**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-K**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe fiscal year ended December 31, 2005**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Commissionfile number 333-72343**

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**TRUE TEMPER SPORTS, INC.**

(Exact name of registrantas specified in its charter)

| **Delaware**                    | **52-2112620**          |
|---------------------------------|-------------------------|
| (State or other jurisdiction of | (I.R.S. Employer        |
| incorporation or organization)  | Identification  Number) |

 

| **8275 Tournament Drive  Suite 200** | ** ** |
|-------------------------------------------|------------|
| **Memphis,  Tennessee**                   | **38125**  |
| (Address of Principal Executive           | (Zip Code) |
| Offices)                                  | ** ** |

 

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

(Registrant’s telephone number,including area code)

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**Securities registered pursuant tosection 12(b) of the Act:** None

**Securities registered pursuant tosection 12(g) of the Act:** None

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act.   o Yes    x No

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act.   o Yes    x No

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x No o

Indicate by checkmark ifdisclosure of delinquent filers pursuant to item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of the registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. x

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

**Large accelerated filer**o    Acceleratedfiler o     Non-accelerated filer  x

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

As ofJuly 1, 2005 the Registrant had 100 shares of Common Stock, $0.01 par value pershare, outstanding. All of the Registrant’s outstanding shares were held byTrue Temper Corporation, the Registrant’s parent company, as of July 1,2005.

**DocumentsIncorporated by Reference**

**None.**

 

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**TRUE TEMPER SPORTS,INC.**

**ANNUALREPORT ON FORM 10-K**

**For the Fiscal YearEnded December 31, 2005**

**INDEX**
|                   | ** ** | ** **                                                                                                                  | ** ** | **Page** | ** ** |
|-------------------|------------|-----------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| PART I       |       |                                                                                                                        |       |     |       |   |   |
| Item 1            |       | Business                                                                                                                    |       |     | 3          |   |   |
| Item 1A           |       | Risk  Factors                                                                                                               |       |     | 11         |   |   |
| Item 1B           |       | Unresolved Staff Comments                                                                                                   |       |     | 16         |   |   |
| Item 2            |       | Properties                                                                                                                  |       |     | 17         |   |   |
| Item 3            |       | Legal Proceedings                                                                                                           |       |     | 17         |   |   |
| Item  4           |       | Submission of Matters to a  Vote of Security Holders                                                                        |       |     | 17         |   |   |
| PART II      |       |                                                                                                                        |       |     |       |   |   |
| Item  5           |       | Market for Registrant’s  Common Equity and Related Stockholder Matters and Issuer Purchases of  Equity Securities |       |     | 18         |   |   |
| Item 6            |       | Selected Financial Data                                                                                                     |       |     | 19         |   |   |
| Item  7           |       | Management’s Discussion and  Analysis of Financial Condition and Results of Operations                            |       |     | 21         |   |   |
| Item  7A          |       | Quantitative and Qualitative  Disclosures About Market Risk                                                                 |       |     | 34         |   |   |
| Item  8           |       | Financial Statements and  Supplementary Data                                                                                |       |     | 35         |   |   |
| Item 9            |       | Changes in and Disagreements With Accountants on  Accounting and Financial Disclosure                                       |       |     | 64         |   |   |
| Item 9A           |       | Controls and Procedures                                                                                                     |       |     | 64         |   |   |
| Item  9B          |       | Other  Information                                                                                                          |       |     | 64         |   |   |
| PART III     |       |                                                                                                                        |       |     |       |   |   |
| Item  10          |       | Directors and Executive  Officers of the Registrant                                                                         |       |     | 65         |   |   |
| Item  11          |       | Executive Compensation                                                                                                      |       |     | 67         |   |   |
| Item 12           |       | Security Ownership of Certain Beneficial Owners and  Management and Related Shareholder Matters                             |       |     | 69         |   |   |
| Item  13          |       | Certain Relationships and  Related Transactions                                                                             |       |     | 69         |   |   |
| Item  14          |       | Principal Accountants Fees  and Services                                                                                    |       |     | 70         |   |   |
| PART IV      |       |                                                                                                                        |       |     |       |   |   |
| Item 15           |       | Exhibits and Financial Statements  Schedule                                                                                 |       |     | 72         |   |   |
| SIGNATURES        |       |                                                                                                                        | 73         |     |       |
| INDEX TO EXHIBITS |       |                                                                                                                        | 75         |     |       |

 

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**PART I**

**Item 1.**                        *Business*

**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 True Temper Sports, Inc.’s (“True Temper” or the“Company”) direct parent company, True Temper Corporation (“TTC”),pursuant to which TTS Holdings LLC and certain of the Company’s seniormanagement purchased all of the outstanding shares of TTC (“Gilbert GlobalAcquisition”). In connection with this acquisition, and effective on March 15,2004, the Company repaid all of its outstanding 2002 senior credit facility,redeemed all of its 107¤8%senior subordinated notes due 2008, and made certain payments of the net remaining equity of the predecessor company to theselling shareholders. These payments were financed with the net proceedsof a new senior credit facility and new 83¤8% seniorsubordinated notes due 2011.

The Gilbert Global Acquisition was accounted for by the Company’s parent company using thepurchase method of accounting. As the Company is a wholly owned subsidiary ofTrue Temper Corporation, the Company has “pushed down” the effect of thepurchase method of accounting to its financial statements. The Company’s financial statements andaccompanying notes, shown in Item 8 of this annual report, present thehistorical cost basis results of the Company as “predecessor” through March 14, 2004,and the results of the Company as “successor” from March 15, 2004 through December 31, 2005, accordingly, certain elements of the successorcompany presentation are not comparable to the predecessor company presentationdue to the different basis of accounting.

For purposes of thefollowing discussion, contained in Item 1 and 7, regarding the Company’sresults of operations and cash flow, the Company has combined the results ofthe predecessor and successor companies in order to compare the results to theprior year. Material variances caused by the different basis of accounting havebeen disclosed where applicable.

**General**

We are the world’s leading designer, manufacturer andmarketer of golf shafts. Since the 1930s, we have manufactured golf shaftsunder the widely recognized *True Temper*brand. In 2005, over 70% of our revenue was generated through the sale of steelgolf shafts. We believe that our share of the worldwide steel shaft market wasapproximately 68% in 2005 and that our share is more than three times greaterthan that of the next largest market participant. We are a leading supplier ofpremium steel shafts to top domestic golf club original equipment manufacturersand distributors, including Callaway, Cleveland, Golfsmith, Golf Works, Mizuno,Nike, PING, TaylorMade, Titleist and Wilson. From 1987 to 2005, our steelshafts were played by the winners of 62 of the PGA’s 76 major championships,including 17 of the last 19 Masters champions. We are also one of the world’slargest manufacturers of premium graphite (carbon fiber based composites) golfshafts, with an estimated share of approximately 8% of this highly fragmentedmarket. In addition to golf shafts, through our Performance Sports business, wealso design, manufacture and market products such as steel and titanium alloybicycle frame components, composite bicycle components, such as forks andhandlebars, and graphite hockey sticks.

Our golf shaftproducts include over 1,000 proprietary models (with our customers’ brand name,label or trademark affixed to the shaft) and 2,000 branded models (with the *True Temper* and / or *Grafalloy* brand name, label or trademarkaffixed to the shaft), including a full range of premium and commercial gradesteel shafts and a full line of premium graphite shafts. We design, manufactureand market approximately 275 lines of steel shafts, including:

·       *Dynamic Gold,* which has been a leadingsteel shaft on the PGA Tour for the past 25 years;

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·       *Dynamic Gold SL,* which delivers theplaying characteristics of Dynamic Gold with 20% less weight;

·       *Black Gold,* which offers a low-to-mid ball flight while combining Frequency TunedTMtechnology with proprietary Grip-toTipTM taper profile;

·       *SensiCore,* which is equipped with patentedvibration-damping technology that, when inserted into our steel shafts,can eliminate up to 70% of vibration at impact to combine the feel of graphitewith the consistency of steel;

·       *Dynalite Gold*, which features a light-weight,soft tip design that promotes a higher ball flight to optimize trajectory forlow-ball hitters;

·       *TX-90*, which at only 90 grams, isone of the lightest steel shafts available and was designed for players seekingconsistent performance using a lighter alternative to traditional steel shafts;

·       *TX Tour*, a tour version of *TX-90* which offers a *Superlite* steel iron shaft with playingcharacteristics targeted towards the low handicap golfer;

·       *TT Lite*, which was designed for the customclub builders and offers a standard weight and mid-flex design which allows forvarious trimming options for a truly custom fit; and

·       Numerousco-branded products, including Callaway’s *Memphis10,*Nike’s *Speedstep,*Ping’s*JZ*and *ZZ Lite*and Wilson’s *FatShaft*.

We also design,manufacture and market approximately 75 lines of premium graphite shafts underthe *Grafalloy*brand name. Ourgraphite shafts have a strong presence at the professional level and have beenplayed by winners on each of the professional tours, including the PGA, EPGA,LPGA, Champions and Nationwide Tours. Our most popular graphite shaft brandsinclude:

·       *Grafalloy Blue,*which is a newbreakthrough graphite shaft designed specifically for today’s oversized metalwoods;

·       *Grafalloy ProLaunch,*a newly introducedgraphite shaft designed with today’s high performance heads and low-spin ballsto help players achieve optimal launch conditions to reduce ball spin andmaximize distance;

·       *Grafalloy Prototype Comp NT*, which incorporates today’s nanotechnology for the most consistent carbon fiber alignment;

·       *Grafalloy ProLite*, which is one of theleading ultra light driver shafts on the professional level and accounts formore than 35% of all the ultra light driver shafts played on the PGA andChampions Tours; and

·       *Grafalloy ProLogic,*which is designed foruse in irons as a graphite alternative to steel and is manufactured with tighttolerances to provide consistent feel and improved shot making.

We believe that we are the only golf shaft company inthe world which is capable, within its own facilities, of manufacturing bothsteel and graphite golf shafts in large volumes. This unique competitiveadvantage allowed us to design, develop, manufacture and sell the firstcommercially viable multi-material golf shaft combining both steel andgraphite into one shaft. Our *BiMatrx RXi*and*BiMatrx Rocket*shafts utilize apatented multi-material technology to combine the torsional stability andconsistent performance benefits of steel with the light-weight flexiblebenefits of graphite into one shaft.

Through our PerformanceSports business, we have utilized the capabilities developed in our golf shaftbusiness to pursue other branded recreational sports equipment markets thathave similar competitive dynamics and manufacturing requirements. We focus onthe premium segment of the bicycle market where innovation, quality andbranding are highly valued by the consumer, and products are often 

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customizedto suit the individual consumer’s specific requirements. Our value-addedpremium bicycle component products generally have higher margins than componentparts made for bicycles sold in mass channel retail stores. In the hockeycomponents market, we focus on the composite shafts used in a variety oforiginal equipment manufacturers’ one-piece and composite sticks.

**The Golf Club Shaft Industry**

The golf equipment industry is estimated to be a$4.6 billion industry, with golf clubs making up the largest portion atapproximately 61%, or $2.8 billion. Spending in the golf equipmentindustry is highly concentrated among avid golfers (golfers that play more than25 rounds of golf per year) who account for approximately 57% of the totalspending on golf equipment despite only accounting for approximately 23%of the golfing population.

There are three basic components needed to manufacturea golf club: the shaft, the club head and the grip. The shaft is critical tothe performance of a golf club as it is critical in controlling the consistencyand distance of a golf shot. While branded premium shafts are critical to theperformance and marketing of golf clubs, these shafts represent a relativelysmall portion of the overall cost of a golf club, typically under 10% ofthe retail sales price.

The golf shaft market is comprised primarily of steeland graphite shafts. We believe that in 2005 the three largest participants inthe worldwide steel shaft market comprised an aggregate market share of morethan 80%. We believe that the concentration in the steel shaft market is due tothe high barriers to entry created by the technical expertise and capitalinvestment necessary to participate in the market as well as the customizedmanufacturing process required for the production of premium steel shafts. Theproduction of graphite shafts is less capital intensive and requires lesstechnical expertise. Although recently there has been some consolidation amonggraphite shaft manufacturers, the graphite shaft industry is fragmented, withthe top five market participants representing approximately 50% of theworldwide market in 2005. We believe that the relatively lower barriers toentry account for this fragmentation.

We believe that from 1991to 1995, graphite shafts gained share in the overall shaft market due to thelight-weight, vibration-damping characteristics of graphite shafts,particularly for longer-shafted, larger-headed woods. Since 1995,however, the development of vibration damping materials for steel shafts suchas our *SensiCore*insert, alongwith the introduction of lighter weight steel alloys in products such as ourDynamic Gold SL and *TX-90*shafts,have resulted in steel shafts that have the vibration damping and light-weightcharacteristics of graphite shafts together with the consistent performance anddistance control qualities of steel shafts. We believe that these designimprovements contributed to the growth in share of steel shafts in the overallshaft market from approximately 50% in 1995 to approximately 65% in 2005.

**Products**

We design, manufacture and market steel and graphitegolf shafts, as well as a variety of high strength, high tolerance componentsfor the hockey, bicycle and other recreational sports markets. Our proprietaryshafts, which accounted for approximately 26% of our net sales in 2005, arecustom designed, and frequently co-branded in partnership with our customers,to accommodate specific golf club head designs. As an example, our proprietarymodels include co-branded products such as Callaway’s *Memphis 10*, Nike’s *Speedstep*, Ping’s *JZ* and *ZZLite* and Wilson’s *Fat Shaft*.Our branded products with the *True Temper*and/or *Grafalloy* names anddesigns are typically sold to golf club original equipment manufacturers,distributors and various custom club assemblers, and are used to eitherassemble new clubs or to replace the shafts in existing clubs.

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***Steel Golf Shafts.******  ***Wemanufacture a wide range of steel golf shaft lines with unique design featuresand performance characteristics. Our steel golf shafts can be divided into thefollowing two major product categories:

(1)         Premium steel shafts; and

(2)         Commercial grade steelshafts.

Premium steel shafts, such as our *Dynamic Gold, Black Gold, Dynamic Gold SL*and *TX-90* product lines, arehigh performance products with tighter design tolerances and qualityspecifications that sell for higher average selling prices and generate higherprofit margins than commercial grade steel shafts. Our commercial grade steelshafts are manufactured to a different specification and sell for a loweraverage selling price to original equipment manufacturers who produce and sellopening price point golf club sets, typically to entry-level players whopurchase their products through mass channel retail stores.

***Graphite GolfShafts.******  ***Wemanufacture a wide range of graphite golf shaft lines, which are offered in avariety of weights, torques and flexes. Our graphite golf shafts are currentlybeing played by over 100 touring professionals on the PGA, EPGA, LPGA,Champions and Nationwide Tours. Our graphite shafts are sold under the *Grafalloy* brand name. Similar to steel,graphite shafts can be placed in several categories of performance, quality andprice. Most of the graphite golf shafts that we produce and sell are higherquality and higher priced premium grade shafts that are sold to golf equipmentdistributors, and to original equipment manufacturers for their custom productofferings.

***Golf Shafts withCombined Materials.******  ***During the last several years, we havebeen working to develop golf shafts that combine multiple materials such assteel and graphite into one shaft. Late in 2000, we introduced a proprietarycustom iron product for a customer that combines a steel shaft with a graphitetip section to produce a shaft that provides a new feel for irons.

We used similar patented technology to introduce the *True Temper* branded product known as *BiMatrx* in January 2001. The *BiMatrx* shaft consists of a graphite shaftwith a steel tip section that is currently designed for use in driver andfairway wood applications.

***Performance Sports Products.******  ***We alsomanufacture and sell a wide variety of high performance components for thebicycle, hockey and other recreational sports markets. In 2005, we sold ourperformance sports products to a broad range of original equipmentmanufacturers and distributors.

**Customers**

We maintain long-standing relationships with a highlydiversified customer base. We are a leading supplier of shafts to the topdomestic golf club original equipment manufacturers and distributors, includingCallaway, Cleveland, Golfsmith, Golf Works, Mizuno, Nike, Ping, TaylorMade,Titleist, and Wilson. In 2005, we had in excess of 600 customers, includingapproximately 540 golf club manufacturers/retailers and approximately 80distributors.

For many years, we have maintained a broad anddiversified customer base in the golf equipment market. In 2005, our top tencustomers represented approximately 72% of our net sales, and our top customeraccounted for approximately 14% of our net sales.

We believe that our closecustomer relationships and responsive service have been significant elements toour success and that our engineering and manufacturing expertise provide uswith a strong competitive advantage in truly partnering with our customer base.We have developed and co-branded many proprietary shafts with our customers. Asan example, we produce proprietary customized steel shafts for Callaway, underthe *Memphis 10* brand; for Ping,under the *JZ* and *ZZ Lite* brands; for Nike, using the *Speedstep* brand; and for Wilson to producethe *Fat Shaft* line of clubs.

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**Competition**

We operate in ahighly competitive environment. We believe that we compete principally on thebasis of:

·       ourability to provide a broad range of high quality steel and graphite shafts atcompetitive prices;

·       ourability to deliver customized products in large quantities on a timely basisthrough distribution channels around the world;

·       theacceptance of steel and graphite shafts in general, and our shafts inparticular, by professional and amateur golfers alike; and

·       ourability to develop and produce innovative new products that provide performancefeatures which benefit golfers of all skill levels.

We believe that our share of the worldwide steel shaftmarket was approximately 68% in 2005 and that our share is more than threetimes greater than the share of the next largest market participant. We believethat we compete primarily with four other steel golf shaft manufacturers: RoyalPrecision, Inc., a domestic based premium steel shaft manufacturer, FarEast Machinery Co., Ltd., located in Taiwan which produces commercialgrade products, Nippon Shaft Co., Ltd., a Japanese manufacturer of premiumproducts, and Summit Sports World Wide Co., Ltd. which produces limitedvolumes of commercial grade steel shafts.

Unlike steel, the graphite shaft manufacturingindustry is highly fragmented with a large number of suppliers selling to onlya few customers. We believe there are over 50 graphite shaft manufacturersworldwide. A few of these companies reside in North America and many arelocated in Far East Asia. We do not believe that there are any graphitesuppliers currently with a market share in graphite that is comparable to themarket share we have in steel. We believe we are one of the five largestproducers of branded premium grade graphite shafts in the world and we estimatethat our market share is approximately 8%. Our major competitors in the premiumgrade branded graphite shaft market include Aldila, Inc., United SportsTechnologies, Inc., Graphite Design International, and FujikuraComposites.

We believe that we are theonly golf shaft company in the world which is capable, within its ownfacilities, of manufacturing both steel and graphite golf shafts in largevolumes.

**Design & Development**

We design and develop products for bothproprietary/co-branded market applications and for the *True Temper*/*Grafalloy* branded product names.

The larger golf club manufacturers often requestexclusively designed proprietary or co-branded steel and graphite golf shaftsfor their club systems, which require golf shafts, heads and grips engineeredto work together. We are committed to serving this market by maintaining ourrole as a leader in innovative shaft designs for both steel and graphitematerials technology. Shaft designs and modifications are frequently the directresult of our combined efforts with that of our customers to develop anexclusive shaft specifically designed for that customer’s clubs. We use acomputer aided design analysis program to evaluate a new shaft’s design withrespect to weight, torque, flex point, tip and butt flexibility, swing weightand other critical shaft design criteria.

In addition to our proprietary/co-branded productapplications, we are very active in designing and developing new products underthe *True Temper* and *Grafalloy* brand names that meet theperformance needs of golfers of all ages and skill levels. We develop thesebranded products based upon our internal research and evaluation of consumerneeds and preferences.

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The materials typically used in production of ourdesigns include several different high strength steel alloys and advancedcomposite systems of graphite and glass fibers with thermosetting epoxy resinsystems.

Using state of the art technology, we generate adesign which is then analyzed by computer for stiffness and strengthproperties. Our research and development efforts focus on technologydevelopment and new materials as an essential precursor to successful newproduct development. Our design research focuses on improvements in shaftaesthetics since cosmetic appearance has become increasingly important tocustomers. To supplement our design and development we employ extensive testingthat includes laboratory durability and stress tests, robotic testing,extensive ball flight/trajectory analysis and individual player evaluation.

In 2003, we opened a 14 acre test facility thatenables us to better evaluate our products. We have our own private drivingrange where we perform qualitative player testing and quantitative mechanicaltesting with a Miya 5 swing robot. Our facility is equipped with an Accushotdata system which allows us to measure the distance and dispersion of each shotto provide an accurate assessment of product performance. Our facility alsoutilizes the newest, state of the art, TrackMan doppler radar system to trackall aspects of ball flight and trajectory. We believe that we are the onlyshaft manufacturer with our own driving range that is capable of this type ofproduct testing.

In addition, our pursuit of strategic vendor alliancescomplement our abilities and needs, an approach which allows us to exploittechnical capabilities beyond our own while minimizing the risk and investmentrequired to enter the market with new products.

Research and developmentcosts for the years ended December 31, 2005, 2004 and 2003 were $1.8 million,$1.5 million and $1.5 million, respectively.

**Manufacturing**

We believe that our manufacturing expertise andproduction capabilities enable us to respond quickly to customers’ orders andprovide sufficient quantities on a timely basis. We believe that our investmentin capital equipment and personnel training has helped us to establish areputation as one of the leading manufacturers of steel and graphite shafts.

*SteelShaft Manufacturing Process.**  *The process of manufacturing a steel shaft has manydistinct phases. Generally, a large steel coil is unrolled and then formedlengthwise, welded and cut into cylinders. The tubing is then treated andfitted over a metal rod or “mandrel” that is used to determine the preciseinside diameter of the cylinder as it is drawn. The tubing is stretched, cutinto sections, and then weighed and balanced. Later, through a process that wepioneered, the sections are tapered to give each shaft model a particular flexand frequency. The shafts are cleaned, straightened, heat-treated and tempered.The shafts are straightened by machines designed and built by us. The shaftsare plated with layers of nickel to prevent corrosion and then covered with afine layer of chrome. Finally, shafts are dried, polished and inspected forcosmetic flaws before our name and logo is affixed to the shaft. It takes anaverage of 15 days to manufacture one of our *True Temper* steel shafts.

*GraphiteShaft Manufacturing Process.**  *There are two processes which are used to manufacturea graphite shaft: flag-wrapping and filament-winding. Most of ourgraphite shafts are produced using the flag-wrapping technique. Theflag-wrapping method uses graphite fiber materials or “prepreg” in sheet form,which requires refrigeration until use. Each new roll of prepreg is allowed toreach room temperature before the material is cut into pennant-shapedpatterns called flags for each particular shaft design. Layer by layer, variouscombinations of prepreg flags are wrapped around mandrels specified for eachparticular shaft design. The layered materials are then encased in thin layersof clear tape for compaction and heated at high temperatures to harden thematerial. At the end of the process, the shafts are painted and stylized usinga variety of colors, patterns and designs. The filament-winding process,on 

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the other hand, beginswith a spool, rather than a sheet, of graphite fiber, which is fed onto thereel of a machine which then wraps the fiber around a mandrel by turning themandrel and simultaneously moving the graphite fiber from one end of themandrel to the other. Once the mandrel is wrapped, the process uses the sameencasing and heating techniques as the flag wrapping process.

*RawMaterials.**  *Weuse several raw materials to produce steel golf shafts, including several steelalloys sourced from three primary vendors, nickel crowns and plating chemicals,Sensicore inserts and various sundry supplies, boxes and labels. Graphiteshafts are produced with a variety of graphite fiber materials in both sheetand spool form that we source from several different vendors. In addition,graphite shafts are finished with a wide variety of paints, inks and heattransfer labels. We believe that there are adequate alternative suppliers ofthese materials and, therefore, we do not believe that we are dependent on anyone supplier.

In addition to the rawmaterials discussed above, we also use a substantial amount of natural gas andelectricity in our manufacturing processes. Suppliers for these types of energysources are limited, and prices are subject to general market and industryconditions.

**Marketing and Promotion**

Our marketing strategy is designed around new productdevelopment and targeted advertising and promotion programs. Through ourability to anticipate and address consumer trends in the golf equipment market,as well as the performance demands of professional golfers, we are able tosuccessfully market our products to golf club manufacturers while strengtheningbrand awareness. During the last several years, our marketing efforts, throughthe utilization of a wide variety of promotional channels, including mass mediaadvertising, print and television, sponsorship of golf-related events,equipment endorsements from original equipment manufacturers and productdemonstrations, have increased our overall exposure in the golf industry.

For example, we have maintained a strong presenceamong PGA Tour players, particularly since 1981, when we began sending our PGATour van to all major PGA events. The tour van functions as a golf club customshop on wheels, visiting over 30 professional tour events during 2005.Typically, the van is located near the practice tee and lends technical supportto the tour professionals while simultaneously promoting the *True Temper* and *Grafalloy* brands to representatives of original equipmentmanufacturers. In addition, we provide technical support to the players on theChampions, Nationwide and LPGA Tours as well as the European and Japanese PGATours.

Although we do not pay any professional golfer toendorse or play our shafts, we believe that the use of our products byprofessional golfers enhances our reputation for quality and performance whilealso promoting the use of our shafts. Due to our strong reputation and service,we estimate that nearly 75% of professional golfers around the world use ourproduct in competition. We clearly recognize the influence that a professionalgolfer, or very low handicap golfer, can have on consumer preferences, so wealso engage in special promotional efforts with local club and teachingprofessionals, and we contribute shafts to college athletic programs, toencourage the use of our product so they provide positive feedback on the *True Temper* and *Grafalloy* brands to their constituents.

Much of our advertising and promotional spending isdedicated to print and television advertising, including cooperativeadvertising with our customers. Additional advertising and promotional spendingis allocated to promotional events such as trade shows, consumer golf shows,PGA Tour activities and retail golf shop advertising displays.

Advertising andpromotional costs for the years ended December 31, 2005, 2004 and 2003 were$3.5 million, $3.5 million and $3.1 million, respectively.

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**Distribution &Sales**

We primarily sell our shafts to original equipmentmanufacturers, retailers and distributors. Typically, distributors resell ourproducts to custom club assemblers, pro shops and individuals. Sales to golfclub manufacturers/retailers accounted for approximately 90% of our net golfshaft sales in 2005, and sales to distributors represented approximately 10% ofour 2005 net golf shaft sales.

We believe that we haveone of the most experienced and respected sales staffs in the industry. Oursales and marketing department includes domestic sales managers, internationalsales managers, a customer service group and a team of design professionals thatprovides field support to our sales representatives. We believe that ourinternational market presence, which comprised approximately 36% of our total 2005net sales, provides an opportunity for future growth. We market our products inJapan, Europe, Australia and Southeast Asia and maintain a distributionoperation in each region. Financial information by geographic segment iscontained in Note 12 to the consolidated financial statements located elsewherein this annual report.

**Employees**

As of December 31, 2005, we had 734 full-timeemployees, including 16 in sales and marketing, 40 in research, development andmanufacturing engineering, 578 in production and the balance in administrativeand support roles.

The hourly employees atour steel plant in Amory, Mississippi are represented by the United Steel Workersof America. In June 2003, the United Steel Workers union at our Amory,Mississippi facility voted to accept a new collective bargaining agreement thatcovers a four year period beginning in July 2003 and expiring on June 30,2007. We believe that our relationships with the union and our employees aregood.

**Intellectual Property**

As of December 31,2005, we held 44 patents worldwide relating to various products andproprietary technologies, including the *SensiCore*technology, and had nine patent applications pending. We also hold numeroustrademarks related to, among other things, our *TrueTemper, Grafalloy* and *Alpha Q*branded products. We do not believe that our competitive position is dependentsolely on patent or trademark protection, or that our operations are dependenton any individual patent or trademark.

**Environmental,Health And Safety Matters**

We are subject to federal, state and localenvironmental and workplace health and safety laws and regulations, includingrequirements governing discharges to the air and water, the handling anddisposal of solid and hazardous wastes, and the remediation of contaminationassociated with releases of hazardous substances. In December 2003, areview was conducted by independent environmental consultants and, based uponsuch report, we believe that we are currently in material compliance withenvironmental and workplace health and safety laws and regulations.Nevertheless, our manufacturing operations involve the use of hazardoussubstances and, as is the case with manufacturers in general, if a release ofhazardous substances occurs or has occurred on or from our facilities, we maybe held liable and may be required to pay the cost of remedying the condition.The amount of any such liability could be material.

We devote significant resources to maintainingcompliance with, and believe we are currently in material compliance with, ourenvironmental obligations. Despite such efforts, the possibility exists thatinstances of noncompliance could occur or be identified, the penalties orcorrective action costs associated with which could be material.

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Like any manufacturer, we are subject to thepossibility that we may receive notices of potential liability, pursuant toComprehensive Environmental Response, Compensation and Liability Act (“CERCLA”),commonly known as Superfund, or analogous state laws, for cleanup costsassociated with onsite or offsite waste recycling or disposal facilities atwhich waste associated with our operations have allegedly come to be located.Liability under CERCLA is strict, retroactive and joint and several. To ourknowledge, no notices involving any material liability are currently pending.

We have made, and willcontinue to make, capital expenditures to comply with current and futureenvironmental obligations. Because environmental requirements are becomingincreasingly stringent, our expenditures for environmental compliance mayincrease in the future.

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

*Our substantialindebtedness could adversely affect our financial health and prevent us fromfulfilling our obligations.*

Our substantial indebtedness could adversely affectthe financial health of our company. For example, it could:

·       makeit more difficult for us to satisfy our obligations with respect to our 83¤8%Senior Subordinated Notes due 2011;

·       increaseour vulnerability to increases in interest rates because our secured creditfacility, under which our indebtedness was $95.7 million as of December 31,2005, is subject to a variable interest rate;

·       limitour ability to fund future working capital, capital expenditures, research anddevelopment costs, acquisitions and other general corporate requirements;

·       requirea substantial amount of our annual cash flow from operations for debt service,thereby reducing the availability of our cash flow to fund working capital,capital expenditures, research and development efforts, acquisitions and othergeneral corporate purposes;

·       limitour flexibility to plan for, or react to, changes in our business and theindustry in which we operate;

·       placeus at a competitive disadvantage compared to our competitors that have lessdebt; and

·       limit our ability to borrowadditional funds.

*To service ourindebtedness, we will require a significant amount of cash. Our ability togenerate cash depends on many factors beyond our control.*

We may not be able to generate the cash we need toservice our indebtedness. Our ability to make payments on and to refinance ourindebtedness, and to fund planned capital expenditures and research anddevelopment efforts will depend on our ability to generate cash in the future.This, to a certain extent, is subject to general economic, financial,competitive, legislative, regulatory and other factors that are beyond ourcontrol. Based on our current level of operations, we believe our cash flowfrom operations, available cash and available borrowings under our senior bankfacilities will be adequate to meet our future liquidity needs.

We cannot assure you,however, that our business will generate sufficient cash flow from operations,or that future borrowings will be available to us under our senior bankfacilities in an amount sufficient to enable us to pay our indebtedness, or tofund our other liquidity needs. We may need to refinance all or a portion ofour indebtedness on or before maturity. We might not be able to refinance anyof our indebtedness on commercially reasonable terms or at all.

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*Our success dependson the continued popularity of golf and the growth of the market for golfclubs.*

We generate a substantialportion of our net revenues from the sale of golf shafts. The demand for ourgolf shafts is directly related to the popularity of golf, the number of golfparticipants and the number of rounds of golf being played by theseparticipants. If golf participation decreases, sales of our products would beadversely affected. In addition, the popularity of golf organizations, such asthe PGA, also affects the sales of our golf shafts. We depend on the exposureof our brands to increase brand recognition and reinforce the quality of ourproducts. Any significant reduction in television coverage of PGA or other golftournaments, or any other significant decreases in either attendance at golftournaments or viewership of golf tournaments, will reduce the visibility ofour brand and could adversely affect our sales.

*A reduction indiscretionary consumer spending could reduce sales of our products.*

Sales of golf clubs aredependent on discretionary consumer spending which may be affected by generaleconomic conditions and could result in a decrease in consumer spending on golfequipment. In addition, our future results of operations could be affectedadversely by a number of other factors that influence discretionary consumerspending, including consumer concerns over international and military conflictsaround the world, unseasonal weather patterns, demand for our existing andfuture products, new product introductions by our competitors, an overalldecline in participation in golf activities, shifting consumer preferencesbetween graphite and steel golf shafts or other materials that we currently donot produce, and competitive pressures that otherwise result in lower thanexpected average selling prices. Any one or more of these factors could resultin our failure to achieve our expectations as to future sales or earnings.Because most operating expenses are relatively fixed in the short-term, we maybe unable to adjust spending to compensate for any unexpected sales shortfall,which could adversely affect our results of operations.

*Our new productdevelopment efforts may not be successful.*

We may not be able tocontinue to develop competitive products, develop or use technology on a timelyor competitive basis or otherwise respond to emerging market trends. Becausethe introduction of new golf shafts using steel, graphite or other compositeand combined materials is critical to our future success, our continued growthwill depend, in large part, on our ability to successfully develop andintroduce new products in the marketplace. Should golf consumers prefer to usegolf clubs made from materials other than steel or graphite, there could be amaterial adverse effect on the results of our operations. In addition, thedesign of new golf clubs is also greatly influenced by the rules andinterpretations of the U.S. Golf Association, or USGA, and the Royal andAncient Golf Club of St. Andrews, or St. Andrews. Although the golf equipmentstandards established by the USGA and St. Andrews generally apply tocompetitive events sanctioned by those organizations, we believe that it iscritical for our future success that our new shafts comply with USGA and St.Andrews standards. New products that we introduce may not receive USGA or St.Andrews approval. In addition, existing USGA and St. Andrews standards may bechanged in ways that adversely affect the sales of our current or futureproducts.

*We are subject towork stoppages at our facilities, which could seriously impact theprofitability of our business.*

If any labor disruption orwork stoppages affect our employees, the results of our operation could beadversely affected. At December 31, 2005, we employed approximately 734 full-timeindividuals. Of these, approximately 351 hourly employees at our Amory,Mississippi facility are represented by the United Steel Workers of America. Werecently entered into a new collective bargaining agreement with the UnitedSteel Workers of America which became effective on July 1, 2003 and will expireon June 30, 2007. Nevertheless, we may be subject to work stoppages orother labor disruptions in the future. If such events were to occur, ourresults of operations may be materially adversely affected.

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*We face intensecompetition with other golf shaft designers and manufacturers, and ourinability to compete effectively for any reason could adversely affect ourbusiness.*

We operate in a highlycompetitive environment and compete against a number of established golf shaftdesigners, manufacturers and distributors. We also compete indirectly withmanufacturers that produce shafts internally and face potential competitionfrom golf club manufacturers that currently purchase golf shaft components fromthird parties but which may have, develop or acquire the ability to manufactureshafts internally. Unlike the steel shaft industry, the graphite shaft industryis highly fragmented. As a result, we compete with many competitors involved inthe design and manufacture of graphite shafts. While we have had long-establishedrelationships with most of our customers, we are not the exclusive supplier tomost of them, and consistent with the industry practice, generally do not havelong-term contracts with our customers. Although we believe that ourrelationships with our customers are good, the loss of a significant customeror a substantial decrease in sales to a significant customer could have amaterial adverse affect on our business and operating results. See “Business-Competition”for a description of the bases on which we compete and the number ofcompetitors in our industry. These factors, as well as demographic trends andeconomic conditions, could result in increased competition and could have amaterial adverse effect on our results of operations.

*Our profitabilitywould be adversely affected if the operation of our Amory manufacturing plantwere interrupted or shut down.*

We operate a majority ofour manufacturing processes at our facility in Amory, Mississippi. Any naturaldisaster or other serious disruption to this facility due to fire, tornado,flood or any other cause would substantially disrupt our sales and would damagea portion of our inventory, impairing our ability to adequately supply ourcustomers. In addition, we could incur significantly higher costs and longerlead times associated with fulfilling our direct-to-consumer orders anddistributing our products to our customers during the time it takes for us toreopen or replace our Amory facility. As a result, disruption at our Amoryfacility would adversely affect our profitability.

*Risks related toour operating facility in China could adversely affect our business.*

In 2003, we opened agraphite manufacturing facility in southern China in order to be able toproduce our graphite shafts at a lower cost. We have since transitioned a largeportion of our composite manufacturing capacity from the United States toChina. As a result, we will be subject to potential political instability inChina and trade conflict between the United States and China.

*Consolidation ofour customer base could adversely affect our business.*

If the industry andcustomer base continues to consolidate, then it is possible a consolidation ofseveral of our existing customers into one company could represent asignificant portion of our annual revenues. If this was to occur, and thiscustomer selected an alternative shaft supplier, it could have a materialadverse effect on our results of operations. If this consolidated company wereto remain our customer it could represent an increased credit risk due to itssize in relation to our total accounts receivable.

*Fluctuations in thecost and availability of raw materials could adversely affect our business.*

Since we are dependentupon certain suppliers for steel, nickel, graphite prepreg and other materials,we are subject to price increases and delays in receiving materials. Althoughwe have several sources for most of the key raw materials we purchase, and weattempt to establish purchase price commitments for one-year periods, we aresubject to price increases for raw materials used in the manufacture of golfshafts and to delays in receiving these materials. As key components to themanufacture of golf shafts, a 

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substantialprice increase to one or more of these raw materials or any extended delay intheir delivery could result in a material adverse effect on our results ofoperations.

*Fluctuations in thecost and availability of energy sources to us could adversely affect ourbusiness.*

Our graphite shaftmanufacturing operations in Southern California and China are dependent upon aconsistent and affordable supply of electricity. If there is a prolongedshortage of electrical supply to these facilities and /or a significantincrease in the cost of electrical power, we may need to temporarily orpermanently close our graphite shaft operations, which could materiallyadversely affect our results of operations. In addition, our steel shaftmanufacturing plant located in Mississippi relies upon a consistent andaffordable supply of both natural gas and electrical power in order to conductnormal operations. If our Mississippi facility should experience a shortage insupply of either power source or a significant increase in cost, it could havea material adverse affect on our results of operations.

*Fluctuations in theavailability of energy sources to our customers could adversely affect ourbusiness.*

There are a significantnumber of golf equipment assemblers that are headquartered and conductmanufacturing operations in Southern California. In the aggregate, thesecompanies account for a significant share of the golf equipment market and alsoaccount for a considerable portion of our sales revenue. With the disruption ofelectrical power to California and other Western states in recent years thereis a risk that our customers’ manufacturing operations may be adverselyaffected by power shortages. If this were to occur they may reduce theirpurchases of shafts from us causing a significant adverse impact to ourrevenues and results of operations.

*Fluctuations incost of health insurance could adversely affect our business.*

Health insurance coverageis a valuable benefit in retaining and attracting employees and has beensubject to significant price increases by health industry providers. Since wedo not plan to eliminate providing health benefits to our employees, the risingcosts could have a material adverse affect on the results of our operations.

*If we are unable toprotect our intellectual property rights, our business and prospects may beharmed.*

The patents we holdrelating to certain of our products and technologies may not offer completeprotection against infringement of our proprietary rights by others. As of December 31,2005 we held 44 patents worldwide relating to various products and proprietarytechnologies, including the *SensiCore*technology, and had nine patent applications pending. Patents may not be issuedfrom the pending patent applications. Moreover, these patents may have limitedcommercial value or may not protect our products. Additionally, the U.S.patents that we hold do not preclude competitors from developing or marketingproducts similar to our products in international markets. We may infringe onothers’ intellectual property rights. One or more adverse judgments withrespect to these intellectual property rights could negatively impact ourability to compete and could adversely affect our business.

*We are subject tovarious environmental, health and safety laws and regulations that govern, andimpose liability, for our activities and operations. If we do not comply withthese laws and regulations, our business could be materially and adverselyaffected.*

We are subject to federal,state, and local environmental and workplace health and safety laws,regulations and requirements which, if contravened, could result in significantcosts to us. Our manufacturing operations involve the use of hazardoussubstances and should there be a release of such substances from ourfacilities, we may be held liable. The penalties or corrective action costsassociated with noncompliance could be material. In addition, we may receivenotices of potential liability pursuant to 

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federalor state laws for cleanup costs associated with waste recycling or disposalfacilities at which wastes associated with our operations have allegedly cometo be located.

*Fluctuations incertain general economic conditions could increase our minimum pensionliability under our defined benefit pension plan.*

We maintain an employersponsored defined benefit pension plan for the hourly employees at our Amory,Mississippi steel golf shaft plant. We are subject to Financial AccountingStandards Board guidelines for recognition of our minimum pension liability,and subject to ERISA regulations with regard to our cash funding of the plan.As a result, certain U.S. economic conditions involving weak equity marketperformance and low general interest rates can both reduce the total value ofthe assets of the plan as well as increase our minimum pension liability underthe plan. If these economic conditions are severe enough they could have asignificant adverse effect on the funding status of our plan and our overallresults of operations.

*If we do not retainour key personnel and attract and retain other highly skilled employees ourbusiness will suffer.*

If we fail to retain andrecruit the necessary personnel, our business and our ability to obtain newcustomers, develop new products and provide acceptable levels of customerservice could suffer. The success of our business is heavily dependent on theleadership of our key management personnel. If any of these persons were toleave our company it would be difficult to replace them, and our business wouldbe harmed. See “Management.”

*We are subject torisks relating to our international operations.*

We are subject torisks customarily associated with foreign operations, including:

·        fluctuationsin currency exchange rates;

·        importand export license requirements;

·        traderestrictions;

·        changesin tariffs and taxes;

·        restrictionson the transfer of funds into or out of a country;

·        unfamiliaritywith foreign laws and regulations;

·        difficultiesin staffing and managing international operations;

·        generaleconomic and political conditions; and

·        unexpectedchanges in regulatory requirements.

These risks could have amaterial adverse effect on our business, prospects, results of operations andfinancial condition.

*We are subject toproduct liability claims and other litigation.*

From time to time, we aresubject to product liability claims involving personal injuries allegedlyrelating to our products. Currently pending claims and any future claims aresubject to the uncertainties related to litigation, and the ultimate outcome ofany such proceedings or claims cannot be predicted.

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*We may not be ableto identify suitable acquisition candidates, and even if we do, we may not beable to acquire those candidates or successfully integrate their operationswith ours.*

We continuously reviewacquisition prospects that would complement our current product offerings,increase our size and geographic scope of operations or otherwise offer growthand operating efficiency opportunities. Any future acquisition may not besuccessfully completed or that, if completed, any such acquisition may not beeffectively integrated into our business. Acquisitions may entail numerousrisks and impose costs on us, including, among others, difficulties associatedwith assimilating acquired operations or products, diversion of management’sattention and adverse effects on existing business relationships with suppliersand customers. In addition, any future acquisitions could result in theincurrence of debt or contingent liabilities and other intangible assets, whichcould have a material adverse effect on our business, financial condition orresults of operations.

*Terrorist attacks,such as the attacks that occurred in New York and Washington, D.C. on September 11,2001, and other acts of violence or war, including the military action in Iraq,have and could negatively impact the U.S. and foreign economies, the financialmarkets, the industries in which we operate, our operations and ourprofitability.*

Terrorist attacks maynegatively affect our operations and your investment. There can be no assurancethat there will not be further terrorist attacks worldwide. These attacks havecontributed to economic instability in the United States and elsewhere, andfurther acts of terrorism, violence or war could further affect the industriesin which we operate, our business and our results of operations. In addition,terrorist attacks or hostilities may directly impact our physical facilities orthose of our suppliers or customers and could impact our sales, our supplychain, our production capability and our ability to deliver our products andservices to our customers. The consequences of any terrorist attacks orhostilities are unpredictable, and we may not be able to foresee events thatcould have an adverse effect on our operations or your investment.

**RisksAssociated with Forward Looking Statements**

The Private Securities Litigation Act of 1995 (the “Act”)provides a safe harbor for forward-looking statements made by our Company. Thisdocument contains forward-looking statements, including but not limited to,Item 1 of Part I, Business, and Item 7 of Part II, Management’sDiscussion and Analysis of Financial Condition and Results of Operations. Allstatements which address operating performance, events or developments that weexpect, plan, believe, hope, wish, forecast, predict, intend, or anticipatewill occur in the future are forward looking statements within the meaning ofthe Act.

The forward-looking statements are based on management’scurrent views and assumptions regarding future events and operatingperformance. However there are many risk factors, including but not limited to,the general state of the economy, the Company’s ability to execute its plans,competitive factors, and other risks that could cause the actual results todiffer materially from the estimates or predictions contained in our Company’sforward-looking statements. Additional information concerning the Company’srisk factors is contained from time to time in the Company’s public filingswith the SEC; and most recently in Item 1A of Part 1 of this Annual Reporton Form 10-K.

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

**Item 1B.**               *Unresolved Staff Comments*

None.

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**Item 2.**                        *Properties*

Ouradministrative offices and manufacturing facilities currently occupyapproximately 500,000 square feet. Our shafts are manufactured at separatefacilities, a steel shaft facility located in Amory, Mississippi and compositegraphite shaft facilities located in El Cajon, California and Guangzhou, China.In addition, we have a multi-material shaft assembly facility located inOlive Branch, Mississippi. Our executive offices are located in a leasedfacility in Memphis, Tennessee. The following table sets forth certain informationregarding significant facilities operated by us as of December 31, 2005:

| **Facility**             | ** ** | ** **                  | ** ** | **Location** | ** ** | **Approx.  Sq. Ft.** | ** ** | **Owned/  Leased**   | ** ** | **Lease  Expiration  Date** | ** ** |
|--------------------------|------------|-----------------------------|------------|--------------|------------|---------------------------|------------|----------------------|------------|-----------------------------|------------|
| Corporate Offices        |       | Memphis,  Tennessee         |       | 15,241       |       | Leased                    |       | June 2011       |       |
| Steel  Shaft/Tubing Mfg. |       | Amory,  Mississippi         |       | 335,000      |       | Leased                    |       | January 2063(1) |       |
| Composite Shaft  Mfg.    |       | Guangzhou,  China           |       | 88,000       |       | Leased                    |       | March 2008      |       |
| Composite Shaft  Mfg.    |       | El  Cajon, California       |       | 45,907       |       | Leased                    |       | October 2008    |       |
| Building                 |       | Olive  Branch, Mississippi  |       | 5,300        |       | Leased                    |       | March 2007      |       |
| Test Facility            |       | Robinsonville,  Mississippi |       | 1,000        | (2)        | Leased                    |       | March 2008      |       |

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(1)          There are several leasescovering the original land as well as the building at our Amory, Mississippifacility. The leases are structured with interim renewal periods of between 5to 10 years, extending through January 2063. At the end of each ofthese renewal periods, we have the option to allow a lease to automaticallyrenew or to not renew the lease.

(2)          Included with the leasedspace is 14 acres of land which we use as a driving range to assess variousqualitative and quantitative tests on product performance.

In addition, we promoteour products in international markets through sales and distribution offices inAustralia, Japan and the United Kingdom, and we also distribute our product inSoutheast Asia from our distribution warehouse in Hong Kong. To the extent thatany such properties are leased, we expect to be able to renew such leases or tolease comparable facilities on terms commercially acceptable to us.

**Item 3.**                        *Legal Proceedings*

Various claims and legalproceedings, generally incidental to the normal course of business, are pendingor threatened against us. While we cannot predict the outcome of these matters,in the opinion of management, any liability arising from these matters will nothave a material adverse effect on our business, financial condition or resultsof operations.

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

There were no matters submitted to a vote of securityholders during 2005.

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**PART II**

**Item 5.**                        *Market for Registrant’s Common Equity and Related Stockholder Matters andIssuer Purchases of Equity Securities*

There is no public market for the Company’s equitysecurities. All of the Company’s capital stock is owned by True TemperCorporation.

The Company paid no dividends on its shares of commonstock in 2004 or 2005.

The Company’s various debt instruments imposerestrictions on the payment of dividends by means of covenants. The Company wasin compliance with all debt covenants as of December 31, 2005.

There were no purchases of the Company’s equitysecurities by or on behalf of the Company or any affiliated purchaser during thefourth quarter of 2005.

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**Item 6.**                        *Selected Financial Data*

Setforth below are our selected historical financial data for the five fiscalyears ended December 31, 2005. The historical financial data were derivedfrom our audited financial statements and the notes thereto (except ratio ofearnings to fixed charges data), for which the December 31, 2005, 2004,and 2003 financial statements are included herein. As more fully described inNote 3 to the financial statements located elsewhere in this annual report, theCompany went through a business combination on March 15, 2004. Accordingly,the following selected financial data is presented for both the predecessor andsuccessor companies. 

| ** **                                                    | ** ** | **Successor  Company**               | ** ** | **Predecessor Company**                                   | ** ** |
|---------------------------------------------------------------|------------|--------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                    | ** ** | **Year  Ended  December 31,**   | ** ** | **Period from  March 15 to  December 31,** | ** ** | **Period from  January 1 to  March 14,** | ** ** | **Year Ended December 31,** | ** ** |
| ** **                                                    | ** ** | **2005**                             | ** ** | **2004**                                                       | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                                    | ** ** | **(Dollars in thousands)** | ** ** |
| **STATEMENT OF OPERATIONS  DATA:**                  | ** ** | ** **                           | ** ** | ** **                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                                     | ** ** |                                 | $          | 117,594                                                        |       |   |   | $ | 78,120 |   |   |   | $ | 20,247 |   |   | $ | 116,206 |   | $ | 107,401 |   | $ | 111,083 |   |
| Gross profit                                                  | ** ** |                                 | 47,232     |                                                           |       |   | 18,016 |   |   |   | 8,376 |   |   | 46,736 |   | 42,240 |   | 43,348 |   |
| Selling, general and administrative  expenses                 | ** ** |                                 | 14,660     |                                                           |       |   | 9,520 |   |   |   | 3,635 |   |   | 14,747 |   | 13,578 |   | 14,963 |   |
| Amortization of goodwill(1)                                   | ** ** |                                 | —     |                                                           |       |   | — |   |   |   | — |   |   | — |   | — |   | 2,695 |   |
| Amortization of intangible assets(2)                          | ** ** |                                 | 13,840     |                                                           |       |   | 10,984 |   |   |   | — |   |   | — |   | — |   | — |   |
| Impairment charge on long lived assets(3)                     | ** ** |                                 | 357        |                                                           |       |   | — |   |   |   | — |   |   | — |   | — |   | — |   |
| Business development, start-up costs and transition  costs(4) | ** ** |                                 | 208        |                                                           |       |   | 738 |   |   |   | 100 |   |   | 869 |   | 312 |   | — |   |
| Transaction and reorganization  expenses(5)                   | ** ** |                                 | —     |                                                           |       |   | 25 |   |   |   | 5,381 |   |   | — |   | — |   | — |   |
| Loss on early extinguishment of long-term debt(5)             | ** ** |                                 | —     |                                                           |       |   | — |   |   |   | 9,217 |   |   | — |   | 777 |   | — |   |
| Operating income (loss)                                       | ** ** |                                 | 18,167     |                                                           |       |   | (3,251 | ) |   |   | (9,957 | ) |   | 31,120 |   | 27,573 |   | 25,690 |   |
| Interest expense, net of interest income                      | ** ** |                                 | 18,631     |                                                           |       |   | 13,491 |   |   |   | 2,498 |   |   | 13,017 |   | 12,236 |   | 12,660 |   |
| Income tax (benefit) expense(6)                               | ** ** |                                 | 33         |                                                           |       |   | (6,350 | ) |   |   | (2,845 | ) |   | 7,113 |   | 5,992 |   | (11,539 | ) |
| Net income (loss)                                             | ** ** |                                 | (466)      |                                                           |       |   | (10,464 | ) |   |   | (9,608 | ) |   | 10,858 |   | 9,252 |   | 24,571 |   |
| BALANCE SHEET DATA (AT  END OF PERIOD):                       | ** ** |                                 |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Working capital(7)                                            | ** ** |                                 | $          | 26,861                                                         |       |   |   | $ | 25,324 |   |   |   | $ | 14,551 |   |   | $ | 15,372 |   | $ | 14,828 |   | $ | 14,748 |   |
| Total assets                                                  | ** ** |                                 | 348,055    |                                                           |       |   | 360,825 |   |   |   | 178,057 |   |   | 179,616 |   | 183,380 |   | 189,330 |   |
| Total debt(8)                                                 | ** ** |                                 | 220,725    |                                                           |       |   | 232,725 |   |   |   | 106,030 |   |   | 113,730 |   | 124,730 |   | 116,522 |   |
| Total stockholder’s equity                               | ** ** |                                 | 99,764     |                                                           |       |   | 101,330 |   |   |   | 39,064 |   |   | 48,793 |   | 43,068 |   | 61,303 |   |
| OTHER FINANCIAL DATA:                                         | ** ** |                                 |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash from operating activities                                | ** ** |                                 | $          | 15,936                                                         |       |   |   | $ | 6,702 |   |   |   | $ | 2,982 |   |   | $ | 21,402 |   | $ | 19,903 |   | $ | 12,162 |   |
| Cash used in investing activities                             | ** ** |                                 | (2,031     | )                                                              |       |   | (1,182 | ) |   |   | (330 | ) |   | (3,460 | ) | (1,164 | ) | (2,291 | ) |
| Cash used in financing activities                             | ** ** |                                 | (12,509    | )                                                              |       |   | (5,019 | ) |   |   | (8,205 | ) |   | (16,623 | ) | (19,846 | ) | (5,862 | ) |
| Depreciation and goodwill  amortization(9)                    | ** ** |                                 | 2,725      |                                                           |       |   | 2,420 |   |   |   | 671 |   |   | 2,906 |   | 3,252 |   | 6,208 |   |
| Capital expenditures                                          | ** ** |                                 | $          | 2,612                                                          |       |   |   | $ | 1,232 |   |   |   | $ | 330 |   |   | $ | 3,460 |   | $ | 1,164 |   | $ | 2,001 |   |
| Ratio of earnings  to fixed charges(10)                  | ** ** |                                 | 1.0x       |                                                           |       |   | n/a |   |   |   | n/a |   |   | 2.3x |   | 2.2x |   | 2.0x |   |

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(1)    As of January 1,2002 the Company adopted the provisions of SFAS No. 142, *Goodwill and Other Intangible Assets.*This statementrequires goodwill and intangible assets acquired in a purchase businesscombination and determined to have an indefinite useful life not be amortized,but instead tested for impairment at least annually in accordance with theprovisions of SFAS No. 142. In accordance with SFAS No. 142 theCompany ceased 

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amortizing goodwill as of January 1,2002 and tested for impairment finding there was no impairment. Prior to theadoption of SFAS No. 142, goodwill was amortized on a straight-linebasis over the expected periods to be benefited, generally between 20 and40 years. See Note 2(g) to the financial statements included elsewhere inthis annual report for further discussion.

(2)    As of January 1,2002 the Company adopted the provisions of SFAS No. 141, *Business Combinations.*This statement requires theidentification and valuation of intangible assets acquired in a businesscombination. Identifiable intangible assets determined to have definitive livesmust be amortized over those expected useful lives. Certain intangible assetswith definitive lives were identified, and the amortization expense during theperiod from March 15, 2004 through December 31, 2005 relates to theamortization of these intangibles. See Note 3 to the financial statementsincluded elsewhere in this annual report for further discussion.

(3)    Impairmentcharge on long-lived assets reflects the 2005 write-down, and subsequentdisposal, of certain manufacturing equipment originally obtained through theacquisition of substantially all of the tangible personal property of ApolloSports in 2000. Apollo Sports was a steel golf shaft competitor in England thatwent out of business in 2000. A significant portion of the assets acquired weresubsequently transferred to True Temper’s Amory, Mississippi facility. Thiswrite-off represents the remainder of the assets located in the United Kingdom thatwere deemed unusable.

(4)    Reflectsvarious start-up business expenses related to the opening of the Company’scomposite manufacturing operation in southern China, and the relateddown-sizing costs incurred at the Company’s El Cajon California facility. For amore complete discussion of business development and start-up costs see Note 2(j) tothe financial statements included elsewhere in this annual report.

(5)    On January 30,2004, TTS Holdings LLC, a new company formed by Gilbert Global Equity Partners,L.P. and its affiliated funds (“Gilbert Global”), entered into a stock purchaseagreement with the Company’s directparent company, True Temper Corporation, pursuant to which TTS Holdings LLC andcertain of the Company’s senior management purchased all of the outstandingshares of True Temper Corporation. In connection with this acquisition, andeffective on March 15, 2004, the Company repaid all of its outstanding2002 senior credit facility, redeemed all of its 107¤8% senior subordinated notes due 2008, andmade certain payments of the net remainingequity of the predecessor company to the selling shareholders. Thesepayments were financed with the net proceeds of a new senior credit facilityand new 83¤8% senior subordinated notes due 2011. As a result of this transaction,the Company incurred certain expenses for legal, investment banking and othermatters; and also recognized a loss on early extinguishment of its 107¤8% senior subordinated notes due 2008. SeeNote 3 to the financial statements included elsewhere in this annual report forfurther discussion.

(6)    The 2001income tax benefit reflects the elimination of the $17,600 valuation allowance.

(7)    Workingcapital includes current assets less current liabilities, excluding cash andcash equivalents.

(8)    Totaldebt includes both the current and long-term portions of debt and capital leaseobligations.

(9)    Depreciationand goodwill amortization (goodwill amortization for years prior to 2002)excludes amortization of intangible assets and amortization of deferredfinancing cost.

(10)  Earningsin 2004 were insufficient to cover fixed costs.

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**Item 7.**                        *Management’s Discussion and Analysis of Financial Condition and Resultsof Operations*

*THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTIONWITH THE MORE DETAILED INFORMATION IN THE AUDITED FINANCIAL STATEMENTS,INCLUDING THE RELATED NOTES, APPEARING ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.*

**Company Overview**

True Temper Sports, Inc.(the “Company”) is a wholly owned subsidiary of True Temper Corporation (“TTC”)and a leading designer, manufacturer and marketer of both steel and composite graphitegolf shafts for original equipment manufacturers and distributors in the golfequipment industry. In addition, the Company produces and sells a variety ofperformance sports products that offer high strength and tight tolerancecomponents produced with steel alloys and composite carbon fiber graphitematerials for the bicycle, hockey and other recreational sports markets. In 2005,golf shaft net sales represented 94% of total net sales, and performance sportsnet sales represented 6%.

**PurchaseAgreement for 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 the Company’s direct parent company, TrueTemper Corporation (“TTC”), pursuant to which TTS Holdings LLC and certain ofthe Company’s senior management purchased all of the outstanding shares of TTC(“Gilbert Global Acquisition”). In connection with this acquisition, andeffective on March 15, 2004, the Company repaid all of its outstanding2002 senior credit facility, redeemed all of its 107¤8% seniorsubordinated notes due 2008, and made certain paymentsof the net remaining equity of the predecessor company to the selling shareholders.These payments were financed with the net proceeds of a new senior creditfacility and new 83¤8%senior subordinated notes due 2011.

The Gilbert Global Acquisition was accounted for by the Company’s parent company using thepurchase method of accounting. As the Company is a wholly owned subsidiary ofTrue Temper Corporation, the Company has “pushed down” the effect of thepurchase method of accounting to its financial statements. The Company’s financial statements andaccompanying notes, shown in Item 8 of this annual report, present thehistorical cost basis results of the Company as “predecessor” through March 14,2004, and the results of the Company as “successor” after that date, accordingly, certain elements of the successorcompany presentation are not comparable to the predecessor company presentationdue to the different basis of accounting.

For purposes of thefollowing discussion, contained in Item 7 and 7A, regarding the Company’sresults of operations and cash flow, the Company has combined the results ofthe predecessor and successor companies in order to compare the results to theprior year. Material variances caused by the different basis of accounting havebeen disclosed where applicable.

**Year in Review—2005**

The past year was marked by significant revenue growthin nearly all areas of the Company’s business, with total net sales increasingby 20% from 2004. A number of factors contributed to this improvement, whichare documented elsewhere in this Annual Report, with particular emphasis givento the successful implementation of the Company’s graphite golf strategicinitiatives. Entering 2005, a key strategy to drive overall revenue was toincrease the Company’s share of graphite golf unit sales volume from mid-rangeproducts sold through the OEM channel. With the successful transition ofgraphite golf manufacturing into a lower cost base Chinese facility, theCompany was able to secure several new OEM programs, and significantly expandits graphite golf shaft sales. This, along with the other factors describedbelow, helped to drive 2005 overall revenue to $117.6 million, achieving a newrecord for the Company.

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During 2004 the Company was forced to manage costsvery closely in a difficult overall golf market. During this past year, theCompany continued its focus on cost controls and productivity, along with thebackdrop of improving revenue. The Company made appropriate modifications toits pricing policies, managed the mix of products being sold, endeavored toreduce usage of natural gas, and redoubled its efforts aimed at productivity inits various manufacturing facilities in order to offset inflationary pressuresin overall energy costs and raw materials. These initiatives resulted inpushing full year gross profit margins back over 40%, a feat achieved onlytwice in the Company’s history.

These revenue gains andfavorable gross profit results enabled the Company to make voluntary repaymentson its bank debt totaling $12.0 million during 2005; reducing its overallleverage significantly, and positioning the Company well for the challenges of2006.

**Outlook—2006**

In 2006, theCompany plans to expand and enhance its position within the golf market andgrow its presence in the performance sports markets with emphasis on hockeysticks and high end bicycle components. In keeping with this plan, the Companyhas recently developed and launched several new golf products for 2006,including:

·  *Black Gold,*a steel golf shaft combining pinpoint frequency tuning with exacting weight andbalance specifications for the utmost consistency;

·  *M-80*,utilizing a new alloy to create one of the lightest steel golf shafts evermade;

·  *PrototypeCompNT Hybrid,* agraphite golf shaft incorporating carbon nano-tubes into the resin system todramatically improve strength properties and playabilty.

In addition, the Company has a number of new steel andgraphite golf products under development, with scheduled launches during thesecond half of 2006. In addition, a number of its OEM partners are preparingfor club launches during the second half of the year that include eitherbranded or proprietary shafts manufactured by True Temper.

The Company’s performance sports segment is also wellpositioned for growth in 2006. It has completed the transition of all carbonfiber hockey and bike production into its Guangzhou, China facility, and for2006 has expanded its manufacturing capability to enable production of severalnew hockey and bike components such as hockey blades and full one-piece sticks.The Company’s internal targets are for the growth rate in this segment tocontinue at its double digit pace, and to exceed that of its overall golfbusiness percentage gains in 2006.

While the Companyremains excited about these internally driven revenue growth initiatives,expectations are moderated somewhat by the modest growth projections for theoverall golf industry. Key market statistics such as rounds played andequipment sales appear to be trending upward, but are not expected to be robustin the coming twelve months. This will drive the Company to maintain its focuson new products and marketshare initiatives in the golf industry.

**Althoughthe Company expects that these internal and external factors will favorablybenefit its business, such outcomes are subject to uncertainties andunforeseeable factors relating to internal operations and the overall businessenvironment, all of which are difficult to predict and many of which are beyondthe Company’s control. Actual future results may vary materially as a result ofvarious risks and uncertainties, including but not limited to, a reduction indiscretionary consumer spending or a general downturn in the economy.  See Item 1A “Risk Factors” for acomplete discussion of these and other risk factors.**

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**Results of Operations**

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

| ** **                                           | ** ** | **Successor  Company**                       | ** ** | **Combined  Company**                        | ** ** | **Successor  Company**                                               | ** ** | **Predecessor  Company**                                           | ** ** | **Predecessor  Company**                     | ** ** |
|------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                           | ** ** | **Year Ended  December 31,  2005** | ** ** | **Year Ended  December 31,  2004** | ** ** | **Period from  March 15 to  December 31,  2004** | ** ** | **Period from  January 1 to  March 14,  2004** | ** ** | **Year Ended  December 31,  2003** | ** ** |
| Net sales                                            |       |                                         | 100.0      | %                                            |       |                                                                 | 100.0      | %                                                                  |       |                                         | 100.0      | % |   |   | 100.0 | % |   |   | 100.0 | % |   |
| Cost of sales                                        |       |                                         | 59.8       |                                         |       |                                                                 | 73.2       |                                                               |       |                                         | 76.9       |   |   |   | 58.6 |   |   |   | 59.8 |   |   |
| Gross profit                                         |       |                                         | 40.2       |                                         |       |                                                                 | 26.8       |                                                               |       |                                         | 23.1       |   |   |   | 41.4 |   |   |   | 40.2 |   |   |
| Selling, general and  administrative  expenses       |       |                                         | 12.5       |                                         |       |                                                                 | 13.4       |                                                               |       |                                         | 12.2       |   |   |   | 18.0 |   |   |   | 12.7 |   |   |
| Amortization of  intangible assets                   |       |                                         | 11.8       |                                         |       |                                                                 | 11.2       |                                                               |       |                                         | 14.1       |   |   |   | — |   |   |   | — |   |   |
| Business development,  start-up and transition costs |       |                                         | 0.2        |                                         |       |                                                                 | 0.9        |                                                               |       |                                         | 0.9        |   |   |   | 0.5 |   |   |   | 0.7 |   |   |
| Transaction and  reorganization expenses             |       |                                         | —     |                                         |       |                                                                 | 5.5        |                                                               |       |                                         | —     |   |   |   | 26.6 |   |   |   | — |   |   |
| Impairment charge on  long lived assets              |       |                                         | 0.3        |                                         |       |                                                                 | —     |                                                               |       |                                         | —     |   |   |   | — |   |   |   | — |   |   |
| Loss on early  extinguishment of debt                |       |                                         | —     |                                         |       |                                                                 | 9.4        |                                                               |       |                                         | —     |   |   |   | 45.5 |   |   |   | — |   |   |
| Operating income (loss)                              |       |                                         | 15.4       |                                         |       |                                                                 | (13.4      | )                                                                  |       |                                         | (4.2       | ) |   |   | (49.2 | ) |   |   | 26.8 |   |   |
| Interest expense, net of  interest income            |       |                                         | 15.8       |                                         |       |                                                                 | 16.3       |                                                               |       |                                         | 17.3       |   |   |   | 12.3 |   |   |   | 11.2 |   |   |
| Other expenses, net                                  |       |                                         | —     |                                         |       |                                                                 | 0.1        |                                                               |       |                                         | 0.1        |   |   |   | — |   |   |   | 0.1 |   |   |
| Income (loss) before  income taxes                   |       |                                         | (0.4       | )                                            |       |                                                                 | (29.8      | )                                                                  |       |                                         | (21.5      | ) |   |   | (61.5 | ) |   |   | 15.5 |   |   |
| Income tax (benefit)  expense                        |       |                                         | 0.0        |                                         |       |                                                                 | (9.3       | )                                                                  |       |                                         | (8.1       | ) |   |   | (14.1 | ) |   |   | 6.1 |   |   |
| Net income (loss)                                    |       |                                         | (0.4       | )%                                           |       |                                                                 | (20.4      | )%                                                                 |       |                                         | (13.4      | )% |   |   | (47.5 | )% |   |   | 9.3 | % |   |

 

**Year Ended December 31, 2005 Compared to the Year EndedDecember 31, 2004**

***Net Sales***for2005 increased approximately $19.2 million, or 19.5%, to $117.6 million from $98.4million in 2004. 

Golfshaft sales increased approximately $18.5 million, or 20.0%, to $110.8 millionin 2005 from $92.3 million in 2004.  Thisimprovement in revenue was driven by several factors, including a favorableshift in the mix of steel golf shafts sold towards more premium, brandedproducts.  In addition, the Companygenerated greater unit sales of graphite golf shafts, which can be attributedto several factors, including:

·  Increased demand for the Company’s new productofferings such as the Grafalloy ProLaunch graphite shaft, Grafalloy Blue ironshaft, and its recently introduced hybrid graphite shafts;

·  A greater number of successful new clubintroductions from several key OEM partners;

·  General reductions in the overall wholesaleand retail channel inventory positions as compared to prior year levels; and

·  Increased acceptance and usage of theCompany’s graphite golf shaft products in certain OEM partners’ custom optionprograms, primarily in the Grafalloy Blue and ProLaunch family ofproducts.  

Performance sports sales increased approximately $0.7million, or 12.3%, to $6.8 million in 2005 from $6.0 million in 2004.  This increase in revenue was driven primarilyby sales growth in the Company’s bike and hockey categories, which remain thestrategic focus for the performance sports segment, and comprise the majorityof the segment’s new products initiatives.

Net sales to international customers increased approximately$5.9 million, or 16.2%, to $42.4 million in 2005 from $36.5 million in2004.  This increase resulted primarilyfrom the same overall golf industry 

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factors and Companyspecific issues described above, related to golf shaft sales activity.  In addition, the Company has seen a markedincrease in its penetration into the steel golf shaft market in Japan; dueprimarily to its new, light-weight steel shaft offerings that are being wellreceived by the Japanese golfers and overseas OEM club companies.

***Gross Profit***for2005 increased approximately $20.8 million, or 79.0%, to $47.2 million from $26.4million in 2004. Gross profit as a percentage of net sales increased to 40.2%in 2005 from 26.8% in 2004.

As a result of the application of purchase accountingto record the Gilbert Global Acquisition, the Company increased the value ofinventory, to reflect its estimated fair value at the date of acquisition, by$11.7 million which was subsequently reflected in cost of sales correspondingwith the related subsequent sales activity during 2004.  This inventory fair value adjustment andrelated recognition in cost of sales is a non-cash transaction and affects onlythe 2004 results of operations.  Thefollowing paragraph describes the gross profit results of the Company excludingthe impact of this purchase accounting adjustment.

***Gross Profit***for2005 increased approximately $9.2 million, or 24.1%, to $47.2 million from$38.1 million in 2004. Gross profit as a percentage of net sales increased to 40.2%in 2005 from 38.7% in 2004.  The increasein gross profit as a percentage of net sales was driven primarily by (i) increasedselling prices for golf shaft products, (ii) favorable product mix in thepremium steel golf shaft segment, (iii) improved foreign currency exchangerates, and (iv) favorable operating improvements from productivity and costcontrol programs at the Company’s manufacturing facilities, including the laborcost savings realized from the transition of graphite product manufacturing toGuangzhou, China.  These favorablefactors were partially offset by (i) an increase in the cost of raw materialsand natural gas and (ii) the impact of general inflation on the Company’s otherlabor and overhead costs.

***Selling, Generaland Administrative (“SG&A”) Expenses***for 2005increased approximately $1.5 million, or 11.4%, to $14.7 million from $13.2million in 2004.  SG&A as apercentage of net sales decreased to 12.5% in 2005 from 13.4% in 2004.  This decrease in SG&A as a percentage ofnet sales was due primarily to the increase in sales between periods.  The increase in SG&A spending betweenperiods was due in part to (i) incremental advertising and promotion of newproducts, (ii) performance based management expense, and (iii) moderateincreases in travel costs in support of the revenue gains.

During 2005 the Company spent approximately $0.2million on its initial compliance project related to Section 404 of theSarbanes-Oxley Act of 2002 (“SOX”).  In2004 the Company spent approximately $0.1 million on SOX initial compliance. 

***Amortization ofIntangible Assets***for 2005 was $13.8 million.  Intangible assets were acquired in connectionwith the Gilbert Global Acquisition. Intangible assets with definitive lives are being amortized using astraight-line method over periods from 2 to 59 years.  Amortization of intangible assets in 2004 was$11.0 million, which represented amortization from March 15, 2004 throughDecember 31, 2004.

***BusinessDevelopment, Start-Up and Transition Costs***for2005 decreased approximately $0.6 million, or 75.2%, to $0.2 million from $0.8million in 2004.   These costs representvarious start-up business expenses related to the opening of the Company’scomposite manufacturing operation in Southern China, and the relateddown-sizing costs incurred at the Company’s El Cajon, California facility.  The decrease in cost reflects the fact thatthis project is substantially complete.

***Transaction andReorganization Expenses***for 2004 were $5.4 millionand were incurred in conjunction with the sale and purchase agreement for TTCwhich closed on March 15, 2004.  Thesetransaction related expenses include (i) investment banking merger andacquisition fees; (ii) legal fees; and (iii) other incidental costs andexpenses related to the sale of TTC.  Nosuch transaction and reorganization expenses were incurred during 2005.

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***Impairment ChargeOn Long-Lived Assets***for 2005 was $0.4 million andwas incurred in conjunction with the write-down, and subsequent disposal, ofcertain manufacturing equipment originally obtained through the acquisition ofsubstantially all of the tangible, personal property of Apollo Sports in2000.  Apollo Sports was a steel golfshaft competitor in England that went out of business in 2000.  A significant portion of the assets acquiredwere subsequently transferred to the Company’s Amory, Mississippifacility.  This write-off represents theremainder of the assets located in the United Kingdom that were deemed unusable.  No such charges were incurred during 2004.

***Loss on the EarlyExtinguishment of Long-Term Debt***for 2004 was $9.2million.  The costs recorded as loss on theearly extinguishment of long-term debt include (i) the write-off of theremaining deferred financing costs related to our 10 7/8% senior subordinatednotes and our 2002 senior credit facility, and (ii) the early extinguishmentcall premium and related interest we incurred when we redeemed the 10 7/8%senior subordinated notes on March 15, 2004. No long-term debt was extinguished during 2005.

***Operating Income***for2005 increased approximately $31.4 million to $18.2 million from an operatingloss of $13.2 million in 2004. Operating income as a percentage of net salesincreased to 15.4% in 2005 from a loss of 13.4% in 2004. This increase reflectsthe profit impact of the items described above.

Excluding the impact of the 2004 inventory purchaseaccounting adjustment, 2004 transaction and reorganization expenses, 2004 losson early extinguishment of long-term debt, 2005 impairment charge on long-livedassets, and the amortization of intangible assets in both 2004 and 2005,operating income would have increased approximately $8.3 million.  

***Interest Expense,net of Interest Income***for 2005 increased approximately $2.6 million to $18.7 million from $16.0million in 2004.  This increasewas driven primarily by the increase in outstanding principal amounts ofvariable rate bank debt and fixed rate bonds associated with the Gilbert GlobalAcquisition, offset somewhat by a decrease in the interest rate on theCompany’s fixed rate debt between periods.

***Income Tax Expense***for2005 changed to approximately $0.0 compared to an income tax benefit of $9.2million in 2004. The effective tax rate during these periods differs from afederal statutory rate of 34% due primarily to the incremental tax rate forstate 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. 

***NetIncome******for 2005 increased approximately$19.6 million to a net loss of $0.5 million from a net loss of $20.1 million in2004.  This increase reflects the profitimpact from the items described above.***

Excluding the impact ofthe 2004 inventory purchase accounting adjustment, 2004 transaction andreorganization expenses, 2004 loss on early extinguishment of long-term debt,2005 impairment charge on long-lived assets, and the amortization of intangibleassets in both 2004 and 2005, net income would have increased approximately $3.4 million.

**YearEnded December 31, 2004 Compared to the Year Ended December 31, 2003**

***Net sales*** for 2004 decreased $17.8 million,or 15.4%, to $98.4 million from $116.2 million in 2003. Net sales ofgolf shafts decreased by $17.4 million to $92.3 million in 2004 from$109.8 million in 2003. This decline in sales is driven by several factorswhich include:

·       Anoverall reduction of major new club introductions during 2004, as many originalequipment manufacturers (“OEMs”) repositioned their launch plans for 2005 inlight of the year’s market conditions;

·       Continueddeclines in shipments of certain products into the retail market, anddiscounting programs intended to clear the excess inventory of existingproducts through the distribution channel;

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·       Atemporary shift in product mix within the Company’s premium steel shaftcategory, which caused a modest decline in the Company’s average selling price;and

·       Adecline in the Company’s graphite unit volume driven by weaker retailsell-through and demand from some of the Company’s major OEM partners.

During the second half of 2004, it also becameapparent that the inventory levels in the distribution channel were somewhatlarger than once thought, as the extensive channel clearing continued throughyear-end. In addition, the OEM product launch delays the Company wasexperiencing in the first half of the year became even more extended. In somecases they were repositioned as spring 2005 launches. The golf industry wasalso impacted by severe weather related events across the United States.

The Company believes that these unfavorable marketdynamics are not isolated to individual customers or distribution channels, assales to top OEM and golf distributors are flat to down at the majority of theCompany’s key accounts.

Performance sports net sales decreased by$0.5 million to $6.0 million in 2004 from $6.5 million in 2003.This decline was driven primarily by a sales reduction in our hockey categoryas we continued to develop our product line and customer base in this newmarket.

Net sales to our international customers remainedrelatively flat compared to 2003 at $36.5 million. Net sales to ourinternational customers as a percentage of total net sales increased to 37.1%in 2004 compared to 31.5% in 2003. This increase was driven by improved foreigncurrency exchange rates in Japan, the United Kingdom and Australia, and anincrease in units shipped into Southeast Asia as major OEM’s continue to locatea portion of their golf club assembly in that region. These positive factorswere somewhat offset by a decline in the unit sales volume in the UnitedKingdom as they experienced similar market factors as described above for theCompany’s overall golf sales.

***Gross Profit***for the year decreased $20.3 million, or 43.5%, to $26.4 million in2004 from $46.7 million in 2003. Gross profit as a percentage of net salesdecreased to 26.8% from 40.2% the prior year.

As a result of theapplication of purchase accounting to record the Gilbert Global Acquisition theCompany increased the value of inventory, to reflect its estimated fair valueat the date of acquisition, by $11.7 million which was subsequently reflectedin cost of sales corresponding with the related subsequent sales activityduring 2004. This inventory fair value adjustment and related recognition incost of sales is a non-cash transaction and affects only the 2004 results ofoperations. The following two paragraphs describe the gross profit results ofthe Company excluding the impact of this purchase accounting adjustment.

***Gross Profit***for the year decreased $8.7 million, or 18.6%, to $38.1 million in2004 from $46.7 million in 2003. Gross profit as a percentage of net salesdecreased to 38.7% from 40.2% the prior year. The Company’s gross profit margindecreased as a result of several factors, including (i) an increase in thecost of raw materials and natural gas, (ii) continued escalation in thecost of employee healthcare benefits, (iii) the unfavorable impact ofcertain fixed costs in the Company’s manufacturing facilities spread over areduced unit volume, and (iv) an unfavorable product mix shift in theCompany’s premium steel shaft category. These factors were somewhat offset bythe favorable impact of (i) improved foreign currency exchange rates,(ii) increased selling prices on branded and other products,(iii) favorable operating improvements from productivity programs at theCompany’s manufacturing facilities, and (iv) the impact of cost controlactions initiated during 2004 in response to the softness on the revenue line.

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Inthe second quarter of 2003 the Company paid a ratification bonus of $0.7million to the hourly employees represented by the United Steelworkers ofAmerica related to a new four year collective bargaining agreement effective July 1,2003. Excluding the impact of this ratification bonus, gross profit as a percentage of net sales would havedecreased to 38.7% in 2004 from 40.8% in 2003.

***Selling,General and Administrative Expenses*** for the yeardecreased approximately $1.6 million, or 10.8%, to $13.2 million in2004 from $14.7 million in 2003. As a percentage of net sales, selling,general and administrative expenses increased to 13.4% in 2004 from 12.7% theprior year. The decrease in total SG&A spending during 2004 resultedprimarily from cost control actions initiated in response to the softness onthe revenue line.

***Amortizationof Intangible Assets*** in 2004 was $11.0 million. Intangibleassets were acquired in connection with the Gilbert Global Acquisition. Intangibleassets with definitive lives are being amortized using a straight-line methodover periods from 2 to 59 years. 

***BusinessDevelopment, Start-Up Costs and Transition Costs*** remainedrelatively flat compared to 2003. In 2003 and 2004 these costs representvarious start-up business expenses related to the opening of the Company’scomposite manufacturing operation in Southern China, and the relateddown-sizing costs incurred at the Company’s El Cajon, California facility. 

***Transactionand Reorganization Expenses*** for the year were $5.4million, and were incurred in conjunction with the sale and purchase agreementfor TTC which closed on March 15, 2004. These transaction related expensesinclude (i) investment banking merger and acquisition fees, (ii) legalfees, and (iii) other incidental costs and expenses related to the sale ofTTC. No such transaction and reorganization expenses were incurred during 2003.

***Losson Early Extinguishment of Long-Term Debt***forthe year was $9.2 million. The costs recorded as loss on the earlyextinguishment of long term debt include (i) the write-off of theremaining deferred financing costs related to the Company’s 107¤8% seniorsubordinated notes and the Company’s 2002 senior credit facility, and (ii) theearly extinguishment call premium and related interest the Company incurredwhen it redeemed the 107¤8%senior subordinated notes on March 15, 2004. No long-term debt wasextinguished during 2003.

***OperatingIncome*** in 2004 decreased by $44.3 million, to a lossof $13.2 million compared to income of $31.1 million in 2003.Operating income as a percentage of net sales decreased to a loss of 13.4% in2004 from income of 26.8% in 2003. This decrease reflects the profit impact ofthe items described above. 

Excluding the impact ofthe inventory purchase accounting adjustment, amortization of intangibleassets, transaction and reorganization expenses and the loss on earlyextinguishment of long-term debt in 2004 as well as the 2003 ratificationbonus, operating income would have decreased approximately $7.7 million.

***InterestExpense*** for the year increased by $3.0 million, to$16.0 million in 2004 from $13.0 million in 2003. This increasewas driven primarily by the increase in outstanding principal amounts ofvariable rate bank debt and fixed rate bonds, offset somewhat by a decrease ininterest rates on both the variable and fixed rate debt between periods.

***IncomeTax*** expense decreased by $16.3 million, to a$9.2 million benefit in 2004 from $7.1 million expense in 2003. Thisdecrease was driven primarily by the pretax expenses recorded as a result ofthe transaction and reorganization on March 15, 2004. The effective taxrate during these periods differs from a federal statutory rate of 34% dueprimarily to the incremental tax 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.

***NetIncome*** in 2004 decreased by approximately $30.9 million,to a loss of $20.1 million from income of $10.9 million in 2003, andreflects the impact of the changes described above. 

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Excluding the impact ofthe inventory purchase accounting adjustment, amortization of intangibleassets, transaction and reorganization expenses and the loss on earlyextinguishment of long-term debt in 2004 as well as the 2003 ratificationbonus, net income in 2004 would have decreased by approximately $6.4 million.

**Liquidity andCapital Resources**

Thefollowing table shows cash flow activity by source. Discussion of cash flowactivity is noted below.

| ** **                                 | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
| Net cash provided  by operating activities |       | $        | 15,936     |     | $          | 9,684 |   |
| Net cash used in  investing activities     |       | $        | (2,031     | )        | $          | (1,512 | ) |
| Net cash used in  financing activities     |       | $        | (12,509    | )        | $          | (13,224 | ) |

 

**General**

At the beginning of 2003the Company had a senior credit facility (the “2002 Senior Credit Facility”)which included a $15.0 million non-amortizing revolving credit facility and a$25.0 million term loan. Amounts under the revolving credit facility wereavailable on a revolving basis through December 31, 2007. The term loanrequired quarterly cash interest and principal payments beginning in March 2003and continuing through December 2007.

In addition, the Companyhad $99.7 million in 107¤8%Senior Subordinated Notes Due 2008 (the “107¤8% Notes”). The107¤8%Notes required cash interest payments each June 1 and December 1,beginning June 1, 1999. The 107¤8%Notes were redeemable at the Company’s option, under certain circumstances andat certain redemption prices, beginning December 1, 2003.

As part of the GilbertGlobal Acquisition the Company entered into a new senior credit facility (the “2004Senior Credit Facility”) which includes a $20.0 million non-amortizingrevolving credit facility and a $110.0 million Term B loan (as amended fromtime to time). The term loan requires cash interest payments and quarterlyprincipal payments beginning June 30, 2004 and continuing through March 15, 2011.

Also in conjunction withthe Gilbert Global Acquisition the Company issued new 83¤8%Senior Subordinated Notes due 2011 (the “83¤8% Notes”). The83¤8%Notes require cash interest payments each March 15th and September 15th commencing on September 15, 2004. The 83¤8%Notes are redeemable at the Company’s option, under certain circumstances andat certain redemption prices, beginning March 15, 2008. 

The Company used theproceeds from the 2004 Senior Credit Facility and the 83¤8%Notes to pay off the existing debt that was outstanding at closing on March 15,2004. Also, a portion of the proceeds were used to pay a dividend to TTC inorder that TTC could repay the outstanding balance on its senior discount noteswhich carried a 13.25% PIK interest rate or a 12.25% cash interest rate. 

Both the 2004 SeniorCredit Facility and the 83¤8% Notescontain covenants and events of default, including substantial restrictions andprovisions which, among other things, limit the Company’s ability to incuradditional indebtedness, make acquisitions and capital expenditures, sellassets, create liens or other encumbrances, make certain payments anddividends, or merge or consolidate. 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. Furthermore, the 2004 Senior Credit Facility requirescertain mandatory prepayments including payments from the net proceeds ofcertain asset sales and a portion of the Company’s excess cash flow as definedwithin the credit agreement.

On September 24, 2004 the Company executed anamendment to its 2004 Senior credit Facility (the “Amendment”). The Amendmentwas approved by the Company, Credit Suisse First Boston acting as 

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administrative agent andcollateral agent, and by a majority of the lenders who were party to the 2004Senior Credit Facility on such date. The Amendment provided adjustments tocertain specified financial ratios and tests included in the 2004 Senior CreditFacility. As part of the Amendment, the margin adder on LIBOR based loans wasincreased from 2.50% to between 2.75% and 3.00%, depending on financial ratios,beginning September 24, 2004 and continuing through December 31, 2005.At December 31, 2005 the Company was in compliance with all of the covenantsin both the 2004 Senior Credit Facility and the 83¤8%Notes.

On March 27, 2006 theCompany amended and restated its 2004 Senior Credit Facility (the “2006Restatement”).  The Restatement wasapproved by the Company, Credit Suisse acting as administrative agent andcollateral agent, and by a majority of the lenders who were party to the 2004Senior Credit Facility at that date.  TheRestatement includes additional term loans under the Company’s existing SeniorSecured Credit Facilities of approximately $15.0 million, amendments thatenable the Company to pursue future acquisitions, and the necessary flexibilityto execute on the Company’s global strategic and operational initiatives.

***Discussion of Cash Flows for Years Ended December 31,2005 and 2004***

Net cash provided by operating activities increasedapproximately $6.3 million between periods, as net income increased during2005. In addition, the Company decreased total inventory by approximately $2.3million during 2005. Offsetting the cash from operations generated by theaforementioned items, trade accounts receivable increased approximately $3.4million during 2005, due primarily to the increase in sales between periods.

The Company used $2.6million of cash to invest in property, plant and equipment in 2005, compared tothe $1.6 million spent in 2004. The increase in investments in property, plantand equipment is the result of additional automation efforts aimed at improvingquality and productivity in the Company’s manufacturing facilities. Inaddition, an under-utilized production facility located in Olive Branch,Mississippi was sold during the third quarter of 2005, generating net proceedsof approximately $0.8 million.

The Company used $12.5million of net cash for financing activities in 2005 as compared to $13.2million in 2004. The 2005 activity includes voluntary prepayments of principalon the 2004 Senior Credit Facility totaling $12.0 million.

The 2004 activity includesthe result of the Gilbert Global Acquisition as noted above. On March 15,2004, the proceeds from issuing the 2004 Senior Credit Facility and theproceeds from issuing the 83¤8% Notes, pluscash generated from operations during the first quarter, and cash on hand atthe beginning of that quarter were used to (i) repay the outstandingprincipal and interest on the Company’s 2002 senior credit facility,(ii) redeem and repay the 107¤8%Notes including accrued and unpaid interest and early redemption call premium,(iii) pay for debt issuance costs on the 2004 senior credit facility andthe 83¤8%Notes, (iv) pay for transaction and reorganization expenses, and(v) make a distribution of the net remaining equity to the sellingshareholders.

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***ExistingContractual Cash Obligations***

Thefollowing table reflects the Company’s contractual cash obligations forlong-term debt and operating leases as of December 31, 2005 (dollars inmillions):

| ** **               | ** ** | **Total** | ** ** | ** 2006** | ** ** | **2007  through  2008** | ** ** | **2009  through  2010** | ** ** | **Thereafter** | ** ** |
|--------------------------|------------|-----------|------------|----------------|------------|-------------------------|------------|-------------------------|------------|----------------|------------|
| Long-Term Debt(1)        |       | $         | 220.7      |           |       | $                       | 0.2        |                    |       |           | $          | 2.0 |   |   |   | $ | 70.4 |   |   |   | $ | 148.1 |   |   |
| Operating Leases         |       | 3.7       |       |           | 1.1        |                    |       |                    | 1.9        |           |       |   | 0.6 |   |   |   | 0.1 |   |   |
| Purchase  Commitments(2) |       | 0.8       |       |           | 0.8        |                    |       |                    | —     |           |       |   | — |   |   |   | — |   |   |
| Total(3)                 |       | $         | 225.2      |           |       | $                       | 2.1        |                    |       |           | $          | 3.9 |   |   |   | $ | 71.0 |   |   |   | $148.2 |   |   |

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(1)   The Company’s long-term debt agreements contain customarychange of control provisions that could, under certain circumstances, causeaccelerated debt repayment.

(2)   Amount represents the purchase commitments for natural gas andnickel used in the manufacture of steel golf shafts at the Amory, Mississippifacility.

(3)   This table does not include future obligations related to fundingpension benefits.

***Future CashGeneration and Use***

Currentlythe Company’s intention is to use existing cash and cash provided from futureoperations, if any, as allowed within the covenants of the 2004 Senior CreditFacility and the 83¤8%Notes, to:

·  Repaythe principal on the 2004 Senior Credit Facility; and/or

·  Tomake additional investments in the business, which may include, among otherthings, capital expenditures, business acquisitions, and/or expenditures forbusiness development and expansion in China.

In addition to the debtservice obligations for principal and interest payments, the Company’sliquidity needs largely relate to working capital requirements and capitalexpenditures for machinery and equipment. The Company intends to fund itscurrent and long-term working capital, capital expenditure and debt servicerequirements through cash flow generated from operations. However, since therecan be no assurance of future performance, as of December 31, 2005 theCompany has the $20.0 million revolving credit facility available for futurecash requirements. The maximum amount the Company may use of the $20.0 millionrevolving credit facility is limited by the financial covenants containedwithin the 2004 Senior Credit Facility. As of December 31, 2005, theCompany believes that cash flow generated from operations, in addition to otherfinancing sources, will be sufficient to meet its cash obligations for theensuing 12 month period.

In addition to theCompany’s cash obligations for interest and principal payments related to itsdebt obligations, the Company also has a management services agreement with anaffiliate of the principle common stock holder in its parent company, whichrequires the payment of an annual advisory fee of $0.5 million.

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

***Discussion of CashFlows for Years Ended December 31, 2004 and 2003***

Cash provided by operatingactivities declined $12.3 million between periods, as net income declined dueto the lower net sales during 2004. In addition, the Company built inventory tofacilitate the transition 

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ofgraphite golf shaft production from its El Cajon, California facility to itsnewly established plant in Guangzhou, China, as well as in anticipation ofstronger sales in future periods. 

We used $1.5 million ofcash to invest in property, plant and equipment in 2004, compared to the $3.5million spent in 2003.

The Company used $13.2million of net cash for financing activities in 2004 as compared to $16.6million in 2003. The 2004 activity included the proceeds from issuing the 2004Senior Credit Facility and the proceeds from issuing the 83¤8%Notes. These proceeds, plus cash generated from operations during the firstquarter, and cash on hand at the beginning of 2004 were used to (i) repaythe outstanding principal and interest on the Company’s 2002 Senior CreditFacility, (ii) to redeem and repay the 107¤8% Notesincluding their accrued and unpaid interest and early redemption call premium, (iii) topay for debt issuance costs on the 2004 Senior Credit Facility and the 83¤8%Notes, (iv) to pay for transaction and reorganization expenses, and (v) toissue a dividend to the Company’s parent company, TTC.

In the third quarter of2004, the Company repaid $2.3 million of principal on its 2004 Senior CreditFacility. The $2.3 million principal repayment included $0.3 million ofmandatory payments and $2.0 million of voluntary prepayments. As a result ofthis voluntary prepayment, the Company has no mandatory quarterly principalpayments for the twelve month period following the date of the voluntaryprepayment on September 24, 2004.

**Seasonality**

In general, the componentsupplier sales to golf equipment companies and distributors are seasonal, andtend to precede the warm weather golf season. However, there are exceptions,especially for those suppliers that sell to the high volume opening price pointgolf club manufacturers who sell their product through mass channel retailstores and generate strong volumes during the holiday gift-giving season. Ourbusiness does experience some seasonal fluctuations, based on a five yearaverage, approximately 55% of our net sales are generated in the first half ofthe year, and the remaining 45% of our net sales are generated in the secondhalf.

**Inflation**

As a general rule wedo not believe inflation has had a dramatic impact on our historical results ofoperations, as we experience inflation trends that are consistent with thenational averages and probably similar to other domestic manufacturers.

Nonetheless, as noted inour earlier disclosure regarding the changes in gross profit, we haveexperienced an increase in the cost of natural gas used for our steel plantoperations in Amory, Mississippi. Based upon current market prices andpurchases of natural gas contracts for 2006, we expect natural gas costs to be relativelyflat in 2006.

In addition, during 2005,we recognized an increase in cost for carbon fiber prepreg, the primary rawmaterial used in the manufacture of graphite golf shafts, hockey sticks andbicycle components. We believe our cost increases were consistent with thoseexperienced by other users of prepreg material during 2005. We expect that ourcosts for prepreg material will increase again in 2006, at a similar rate to2005 and in amounts consistent with other companies using similar materials.

**CriticalAccounting Policies and Estimates**

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America (“GAAP”) requires the appropriateapplication of certain accounting policies, many of which require ourmanagement to make estimates and assumptions about future events and theirimpact on amounts reported in the financial statements and accompanying notes.Since future events and their impact cannot be determined with absolutecertainty, the actual results will inevitably differ from our management’sestimates. Such differences may be material to the financial statements.

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We believe that ourapplication of accounting policies, and the estimates inherently requiredtherein, are reasonable under the circumstances. These accounting policies andestimates are constantly reevaluated, and adjustments are made when facts andcircumstances dictate a change. Historically, we have found our application ofaccounting policies to be appropriate, and actual results have not differed materiallyfrom those determined using necessary estimates.

Our accounting policies are more fully described innote 2 to our consolidated financial statements located elsewhere in thisannual report. We have identified certain critical accounting policies whichare described below.

***RevenueRecognition.******  ***We derive substantially all of ourrevenue from the sales of golf shafts and performance sports products. Revenueis recognized when all of the following conditions exist: (i) persuasiveevidence of an arrangement exists, (ii) delivery has occurred, (iii) therevenue amount is determinable and (iv) collection is reasonably assured.Liabilities are established for estimated returns, allowances, and discounts atthe time revenue is recognized.

***Pension and OtherPostretirement Obligations.******  ***Pensionand other postretirement benefits costs and obligations are dependent onassumptions used in calculating such amounts. These assumptions includediscount rates, expected return on plan assets, rates of salary increase,health care cost trend rates, mortality rates, and other factors. Theseassumptions are updated on an annual basis prior to the beginning of each year.The Company considers current market conditions, including interest rates, inmaking these assumptions. The Company develops the discount rates by consideringthe yields available on high-quality fixed income investments with maturitiescorresponding to the related benefit obligation. The Company’s discount ratefor its defined benefit pension plans was 5.75% and 6.00% at December 31,2005 and 2004, respectively. As discussed further in Note 9 of the Notes toConsolidated Financial Statements, the Company develops the expected return onplan assets by considering various factors, which include its targeted assetallocation percentages, historic returns, and expected future returns. TheCompany’s expected long-term rate of return assumption for assets in itsdefined benefit plan for 2005 and 2006 is 8.50%.

The Company believes that the assumptions used areappropriate; however, differences in actual experience or changes in theassumptions may materially affect the Company’s financial position or resultsof operations. In accordance with accounting principles generally accepted inthe United States, actual results that differ from the actuarial assumptions areaccumulated and, if in excess of a specified corridor, amortized over futureperiods and, therefore, generally affect recognized expense and the recordedobligation in future periods. Also, gains and losses resulting from changes inassumptions are amortized over the expected remaining service period of activeplan participants or, for retired participants, the average remaining lifeexpectancy, to the extent that such amounts exceed 10% of the greater of themarket-related value of plan assets or the projected benefit obligation at thebeginning of the year. The Company expects that its pension and otherpostretirement benefit costs in 2006 will exceed the costs recognized in 2005by approximately $0.2 million. This increase is principally attributable to thereduction in the assumed discount rate used to value the projected benefitobligation as of December 31, 2005.

***Impairment of Long-Lived Assets, Including Goodwill.******  ***We account forlong-lived assets in accordance with the provisions of Statement No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets* (Statement 144) and evaluate our goodwill forimpairment under Statement No. 142, *Goodwilland Other Intangible Assets* (Statement 142). We evaluate ourgoodwill for impairment on an annual basis. We periodically evaluate ourlong-lived assets, including goodwill, for indicators that would suggest thatthe carrying amount of the assets may not be recoverable. The judgmentsregarding the existence of such indicators are based on factors such asoperating performance, market conditions, and legal factors. The valuation ofour long-lived assets, including goodwill requires us to use our judgment inevaluating these indicators.

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In accordance with SFAS No. 144, long-livedassets, such as property, plant, and equipment, and purchased intangiblessubject to amortization, are reviewed for impairment whenever events or changesin circumstances indicate that the carrying amount of an asset may not berecoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount of an asset to estimated undiscounted futurecash flows expected to be generated by the asset. If the carrying amount of anasset exceeds its estimated future cash flows, an impairment charge isrecognized by the amount by which the carrying amount of the asset exceeds thefair value of the asset. Assets to be disposed of would be separately presentedin the balance sheet and reported at the lower of the carrying amount or fairvalue less costs to sell, and are no longer depreciated. The assets andliabilities of a disposal group classified as held for sale would be presentedseparately in the appropriate asset and liability sections of the balancesheet.

Goodwill and intangibleassets not subject to amortization are tested annually for impairment, and aretested for impairment more frequently if events and circumstances indicate thatthe asset might be impaired. An impairment loss is recognized to the extentthat the carrying amount exceeds the asset’s fair value.

***Valuation for Deferred Income Taxes.******  ***Our financialstatements include an estimate of income taxes assessed in each legaljurisdiction in which we operate. These income taxes include both a currentpayable amount, as well as a deferred portion which results from a variety oftemporary book versus tax treatment differences. These differences result indeferred tax assets and liabilities, which are included in our balance sheet.Once established, any deferred tax asset must be evaluated to determine thelikelihood that we will generate sufficient future taxable income to utilizethe full amount. When facts and circumstances warrant, we establish, increaseor reduce valuation allowances associated with deferred tax assets in order toreflect which assets meet the more likely than not realizability test.

**Impactof Recently Issued Accounting Standards**

In December 2004, theFASB issued Statement No. 123 (revised December 2004), *Share-Based Payment*(“Statement 123(R)”). Statement 123(R) replacesFASB Statement 123, *Accounting for Stock-BasedCompensation*, and supersedes APB Opinion No. 25, *Accounting for Stock Issued to Employees*. Statement 123(R) willrequire compensation costs related to share-based payment transactions to berecognized in the financial statements. With limited exceptions, the amount ofcompensation cost will be measured based on the grant-date fair value of theequity or the liability instruments issued. In addition, liability awards willbe remeasured each reporting period. Compensation cost will be recognized overthe period that an employee provides service in exchange for the award. Statement123(R) is effective as of the beginning of the first annual reportingperiod that begins after June 15, 2005. The Company does not believe theadoption of Statement 123(R) will have a material impact on the company’sconsolidated financial condition or results of operations taken as a whole.

In November 2004, the FASB issued SFAS No. 151,Inventory Costs. The Company is required to adopt the provisions of SFASNo. 151, on a prospective basis, as of January 1, 2006. SFASNo. 151 clarifies the accounting for abnormal amounts of idle facilityexpense, freight, handling costs, and wasted material. SFAS No. 151requires that those items—if abnormal—be recognized as expenses in the periodincurred. In addition, SFAS No. 151 requires the allocation of fixed productionoverheads to the costs of conversions based upon the normal capacity of theproduction facilities. The Company does not believe that the adoption of SFASNo. 151 will have a material impact on its financial position or resultsof operations.

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**Item 7A.**                *Quantitative and Qualitative Disclosures About Market Risk*

**Interest Rate Sensitivity**

Thetable below provides information about our debt obligations as ofDecember 31, 2005 that are sensitive to changes in interest rates. Thetable presents cash flows and related weighted average interest rates byexpected maturity dates (dollars in millions).

| ** **                                       | ** ** | **Expected Maturity Date** | ** ** | **There-** | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|------------|------------|------------|------------|
| **LONG TERM DEBT**                     | ** ** | ** **                           | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **after** | ** ** | **Total** | ** ** |
| Fixed Rate 83¤8%  Senior Subordinated Notes |       | $                                    | —     |       | $          | —     |       | $ | — |   | $ | — |   | $ | — |   | $ | 125.0 |   | $ | 125.0 |   |
| Average Interest Rate                            |       |                                 |       |       |       |       |       |   |   |   |   | 8.38 | % | 8.38 | % |
| Variable Rate Senior  Credit Facility            |       | $                                    | 0.2        |       | $          | 1.0        |       | $ | 1.0 |   | $ | 1.0 |   | $ | 69.4 |   | $ | 148.1 |   | $ | 95.7 |   |
| Average Interest Rate(a)                         |       |                                 |       |       |       |       |       |   |   |   |   |   |   | 7.53 | % |
|                                                  |            |                                      |            |            |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(a)           Variablerate long-term debt is comprised of term loans under the 2004 Senior CreditFacility, which provides for interest at our option, at (1) the base rateof the bank acting as administrative agent plus a margin adder of 2.00%, or(2) under a LIBOR option with a borrowing spread of LIBOR plus 2.50% to3.00%, depending on certain financial ratios.

**Exchange RateSensitivity**

We use forward foreignexchange contracts (“Instruments” or “Derivative Instruments”) in ourmanagement of foreign currency exchange rate exposures. Instruments used ashedges must be effective at reducing the risks associated with the underlyingexposure and must be designated as a hedge at the inception of the contract.Accordingly, changes in the market value of the Instruments must have a highdegree of inverse correlation with changes in the market value or cash flows ofthe underlying hedged item.

Weuse Derivative Instruments to hedge several components of our revenue and cashcollection stream, including, (i) anticipated foreign currency sales, (ii) accountsreceivable denominated in foreign currencies, and (iii) cash balancesmaintained in foreign currencies.

The changes in the marketvalue of Derivative Instruments hedging anticipated foreign currency sales arerecognized in the consolidated balance sheets as a component of accumulatedother comprehensive income in stockholder’s equity. To the extent an instrumentis no longer effective as a hedge due to a change in the underlying exposure,gains and losses are recognized currently in the consolidated statements ofoperations as a component of cost of sales.

The changes in the marketvalue of Derivative Instruments hedging accounts receivable or cash denominatedin foreign currency are recognized as a component of operating income duringthe period of the change, as they are marked to market on a monthly basis.

At December 31, 2005,the Company had no outstanding forward foreign currency contracts designated ashedging instruments.

Assuming a hypothetical10% adverse change in all foreign currencies, with the resulting functionalcurrency gains and losses translated into U.S. dollars at the spot rate, theloss in fair value of exchange contracts held on December 31, 2005, wouldbe $0.5 million. Those losses would be offset, in part, by gains on theunderlying receivables and cash being hedged. See note 2(h) to ourconsolidated financial statements located elsewhere in this annual report forfurther discussion of foreign currencies.

**Commodity Risk**

We have some exposure torisks associated with fluctuations in prices for commodities such as nickel andnatural gas which are used to manufacture our products. Nickel is used in theplating of steel golf shafts, and natural gas is used as an energy source primarilyin our steel manufacturing operations. In some cases we will purchase contractsto lock in prices for both nickel and natural gas to be delivered anywhere fromone to twenty-four months from the date the contract is consummated. As of December 31,2005 we held either under contract or have purchased approximately 8% of ourexpected 2006 usage of natural gas, and 50% of our expected 2006 usage ofnickel.

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**Item 8.**                        *Financial Statements and Supplementary Data*

**Report of Independent Registered Public AccountingFirm**

The Board of DirectorsTrue Temper Sports, Inc.

We have audited the accompanying consolidated balancesheets of True Temper Sports, Inc. and subsidiaries (the Company) as of December 31,2005 and 2004 and the related consolidated statements of operations,stockholder’s equity and comprehensive income, and cash flows for the yearended December 31, 2005 and for the period from March 15, 2004 to December 31,2004. We have also audited the related consolidated statements of operations,stockholder’s equity and comprehensive income and cash flows of the predecessorof the Company (the Predecessor) for the period from January 1, 2004 to March 14,2004 and for the year ended December 31, 2003. In connection with ouraudits of the consolidated financial statements, we also audited theaccompanying financial statement schedule. These consolidated financialstatements and the financial statement schedule are the responsibility of theCompany’s management. Our responsibility is to express an opinion on theseconsolidated financial statements and the financial statement schedule based onour audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of True Temper Sports, Inc. and subsidiaries as of December 31,2005 and 2004 and the results of their operations and their cash flows for theyear ended December 31, 2005 and for the period from March 15, 2004to December 31, 2004 and the results of operations and cash flows of thePredecessor for the period from January 1, 2004 to March 14, 2004 andfor the year ended December 31, 2003, in conformity with U.S. generallyaccepted accounting principles. Also, in our opinion, the related financialstatement schedule, when considered in relation to the consolidated financialstatements taken as a whole, presents fairly, in all material respects, theinformation set forth therein.

Asdiscussed in Note 1 to the consolidated financial statements, the Company’sconsolidated financial statements reflect the effect of the purchase method ofaccounting, which is a different basis of accounting than the Predecessor’sconsolidated financial statements, which are reflected on a historical costbasis. Therefore, the Company’s consolidated financial statements are notcomparable to the Predecessor’s consolidated financial statements.
| KPMG LLP             |   |
|----------------------|--------|
| Memphis,  Tennessee  |
| March 27,  2006 |

 

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

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Dollars in thousands)**

| ** **                                                 | ** ** | **Successor Company**             | ** ** | ** **                                                     | ** ** | **Predecessor Company** | ** **  |
|------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------|-------------|
| ** **                                                 | ** ** | **Year ended  December 31,** | ** ** | **Period from  March 15  To December 31,** | ** ** | ** **                   | ** **  | **Period from  January 1  To March 14,** | ** ** | **Year ended  December 31,** | ** ** |
| ** **                                                 | ** ** | **2005**                               | ** ** | **2004**                                                       | ** ** | ** **                   | ** **  | **2004** | ** ** | **2003** | ** ** |
| **NET  SALES**                                             | ** ** |                                   | **$**      | **117,594**                                                    |       |                         |        | **$** | **78,120** | ** ** |   |   |   |   | **$** | **20,247** | ** ** |   |   | **$** | **116,206** | ** ** |   |
| Cost of sales                                              |       |                                   | 70,362     |                                                           |       |                         | 60,104      |   |   |   |   |   | 11,871 |   |   |   | 69,470 | ** ** |   |
| **GROSS PROFIT**                                           | ** ** |                                   | **47,232** |                                                           |       |                         | **18,016**  | ** ** |   |   |   |   | **8,376** | ** ** |   |   | **46,736** | ** ** |   |
| Selling, general and administrative expenses               |       |                                   | 14,660     |                                                           |       |                         | 9,520       |   |   |   |   |   | 3,635 |   |   |   | 14,747 | ** ** |   |
| Amortization of  intangible assets                         |       |                                   | 13,840     |                                                           |       |                         | 10,984      |   |   |   |   |   | — |   |   |   | — | ** ** |   |
| Business  development, start-up costs and transition costs |       |                                   | 208        |                                                           |       |                         | 738         |   |   |   |   |   | 100 |   |   |   | 869 | ** ** |   |
| Transaction and  reorganization expense                    |       |                                   | —     |                                                           |       |                         | 25          |   |   |   |   |   | 5,381 |   |   |   | — | ** ** |   |
| Impairment charge  on long lived assets                    |       |                                   | 357        |                                                           |       |                         | —      |   |   |   |   |   | — |   |   |   | — | ** ** |   |
| Loss on early  extinguishment of long-term   debt          |       |                                   | —     |                                                           |       |                         | —      |   |   |   |   |   | 9,217 |   |   |   | — | ** ** |   |
| **OPERATING INCOME (LOSS)**                                | ** ** |                                   | **18,167** |                                                           |       |                         | **(3,251**  | **)** |   |   |   |   | **(9,957** | **)** |   |   | **31,120** | ** ** |   |
| Interest expense, net of interest income                   |       |                                   | 18,631     |                                                           |       |                         | 13,491      |   |   |   |   |   | 2,498 |   |   |   | 13,017 | ** ** |   |
| Other (income) expenses,  net                              |       |                                   | (31        | )                                                              |       |                         | 72          |   |   |   |   |   | (2 | ) |   |   | 132 | ** ** |   |
| **INCOME (LOSS) BEFORE INCOME TAXES**                 | ** ** |                                   | **(433**   | **)**                                                          |       |                         | **(16,814** | **)** |   |   |   |   | **(12,453** | **)** |   |   | **17,971** | ** ** |   |
| Income tax (benefit) expense                               |       |                                   | 33         |                                                           |       |                         | (6,350      | ) |   |   |   |   | (2,845 | ) |   |   | 7,113 | ** ** |   |
| **NET  INCOME (LOSS)**                                     | ** ** |                                   | **$**      | **(466**                                                       | **)**      |                         |        | **$** | **(10,464** | **)** |   |   |   |   | **$** | **(9,608** | **)** |   |   | **$** | **10,858** | ** ** |   |

 

See accompanying notes to consolidated financial statements.

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

**CONSOLIDATED BALANCE SHEETS**

**(Dollars in thousands)**

| ** **                                                                                                | ** ** | **Successor Company** | ** **  | ** **            |
|-----------------------------------------------------------------------------------------------------------|------------|----------------------------|-------------|-----------------------|
| ** **                                                                                                | ** ** | **December 31,**      | ** **  | **December 31,** | ** ** | ** ** |
| ** **                                                                                                | ** ** | **2005**                   | ** **  | **2004**              | ** ** | ** ** |
| **ASSETS**                                                                                                |       |                       |        |                  |   |   |   |   |   |   |
| **CURRENT ASSETS**                                                                                        |       |                       |        |                  |   |   |   |   |   |   |
| Cash and cash equivalents                                                                                 |       |                       | $           | 4,733                 |   |   |   | $ | 3,337 |   |   |   |
| Receivables, net                                                                                          |       |                       | 17,949      |                  |   |   | 14,578 |   |   |   |
| Inventories                                                                                               |       |                       | 19,633      |                  |   |   | 21,910 |   |   |   |
| Deferred financing costs                                                                                  |       |                       | 1,239       |                  |   |   | 1,449 |   |   |   |
| Prepaid expenses and other current assets                                                                 |       |                       | 2,591       |                  |   |   | 2,084 |   |   |   |
| **Total current assets**                                                                                  | ** ** | ** **                 | **46,145**  |                  | ** ** | ** ** | **43,358** |   |   |   |
| Property, plant and equipment, net                                                                        |       |                       | 12,210      |                  |   |   | 13,407 |   |   |   |
| Goodwill, net                                                                                             |       |                       | 150,883     |                  |   |   | 150,883 |   |   |   |
| Intangible  assets, net                                                                                   |       |                       | 132,629     |                  |   |   | 146,266 |   |   |   |
| Deferred  financing costs, net                                                                            |       |                       | 5,265       |                  |   |   | 6,504 |   |   |   |
| Other assets                                                                                              |       |                       | 923         |                  |   |   | 407 |   |   |   |
| **Total assets**                                                                                          | ** ** | ** **                 | **$**       | **348,055**           |   | ** ** | ** ** | **$** | **360,825** |   |   |   |
| **LIABILITIES & STOCKHOLDER’S EQUITY**                                                      |       |                       |        |                  |   |   |   |   |   |   |
| **CURRENT LIABILITIES**                                                                                   |       |                       |        |                  |   |   |   |   |   |   |
| Current portion of long-term debt                                                                         |       |                       | $           | 245                   |   |   |   | $ | 545 |   |   |   |
| Accounts payable                                                                                          |       |                       | 4,410       |                  |   |   | 4,356 |   |   |   |
| Accrued expenses and other current liabilities                                                            |       |                       | 9,896       |                  |   |   | 9,796 |   |   |   |
| **Total current liabilities**                                                                             | ** ** | ** **                 | **14,551**  |                  | ** ** | ** ** | **14,697** |   |   |   |
| Deferred tax  liability, net                                                                              |       |                       | 4,531       |                  |   |   | 5,403 |   |   |   |
| Long-term debt, net  of current portion                                                                   |       |                       | 220,480     |                  |   |   | 232,180 |   |   |   |
| Other liabilities                                                                                         |       |                       | 8,729       |                  |   |   | 7,215 |   |   |   |
| **Total liabilities**                                                                                     | ** ** | ** **                 | **248,291** |                  | ** ** | ** ** | **259,495** |   |   |   |
| **STOCKHOLDER’S  EQUITY**                                                                            |       |                       |        |                  |   |   |   |   |   |   |
| Common stock—par  value $0.01 per share; authorized 1,000 shares; issued and outstanding 100  shares |       |                       | —      |                  |   |   | — |   |   |   |
| Additional  paid-in capital                                                                               |       |                       | 111,943     |                  |   |   | 111,943 |   |   |   |
| Accumulated deficit                                                                                       |       |                       | (10,930     | )                     |   |   | (10,464 | ) |   |   |
| Accumulated other  comprehensive loss, net of taxes                                                       |       |                       | (1,249      | )                     |   |   | (149 | ) |   |   |
| **Total stockholder’s equity**                                                                       | ** ** | ** **                 | **99,764**  |                  | ** ** | ** ** | **101,330** |   |   |   |
| Commitments and  contingent liabilities (See Note 11)                                                     | ** ** | ** **                 | —      |                  | ** ** | ** ** | — |   |   |   |
| **Total  liabilities and stockholder’s equity**                                                      | ** ** | ** **                 | **$**       | **348,055**           |   | ** ** | ** ** | **$** | **360,825** |   |   |   |

 

See accompanying notes to consolidated financial statements.

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

**CONSOLIDATED STATEMENTS OFSTOCKHOLDER’S EQUITY ANDCOMPREHENSIVE INCOME**

**(Dollars in thousands)**

| ** **                                                                     | ** ** | ** **            | ** ** | ** **         | ** ** | ** **       | ** **        | **Retained**      | ** ** | **Accumulated** | ** **        | ** ** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------|------------|------------------|-------------------|-------------------|------------|-----------------|-------------------|------------|------------|
| ** **                                                                     | ** ** | ** **            | ** ** | ** **         | ** ** | **Additional**   | ** **        | **Earnings/**     | ** ** | **Other**       | ** **        | ** ** | ** ** |
| ** **                                                                     | ** ** | **Common Stock** | ** ** | **Paid-In**        | ** ** | **(Accumulated** | ** **        | **Comprehensive** | ** ** | ** **      | ** **        |
| ** **                                                                     | ** ** | **Shares**            | ** ** | **Par Value** | ** ** | **Capital**      | ** **        | **Deficit)**      | ** ** | **Loss**        | ** **        | **Total**  | ** ** |
| **Balance  at December 31, 2002**                                         |       |                  | **100**    | ** **         | ** ** | ** **       | **$ —** | ** **        | ** ** | ** **      | **$ 40,326** | ** ** | ** ** | ** ** | **$ 3,145** | ** ** | ** ** | ** ** | **$ (403** | **)** | ** ** | **$ 43,068** |   |   |
| Net income                                                                     |       |                  | —     |               |       |             | —            |              |       |            | —            |       |       |   | 10,858 |   |   |   | — |   |   | 10,858 |   |   |
| Minimum pension  liability, net of taxes                                       |       |                  | —     |               |       |             | —            |              |       |            | —            |       |       |   | — |   |   |   | (118 | ) |   | (118 | ) |   |
| Mark to market  adjustment on derivative instruments, net of taxes             |       |                  | —     |               |       |             | —            |              |       |            | —            |       |       |   | — |   |   |   | 192 |   |   | 192 |   |   |
| Comprehensive  income, net of taxes                                            |       |                  |       |               |       |             |              |              |       |            |              |       |       |   |   |   |   |   |   |   |   | 10,932 |   |   |
| Dividends  declared to parent company                                          |       |                  | —     |               |       |             | —            |              |       |            | —            |       |       |   | (5,207 | ) |   |   | — |   |   | (5,207 | ) |   |
| **Balance  at December 31, 2003**                                         | ** ** | ** **            | **100**    | ** **         | ** ** | ** **       | **$ —** | ** **        | ** ** | ** **      | **$ 40,326** | ** ** | ** ** | ** ** | **$ 8,796** | ** ** | ** ** | ** ** | **$ (329** | **)** | ** ** | **$ 48,793** |   |   |
| Net loss for the period from January 1, 2004  through March 14, 2004 |       |                  | —     |               |       |             | —            |              |       |            | —            |       |       |   | (9,608 | ) |   |   | — |   |   | (9,608 | ) |   |
| Mark to market adjustment on derivative instruments,  net of taxes             |       |                  | —     |               |       |             | —            |              |       |            | —            |       |       |   | — |   |   |   | (121 | ) |   | (121 | ) |   |
| Comprehensive loss, net of taxes                                               |       |                  |       |               |       |             |              |              |       |            |              |       |       |   |   |   |   |   |   |   |   | (9,729 | ) |   |
| **Balance at March 14, 2004**                                             | ** ** | ** **            | **100**    | ** **         | ** ** | ** **       | **$ —** | ** **        | ** ** | ** **      | **$ 40,326** | ** ** | ** ** | ** ** | **$  (812** | **)** | ** ** | ** ** | **$ (450** | **)** | ** ** | **$ 39,064** |   |   |

 

See accompanying notes to consolidated financial statements.

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

**CONSOLIDATEDSTATEMENTS OFSTOCKHOLDER’S EQUITY ANDCOMPREHENSIVE INCOME**

**(Dollars in thousands)**

| ** **                                                                                | ** ** | ** **            | ** ** | ** **         | ** ** | ** **      | ** ** | ** **        | ** ** | **Accumulated** | ** ** | ** **  | ** **  |
|-------------------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------|------------|-----------------|------------|-------------------|------------|-----------------|------------|-------------|-------------|
| ** **                                                                                | ** ** | ** **            | ** ** | ** **         | ** ** | **Additional**  | ** ** | ** **        | ** ** | **Other**       | ** ** | ** **  | ** **  |
| ** **                                                                                | ** ** | **Common Stock** | ** ** | **Paid-In**        | ** ** | **Accumulated** | ** ** | **Comprehensive** | ** ** | ** **      | ** ** |
| ** **                                                                                | ** ** | **Shares**            | ** ** | **Par Value** | ** ** | **Capital**     | ** ** | **Deficit**       | ** ** | **Loss**        | ** ** | **Total**   | ** **  |
| **Initial  capitalization and acquisition of Predecessor Company at March 15, 2004** |       |                  | **—** | ** **         | ** ** | ** **      | **$**      | **—**        | ** ** | ** **      | **$**      | **112,715** | ** **  | ** ** | **$** | **—** | ** ** | ** ** | ** ** | **$** | **—** | ** ** | ** ** | **$** | **112,715** |   |
| Subsequent  adjustment to initial capitalization for final working capital amount    |       |                  | —     |               |       |            | —     |              |       | (772            | )          |        | —      |   |   |   | — |   |   | (772 | ) |
| Net loss for the period from March 15, 2004  through December 31, 2004          |       |                  | —     |               |       |            | —     |              |       | —          |       |        | (10,464     | ) |   |   | — |   |   | (10,464 | ) |
| Minimum pension liability, net of taxes                                              |       |                  | —     |               |       |            | —     |              |       | —          |       |        | —      |   |   |   | (164 | ) |   | (164 | ) |
| Mark to market adjustment on derivative instruments,  net of taxes                   |       |                  | —     |               |       |            | —     |              |       | —          |       |        | —      |   |   |   | 15 |   |   | 15 |   |
| Comprehensive loss, net of  taxes                                                         |       |                  |       |               |       |            |       |              |       |            |       |        |        |   |   |   |   |   |   | (10,613 | ) |
| **Balance  at December 31, 2004**                                                    |       |                  | **100**    | ** **         | ** ** | ** **      | **—** | ** **        | ** ** | **111,943**     | ** ** | ** **  | **(10,464** | **)** | ** ** | ** ** | **(149** | **)** | ** ** | **101,330** |   |
| Net loss                                                                                  |       |                  | —     |               |       |            | —     |              |       | —          |       |        | (466        | ) |   |   | — |   |   | (466 | ) |
| Minimum pension  liability, net of taxes                                                  |       |                  | —     |               |       |            | —     |              |       | —          |       |        | —      |   |   |   | (1,085 | ) |   | (1,085 | ) |
| Mark to market adjustment on derivative instruments,  net of taxes                        |       |                  | —     |               |       |            | —     |              |       | —          |       |        | —      |   |   |   | (15 | ) |   | (15 | ) |
| Comprehensive loss, net of taxes                                                          |       |                  |       |               |       |            |       |              |       |            |       |        |        |   |   |   |   |   |   | (1,566 | ) |
| **Balance at December 31, 2005**                                                          |       |                  | **100**    | ** **         | ** ** | ** **      | **$**      | **—**        | ** ** | ** **      | **$**      | **111,943** | ** **  | ** ** | **$** | **(10,930** | **)** | ** ** | ** ** | **$** | **(1,249** | **)** | ** ** | **$** | **99,764** |   |

 

See accompanying notes to consolidated financial statements.

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

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Dollars in thousands)**

| ** **                                                                                     | ** ** | **Successor Company**         | ** **  | ** **                                                     | ** ** | **Predecessor Company** | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------------------------------|-------------|----------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                     | ** ** | **Year  ended  December 31,** | ** **  | **Period from  March 15  To December 31,** | ** ** | ** **                   | ** ** | **Period from  January 1  To March 14,** | ** ** | **Year  ended  December 31,** | ** ** |
| ** **                                                                                     | ** ** | **2005**                           | ** **  | **2004**                                                       | ** ** | ** **                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| **OPERATING ACTIVITIES**                                                                       |       |                               |        |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                              |       |                               | $           | (466                                                           | )          |                         |       | $ | (10,464 | ) |   |   |   |   | $ | (9,608 | ) |   |   | $ | 10,858 |   |   |
| Adjustments to reconcile  net income (loss) to net cash provided by operating activities:      |       |                               |        |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                                                                 |       |                               | 2,725       |                                                           |       |                         | 2,420      |   |   |   |   |   | 671 |   |   |   | 2,906 |   |   |
| Amortization of  deferred financing costs                                                      |       |                               | 1,449       |                                                           |       |                         | 1,034      |   |   |   |   |   | 109 |   |   |   | 632 |   |   |
| Amortization of  intangible assets                                                             |       |                               | 13,840      |                                                           |       |                         | 10,984     |   |   |   |   |   | — |   |   |   | — |   |   |
| Inventory fair  value adjustment recorded in cost of sales                                     |       |                               | —      |                                                           |       |                         | 11,663     |   |   |   |   |   | — |   |   |   | — |   |   |
| Loss on disposal  of property, plant and equipment                                             |       |                               | 300         |                                                           |       |                         | 40         |   |   |   |   |   | — |   |   |   | 89 |   |   |
| Transaction and  reorganization expenses                                                       |       |                               | —      |                                                           |       |                         | 25         |   |   |   |   |   | 5,381 |   |   |   | — |   |   |
| Loss on early  extinguishment of long-term debt                                           |       |                               | —      |                                                           |       |                         | —     |   |   |   |   |   | 9,217 |   |   |   | — |   |   |
| Deferred taxes                                                                                 |       |                               | (201        | )                                                              |       |                         | (6,432     | ) |   |   |   |   | (2,898 | ) |   |   | 6,883 |   |   |
| Changes in assets and  liabilities, net of acquisitions:                                       |       |                               |        |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Receivables, net                                                                               |       |                               | (3,371      | )                                                              |       |                         | (255       | ) |   |   |   |   | 1,273 |   |   |   | (529 | ) |   |
| Inventories                                                                                    |       |                               | 2,277       |                                                           |       |                         | (3,454     | ) |   |   |   |   | (2,800 | ) |   |   | (601 | ) |   |
| Prepaid expenses  and other assets                                                             |       |                               | (514        | )                                                              |       |                         | (463       | ) |   |   |   |   | (68 | ) |   |   | (422 | ) |   |
| Accounts payable                                                                               |       |                               | 54          |                                                           |       |                         | (2,015     | ) |   |   |   |   | 1,379 |   |   |   | (1,007 | ) |   |
| Accrued interest                                                                               |       |                               | (38         | )                                                              |       |                         | 3,761      |   |   |   |   |   | 1,993 |   |   |   | 222 |   |   |
| Other liabilities                                                                              |       |                               | (119        | )                                                              |       |                         | (142       | ) |   |   |   |   | (1,667 | ) |   |   | 2,371 |   |   |
| **Net cash  provided by operating activities**                                                 | ** ** | ** **                         | **15,936**  | ** **                                                     | ** ** | ** **                   | **6,702**  | ** ** | ** ** | ** ** | ** ** | ** ** | **2,982** | ** ** | ** ** | ** ** | **21,402** | ** ** | ** ** |
| **INVESTING ACTIVITIES**                                                                       | ** ** | ** **                         | ** **  | ** **                                                     | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Purchase of  property, plant and equipment                                                     |       |                               | (2,612      | )                                                              |       |                         | (1,232     | ) |   |   |   |   | (330 | ) |   |   | (3,460 | ) |   |
| Proceeds from the  sales of property, plant and   equipment                                    |       |                               | 784         |                                                           |       |                         | 50         |   |   |   |   |   | — |   |   |   | — |   |   |
| Other investing activity                                                                       |       |                               | (203        | )                                                              |       |                         | —     |   |   |   |   |   | — |   |   |   | — |   |   |
| **Net cash  used in investing activities**                                                     | ** ** | ** **                         | **(2,031**  | **)**                                                          | ** ** | ** **                   | **(1,182** | **)** | ** ** | ** ** | ** ** | ** ** | **(330** | **)** | ** ** | ** ** | **(3,460** | **)** | ** ** |
| **FINANCING ACTIVITIES**                                                                       |       |                               |        |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from  issuance of bank debt                                                           |       |                               | —      |                                                           |       |                         | 110,000    |   |   |   |   |   | — |   |   |   | — |   |   |
| Proceeds from  issuance of Senior Subordinated Notes                                           |       |                               | —      |                                                           |       |                         | 125,000    |   |   |   |   |   | — |   |   |   | — |   |   |
| Principal payments  on bank debt                                                               |       |                               | (12,000     | )                                                              |       |                         | (2,275     | ) |   |   |   |   | (7,700 | ) |   |   | (11,000 | ) |   |
| Repay bank debt,  including accrued interest                                                   |       |                               | —      |                                                           |       |                         | (6,335     | ) |   |   |   |   | — |   |   |   | — |   |   |
| Call senior  subordinated notes, including accrued   interest and call premiums                |       |                               | —      |                                                           |       |                         | (109,160   | ) |   |   |   |   | — |   |   |   | — |   |   |
| Payment of debt  issuance costs                                                                |       |                               | —      |                                                           |       |                         | (8,678     | ) |   |   |   |   | — |   |   |   | (278 | ) |   |
| Dividends paid                                                                                 |       |                               | —      |                                                           |       |                         | —     |   |   |   |   |   | — |   |   |   | (5,207 | ) |   |
| Distribution of  net equity to selling shareholders                                       |       |                               | —      |                                                           |       |                         | (102,518   | ) |   |   |   |   | — |   |   |   | — |   |   |
| Transaction and  reorganization expenses, including cash payments for direct acquisition costs |       |                               | —      |                                                           |       |                         | (10,805    | ) |   |   |   |   | (463 | ) |   |   | — |   |   |
| Other financing  activity                                                                      |       |                               | (509        | )                                                              |       |                         | (248       | ) |   |   |   |   | (42 | ) |   |   | (138 | ) |   |
| **Net cash  used in financing activities**                                                     | ** ** | ** **                         | **(12,509** | **)**                                                          | ** ** | ** **                   | **(5,019** | **)** | ** ** | ** ** | ** ** | ** ** | **(8,205** | **)** | ** ** | ** ** | **(16,623** | **)** | ** ** |
| Net increase  (decrease) in cash                                                               |       |                               | 1,396       |                                                           |       |                         | 501        |   |   |   |   |   | (5,553 | ) |   |   | 1,319 |   |   |
| Cash at beginning  of period                                                                   |       |                               | 3,337       |                                                           |       |                         | 2,836      |   |   |   |   |   | 8,389 |   |   |   | 7,070 |   |   |
| **Cash at  end of period**                                                                     | ** ** | ** **                         | **$**       | **4,733**                                                      | ** ** | ** **                   | ** ** | **$** | **3,337** | ** ** | ** ** | ** ** | ** ** | ** ** | **$** | **2,836** | ** ** | ** ** | ** ** | **$** | **8,389** | ** ** | ** ** |

 

See accompanying notes to consolidated financial statements.

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

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

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

**(1)   DESCRIPTION OF BUSINESS**

True Temper Sports, Inc. (“True Temper” or the “Company”)is primarily engaged in the design, manufacture and sale of steel and compositegolf shafts as well as a variety of other high strength, tight tolerancetubular components for the bicycle, automotive and recreational sports markets.True Temper’s manufacturing plants and related facilities are located inMemphis, Tennessee, Amory and Olive Branch, Mississippi, El Cajon, Californiaand Guangzhou, China. The majority of True Temper’s sales are to golf clubmanufacturers and distributors primarily located in the United States, Europe,Japan, Australia and Southeast Asia. True Temper operates as a wholly-ownedoperating subsidiary of True Temper Corporation. 

The consolidated financial statements include thefinancial statements of True Temper and its majority owned subsidiaries. Allsignificant intercompany balances and transactions have been eliminated inconsolidation. 

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 the Company’sdirect parent company, True Temper Corporation, pursuant to which TTS HoldingsLLC and certain of the Company’s senior management purchased all of theoutstanding shares of True Temper Corporation. In connection with thisacquisition, and effective on March 15, 2004, the Company repaid all ofits outstanding 2002 senior credit facility, redeemed all of its 107¤8%senior subordinated notes due 2008, and made certain payments of the netremaining equity of the predecessor company to the selling shareholders. Thesepayments were financed with the net proceeds of a new senior credit facilityand new 83¤8%senior subordinated notes due 2011.

This transaction wasaccounted for by the Company’s parent company using the purchase method ofaccounting. As the Company is a wholly owned subsidiary of True TemperCorporation, the Company has “pushed down” the effect of the purchase method ofaccounting to these financial statements. These financial statements andaccompanying notes present the historical cost basis results of the Company as “predecessorcompany” through March 14, 2004, and the results of the Company as “successorcompany” from March 15, 2004 through December 31, 2004, accordingly,the successor company presentation is not comparable to the predecessor companypresentation due to the different basis of accounting. The financial statementshave also been separated by a vertical dashed line into predecessor company andsuccessor company results.

**(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**(a)****         RevenueRecognition**

Revenue is generallyrecognized when persuasive evidence of an arrangement exists, delivery hasoccurred, the revenue amount is determinable and collection is reasonablyassured. Valuation allowances are established for estimated returns, allowancesand discounts at the time revenue is recognized.

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**(b)****         Useof Estimates**

The preparation of theconsolidated financial statements requires management of the Company to make anumber of estimates and assumptions relating to the reported amount of assetsand liabilities and the disclosure of contingent assets and liabilities at thedate of the consolidated financial statements and the reported amounts ofrevenues and expenses during the period. Significant items subject to suchestimates and assumptions include the carrying amount of property, plant andequipment; valuation allowances for receivables, inventories and deferredincome tax assets; valuation of derivative instruments; and assets andobligations related to employee benefits. Actual results could differ fromthose estimates. 

**(c)****          TradeAccounts Receivable**

Trade receivables are netof allowance for doubtful accounts of $411 and $915 as of December 31, 2005and 2004, respectively. 

**(d)****         Inventories**

Inventories are stated atthe lower of cost or market. Cost is determined using the first-in, first-outmethod. 

**(e)****          DeferredFinancing Costs**

Costs associated with theissuance of debt are deferred and amortized as a component of interest expenseover the life of the related debt, using a method that approximates theinterest method. 

**(f)****            Property,Plant and Equipment**

Property,plant and equipment is stated on a cost basis, net of accumulated depreciation.Depreciation is provided over the estimated useful life of each asset using thestraight-line method. Leasehold improvements are amortized over theshorter of the useful life or the applicable lease term including optionperiods when appropriate. In general the estimated useful lives for bothpredecessor and successor companies are as follows: 

| **Asset Category**                                     | ** ** | ** **  | ** ** | **Life** | ** ** |
|-------------------------------------------------------------|------------|-------------|------------|----------|------------|
| Buildings                                                   |       | 15-40 years |       |
| Furniture and  office equipment                             |       | 10-15 years |       |
| Machinery and  equipment                                    |       | 8-15 years  |       |
| Computers and  related equipment                            |       | 2-4 years   |       |
| Leasehold  improvements                                     |       | 6-15 years  |       |
| Assets held for use—not  currently used for production |       | 8 years     |       |

 

**(g)****          Goodwilland Other Intangible Assets**

Goodwill represents the excess of costs over fairvalue of assets of businesses acquired. Goodwill and intangible assets acquiredin a purchase business combination and determined to have an indefinite usefullife are not amortized, but instead tested for impairment at least annually inaccordance with the provisions of Statement of Financial Accounting Standards (“SFAS”)No. 142, *Goodwill and Other Intangible Assets*.Intangible assets with estimable useful lives are amortized over theirrespective estimated useful lives to their estimated residual values, andreviewed for impairment in accordance with SFAS No. 144, *Accounting for Impairment or Disposal of Long-LivedAssets*. 

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TheCompany assesses its goodwill and other indefinite-lived intangible assets forimpairment on an annual basis. If an indication of impairment exists, theCompany makes a comparison of the carrying amount of the reporting units to itsestimated fair value. If the reporting unit’s carrying value exceeds its fairvalue, the Company allocates the fair value to all of the assets andliabilities of the reporting unit and determines the implied fair value of thegoodwill and indefinite-lived intangible assets. An impairment loss would berecognized to the extent that a reporting unit’s recorded goodwill or otherindefinite-lived intangible assets exceeded the implied fair value. The Companyperformed its annual impairment testing in the fourth quarter of 2005. Noimpairment was determined upon performing these impairment tests.

**(h)****         DerivativeInstruments and Foreign Currencies**

The Company uses forward foreign exchange contracts (“Instruments”or “Derivative Instruments”) in its management of foreign currency exchangerate exposures. Instruments that are designated hedges in accordance with SFASNo. 133, *Accounting for**Derivative Instruments and Certain Hedging Activities, as amended*,must be effective at reducing the risks associated with the underlying exposureand must be designated as a hedge at the inception of the contract.Accordingly, changes in the market value of the Instruments must have a highdegree of inverse correlation with changes in the market value or cash flows ofthe underlying hedged item. 

The Company has used Derivative Instruments to hedgeseveral components of its revenue and cash collection stream, including, (i) anticipatedforeign currency sales, (ii) accounts receivable denominated in foreigncurrencies, and (iii) cash balances maintained in foreign currencies. 

The changes in the market value of DerivativeInstruments designated as hedging instruments for anticipated foreign currencysales are recognized in the consolidated balance sheets as a component ofaccumulated other comprehensive income (loss) in consolidated stockholder’sequity. To the extent an instrument is no longer effective as a hedge due to achange in the underlying exposure, gains and losses are recognized currently inthe consolidated statements of operations as a component of cost of sales. 

The changes in the market value of DerivativeInstruments hedging accounts receivable or cash denominated in foreign currencyare recognized as a component of operating income during the period of thechange, as they are marked to market on a monthly basis. 

At December 31, 2005, theCompany had no outstanding forward foreign currency contracts designated ashedging instruments.

True Temper recorded a gain (loss) in operations onforeign currency of ($172) for the year ended December 31, 2005, $79 forthe period January 1, 2004 to March 14, 2004, ($40) for the periodMarch 15, 2004 to December 31, 2004, and $215 for the year endedDecember 31, 2003. 

Thefollowing table summarizes the contractual notional amounts of True Temper’sforward exchange contracts as of December 31, 2005 and 2004 (in U.S.dollars):

| ** **        | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------|------------|----------|------------|----------|------------|
| Pound Sterling    |       | $        | 2,099      |     |       | $ | 3,405 |   |   |
| Yen               |       | 2,250    |       |     | 1,761      |   |   |
| Australian dollar |       | 457      |       |     | 940        |   |   |
| Total             |       | $        | 4,806      |     |       | $ | 6,106 |   |   |

 

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**(i)****            Impairmentof Long-Lived Assets**

SFAS No. 144 provides a single accounting modelfor long-lived assets to be disposed of. SFAS No. 144 alsochanges the criteria for classifying an asset as held for sale; and broadensthe scope of businesses to be disposed of that qualify for reporting asdiscontinued operations and changes the timing of recognizing losses on suchoperations. 

In accordance with SFAS No. 144,long-lived assets, such as property, plant, and equipment, and purchasedintangibles subject to amortization, are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Recoverability of assets to be held and used ismeasured by a comparison of the carrying amount of an asset to estimatedundiscounted future cash flows expected to be generated by the asset. If thecarrying amount of an asset exceeds its estimated future cash flows, animpairment charge is recognized by the amount by which the carrying amount ofthe asset exceeds the fair value of the asset. Assets to be disposed of wouldbe separately presented in the balance sheet and reported at the lower of thecarrying amount or fair value less costs to sell, and are no longerdepreciated. The assets and liabilities of a disposal group classified as heldfor sale would be presented separately in the appropriate asset and liabilitysections of the balance sheet. 

During 2005 the Companyrecognized a non-cash pretax charge of $357 associated with the impairment ofcertain steel golf shaft manufacturing equipment originally obtained throughthe acquisition of substantially all of the tangible personal property ofApollo Sports in 2000. A significant portion of the assets acquired weresubsequently transferred to the Company’s Amory, Mississippi facility. The impairmentcharge represents the carrying value of the remainder of the assets located inBirmingham, England, that were deemed to be unusable for future steel golf shaftmanufacturing. As of December 31, 2005 the assets had been disposed of andhad zero book value.

**(j)****            BusinessDevelopment, Start-up Costs and Transition Costs**

Costs associated withbusiness development, start-up and transition costs are comprised,primarily, of costs related to opening a composite manufacturing operation inGuangzhou, China and the related down-sizing costs incurred at the Company’s ElCajon, California facility. These costs include travel, consulting, legal andother professional services, personnel recruiting and compensation, facilityrent and other start-up and related shutdown costs. The costs areexpensed as incurred and separately identified on the statement of operationsas a component of operating income.

**(k)****         Advertisingand Promotional Costs**

Advertising andpromotional costs are accounted for in accordance with Statement of Position 93-7“Reporting on Advertising Costs”, which requires that the cost of producingadvertisements be expensed at the time of the first showing of theadvertisement or as incurred. True Temper’s policy is to expense costsassociated with the production of advertising at the time of first showing ofthe advertisement. Advertising and promotional costs primarily consist of tradeshow costs, media spots including print, radio and television, advertisingproduction and agency fees, sponsorships, and product and promotional samples.Advertising and promotional expense was $3,466 for the year endedDecember 31, 2005, $1,155 for the period January 1, 2004 through March 14,2004, $2,314 for the period March 15, 2004 to December 31, 2004, and$3,106 for the year ended December 31, 2003. Certain of the Company’scustomers participate in a cooperative advertising program where the Companyagrees to reimburse these customers for a portion of their advertising coststhat feature the Company’s product. Cooperative advertising costs are shown asa reduction of sales. 

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**(l)****            Researchand Development Costs**

Costsassociated with the development of new products and changes to existingproducts are expensed as incurred and are included in selling, general, andadministrative expenses. Research and development costs were $1,812 for the yearended December 31, 2005, $328 for the period January 1, 2004 through March 14,2004, $1,180 for the period March 15, 2004 to December 31, 2004, and$1,501 for the year ended December 31, 2003. 

**(m)****     Post-RetirementBenefits**

True Temper’s hourly unionemployees at its Amory, Mississippi plant are covered by a non-contributorydefined benefit plan. The defined benefit plan is funded in conformity withfunding requirements of applicable government regulations. Benefits are basedon a negotiated, fixed amount multiplied by the employee’s length of service.In addition to the defined benefit plan, these same employees receive certainpost-retirement medical, dental and life insurance benefits. 

True Temper’s US based salariedemployees, and certain international employees, are covered by a non-contributorydefined contribution plan. Company contributions to this plan are based on theemployee’s age and are calculated as a percentage of compensation. This plan isfunded on a current basis. In addition to the non-contributory definedcontribution plan, certain post-retirement medical, dental and lifeinsurance benefits are provided to those salaried employees who were employedby the Company prior to January 1, 2000. 

All US based employees,and certain international employees, of True Temper are eligible to participatein a company sponsored 401(k) plan. The Company’s contribution to thisplan is calculated as a percentage of the employee’s compensation and theemployee’s contribution. All Company contributions to this plan are paid incash. 

**(n)****         IncomeTaxes**

Incometaxes are accounted for under the asset and liability method. Deferred taxassets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax bases and operatingloss and tax credit carryforwards. Deferred tax assets and liabilities aremeasured using enacted tax rates expected to apply to taxable income in theyears in which those temporary differences are expected to be recovered orsettled. The effect on deferred tax assets and liabilities of a change in taxrates is recognized in income in the period that includes the enactment date. 

**(o)   Stock Based Compensation**

On August 10, 2005the Company’s parent company, True Temper Corporation (“TTC”), issued, tocertain employees of the Company in return for service, a total of 525,400stock options and stock appreciation rights (“Equity Incentive Awards”) topurchase common stock of TTC for $13.56 per share. The Equity Incentive Awardsvest and become exercisable at various times and under various conditionsthrough August 10, 2012, based on service with certain accelerationfeatures based on performance criteria.

The Company applies the intrinsic-value-basedmethod of accounting prescribed by Accounting Principles Board (APB) OpinionNo. 25, Accounting for Stock Issued to Employees, and relatedinterpretations including FASB Interpretation No. 44, Accounting forCertain Transactions involving Stock Compensation, an interpretation of APBOpinion No. 25, issued in March 2000, to account for its fixed-planEquity Incentive Awards. Under this method, compensation expense is recorded onthe 

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date of grant only if thecurrent market price of the underlying stock exceeded the exercise price of theEquity Incentive Award. SFAS No. 123, Accounting for Stock BasedCompensation, established accounting and disclosure requirements using a fair-value-basedmethod of accounting for stock-based employee compensation plans. Asallowed by SFAS No. 123, the Company has elected to continue to apply theintrinsic-value-based method of accounting described above, and hasadopted only the disclosure requirements of SFAS No. 123. The followingtable illustrates the effect on net income (loss) if the fair-value-basedmethod had been applied to all outstanding and unvested Equity Incentive Awardsin each period, and such effect on the net income of TTC were to be pushed downto its wholly owned subsidiary, True Temper Sports, Inc.

| ** **                                                                                                                   | ** ** | **Year Ended  December 31,   2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| Net income  (loss), as reported                                                                                              |       |                                          | $          | (466 | ) |   |
| Add stock-based  employee compensation expense in reported net income (loss), net of tax                                     |       |                                          | —     |   |   |
| Deduct total  stock-based employee compensation expense determined under fair value based  method for all awards, net of tax |       |                                          | (66        | ) |   |
| Net income (loss),  adjusted                                                                                                 |       |                                          | $          | (532 | ) |   |

 

Stock options granted toemployees of the predecessor company were exercised during the first quarter of2004 in connection with the termination of the predecessor company’s plan,concurrent with the business combination described more fully in Note 3 tothese financial statements.

**(p)****         FairValue of Financial Instruments**

The fair value offinancial instruments represents the amount at which the instrument could beexchanged in a current transaction between willing parties, other than a forcedsale or liquidation. Significant differences can arise between the fair valueand carrying amount of financial instruments that are recognized at historicalcost amounts. 

The following methods andassumptions were used by True Temper in estimating fair value disclosures forfinancial instruments: 

*Cash,Trade Receivables and Payables—*The amounts reported in thebalance sheets approximate fair value. 

*Long-TermDebt—*The carrying values of the Company’s variable rate debtapproximates fair value. The estimated fair value of the Company’s fixed ratedebt is based upon interest rates available for the issuance of debt withsimilar terms and remaining maturities. As of December 31, 2005 and 2004,the Company’s Senior Subordinated Notes had an estimated fair value of $111.3 millionand $116.3 million, respectively. 

*ForeignCurrency Contracts—*The fair value of forward exchangecontracts is estimated using prices established by financial institutions forcomparable instruments which was approximately $0.1 million at December 31,2005 and 2004. 

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Thefair value estimates presented herein are based on information available tomanagement as of December 31, 2005 Although management is not aware of anyfactors that would significantly affect the estimated fair value amounts, suchamounts have not been comprehensively revalued for purposes of these financialstatements since that date and current estimates of fair value may differsignificantly from the amounts presented herein. 

**(q)****         RecentAccounting Pronouncements**

In December 2004, theFASB issued SFAS No. 123 (revised December 2004), *Share-Based Payment*(“SFAS 123(R)”). SFAS 123(R) replaces SFAS No. 123, *Accountingfor Stock-Based Compensation*, and supersedes APB Opinion No. 25,*Accounting for Stock Issued to Employees*.SFAS 123(R) will require compensation costs related to share-based paymenttransactions to be recognized in the financial statements. With limitedexceptions, the amount of compensation cost will be measured based on thegrant-date fair value of the equity or the liability instruments issued. Inaddition, liability awards will be remeasured each reporting period. Compensationcost will be recognized over the period that an employee provides service inexchange for the award. SFAS 123(R) is effective as of the beginning ofthe first annual reporting period that begins after June 15, 2005. TheCompany does not believe the adoption of SFAS 123(R) will have a materialimpact on the Company’s consolidated financial condition or results ofoperations taken as a whole. 

In November 2004, theFASB issued SFAS No. 151, Inventory Costs. The Company is required toadopt the provisions of SFAS No. 151, on a prospective basis, as ofJanuary 1, 2006. SFAS No. 151 clarifies the accounting for abnormalamounts of idle facility expense, freight, handling costs, and wasted material.SFAS No. 151 requires that those items—if abnormal—be recognized as expenses inthe period incurred. In addition, SFAS No. 151 requires the allocation of fixedproduction overheads to the costs of conversions based upon the normal capacityof the production facilities. The Company does not believe that the adoption ofSFAS No. 151 will have a material impact on the Company’s consolidatedfinancial condition or results of operations taken as a whole.

In March 2005, FIN 47“Accounting for Conditional Asset Retirement Obligations” was issued. FIN 47requires conditional asset retirement obligations to be recognized if a legalobligation exists to perform asset retirement activities and a reasonableestimate of the fair value of the obligation can be made. FIN 47 also providesguidance as to when an entity would have sufficient information to reasonablyestimate the fair value of an asset retirement obligation. FIN 47 was adoptedby the Company effective December 31, 2005. The adoption of FIN 47 has had nomaterial impact on the financial position or results of operations of the Company.

**(r)****          SupplementalDisclosures of Cash Flow Information**

Cashpayments for income taxes and interest are as follows: 

| ** **   | ** ** | **Successor Company** | ** ** | ** **                | ** ** | **Predecessor Company** | ** ** |
|--------------|------------|-----------------------|------------|---------------------------|------------|-------------------------|------------|
| ** **   | ** ** | ** **            | ** ** | **Period from**      | ** ** | ** **              | ** ** | **Period from** | ** ** | ** ** | ** ** |
| ** **   | ** ** | **Year Ended**   | ** ** | **March 15 to** | ** ** | ** **              | ** ** | **January 1 to** | ** ** | **Year Ended ** | ** ** |
| ** **   | ** ** | **December 31,** | ** ** | **December 31,**     | ** ** | ** **              | ** ** | **March 14,** | ** ** | **December 31,** | ** ** |
| ** **   | ** ** | **2005**              | ** ** | **2004**                  | ** ** | ** **              | ** ** | **2004** | ** ** | **2003** | ** ** |
| Income taxes |       |                  | $          | 147                       |       |                    |       | $ | 89 |   |   |   |   |   | $ | 174 |   |   |   | $ | 162 |   |   |
| Interest     |       |                  | $          | 17,330                    |       |                    |       | $ | 8,789 |   |   |   |   |   | $ | 348 |   |   |   | $ | 12,265 |   |   |

 

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**(s)**                                AccumulatedOther Comprehensive Income (Loss)

Theaccumulated balances for each classification within accumulated othercomprehensive income (loss) are as follows: 

| ** **              | ** ** | **Derivative  Instruments  Mark to Market  Adjustment** | ** ** | **Minimum  Pension  Liability  Adjustments** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** |
|-------------------------|------------|-------------------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|
| Predecessor Company:    |       |                                                              |       |                                         |       |                                        |       |   |   |   |   |   |   |
| December 31, 2002  |       |                                                              | $          | —                                       |       |                                        |       | $ | (403 | ) |   |   | $ | (403 | ) |   |
| Period change           |       |                                                              | 192        |                                         |       |                                        | (118       | ) |   |   | 74 |   |   |
| December 31, 2003  |       |                                                              | $          | 192                                          |       |                                        |       | $ | (521 | ) |   |   | $ | (329 | ) |   |
| Period change           |       |                                                              | (121       | )                                            |       |                                        | —     |   |   |   | (121 | ) |   |
| March 14, 2004     |       |                                                              | $          | 71                                           |       |                                        |       | $ | (521 | ) |   |   | $ | (450 | ) |   |
|                    |       |                                                              |       |                                         |       |                                        |       |   |   |   |   |   |   |
| Successor  Company:     |       |                                                              |       |                                         |       |                                        |       |   |   |   |   |   |   |
| March 15,  2004    |       |                                                              | $          | —                                       |       |                                        |       | $ | — |   |   |   | $ | — |   |   |
| Period change           |       |                                                              | 15         |                                         |       |                                        | (164       | ) |   |   | (149 | ) |   |
| December 31,  2004 |       |                                                              | $          | 15                                           |       |                                        |       | $ | (164 | ) |   |   | $ | (149 | ) |   |
| Period change           |       |                                                              | (15        | )                                            |       |                                        | (1,085     | ) |   |   | (1,100 | ) |   |
| December 31, 2005       |       |                                                              | $          | —                                       |       |                                        |       | $ | (1,249 | ) |   |   | $ | (1,249 | ) |   |

 

**(3)   ACQUISITIONS**

On January 30, 2004, TTS Holdings LLC, a new companyformed by Gilbert Global Equity Partners, L.P. and its affiliated funds (“GilbertGlobal”), entered into a stock purchase agreement with the Company’s directparent company, True Temper Corporation, pursuant to which TTS Holdings LLC andcertain of the Company’s senior management purchased all of the outstandingshares of True Temper Corporation. In connection with this acquisition, andeffective on March 15, 2004, the Company repaid all of its outstanding2002 senior credit facility, redeemed all of its 107¤8% seniorsubordinated notes due 2008, and made certain payments of the net remainingequity of the predecessor company to the selling shareholders. These paymentswere financed with the net proceeds of a new senior credit facility and new 83¤8%senior subordinated notes due 2011. These debt instruments are furtherdescribed in Note 7 below.

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Thepurchase price as stipulated in the January 30, 2004 stock purchaseagreement totaled $342.0 million, plus direct acquisition costs and certainworking capital adjustments of $18.4 million, less a purchase price adjustmentfor final working capital of $0.8 million. Following is the allocation of thetotal consideration paid:

| Current assets,  excluding inventory                       |   |    |   | $       | 20,086  |   |
|------------------------------------------------------------|--------|---------|--------|---------|---------|--------|
| Inventory                                                  |   |    |   | 30,119  |    |
| Identifiable  intangible assets:                           |   |    |   |    |    |
| Trade name                                                 |   | $       | 19,455 |    |    |   |
| Patented technology                                        |   | 11,686  |   |    |    |
| Purchased customer relationships                           |   | 121,524 |   |    |    |
| Lease contract                                             |   | 4,323   |   |    |    |
| Other                                                      |   | 262     |   |    |    |
| Total identifiable intangible assets                       |   |    |   | 157,250 |    |
| Property, plant  and equipment                             |   |    |   | 14,684  |    |
| Deferred tax  assets, net, existing at acquisition date    |   |    |   | 51,866  |    |
| Deferred tax  assets related to acquisition                |   |    |   | 10,552  |    |
| Deferred  financing costs                                  |   |    |   | 7,366   |    |
| Goodwill                                                   |   |    |   | 150,883 |    |
| Other assets                                               |   |    |   | 95      |    |
| Current  liabilities                                       |   |    |   | (12,475 | )       |
| Deferred tax  liability related to intangible assets       |   |    |   | (59,680 | )       |
| Deferred tax  liability related to fair value of inventory |   |    |   | (4,432  | )       |
| Other liabilities                                          |   |    |   | (6,656  | )       |
| Total                                                      |   |    |   | $       | 359,658 |   |
|                                                            |        |         |        |         |         |        |  |

 

This transaction was accounted for by the Company’sparent company using the purchase method of accounting. As the Company is awholly owned subsidiary of True Temper Corporation, the Company has “pusheddown” the effect of the purchase method of accounting to these financialstatements.

In connection with the acquisition, the Companyconducted an assessment and valuation of all tangible and intangible assetsacquired. The results of this exercise are reflected in the allocation tableabove. Of particular note was (i) the establishment of intangible assetsin an aggregate amount of approximately $157.3 million based on both internalCompany assessments and a thorough study conducted by an independent firmspecializing in intangible asset valuation; and (ii) the write-up ofinventory by approximately $11.7 million to reflect the estimated fair value ofinventory at the date of acquisition. Both of these adjustments were completedin compliance with the purchase accounting prescribed by Statement of FinancialAccounting Standards No. 141, *Business Combinations*.

The establishment of the intangible assets results incertain non-cash amortization expense beginning in 2004, as these intangibleassets are amortized over their expected economic lives. The write-up ofinventory to its estimated fair value results in a non-cash charge to cost ofsales in 2004 totaling $11.7 million.

In addition, at the time of the transaction thepredecessor company recorded certain transaction related expenses totaling $5.4million. These expenses consist primarily of investment banking merger andacquisition fees, legal fees and other incidental costs and expenses typicallyincurred in an acquisition of this nature.

Also, as a direct result of the early extinguishmentof the predecessor company’s long term debt, expenses totaling $9.2 millionwere incurred consisting primarily of the write-off of the remaining deferred 

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financing costs related tothe 107¤8%senior subordinated notes due 2008 and the 2002 senior credit facility, and theearly extinguishment call premium and related interest incurred when theCompany redeemed the 107¤8%senior subordinated notes on March 15, 2004.

Thefollowing unaudited pro forma financial information is presented as if theaforementioned transaction, and all related purchase accounting adjustments,had occurred as of the beginning of each period presented. The pro formaamounts contain certain adjustments, including, (i) an adjustment tointerest expense to reflect the extinguishment of the 107¤8%Senior Subordinated Notes due 2008 and the 2002 senior credit facility, and theissuance of the 83¤8%Senior Subordinated Notes due 2011 and 2004 senior credit facility, (ii) theelimination of transaction and reorganization expenses, the loss on earlyextinguishment of long term debt, and the non-cash cost of sales charge relatedto the fair value of inventory write-up, which are all non-recurring, (iii) theadditional charge to operating income for the amortization of intangible assetsand (iv) the related tax effect of the adjustments described above.

| ** **                         | ** ** | **Years Ended  December 31,** | ** ** |
|------------------------------------|------------|------------------------------------|------------|
| ** **                         | ** ** | **2004**                           | ** ** | **2003** | ** ** |
| Net sales                          |       | $                                  | 98,367     |   | $ | 116,206 |   |
| Income (loss)  before income taxes |       | $                                  | (6,633     | ) | $ | 363 |   |
| Net income (loss)                  |       | $                                  | (4,203     | ) | $ | (59 | ) |

 

***Intangible Asset Carrying Value***

Asdescribed above, the Company established certain intangible assets as a resultof the application of purchase accounting to the acquisition on March 15,2004. The following table sets forth the gross value and accumulatedamortization for these intangible assets at December 31, 2005.

| ** **                        | ** ** | **Gross Value** | ** ** | **Weighted  Average  Amortization  Period** | ** ** | **Accumulated  Amortization** | ** ** |
|-----------------------------------|------------|----------------------|------------|---------------------------------------------|------------|-------------------------------|------------|
| Trade name                        |       |                 | $          | 19,455                                      |       |                          |       | — |   |   |   | $ | — |   |   |
| Patented  technology              |       |                 | 11,686     |                                        |       |                          | 8.0 yrs    |   |   |   | 2,615 |   |   |
| Purchased  customer relationships |       |                 | 121,524    |                                        |       |                          | 10.0 yrs   |   |   |   | 21,820 |   |   |
| Lease contract                    |       |                 | 4,323      |                                        |       |                          | 59.0 yrs   |   |   |   | 131 |   |   |
| Other                             |       |                 | 262        |                                        |       |                          | 2.0 yrs    |   |   |   | 235 |   |   |
| Total                             |       |                 | $          | 157,250                                     |       |                          |       |   |   |   |   | $ | 24,801 |   |   |

 

Thefollowing table sets forth the estimated aggregate future amortization expensefor these intangible assets at December 31, 2005.

| ** ** | ** ** | **Estimated  Aggregate  Amortization  Expense** | ** ** |
|------------|------------|-------------------------------------------------|------------|
| 2006       |       |                                            | 13,713     |   |   |
| 2007       |       |                                            | 13,686     |   |   |
| 2008       |       |                                            | 13,686     |   |   |
| 2009       |       |                                            | 13,686     |   |   |
| 2010       |       |                                            | 13,686     |   |   |

 

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**(4)   INVENTORIES**

Inventories,as of December 31 of the year indicated, consist of the following: 

| ** **      | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------|------------|----------|------------|----------|------------|
| Raw materials   |       | $        | 4,556      |     | $          | 4,601 |   |
| Work in process |       | 1,734    |       | 2,182    |       |
| Finished goods  |       | 13,343   |       | 15,127   |       |
| Total           |       | $        | 19,633     |     | $          | 21,910 |   |

 

**(5)   PROPERTY,PLANT AND EQUIPMENT**

Majorclasses of property, plant and equipment, as of December 31 of the yearindicated, are summarized as follows: 

| ** **                                                 | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------|------------|----------|------------|----------|------------|
| Land improvements                                          |       | $        | 113        |     | $          | 113 |   |
| Buildings                                                  |       | 2,815    |       | 3,066    |       |
| Furniture and  office equipment                            |       | 262      |       | 241      |       |
| Machinery and  equipment                                   |       | 10,924   |       | 9,478    |       |
| Computer  equipment and capitalized software               |       | 451      |       | 414      |       |
| Leasehold  improvements                                    |       | 1,429    |       | 1,566    |       |
| Assets held for  use—not currently used in production |       | —   |       | 643      |       |
| Construction in progress                                   |       | 1,361    |       | 306      |       |
|                                                       |       | 17,355   |       | 15,827   |       |
| Less accumulated  depreciation                             |       | 5,145    |       | 2,420    |       |
| Net property, plant and  equipment                         |       | $        | 12,210     |     | $          | 13,407 |   |

 

Depreciation expense was $2,725for the year ended December 31, 2005, $671 for the period January 1,2004 through March 14, 2004, $2,420 for the period March 15, 2004 to December 31,2004, and $2,906 for the year ended December 31, 2003. 

**(6)   OTHERCURRENT LIABILITIES**

Othercurrent liabilities, as of December 31 of the year indicated, consist ofthe following: 

| ** **                                                | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|----------|------------|
| Accrued  compensation, benefits and related payroll taxes |       | $        | 4,276      |     | $          | 4,051 |   |
| Accrued interest                                          |       | 3,730    |       | 3,769    |       |
| Other                                                     |       | 1,890    |       | 1,976    |       |
| Total                                                     |       | $        | 9,896      |     | $          | 9,796 |   |

 

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**(7)**          BORROWINGS

**(a)   Long-TermDebt**

Long-termdebt at December 31, 2005 and 2004 consisted of the following:

| ** **                                     | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|
| 83¤8%  Senior Subordinated Notes due 2011 |       | $        | 125,000    |     | $          | 125,000 |   |
| 2004 senior  credit facility                   |       | 95,725   |       | 107,725  |       |
| Total debt                                     |       | 220,725  |       | 232,725  |       |
| Less current maturities                        |       | 245      |       | 545      |       |
| Long-term debt                                 |       | $        | 220,480    |     | $          | 232,180 |   |

 

The 83¤8% SeniorSubordinated Notes due 2011 (the “Notes”) provide for semi-annual interestpayments, in arrears, due on March 15 and September 15. At the optionof the Company, up to 35% of the Notes are redeemable prior to March 15,2007, at 108.375%, with the net cash proceeds of one or more public equityofferings. In addition, at any time prior to March 15, 2008, the Companymay also redeem all or a part of the Notes upon the occurrence of a change ofcontrol. On or after March 15, 2008 the Notes may be redeemed, at theoption of the Company, in whole or in part, at a redemption price of 104.188%beginning March 15, 2008 and declining ratably thereafter to 100.000% on March 15,2010.

The 2004 senior credit facility has a maturity date ofMarch 15, 2011, and provides for interest on the term loan, at the Company’soption, at (i) the base rate of the bank acting as administrative agentplus a margin adder of 2.00%, or (ii) under a LIBOR option with aborrowing spread of LIBOR plus 2.50% to 3.00%, depending on financialratios. The Company’s weighted average rate at December 31, 2005 was 7.53%.

The loans under the 2004 senior credit facility aresenior to the Notes, and are secured by substantially all of the Company’sassets.

The 2004 senior credit facility and the Notes containprovisions which, among other things, limit the Company’s ability to (i) incuradditional indebtedness, (ii) make acquisitions and capital expenditures, (iii) sellassets, (iv) create liens or other encumbrances, (v) make certainpayments and dividends, or (vi) merge or consolidate. In addition, boththe senior credit facility and the Notes contain customary change of controlprovisions that could, under certain circumstances, cause accelerated debtrepayment. 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.

On September 24, 2004 the Company executed anamendment to its 2004 senior credit facility (the “Amendment”). The Amendmentwas approved by the Company, Credit Suisse First Boston acting asadministrative agent and collateral agent, and by a majority of the lenders whowere party to the 2004 senior credit facility on such date. The Amendmentprovided adjustments to certain specified financial ratios and tests includedin the 2004 senior credit facility. As part of the Amendment, the margin adderon LIBOR based loans was increased from 2.50% to between 2.75% and 3.00%,depending on financial ratios, beginning September 24, 2004 and continuingthrough December 31, 2005. At December 31, 2005 the Company was incompliance with all of the covenants in both the 2004 senior credit facilityand the Notes.

On March 27, 2006 the Company amended and restated its2004 Senior Credit Facility (the “2006 Restatement”).  The Restatement was approved by the Company,Credit Suisse acting as administrative agent and collateral agent, and by amajority of the lenders who were party to the 2004 

52

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Senior Credit Facility atthat date.  The Restatement includesadditional term loans under the Company’s existing Senior Secured CreditFacilities of approximately $15.0 million, amendments that enable the Companyto pursue future acquisitions, and the necessary flexibility to execute on theCompany’s global strategic and operational initiatives.

At December 31,2005, future minimum principal payments on long-term debt were asfollows:

| 2006       |   | 245     |    |
|------------|--------|---------|---------|
| 2007       |   | 982     |    |
| 2008       |   | 982     |    |
| 2009       |   | 982     |    |
| 2010       |   | 69,462  |    |
| Thereafter |   | 148,072 |    |
| Total      |   | $       | 220,725 |   |
|            |        |         |         |  |

 

**(b)   Line of Credit**

The Company may borrow,through March 15, 2009, up to $20.0 million under a revolving creditagreement included in the 2004 senior credit facility. Borrowings under theagreement are subject to the same provisions described in the long term debtsection of this Note. The Company had no outstanding borrowings under this lineof credit as of December 31, 2005.

**(8)**          INCOMETAXES

Totalincome taxes for the periods indicated were allocated as follows:

| ** **                                          | ** ** | **Successor Company**             | ** ** | ** **                                                     | ** ** | **Predecessor Company** | ** ** |
|-----------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                          | ** ** | **Year Ended  December 31,** | ** ** | **Period from  March 15 to  December 31,** | ** ** | ** **                   | ** ** | **Period from  January 1 to  March 14,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                                          | ** ** | **2005**                               | ** ** | **2004**                                                       | ** ** | ** **                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Income from  continuing operations                  |       |                                   | $          | 33                                                             |       |                         |       | $ | (6,350 | ) |   |   |   |   | $ | (2,845 | ) |   |   | $ | 7,113 |   |   |
| Stockholders’ equity:                          |       |                                   |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Additional minimum pension  liability               |       |                                   | (665       | )                                                              |       |                         | (100       | ) |   |   |   |   | — |   |   |   | (72 | ) |   |
| Mark to market adjustment on derivative instruments |       |                                   | 9          |                                                           |       |                         | (9         | ) |   |   |   |   | (74 | ) |   |   | 118 |   |   |
| Total income taxes                                  |       |                                   | $          | (623                                                           | )          |                         |       | $ | (6,459 | ) |   |   |   |   | $ | (2,919 | ) |   |   | $ | (7,159 | ) |   |

 

53

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The income tax expense(benefit) attributable to income for continuing operations, for the periodsindicated, is as follows:

| ** **     | ** ** | **Successor Company**             | ** ** | ** **                                                     | ** ** | **Predecessor Company** | ** ** |
|----------------|------------|----------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------|------------|
| ** **     | ** ** | **Year Ended  December 31,** | ** ** | **Period from  March 15 to  December 31,** | ** ** | ** **                   | ** ** | **Period from  January 1 to  March 14,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **     | ** ** | **2005**                               | ** ** | **2004**                                                       | ** ** | ** **                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Current:       |       |                                   |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal        |       |                                   | $          | —                                                         |       |                         |       | $ | — |   |   |   |   |   | $ | — |   |   |   | $ | — |   |   |
| State          |       |                                   | 40         |                                                           |       |                         | 30         |   |   |   |   |   | 10 |   |   |   | 40 |   |   |
| Foreign        |       |                                   | 194        |                                                           |       |                         | 52         |   |   |   |   |   | 43 |   |   |   | 190 |   |   |
| Total current  |       |                                   | 234        |                                                           |       |                         | 82         |   |   |   |   |   | 53 |   |   |   | 230 |   |   |
| Deferred:      |       |                                   |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal        |       |                                   | (169       | )                                                              |       |                         | (5,425     | ) |   |   |   |   | (2,439 | ) |   |   | 5,795 |   |   |
| State          |       |                                   | (32        | )                                                              |       |                         | (1,007     | ) |   |   |   |   | (459 | ) |   |   | 1,088 |   |   |
| Total deferred |       |                                   | (201       | )                                                              |       |                         | (6,432     | ) |   |   |   |   | (2,898 | ) |   |   | 6,883 |   |   |
| Total          |       |                                   | $          | 33                                                             |       |                         |       | $ | (6,350 | ) |   |   |   |   | $ | (2,845 | ) |   |   | $ | 7,113 |   |   |

 

The actual income taxexpense (benefit) attributable to income for continuing operations differs fromthe amounts computed by applying the U.S. federal tax rate of 34% to the pretaxearnings as a result of the following:

| ** **                                           | ** ** | **Successor Company**              | ** ** | ** **                                                     | ** ** | **Predecessor Company** | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                           | ** ** | **Year  Ended  December 31,** | ** ** | **Period from  March 15 to  December 31,** | ** ** | ** **                   | ** ** | **Period from  January 1 to  March 14,** | ** ** | **Year  Ended  December 31,** | ** ** |
| ** **                                           | ** ** | **2005**                           | ** ** | **2004**                                                       | ** ** | ** **                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Computed “expected” tax  expense (benefit) |       | $                                  | (147       | )                                                              |       | $                            | (5,717     | ) |   |   |   |   | $ | (4,235 | ) |   |   | $ | 6,110 |   |   |
| State tax, net of  federal benefit                   |       | 5                                  |       |                                                           | (645       | )                            |       |   |   |   | (296 | ) |   |   | 744 |   |   |
| Foreign taxes                                        |       | 194                                |       |                                                           | 52         |                         |       |   |   |   | 43 |   |   |   | 190 |   |   |
| Transaction expenses                                 |       | —                             |       |                                                           | —     |                         |       |   |   |   | 1,643 |   |   |   | — |   |   |
| Other                                                |       | (19                                | )          |                                                           | (40        | )                            |       |   |   |   | — |   |   |   | 69 |   |   |
| Actual income tax expense (benefit)                  |       | $                                  | 33         |                                                           |       | $                            | (6,350     | ) |   |   |   |   | $ | (2,845 | ) |   |   | $ | 7,113 |   |   |

 

The components of deferredtax assets and liabilities for the years ended December 31, 2005 and 2004 areas follows:

| ** **                          | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
| Deferred tax assets:                |       |     |       |     |       |
| Goodwill                            |       | $        | 35,831     |     | $          | 40,646 |   |
| Accrued liabilities                 |       | 1,484    |       | 1,440    |       |
| Asset impairment                    |       | 704      |       | 704      |       |
| Net operating loss  carryforwards   |       | 7,867    |       | 7,129    |       |
| Facility start-up costs             |       | 253      |       | 343      |       |
| Pension liability                   |       | 722      |       | 695      |       |
| Post retirement benefit  obligation |       | 1,162    |       | 1,318    |       |
| Uniform capitalization              |       | 341      |       | 140      |       |
| Other                               |       | —   |       | 64       |       |
| Gross deferred tax  assets          |       | $        | 48,364     |     | $          | 52,479 |   |
| Deferred tax  liabilities:          |       |     |       |     |       |
| Identifiable intangible  assets     |       | $        | (50,263    | )        | $          | (55,511 | ) |
| Property, plant and  equipment      |       | (2,588   | )          | (2,275   | )          |
| Other                               |       | (44      | )          | (96      | )          |
| Net deferred tax asset (liability)  |       | $        | (4,531     | )        | $          | (5,403 | ) |

 

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At December 31, 2005,the Company had net operating loss carryforwards for federal and state incometax purposes of approximately $20,700 which expire between 2020 and 2025.

**(9)**          EMPLOYEEBENEFIT PLANS

TrueTemper Sports, Inc. has a qualified pension plan for the hourly unionemployees at its Amory, Mississippi plant. The following tables provide areconciliation of the changes in the plans’ benefit obligation, fair value ofassets and a statement of the plans’ funded status for the year endedDecember 31, 2005 and for the periods January 1, 2004 through March 14,2004 and March 15, 2004 to December 31, 2004:

| ** **                                       | ** ** | **Successor Company**              | ** ** | ** **                                                           | ** ** | **Predecessor  Company** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                       | ** ** | **Year Ended  December 31,  2005** | ** ** | **Period from  March 15 to  December 31,  2004** | ** ** | ** **               | ** ** | **Period from  January 1 to  March 14,  2004** | ** ** |
| Reconciliation of  benefit obligation:           |       |                                    |       |                                                                 |       |                     |       |   |   |   |   |   |   |   |   |
| Benefit  obligation at beginning of period       |       |                                    | $          | 17,373                                                               |       |                     |       | $ | 16,547 |   |   |   |   |   | $ | 15,687 |   |   |
| Service cost                                     |       |                                    | 550        |                                                                 |       |                     | 406        |   |   |   |   |   | 180 |   |   |
| Interest cost                                    |       |                                    | 1,026      |                                                                 |       |                     | 764        |   |   |   |   |   | 203 |   |   |
| Actuarial losses                                 |       |                                    | 455        |                                                                 |       |                     | (91        | ) |   |   |   |   | 543 |   |   |
| Benefit payments                                 |       |                                    | (389       | )                                                                    |       |                     | (253       | ) |   |   |   |   | (66 | ) |   |
| Benefit obligation at end of period              |       |                                    | $          | 19,015                                                               |       |                     |       | $ | 17,373 |   |   |   |   |   | $ | 16,547 |   |   |
| Reconciliation of fair value of plan assets:     |       |                                    |       |                                                                 |       |                     |       |   |   |   |   |   |   |   |   |
| Fair value of plan assets at beginning of period |       |                                    | $          | 13,387                                                               |       |                     |       | $ | 13,374 |   |   |   |   |   | $ | 13,145 |   |   |
| Actual return on plan assets                     |       |                                    | (239       | )                                                                    |       |                     | 266        |   |   |   |   |   | 295 |   |   |
| Employer contributions                           |       |                                    | 285        |                                                                 |       |                     | —     |   |   |   |   |   | — |   |   |
| Benefit payments                                 |       |                                    | (389       | )                                                                    |       |                     | (253       | ) |   |   |   |   | (66 | ) |   |
| Fair value of plan assets at end of year         |       |                                    | $          | 13,044                                                               |       |                     |       | $ | 13,387 |   |   |   |   |   | $ | 13,374 |   |   |
| Funded status:                                   |       |                                    |       |                                                                 |       |                     |       |   |   |   |   |   |   |   |   |
| Funded status at December 31                |       |                                    | $          | (5,971                                                               | )          |                     |       | $ | (3,986 | ) |   |   |   |   | $ | (3,173 | ) |   |
| Unrecognized net actuarial loss                  |       |                                    | 2,320      |                                                                 |       |                     | 505        |   |   |   |   |   | — |   |   |
| Net amount  recognized                           |       |                                    | $          | (3,651                                                               | )          |                     |       | $ | (3,481 | ) |   |   |   |   | $ | (3,173 | ) |   |

 

Thefollowing table provides the amounts recognized in the statement of financialposition for the year ended December 31, 2005 and for the periods January 1,2004 through March 14, 2004 and March 15, 2004 to December 31,2004:

| ** **                                     | ** ** | **Successor Company**              | ** ** | ** **                                                           | ** ** | **Predecessor  Company** | ** ** |
|------------------------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                     | ** ** | **Year Ended  December 31,  2005** | ** ** | **Period from  March 15 to  December 31,  2004** | ** ** | ** **               | ** ** | **Period from  January 1 to  March 14,  2004** | ** ** |
| Accrued benefit  liability                     |       |                                    | $          | (5,666                                                               | )          |                     |       | $ | (3,746 | ) |   |   |   |   | $ | (2,923 | ) |   |
| Accumulated other  comprehensive loss (income) |       |                                    | 2,015      |                                                                 |       |                     | 265        |   |   |   |   |   | (250 | ) |   |
| Net amount  recognized                         |       |                                    | $          | (3,651                                                               | )          |                     |       | $ | (3,481 | ) |   |   |   |   | $ | (3,173 | ) |   |

 

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The Company expects tomake quarterly contributions of $102 to the pension plan in 2006. The followingtable sets forth the estimated benefit payments, which reflect expected futureservice, as appropriate, expected to be paid in the periods indicated.

| 2006           |   | $ | 540   |   |
|----------------|--------|---|-------|--------|
| 2007           |   | $ | 630   |   |
| 2008           |   | $ | 740   |   |
| 2009           |   | $ | 839   |   |
| 2010           |   | $ | 930   |   |
| 2011–2015 |   | $ | 6,091 |   |

 

Thefollowing table provides the components of net periodic expense for the definedbenefit pension plans for the year ended December 31, 2005 and for theperiods January 1, 2004 through March 14, 2004 and March 15,2004 to December 31, 2004, and for the year ended December 31, 2003:

| ** **                                       | ** ** | **Successor Company**              | ** ** | ** **                                                           | ** ** | **Predecessor Company** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                       | ** ** | **Year ended  December 31,  2005** | ** ** | **Period from  March 15 to  December 31,  2004** | ** ** | ** **                   | ** ** | **Period from  January 1 to  March 14,  2004** | ** ** | **Year ended  December 31,  2003** | ** ** |
| Service cost of  benefits earned during the year |       |                                    | $          | 550                                                                  |       |                         |       | $ | 406 |   |   |   |   |   | $ | 180 |   |   |   | $ | 460 |   |   |
| Interest cost on  projected benefit obligation   |       |                                    | 1,026      |                                                                 |       |                         | 764        |   |   |   |   |   | 203 |   |   |   | 832 |   |   |
| Expected return  on plan assets                  |       |                                    | (1,120     | )                                                                    |       |                         | (862       | ) |   |   |   |   | (227 | ) |   |   | (964 | ) |   |
| Amortization of  prior service cost              |       |                                    | —     |                                                                 |       |                         | —     |   |   |   |   |   | 30 |   |   |   | — |   |   |
| Net periodic pension expense                     |       |                                    | $          | 456                                                                  |       |                         |       | $ | 308 |   |   |   |   |   | $ | 186 |   |   |   | $ | 328 |   |   |
| Purchase  accounting recognition                 |       |                                    | —     |                                                                 |       |                         | —     |   |   |   |   |   | 2,987 |   |   |   | — |   |   |
| Net periodic pension expense                     |       |                                    | $          | 456                                                                  |       |                         |       | $ | 308 |   |   |   |   |   | $ | 3,173 |   |   |   | $ | 328 |   |   |
| Weighted average  assumptions:                   |       |                                    |       |                                                                 |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount rate:                                   |       |                                    |       |                                                                 |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Benefit obligation                               |       |                                    | 5.75       | %                                                                    |       |                         | 6.00       | % |   |   |   |   | 6.25 | % |   |   | 6.25 | % |   |
| Expected return on plan assets                   |       |                                    | 8.50       | %                                                                    |       |                         | 8.50       | % |   |   |   |   | 8.50 | % |   |   | 8.50 | % |   |
| Rate of  compensation increase                   |       |                                    | 3.00       | %                                                                    |       |                         | 3.00       | % |   |   |   |   | 3.00 | % |   |   | 3.00 | % |   |

 

Thefollowing table provides information related to the Company’s pension plan inwhich accumulated benefit obligations exceeded the fair value of plan assets asof the applicable period end:

| ** **                      | ** ** | **Successor  Company**                  | ** ** | ** **                                                           | ** ** | **Predecessor  Company ** | ** ** |
|---------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                      | ** ** | **Year Ended  December 31,  2005** | ** ** | **Period from  March 15 to  December 31,  2004** | ** ** | ** **                     | ** ** | **Period from  January 1 to  March 14,  2004** | ** ** |
| Projected benefit  obligation   |       |                                    | $          | 19,015                                                               |       |                           |       | $ | 17,373 |   |   |   |   |   | $ | 16,547 |   |   |
| Accumulated  benefit obligation |       |                                    | $          | 18,710                                                               |       |                           |       | $ | 17,133 |   |   |   |   |   | $ | 16,298 |   |   |
| Fair value of assets            |       |                                    | $          | 13,044                                                               |       |                           |       | $ | 13,387 |   |   |   |   |   | $ | 13,374 |   |   |

 

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Assetsof the defined benefit plan for hourly union employees consist primarily ofinvestments in equity securities, debt securities, and cash equivalents. Theweighted-average asset allocations for the year ended December 31,2005 and for the periods January 1, 2004 through March 14, 2004 andMarch 15, 2004 to December 31, 2004, by asset category, are asfollows:

| ** **        | ** ** | **Successor Company**              | ** ** | ** **                                                           | ** ** | **Predecessor  Company** | ** ** | ** **                                                         | ** ** |
|-------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------------|------------|--------------------------|------------|--------------------------------------------------------------------|------------|
| ** **        | ** ** | **Year Ended  December 31,  2005** | ** ** | **Period from  March 15 to  December 31,  2004** | ** ** | ** **               | ** ** | **Period from  January 1 to  March 14,  2004** | ** ** | **Target** | ** ** |
| Equity securities |       |                                    | 61.0       | %                                                                    |       |                     | 59.0       | %                                                                  |       |   |   |   | 52.0 | % |   | 50-70 | % |
| Debt securities   |       |                                    | 33.0       | %                                                                    |       |                     | 41.0       | %                                                                  |       |   |   |   | 47.9 | % |   | 30-50 | % |
| Cash and other    |       |                                    | 6.0        | %                                                                    |       |                     | 0.0        | %                                                                  |       |   |   |   | 0.1 | % |   | 0 | % |
| Total             |       |                                    | 100.0      | %                                                                    |       |                     | 100.0      | %                                                                  |       |   |   |   | 100.0 | % |   | 100.0 | % |

 

In addition to the defined benefit pension plan forhourly employees, the Company also maintains a defined contribution plan whichcovers substantially all employees. Expenses for defined contribution plansamounted to $635 for the year ended December 31, 2005, $148 for the periodJanuary 1, 2004 through March 14, 2004, $575 for the periodMarch 15, 2004 to December 31, 2004, and $779 for the year endedDecember 31, 2003.

The Company also participates in certain unfundedhealth care plans that provide post-retirement medical, dental, and lifeinsurance to hourly union employees at its Amory, Mississippi plant and tosalaried employees hired prior to January 1, 2000. The post-retirementplans are contributory, and include certain cost-sharing features, suchas deductibles and co-payments.

Thefollowing table sets forth the benefit obligation of the unfunded post-retirementhealth plans for the year ended December 31, 2005 and for the periods January 1,2004 through March 14, 2004 and March 15, 2004 to December 31,2004:

| ** **                                | ** ** | **Successor Company**              | ** ** | ** **                                                           | ** ** | **Predecessor  Company** | ** ** |
|-------------------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                | ** ** | **Year Ended  December 31,  2005** | ** ** | **Period from  March 15 to  December 31,  2004** | ** ** | ** **               | ** ** | **Period from  January 1 to  March 14,  2004** | ** ** |
| Reconciliation of  benefit obligation:    |       |                                    |       |                                                                 |       |                     |       |   |   |   |   |   |   |   |   |
| Benefit obligation at beginning of period |       |                                    | $          | 3,554                                                                |       |                     |       | $ | 3,575 |   |   |   |   |   | $ | 3,515 |   |   |
| Service cost                              |       |                                    | 91         |                                                                 |       |                     | 78         |   |   |   |   |   | 20 |   |   |
| Interest cost                             |       |                                    | 220        |                                                                 |       |                     | 162        |   |   |   |   |   | 44 |   |   |
| Participant contributions                 |       |                                    | 185        |                                                                 |       |                     | 108        |   |   |   |   |   | 28 |   |   |
| Actuarial loss                            |       |                                    | 723        |                                                                 |       |                     | 81         |   |   |   |   |   | 86 |   |   |
| Benefits paid                             |       |                                    | (904       | )                                                                    |       |                     | (450       | ) |   |   |   |   | (118 | ) |   |
| Benefit obligation at end of period       |       |                                    | 3,869      |                                                                 |       |                     | 3,554      |   |   |   |   |   | 3,575 |   |   |
| Unrecognized net actuarial loss           |       |                                    | (804       | )                                                                    |       |                     | (81        | ) |   |   |   |   | — |   |   |
| Accrued benefit  costs                    |       |                                    | $          | 3,065                                                                |       |                     |       | $ | 3,473 |   |   |   |   |   | $ | 3,575 |   |   |

 

57

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Thefollowing table provides the components of net periodic expense for theunfunded post retirement health plans for the year ended December 31, 2005and for the periods January 1, 2004 through March 14, 2004 and March 15,2004 to December 31, 2004, and for the year ended December 31, 2003:

| ** **                           | ** ** | **Successor Company**        | ** ** | ** **                                                     | ** ** | **Predecessor Company** | ** ** |
|--------------------------------------|------------|-----------------------------------|------------|----------------------------------------------------------------|------------|------------------------------|------------|
| ** **                           | ** ** | **Year Ended  December 31,** | ** ** | **Period from  March 15 to  December 31,** | ** ** | ** **                   | ** ** | **Period from  January 1 to  March 14,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                           | ** ** | **2005**                          | ** ** | **2004**                                                       | ** ** | ** **                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Service cost                         |       |                              | $          | 91                                                             |       |                         |       | $ | 78 |   |   |   |   |   | $ | 20 |   |   |   | $ | 85 |   |   |
| Interest cost                        |       |                              | 220        |                                                           |       |                         | 162        |   |   |   |   |   | 44 |   |   |   | 217 |   |   |
| Amortization of  prior service costs |       |                              | —     |                                                           |       |                         | —     |   |   |   |   |   | (7 | ) |   |   | (37 | ) |   |
| Recognized net  losses               |       |                              | —     |                                                           |       |                         | —     |   |   |   |   |   | 13 |   |   |   | 54 |   |   |
| Net periodic cost                    |       |                              | $          | 311                                                            |       |                         |       | $ | 240 |   |   |   |   |   | $ | 70 |   |   |   | $ | 319 |   |   |
| Purchase  accounting recognition     |       |                              | —     |                                                           |       |                         | —     |   |   |   |   |   | 1,060 |   |   |   | — |   |   |
| Total amount recognized              |       |                              | $          | 311                                                            |       |                         |       | $ | 240 |   |   |   |   |   | $ | 1,130 |   |   |   | $ | 319 |   |   |
| Discount Rate:                       |       |                              |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Benefit  obligation                  |       |                              | 5.75       | %                                                              |       |                         | 6.00       | % |   |   |   |   | 6.00 | % |   |   | 6.25 | % |   |

 

The healthcare cost trendrate used to determine the post-retirement benefit obligation was 10.0%for 2005. This rate decreases gradually to an ultimate rate of 5.0% in 2014,and remains at that level thereafter. While the trend rate can be a significantfactor in determining the amounts reported, for the year ended December 31,2005 a one-percentage-point increase or decrease in the trend ratewill have only minimal impact due to the claims costs being close to theemployer imposed cap.

**(10) STOCK OPTIONS**

In 2004, the Company’s parent, True Temper Corporation(“TTC”) adopted an equity incentive plan (the “2004 Plan”) pursuant towhich TTC’s board of directors may grant equity incentive awards to officersand key employees of the Company. The 2004 Plan authorizes grants of options topurchase and grants of restricted shares, in total, up to 1,008,051 shares ofauthorized but unissued common stock. Stock options are granted with anexercise price equal to the stock’s fair market value at the date of grant. Allstock options have 10 year terms and vest and become fully exercisable atdiffering time periods up to four years from the date of grant.

AtDecember 31, 2005, there were 79,430 shares available for grant under the2004 Plan. The per share weighted average fair value of stock options grantedduring 2005 was $2.41, on the date of grant using the Black Scholes option-pricingmodel (excluding a volatility assumption) with the following weighted averageassumptions:

| Expected dividend  yield  |   | 0.0  | %      |
|---------------------------|--------|------|--------|
| Risk free rate of  return |   | 4.21 | %      |
| Expected life (years)     |   | 4.7  |   |

 

Stockoption activity during 2005 is as follows:

| ** **                         | ** ** | **Number of  Shares** | ** ** | **Wtd. Avg.  Exercise  Price** | ** ** |
|------------------------------------|------------|----------------------------|------------|-------------------------------------|------------|
| Granted                            |       |                       | 525,400    |                                |       |   | $ | 13.56 |   |   |
| Exercised                          |       |                       | —     |                                |       |   | — |   |   |
| Forfeited                          |       |                       | —     |                                |       |   | — |   |   |
| Balance at  December 31, 2005 |       |                       | 524,400    |                                |       |   | $ | 13.56 |   |   |

 

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No stock options expired in 2005. At December 31,2005, the exercise price and weighted average remaining contractual life ofoutstanding options was $13.56 and 9.6 years, respectively.

At December 31, 2005there were no options exercisable.

**(11)**   COMMITMENTSAND CONTINGENCIES

**(a)   Lease Obligation**

The Company is obligated under various non-cancelableleases for office facilities and equipment. These leases generally provide forrenewal options and, in the case of facilities leases, for periodic rateincreases based upon economic factors. All non-cancelable leases with aninitial term greater than one year have been categorized as either capital oroperating leases in conformity with SFAS No. 13, *Accounting for Leases*.

Future minimum paymentsunder non-cancelable operating leases with initial terms of one year ormore as of December 31, 2005 are as follows: 

| ** **                    | ** ** | **Operating  Leases** | ** ** |
|-------------------------------|------------|-----------------------|------------|
| 2006                          |       |                  | $          | 1,096 |   |   |
| 2007                          |       |                  | 1,076      |   |   |
| 2008                          |       |                  | 779        |   |   |
| 2009                          |       |                  | 291        |   |   |
| 2010                          |       |                  | 284        |   |   |
| Thereafter                    |       |                  | 143        |   |   |
| Total minimum  lease payments |       |                  | $          | 3,669 |   |   |

 

Rental expense onoperating leases was $1,067 for the year ended December 31, 2005, $210 forthe period January 1, 2004 through March 14, 2004, $812 for theperiod March 15, 2004 to December 31, 2004, and $1,002 for the yearended December 31, 2003.

**(b)   Product Warranties**

The Company generally warrants its products againstcertain manufacturing and other defects. These product warranties are providedfor specific periods of time and/or usage of the product depending on thenature of the product, the geographic location of its sale and other factors.As of December 31, 2005 and 2004, the Company has accrued $309 and $153,respectively, for estimated product warranty claims. The accrued productwarranty costs are based primarily on historical experience of actual warrantyclaims as well as current information on product costs. Warranty claims expensewas $959 for the year ended December 31, 2005, $129 for the period January 1,2004 through March 14, 2004, $527 for the period March 15, 2004 to December 31,2004, and $812 for the year ended December 31, 2003.

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Thefollowing table provides the changes in the Company’s product warranties:

| Predecessor:                                                 |   |   |   |
|--------------------------------------------------------------|--------|--------|--------|
| January 1,  2003                                        |   | $      | 137    |   |
| Liabilities accrued for warranties issued during the  period |   | 812    |   |
| Warranty claims paid during the period                       |   | (773   | )      |
| December 31,  2003                                      |   | $      | 176    |   |
| Liabilities accrued for warranties issued during the  period |   | 129    |   |
| Warranty claims paid during the period                       |   | (91    | )      |
| March 15,  2004                                         |   | $      | 214    |   |
| Successor:                                                   |   |   |   |
| Liabilities accrued for warranties issued during the  period |   | 527    |   |
| Warranty claims paid during the period                       |   | (588   | )      |
| December 31,  2004                                      |   | $      | 153    |   |
| Liabilities accrued for warranties issued during the  period |   | 959    |   |
| Warranty claims paid during the period                       |   | (803   | )      |
| December 31, 2005                                            |   | $      | 309    |   |

 

**(c)   LegalProceedings**

The Company has certaincontingent liabilities resulting from litigation and claims incident to theordinary course of business. Management believes that the probable resolutionof such contingencies will not materially affect the consolidated financialposition or results of operations of the Company.

**(12)**   RELATEDPARTY TRANSACTIONS

On March 15, 2004, True Temper entered into amanagement services agreement with an entity affiliated with Gilbert Global,which is a related party through its indirect management and ownership interestin True Temper Corporation.

In accordance withthis agreement, Gilbert Global has agreed to provide:

(1)          general managementservices;

(2)   assistancewith the identification, negotiation and analysis of acquisitions anddispositions;

(3)   assistancewith the negotiation and analysis of financial alternatives; and

(4)   otherservices agreed upon by True Temper and Gilbert Global.

In exchange forsuch services, Gilbert Global or its nominee receives:

(1)          an annual advisory feeof $0.5 million payable quarterly, plus reasonable out-of-pocketexpenses;

(2)          a transaction fee in anamount equal to 1.25% of the aggregate transaction value in connection with theconsummation of any material acquisition, divestiture, financing or refinancingby True Temper or any of its subsidiaries.

The management services agreement has an initial termof five years, subject to automatic one-year extensions unless theCompany or Gilbert Global provides written notice of termination. The annualadvisory fee of $0.5 million is an obligation of the Company and is alsocontractually subordinated to the Notes and the bank credit facilities.

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On March 15, 2004,the Company terminated its management services agreement with CornerstoneEquity Investors, LLC, which was a related party through its indirectmanagement and ownership interest in the predecessor company.

**(13)**   SEGMENTAND OTHER RELATED DISCLOSURES

**(a)   SegmentReporting**

TheCompany operates in two reportable business segments: golf shafts andperformance sports. The Company’s reportable segments are based on the type ofproduct manufactured and the application of that product in the marketplace.The golf shaft segment manufactures and sells steel and composite golf shaftsfor use exclusively in the golf industry. The performance sports segmentmanufactures and sells high strength, tight tolerance tubular components forbicycle, hockey and other recreational sports markets. The accounting policiesfor these segments are the same as those described in the summary ofsignificant accounting policies. The Company evaluates the performance of thesesegments based on segment sales and gross profit. The Company has no inter-segmentsales. General corporate assets that are not allocated down to segments,include: cash, non-trade receivables, deferred tax assets and liabilities,deferred financing costs, corporate property plant and equipment, goodwill andother intangible assets.

| ** **            | ** ** | **Successor Company**                        | ** ** | ** **                                                     | ** ** | **Predecessor Company** | ** ** |
|-----------------------|------------|----------------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------|------------|
| ** **            | ** ** | **Year Ended   December 31,** | ** ** | **Period from  March 15 to  December 31,** | ** ** | ** **                   | ** ** | **Period from  January 1 to  March 14,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **            | ** ** | **2005**                                     | ** ** | **2004**                                                       | ** ** | ** **                   | ** ** | **2004** | ** ** | **2003 ** | ** ** |
| Net sales:            |       |                                         |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Golf shafts           |       |                                         | $          | 110,820                                                        |       |                         |       | $ | 73,274 |   |   |   |   |   | $ | 19,067 |   |   |   | $ | 109,754 |   |   |
| Performance sports    |       |                                         | 6,774      |                                                           |       |                         | 4,846      |   |   |   |   |   | 1,180 |   |   |   | 6,452 |   |   |
| Total                 |       |                                         | $          | 117,594                                                        |       |                         |       | $ | 78,120 |   |   |   |   |   | $ | 20,247 |   |   |   | $ | 116,206 |   |   |
| Gross profit:         |       |                                         |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Golf shafts           |       |                                         | $          | 45,804                                                         |       |                         |       | $ | 17,038 |   |   |   |   |   | $ | 8,080 |   |   |   | $ | 45,118 |   |   |
| Performance sports    |       |                                         | 1,428      |                                                           |       |                         | 978        |   |   |   |   |   | 296 |   |   |   | 1,618 |   |   |
| Total                 |       |                                         | $          | 47,232                                                         |       |                         |       | $ | 18,016 |   |   |   |   |   | $ | 8,376 |   |   |   | $ | 46,736 |   |   |
| Depreciation Expense: |       |                                         |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Golf shafts           |       |                                         | $          | 2,242                                                          |       |                         |       | $ | 2,098 |   |   |   |   |   | $ | 582 |   |   |   | $ | 2,486 |   |   |
| Performance sports    |       |                                         | 483        |                                                           |       |                         | 322        |   |   |   |   |   | 89 |   |   |   | 420 |   |   |
| Total                 |       |                                         | $          | 2,725                                                          |       |                         |       | $ | 2,420 |   |   |   |   |   | $ | 671 |   |   |   | $ | 2,906 |   |   |
| Capital Expenditures: |       |                                         |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Jointly used assets   |       |                                         | $          | 143                                                            |       |                         |       | $ | 129 |   |   |   |   |   | $ | 22 |   |   |   | $ | — |   |   |
| Golf shafts           |       |                                         | 1,686      |                                                           |       |                         | 810        |   |   |   |   |   | 286 |   |   |   | 3,112 |   |   |
| Performance sports    |       |                                         | 783        |                                                           |       |                         | 293        |   |   |   |   |   | 22 |   |   |   | 348 |   |   |
| Total                 |       |                                         | $          | 2,612                                                          |       |                         |       | $ | 1,232 |   |   |   |   |   | $ | 330 |   |   |   | $ | 3,460 |   |   |
| Total assets:         |       |                                         |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Jointly used assets   |       |                                         | $          | 1,810                                                          |       |                         |       | $ | 1,291 |   |   |   |   |   | $ | 1,398 |   |   |   | $ | 1,333 |   |   |
| Golf shafts           |       |                                         | 42,693     |                                                           |       |                         | 44,237     |   |   |   |   |   | 42,019 |   |   |   | 41,087 |   |   |
| Performance sports    |       |                                         | 4,210      |                                                           |       |                         | 3,333      |   |   |   |   |   | 2,920 |   |   |   | 2,997 |   |   |
| Total                 |       |                                         | $          | 48,713                                                         |       |                         |       | $ | 48,861 |   |   |   |   |   | $ | 46,337 |   |   |   | $ | 45,417 |   |   |

 

Revenues from two customers of True Temper’s golfshafts segment represented approximately $16,100 or 13.7%, and $14,700 or 12.5%,respectively, of the Company’s 2005 revenues. Revenues from two customers ofTrue Temper’s golf shafts segment represented approximately $2,900 or 14.2% 

61

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and $2,200 or 10.6% of theCompany’s revenues for the period January 1 to March 14, 2004.Revenues from one customer of True Temper’s golf shafts segment representedapproximately $11,000 or 14.1% of the Company’s revenues for the period March 15to December 31, 2004. Revenues from two customers of True Temper’s golfshafts segment represented approximately $16,000 or 13.7%, and $13,500 or11.6%, respectively, of the Company’s 2003 revenues. 

Following arereconciliations of total reportable segment assets to total Company assets, asof December 31, and total reportable segment gross profit to total Companyincome before income taxes for the periods indicated:

| ** **                                     | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|
| Total assets:                                  |       |     |       |     |       |
| Total from reportable segments                 |       | $        | 48,713     |     | $          | 48,861 |   |
| General corporate and other unallocated assets |       | 299,342  |       | 311,964  |       |
| Total                                          |       | $        | 348,055    |     | $          | 360,825 |   |

 

| ** **                                                 | ** ** | **Successor Company**                  | ** ** | ** **                                                     | ** ** | **Predecessor Company** | ** ** |
|------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                 | ** ** | **Year Ended  December 31,** | ** ** | **Period from  March 15 to  December 31,** | ** ** | ** **                   | ** ** | **Period from  January 1 to  March 14,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **                                                 | ** ** | **2005**                               | ** ** | **2004**                                                       | ** ** | ** **                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Total reportable  segment gross profit                     |       |                                   | $          | 47,232                                                         |       |                         |       | $ | 18,016 |   |   |   |   |   | $ | 8,376 |   |   |   | $ | 46,736 |   |   |
| Less:                                                      |       |                                   |       |                                                           |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative expenses               |       |                                   | 14,660     |                                                           |       |                         | 9,520      |   |   |   |   |   | 3,635 |   |   |   | 14,747 |   |   |
| Amortization of intangible assets                          |       |                                   | 13,840     |                                                           |       |                         | 10,984     |   |   |   |   |   | — |   |   |   | — |   |   |
| Business development, start-up costs and transition  costs |       |                                   | 208        |                                                           |       |                         | 738        |   |   |   |   |   | 100 |   |   |   | 869 |   |   |
| Transaction and reorganization  expense                    |       |                                   | —     |                                                           |       |                         | 25         |   |   |   |   |   | 5,381 |   |   |   | — |   |   |
| Impairment charge on long lived assets                     |       |                                   | 357        |                                                           |       |                         | —     |   |   |   |   |   | — |   |   |   | — |   |   |
| Loss on early extinguishment of long-term debt             |       |                                   | —     |                                                           |       |                         | —     |   |   |   |   |   | 9,217 |   |   |   | — |   |   |
| Interest expense                                           |       |                                   | 18,631     |                                                           |       |                         | 13,491     |   |   |   |   |   | 2,498 |   |   |   | 13,017 |   |   |
| Other expense (income), net                                |       |                                   | (31        | )                                                              |       |                         | 72         |   |   |   |   |   | (2 | ) |   |   | 132 |   |   |
| Total Company income  (loss) before income taxes           |       |                                   | $          | (433                                                           | )          |                         |       | $ | (16,814 | ) |   |   |   |   | $ | (12,453 | ) |   |   | $ | 17,971 |   |   |

 

**(b)   Sales byGeographic Region**

The geographicdistribution of the Company’s net sales, by location of customer, is summarizedas follows: 

| ** **    | ** ** | **Successor Company**                  | ** ** | ** **                                                     | ** ** | **Predecessor Company** | ** ** |
|---------------|------------|----------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------|------------|
| ** **    | ** ** | **Year Ended  December 31,** | ** ** | **Period from  March 15 to  December 31,** | ** ** | ** **                   | ** ** | **Period from  January 1 to  March 14,** | ** ** | **Year Ended  December 31,** | ** ** |
| ** **    | ** ** | **2005**                               | ** ** | **2004**                                                       | ** ** | ** **                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| U.S.          |       |                                   | $          | 75,151                                                         |       |                         |       | $ | 49,700 |   |   |   |   |   | $ | 12,140 |   |   |   | $ | 79,652 |   |   |
| International |       |                                   | 42,443     |                                                           |       |                         | 28,420     |   |   |   |   |   | 8,107 |   |   |   | 36,554 |   |   |
| Total         |       |                                   | $          | 117,594                                                        |       |                         |       | $ | 78,120 |   |   |   |   |   | $ | 20,247 |   |   |   | $ | 116,206 |   |   |

 

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Revenues generated from sales into Southern Chinaaccounted for approximately $20,900 or 17.7% of True Temper’s total sales forthe year ended December 31, 2005, $3,300 or 16.4% of True Temper’s totalsales for the period January 1 to March 14, 2004, $14,200 or 18.2% ofTrue Temper’s total sales for the period March 15 to December 31,2004, and $16,200 or 14.0% for the year ended December 31, 2003. The salesinto Southern China are due primarily to our major U.S. based originalequipment manufacturers shifting a portion of their assembly operations to thatregion. Assets by location are not disclosed, as assets located outside theU.S. are immaterial.

**(14)**   SELECTEDQUARTERLY FINANCIAL DATA (UNAUDITED)

Thefollowing is a summary of unaudited quarterly results of operations for theyears ended December 31, 2005 and 2004.

| ** **       | ** ** | **First  Quarter** | ** ** | **Second  Quarter** | ** ** | **Third  Quarter** | ** ** | **Fourth  Quarter** | ** ** |
|------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|
| **Predecessor:** |       |               |       |                |       |               |       |                |       |
| **2004**         |       |               |       |                |       |               |       |                |       |
| Net sales        |       | $                  | 20,247     |                | —     |               | —     |                | —     |   |
| Gross profit     |       | 8,376              |       | —              |       | —             |       | —              |       |
| Net income       |       | (9,608             | )          | —              |       | —             |       | —              |       |
|                  |            |                    |            |                     |            |                    |            |                     |            |  |

 

| ** **     | ** ** | **First  Quarter** | ** ** | **Second  Quarter** | ** ** | **Third  Quarter** | ** ** | **Fourth  Quarter** | ** ** |
|----------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|
| **Successor:** |       |               |       |                |       |               |       |                |       |
| **2004**       |       |               |       |                |       |               |       |                |       |
| Net sales      |       | $                  | 9,964      |                | $          | 25,333             |       | $                   | 21,308     |   | $ | 21,515 |   |
| Gross profit   |       | 3,976              |       | 10,210              |       | 8,379              |       | (4,549              | )          |
| Net income     |       | 1,597              |       | 1,713               |       | 748                |       | (14,522             | )          |
| **2005**       |       |               |       |                |       |               |       |                |       |
| Net sales      |       | $                  | 32,103     |                | $          | 32,565             |       | $                   | 25,520     |   | $ | 27,406 |   |
| Gross profit   |       | 12,869             |       | 13,251              |       | 10,443             |       | 10,669              |       |
| Net income     |       | 184                |       | 570                 |       | (661               | )          | (559                | )          |

 

**(15) SUBSEQUENT EVENT**

**As morefully described in Note 7, the Company amended and restated its 2004Senior Credit Facility on March 27, 2006.**

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**Item9.        *Changes in andDisagreements With Accountants on Accounting and Financial Disclosure***

None.

**Item 9A.     *Controls and Procedures***

**Evaluationof Disclosure Controls and Procedures**

Evaluations required by Rule 13a-15of the Securities Exchange Act of 1934 of the effectiveness of the Company’sdisclosure controls and procedures (as defined in Rule 13a-15(e) underthe Securities Exchange Act of 1934) as of the end of the period covered bythis Report have been carried out under the supervision and with theparticipation of the Company’s management, including its Chief ExecutiveOfficer and Chief Financial Officer. Based upon such evaluations, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures were effective. There have been no changesin the Company’s internal controls over financial reporting during the periodcovered by this Report that were identified in connection with the evaluationreferred to above that have materially affected, or are reasonably likely tomaterially affect, the Company’s internal controls over financial reporting.

**Item 9B.     *Other Information***

None.

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**PART III**

**Item 10.**                 *Directors and Executive Officers of the Registrant*

Thedirectors and executive officers of True Temper as of December 31, 2005are as follows:

| **Name**                      | ** ** | ** ** | ** ** | **Age** | ** ** | **Position**                                            | ** ** |
|-------------------------------|------------|------------|------------|---------|------------|---------------------------------------------------------|------------|
| Scott C. Hennessy             |       |       | 47         |    |       | Chief  Executive Officer, President and Director        |       |
| Fred H. Geyer                 |       |       | 45         |    |       | Senior  Vice President, Chief Operating Officer         |       |
| Adrian H. McCall              |       |       | 48         |    |       | Senior  Vice President of Global Distribution and Sales |       |
| Stephen M. Brown              |       |       | 40         |    |       | Vice  President of Human Resources                      |       |
| Graeme Horwood                |       |       | 61         |    |       | Vice  President Engineering, Research and Development   |       |
| Jason A. Jenne                |       |       | 36         |    |       | Vice  President, Chief Financial Officer and Treasurer  |       |
| Gene Pierce                   |       |       | 39         |    |       | Vice  President of Manufacturing                        |       |
| Steven J. Gilbert             |       |       | 58         |    |       | Director  and Co-Chairman                               |       |
| Steven Kotler                 |       |       | 58         |    |       | Director  and Co-Chairman                               |       |
| Richard W.  Gaenzle, Jr. |       |       | 41         |    |       | Director                                                |       |
| Jeffery W.  Johnson           |       |       | 37         |    |       | Director                                                |       |
| William P. Lauder             |       |       | 45         |    |       | Director                                                |       |

 

**ScottC. Hennessy**has been the President since 1996, and theChief Executive Officer and Director since October 1998. Mr. Hennessyjoined us in 1994 as Vice President-Sales and Marketing. From 1980 to1994, Mr. Hennessy held various management positions at Black &Decker in sales, marketing and product development. Mr. Hennessy sits onthe Board of Governors of the National Golf Foundation. Mr. Hennessygraduated magna cum laude with a B.S. from the University of Delaware. 

**FredH. Geyer**has been the Chief Operating Officer since January 2005,and Senior Vice President since August 2002. From 1998 through 2004,Mr. Geyer served as the Company’s Chief Financial Officer. From 1985 to1998, Mr. Geyer held various positions at Emerson Electric Company,including Vice President-Finance in the Air Moving Motor Division. Priorto that, Mr. Geyer worked at Arthur Andersen LLP as a Senior Auditor. Mr. Geyeris a Certified Public Accountant and is a member of the American Institute ofCertified Public Accountants. Mr. Geyer graduated magna cum laude with aB.S. in Accounting from the University of Missouri at St. Louis. 

**AdrianH. McCall**has been the Senior Vice President of GlobalDistribution and Sales since August 2002. From March 1999 to July 2002,Mr. Mc Call served as our Vice President of International Sales andMarketing since March 1999. From September 1995 to March 1999, Mr. McCallserved as our Director of International Sales and Marketing. From May 1992to September 1995, Mr. McCall served as Director of InternationalOperations of The Upper Deck Company, a manufacturer and distributor ofbaseball cards. Mr. McCall graduated cum laude with a B.S. from theUniversity of Hartford. 

**StephenR. Brown**has been the Vice President of HumanResources since August 2002. From January 1998 to July 2002, Mr. Brownhas served as our Director of Human Resources. From September 1996 to December 1997,Mr. Brown served as the Manager-Human Resources. Prior to that,since 1992, Mr. Brown served in various Human Resource managementpositions with Emerson Electric Company. Mr. Brown received a B.A. fromthe University of South Carolina. 

**GraemeHorwood**has been the Vice President of Engineering,Research and Development since June 2001. From April 2000 to May 2001,Mr. Horwood served as our Senior Manager Technical Services. From 1986 to2000, Mr. Horwood held various management positions at Apollo SportsTechnologies. Mr. Horwood is a Chartered Engineer as well as a member ofthe Institute of Mechanical Engineers both in the United Kingdom. Mr. Horwoodgraduated first class honors with a B.S. from Coventry University. 

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**JasonJenne**has been the Chief Financial Officer andTreasurer since January 2005 and Vice President since August 2003. From September2002 to August 2003, Mr. Jenne served as the Director of CorporateFinance. From September 1998 to September 2002, Mr. Jenne served as theCorporate Controller. From 1993 to 1998, Mr. Jenne served in variousFinance and Accounting positions at Emerson Electric Company. Mr. Jennegraduated magna cum laude with a B.S. from Southern Illinois University. 

**GenePierce**has been the Vice President of Manufacturingsince June 2001. From January 1999 to June 2001, Mr. Pierceserved as the Director of Steel Operations and Plant Manager of our steelfacility. From May 1997 to January 1999, Mr. Pierce served asBusiness Operations Manager at Metalloy Corporation. Mr. Pierce receivedboth a B.S. and M.B.A. from Mississippi State University.

**StevenJ. Gilbert**became a member of and Co-Chairman of theboard of directors upon consummation of the Gilbert Global Acquisition. He is afounder and has served as Chairman of the Board of Gilbert Global EquityPartners, L.P. since 1997. From 1992 to 1997, he was the founder and ManagingGeneral Partner of Soros Capital L.P., the principal venture capital andleveraged transaction entity of Quantum Group of Funds, and a principal Advisorto Quantum Industrial Holdings Ltd. From 1988 through 1992 he was the ManagingDirector of Commonwealth Capital Partners, L.P., a private equity investmentfirm. From 1984 to 1988, Mr. Gilbert was the Managing General Partner ofChemical Venture Partners (now J.P. Morgan Partners), which he founded.Mr. Gilbert is a Director of LCC International, Inc., Optical CapitalGroup, Inc., Montpelier Re Holdings Ltd., Olympus Re Holdings Ltd., CPMHoldings, Inc., the Asian Infrastructure Fund and J O Hambro InvestmentManagement, Ltd. Previously, Mr. Gilbert has been a director of numerouspublic and private companies. Mr Gilbert received a B.S. from the WhartonSchool at the University of Pennsylvania, an M.B.A. from the Harvard GraduateSchool of Business Administration, and a J.D. from Harvard Law School. 

**StevenKotler**became a member of and Co-Chairman of the boardof directors upon consummation of the Gilbert Global Acquisition. He has servedas Vice Chairman of Gilbert Global Equity Partners, L.P. since 2000. Prior tojoining Gilbert Global, Mr. Kotler was Co-Chairman, Chief ExecutiveOfficer and President of Schroder & Co. and it predecessor firm,Wertheim & Co. Mr. Kotler is a member of the Board of Directorsof CPM Holdings, Inc. Previously, Mr Kotler has served as a Governor ofthe American Stock Exchange and a director of numerous public and privatecompanies. Mr. Kotler is a graduate of city College of New York. 

**RichardW. Gaenzle, Jr.**became a member of the board ofdirectors upon consummation of the Gilbert Global Acquisition. He is a founderand has served as Managing Director of Gilbert Global Equity Partners, L.P.since 1997. From 1992 to 1997, he was a principal of Soros Capital L.P., theprincipal venture capital and leveraged transaction entity of Quantum Group ofFunds, and a principal Advisor to Quantum Industrial Holdings Ltd. Prior tojoining Soros Capital, Mr. Gaenzle held various positions in theinvestment banking industry. Mr. Gaenzle is Vice Chairman of OpticalCapital Group, LLC and a Director of CPM Holdings, Inc. Previously, Mr. Gaenzlehas been a director of numerous companies. Mr. Gaenzle received a B.A.from Hartwick College and an M.B.A. from Fordham University. 

**JeffreyW. Johnson**became a member of the board of directorsupon consummation of the Gilbert Global Acquisition. He is a founder and hasserved as Managing Director of Gilbert Global Equity Partners, L.P. since 1997.Mr. Johnson was previously with Goldman, Sachs & Co. in itsmergers and acquisitions department, Hallmark Cards, Inc. and FrankRussell Company. He is a director of CPM Holdings, Inc. Mr. Johnsonreceived a B.A. from Claremont McKenna College and an M.B.A. from the HarvardGraduate School of Business Administration. 

**William P. Lauder**becamea member of the board of directors in 2004. In July 2004 Mr. Lauderwas named the President and Chief Executive Officer of Estee Lauder Companies, Inc.He joined Estee Lauder Companies in 1986 and held numerous positions ofincreasing responsibility. Mr. Lauder received a B.A. and an M.B.A. fromthe Wharton School at the University of Pennsylvania. 

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***Code of Ethics.***

The Audit Committee of theBoard of Directors has adopted a Code of Ethics for the Chief ExecutiveOfficer, the Chief Financial Officer, the Chief Operating Officer, and othersenior financial personnel. A copy of the Code of Ethics is available on theCompany’s website at www.truetemper.com. The Company will disclose anyamendments or waivers of the Code of Ethics on the same website.

***Audit Committee.***

The Board of Directors hasdetermined that Steven Kotler is an “audit committee financial expert” asdefined in the rules and regulations adopted by the Securities andExchange Commission. 

**Item 11.**                 *Executive Compensation*

The following table setsforth information concerning the annual and long-term compensation for servicesin all capacities to True Temper for 2005, 2004 and 2003 of those persons whoserved as (1) the Chief Executive Officer during 2005 and (2) theother four most highly compensated executive officers of True Temper for 2005(the “Named Executive Officers”):

**SummaryCompensation Table**

|                                            | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** | **Long-Term Compensation** | ** ** |
|--------------------------------------------|------------|------------|------------|------------------------------|------------|---------------------------------|------------|
| **Name and  Principal Position** | ** ** | ** ** | ** ** | **Year**                     | ** ** | **Salary**                      | ** ** | **Bonus  Earned** | ** ** | **Other  Annual  Compensation(1)** | ** ** | **Awards  Restricted  Stock(2)** | ** ** | **All Other  Compensation(3)** | ** ** |
| Scott C. Hennessy                          |       | 2005       |       | $                            | 416,667    |                            | $          | 205,000 |   |   | $ | 28,951 |   |   | $ | — |   |   | $ | 6,994 |   |   |
| Chief Executive Officer,                   |       | 2004       |       | $                            | 400,000    |                            | $          | — |   |   | $ | 28,910 |   |   | $ | 2,603,520 |   |   | $ | 10,182 |   |   |
| President and Director                     |       | 2003       |       | $                            | 359,167    |                            | $          | 550,000 |   |   | $ | 28,191 |   |   | $ | — |   |   | $ | 9,933 |   |   |
| Fred H. Geyer                              |       | 2005       |       | $                            | 208,333    |                            | $          | 90,000 |   |   | $ | 18,097 |   |   | $ | — |   |   | $ | 9,798 |   |   |
| Senior  Vice President,                    |       | 2004       |       | $                            | 200,000    |                            | $          | — |   |   | $ | 17,284 |   |   | $ | 1,139,040 |   |   | $ | 10,190 |   |   |
| Chief  OperatingOfficer                    |       | 2003       |       | $                            | 185,417    |                            | $          | 200,000 |   |   | $ | 17,699 |   |   | $ | — |   |   | $ | 10,000 |   |   |
| Adrian H. McCall                           |       | 2005       |       | $                            | 183,333    |                            | $          | 67,000 |   |   | $ | 18,075 |   |   | $ | — |   |   | $ | 9,167 |   |   |
| Senior Vice President of                   |       | 2004       |       | $                            | 175,000    |                            | $          | — |   |   | $ | 17,917 |   |   | $ | 813,600 |   |   | $ | 10,250 |   |   |
| International Sales and                    |       | 2003       |       | $                            | 166,255    |                            | $          | 160,000 |   |   | $ | 17,765 |   |   | $ | — |   |   | $ | 10,000 |   |   |
| Marketing                                  |       |       |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |
| Gene Pierce                                |       | 2005       |       | $                            | 160,667    |                            | $          | 38,000 |   |   | $ | 36,043 | (4) |   | $ | — |   |   | $ | 8,033 |   |   |
| Vice President of                          |       | 2004       |       | $                            | 154,000    |                            | $          | — |   |   | $ | 154 |   |   | $ | 325,440 |   |   | $ | 10,250 |   |   |
| Operations                                 |       | 2003       |       | $                            | 150,505    |                            | $          | 90,000 |   |   | $ | 28,259 | (4) |   | $ | — |   |   | $ | 10,032 |   |   |
| Jason A. Jenne                             |       | 2005       |       | $                            | 154,167    |                            | $          | 45,000 |   |   | $ | 18,563 |   |   | $ | — |   |   | $ | 3,854 |   |   |
| Vice President,  Chief                |       | 2004       |       | $                            | 125,000    |                            | $          | — |   |   | $ | 115 |   |   | $ | 488,160 |   |   | $ | 5,000 |   |   |
| Financial Officer and                      |       | 2003       |       | $                            | 110,417    |                            | $          | 75,000 |   |   | $ | 84 |   |   | $ | — |   |   | $ | 3,760 |   |   |
| Treasurer                                  |       |       |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |
|                                            |            |            |            |                              |            |                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)    Includescertain life insurance benefits; and where applicable, country club dues andcar allowance.

(2)    Theamounts in the table represent the value of the restricted shares based on theprice of $13.56 per share of common stock on the date of grant. Shares of TrueTemper Corporation are not traded on any public exchange, therefore informationregarding the value of the restricted shares as of December 31, 2005 hasbeen omitted. The restrictions on the shares are lifted, and the restrictedstock vests, only with certain future performance goals being achieved. Dependingon future performance, the restricted shares can have a value ranging from $0to the value listed. 

(3)    Includescompany contributions under our 401(k) plan. 

(4)    Amount includes moving and relocation benefits.

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**Pension Plan**

True Temper Sports, Inc.sponsors a tax qualified defined benefit pension plan. Only the hourly employeesat the Amory, Mississippi manufacturing plant, who are part of the collectivebargaining unit of the United Steel Workers, are eligible to participate in theplan. Benefits are calculated based primarily on years of service, among otherfactors. As of December 31, 2005, none of True Temper Corporation’s namedexecutive officers were eligible to participate in the plan.

**Equity Incentive Plan**

The Board ofDirectors has adopted an equity incentive plan which provides for the grant tocertain key employees and/or directors of (i) options to purchase commonstock of TTC that are non-qualified options or incentive stock options forfederal income tax purposes, and/or (ii) shares of common stock of TTCrestricted stock, restricted stock units or stock appreciation rights. Theequity incentive plan is administered by the Compensation Committee of theBoard of Directors. The Compensation Committee has broad powers under the stockoption plan, including exclusive authority to determine:

(1)   who willreceive awards; 

(2)   the type,size and terms of awards; 

(3)   the timewhen awards will be granted; and 

(4)   vesting criteria, if any, of the awards. 

**Option / SAR Grants in Last Fiscal Year**

Thefollowing table sets forth all True Temper Corporation common stock optionsgranted to Named Executives Officers during 2005.

| ** **        | ** ** | **Number of  Securities  Underling  Options** | ** ** | **% of  Total  Granted to  Employees  In Fiscal** | ** ** | **Exercise  Or Base  Price** | ** ** | **Expiration**         | ** ** | **Potential  Realized Value of  Assumed Annual  Rates of Stock Price  Appreciation  For Option Term** | ** ** |
|-------------------|------------|----------------------------------------------------|------------|------------------------------------------------------------------|------------|-----------------------------------|------------|------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Name**          | ** ** | ** **                                         | ** ** | **Granted**                                                      | ** ** | **Year**                          | ** ** | **($ / sh)** | ** ** | **Date**                                                                                                                                      | ** ** | **5%** | ** ** | **10%** | ** ** |
| Scott C. Hennessy |       |                                               | 144,000    |                                                             |       |                              | 26.0       | %                      |       |                                                                                                                                          | $          | 13.56 |   |   | March 15,  2014 |   | $ | 1,228,005 |   | $ | 3,112,005 |   |
| Fred H. Geyer     |       |                                               | 72,000     |                                                             |       |                              | 13.0       | %                      |       |                                                                                                                                          | $          | 13.56 |   |   | March 15,  2014 |   | 614,002 |   | 1,556,003 |   |
| Adrian H. McCall  |       |                                               | 50,200     |                                                             |       |                              | 9.1        | %                      |       |                                                                                                                                          | $          | 13.56 |   |   | March 15,  2014 |   | 428,096 |   | 1,084,880 |   |
| Gene Pierce       |       |                                               | 28,800     |                                                             |       |                              | 5.2        | %                      |       |                                                                                                                                          | $          | 13.56 |   |   | March 15, 2014 |   | 245,601 |   | 622,401 |   |
| Jason A. Jenne    |       |                                               | 36,000     |                                                             |       |                              | 6.5        | %                      |       |                                                                                                                                          | $          | 13.56 |   |   | March 15, 2014 |   | 307,001 |   | 778,002 |   |
|                   |            |                                                    |            |                                                                  |            |                                   |            |                        |            |                                                                                                                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The value of the optionspresented assumes that 100% of the options vest during the option term. Aportion of the underlying options vest based on service, and a portion vestbased on company performance. Based on future financial performance, theultimate value of the options may be significantly less than presented in thistable.

**AggregatedOptions / SAR Exercises and Fiscal Year-end Option / SAR Value Table**

***None.***

**Compensation of Directors**

True Temper will reimburse directors for anyout-of-pocket expenses incurred by them in connection with services provided insuch capacity. In addition, we may compensate directors for services providedin such capacity.

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**Item12.      *SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters***

All of theoutstanding shares of our capital stock are owned by TTC. The following tablesets forth information with respect to the beneficial ownership of TTC’scapital stock as of March 30, 2005 by:

(1)   allstockholders of TTC that own more than 5% of any class of such votingsecurities,

(2)   eachdirector and named executive officer, and

(3)   all directors and executive officers as agroup.

| **Name of Beneficial Owner(1)**                                                                           | ** ** | ** ** | ** ** | **Number of  Common  Shares** | ** ** | **Percentage of  Outstanding  Common  Stock** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------|------------|----------------------------------------------------|------------|
| TTS Holdings LLC  c/o Gilbert Global Equity Capital, LLC.  590 Madison Avenue  40th Floor  New York, New York 10022 |       | 8,778,919  |       |                          | 96.8       | %                                                  |       |
| Scott C. Hennessy                                                                                                        |       | 167,021    |       |                          | 1.8        | %                                                  |       |
| Fred H. Geyer                                                                                                            |       | 29,509     |       |                          | *          |                                               |       |
| Adrian H. McCall                                                                                                         |       | 29,509     |       |                          | *          |                                               |       |
| Gene Pierce                                                                                                              |       | 5,533      |       |                          | *          |                                               |       |
| Jason A. Jenne                                                                                                           |       | 3,689      |       |                          | *          |                                               |       |
| All directors and  executive officers as a group (7 persons)                                                             |       | 245,589    |       |                          | 2.7        | %                                                  |       |

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*       Less than1%.

(1)   Except as otherwise indicated, the address for all persons shownon this table is c/o True Temper Sports, Inc., 8275 Tournament Drive,Suite 200, Memphis, TN 38125.

 

**Item 13.**                 *Certain Relationships and Related Transactions*

**Stock Purchase Agreement**

In accordance with theterms of the Purchase Agreement by and among TTS Holdings LLC, True TemperCorporation, and True Temper Sports, LLC and others dated January 30, 2004(the “Stock Purchase Agreement”), Sellers, as defined in the Stock PurchaseAgreement, have indemnified TTS Holdings, LLC, the purchaser, against anyand all damages resulting from any misrepresentation or breach of warranty ofSellers contained in the Stock Purchase Agreement, for claims made within 18months following the closing date, except that claims involving environmentalmatters, tax matters, or employee benefit matters shall survive for a period of36 months following the closing date. The indemnification obligations of theSellers under the Stock Purchase Agreement are generally subject to a $10.0million basket amount and are limited to an aggregate payment of no more thanthe total amount held in escrow.

**Stockholders Agreement**

Upon theconsummation of the Stock Purchase Agreement, TTC and all of its stockholders,including TTS Holdings, LLC, entered into a stockholders agreement. Thestockholders agreement:

(1)         requires that each of theparties vote all of their voting securities of TTC and take all other necessaryor desirable actions to cause the size of the board of directors of TTC to be establishedat the number of members determined by TTS Holdings, LLC and to cause designeesof TTS 

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Holdings, LLC representinga majority of the board of directors to be elected to the board of directors ofTTC;

(2)         grantsTTC and TTS Holdings, LLC a right of first refusal on any proposed transfer ofshares of capital stock of TTC held by any of the stockholders;

(3)         grantstag-along rights on certain transfers of shares of capital stock of TTC;

(4)         requiresthe stockholders to consent to a sale of TTC to an independent third party ifsuch sale is approved by certain holders of the then outstanding shares of thecompany’s voting common stock; and

**ManagementServices Agreement**

Inconnection with the stock purchase agreement, True Temper entered into amanagement services agreement with Gilbert Global. In accordance with thisagreement, Gilbert Global has agreed to provide:

(1)         general managementservices;

(2)         assistance with theidentification, negotiation and analysis of acquisitions and dispositions;

(3)         assistance with thenegotiation and analysis of financial alternatives; and

(4)         other services agreedupon by True Temper and Gilbert Global.

In exchange for such services, Gilbert Global or itsnominee receives:

(1)         an annual advisory fee of$0.5 million payable quarterly, plus reasonable out-of-pocket expenses;

(2)         a transaction fee in anamount equal to 1.25% of the aggregate transaction value in connection with theconsummation of any material acquisition, divestiture, financing or refinancingby True Temper or any of its subsidiaries; and

(3)         a one-time transactionfee of $2.5 million upon the consummation of the recapitalization.

The management servicesagreement has an initial term of five years, subject to automatic one-yearextensions unless we or Gilbert Global provide written notice of termination.The annual advisory fee of $0.5 million is an obligation of ours and is alsocontractually subordinated to the Notes and the senior credit facilities. 

**Item14.**                 *Principal Accountants Fees and Services*

Thefollowing table represents aggregate fees billed to the Company for fiscalyears ended December 31 by KPMG LLP, the Company’s principal accountingfirm.

| ** **             | ** ** | **Fiscal Years Ended** | ** ** |
|------------------------|------------|----------------------------------|------------|
| ** **             | ** ** | **2005**                         | ** ** | **2004** | ** ** |
| Audit fees             |       | $160,000                         |       | $ | 159,000 |   |
| Audit-related  fees(1) |       | 25,000                           |       | 17,500 |   |
| Tax Fees(2)            |       | 37,500                           |       | 40,310 |   |
| All other fees(3)      |       | —                           |       | 130,906 |   |
| Total fees(4)          |       | $222,500                         |       | $ | 347,716 |   |

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(1)          Primarily benefit plansaudit services

(2)          Primarilytax returns, advice and planning

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(3)          Primarily advisoryservices relating to compliance with reporting requirements

(4)          All fees have beenapproved by the Audit Committee

The Audit Committee hasconsidered whether performance of services other than audit services iscompatible with maintaining the independence of KPMG LLP.

**Auditor Fees Pre-approval Policy**

In 2003, the Audit Committee adopted a policyconcerning approval of audit and non-audit services to be provided by theindependent auditor to the Company. The policy requires that all services KPMGLLP, the Company’s independent auditor, may provide to the Company, includingaudit services and permitted audit-related and non-audit services, excludingcertain designated tax services, must be approved by the Audit Committee. TheCommittee approved all audit and non-audit services provided by KPMG duringfiscal 2005.

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**PART IV**

**Item 15.**                 *Exhibits and Financial Statements Schedule*

1.                 *Financial Statements.  *The following financialstatements of True Temper Sports, Inc. have been included in part II, item8 of this report on Form 10-K:

Report of Independent Registered Public AccountingFirm

Consolidated Statements of Operations for the yearended December 31, 2005, and the period from March 15, 2004 to December31, 2004 of the Company

Consolidated Statements of Operations for the periodfrom January 1, 2004 to March 14, 2004 and the year ended December 31, 2003 forthe Predecessor

Consolidated Balance Sheets at December 31, 2005and 2004

Consolidated Statements of Stockholder’s Equity andComprehensive Income for the year ended December 31, 2005, and the period fromMarch 15, 2004 to December 31, 2004 of the Company

Consolidated Statements of Stockholder’s Equity andComprehensive Income for the period from January 1, 2004 to March 14, 2004 andthe year ended December 31, 2003 for the Predecessor

Consolidated Statements of Cash Flows for the year endedDecember 31, 2005, and the period from March 15, 2004 to December 31, 2004of the Company

ConsolidatedStatements of Cash Flows for the period from January 1, 2004 to March 14, 2004and the year ended December 31, 2003 for the Predecessor

Notes to theConsolidated Financial Statements 

2.                 *Financial Statement Schedule.*

**SCHEDULEII—VALUATION AND QUALIFYING ACCOUNTS**

| ** **                         | ** ** | ** **                                         | ** ** | **Additions**                                 | ** ** | ** **                           | ** ** | ** **        | ** ** |
|------------------------------------|------------|----------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------------------|------------|-------------------|------------|
| ** **                         | ** ** | **Balance at  Beginning  of Period**     | ** ** | **Charged to  Costs and  Expenses** | ** ** | **Charged to  Other  Accounts** | ** ** | **Deductions(1)** | ** ** | **Balance at  End  of Period** | ** ** |
| ** **                         | ** ** | **Dollars in thousands  (debit)/credit** | ** ** | ** **                                    | ** ** | ** **                           | ** ** | ** **        | ** ** |
| ALLOWANCE FOR  DOUBTFUL ACCOUNTS   |       |                                               |       |                                          |       |                                 |       |              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Year Ended December 31, 2003  |       |                                               | 653        |                                          |       |                                 | 256        |              |       |   | — |   |   |   | (77 | ) |   |   | 832 |   |   |
| Year Ended December 31, 2004  |       |                                               | 832        |                                          |       |                                 | 109        |              |       |   | — |   |   |   | (26 | ) |   |   | 915 |   |   |
| Year Ended  December 31, 2005 |       |                                               | 915        |                                          |       |                                 | 165        |              |       |   | — |   |   |   | (669 | ) |   |   | 411 |   |   |

 

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(1)          Deductions representuncollectible accounts charged against the allowance for doubtful accounts.

All other schedulesare omitted because they are not applicable or the required information isshown in the financial statements or notes thereto.

3.                 Exhibits.

See the Index to Exhibits.

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**SIGNATURES**

Pursuant to therequirements of section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.
|        | TRUE TEMPER  SPORTS, INC. |
|--------|--------------------------------|
|   | By:                            | /s/ SCOTT C. HENNESSY |
|   | Name:                          | Scott C. Hennessy |
|   | Title:                         | *President and Chief Executive Officer* |
|   | Date:                          | March 28, 2006 |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.
|        | By:    | /s/ STEVEN J.  GILBERT           |
|--------|--------|----------------------------------|
|   | Name:  | Steven J. Gilbert                |
|   | Title: | *Director and Co-Chairman*       |
|   | Date:  | March 28, 2006                   |
|   | By:    | /s/ STEVEN KOTLER                |
|   | Name:  | Steven Kotler                    |
|   | Title: | *Director and Co-Chairman*       |
|   | Date:  | March 28, 2006                   |
|   | By:    | /s/ RICHARD W. GAENZLE, JR. |
|   | Name:  | Richard W. Gaenzle, Jr.     |
|   | Title: | *Director*                       |
|   | Date:  | March 28, 2006                   |
|   | By:    | /s/ JEFFREY W. JOHNSON           |
|   | Name:  | Jeffrey W. Johnson               |
|   | Title: | *Director*                       |
|   | Date:  | March 28, 2006                   |
|   | By:    | /s/ WILLIAM P. LAUDER            |
|   | Name:  | William P. Lauder                |
|   | Title: | *Director*                       |
|   | Date:  | March 28, 2006                   |

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|        | By:    | /s/ SCOTT C. HENNESSY                                                      |
|--------|--------|----------------------------------------------------------------------------|
|   | Name:  | Scott C. Hennessy                                                          |
|   | Title: | *President, Chief Executive  Officer  and Director*                        |
|   | Date:  | March 28, 2006                                                             |
|   | By:    | /s/ JASON A.  JENNE                                                        |
|   | Name:  | Jason A. Jenne                                                             |
|   | Title: | *Vice President Chief Financial Officer and  Principal Accounting Officer* |
|   | Date:  | March 28, 2006                                                             |

 

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

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| 10.7 |   | First Amendment, dated as of September 24,  2004, to the Credit Agreement, dated as of March 15, 2004, by and among  True Temper Corporation, True Temper Sports, Inc, the Lenders identified  therein, Credit Suisse First Boston, Antares Capital Corporation, Goldman  Sachs Credit Partners L.P. and Merrill Lynch Capital (filed as  Exhibit 10.1 to True Temper Sports, Inc.’s report on Form 8-K,  as filed with the Securities and Exchange Commission on September 30, 2004).* |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.8 |   | Amended and Restated Credit Agreement dated as of  March 27, 2006, (amending and restating the Credit Agreement dated as of  March 15, 2004, by and among True Temper Corporation, True Temper  Sports, Inc, the Lenders identified therein, Credit Suisse First Boston,  Antares Capital Corporation, Goldman Sachs Credit Partners L.P. and Merrill  Lynch Capital).**                                                                                                                                                        |
| 12.1 |   | Computation of Ratio of  Earnings To Fixed Charges.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.1 |   | Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 31.2 |   | Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 32.1 |   | Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 32.2 |   | Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

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*                    Incorporatedby reference

**             Filed herewith

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