True Temper Sports, Inc. Announces 2006 First Quarter Results
MEMPHIS (May 17, 2006) -- Today, True Temper Sports, Inc. ("True Temper" or the "Company") announced its 2006 first quarter results of operations. Net sales for the
first quarter were $31.7 million, relatively flat when compared to the
$32.1 million recorded during the first quarter of 2005. Adjusted EBITDA
(defined below) for the first quarter decreased approximately $0.9 million,
or 9.5%, to $8.7 million from $9.6 million in the first quarter of 2005.
Net income for the first quarter decreased approximately $0.4 million, to a
net loss of $0.2 million from net income of $0.2 million in the first
quarter of 2005.
In his comments about the Company's performance, Scott Hennessy,
President and CEO said, "While we continually strive for revenue growth
each quarter, given the industry backdrop and overall market conditions
during this first half of 2006, we were pleased to deliver sales that were
basically in-line with expectations and prior year levels. There is a
general lack of new product momentum in the iron category at this time, and
as expected, that has negatively impacted our sales of premium steel golf
shafts. Many of our OEM partners are in the later stages of prior year iron
product lines, and are actively working on the next wave of introductions
scheduled for launch during the second half of 2006. Despite our
disappointment in the overall steel shaft market, the growth acceleration
of our graphite golf and performance sports categories are very
encouraging; both of which set new quarterly sales records and posted
strong double digit growth rates for the first quarter. Our graphite golf
business continues to prosper behind the demand for our Grafalloy
ProLaunch(TM) line and the new stock OEM business that we secured during
2005. Our performance sports division posted revenue improvement of 45%
during the first quarter, as our diversification into the hockey and
cycling markets continues to expand, and supplement our base tubing
business."
Mr. Hennessy continued, "With the success we achieved in our graphite
golf and performance sports categories, we had an anticipated shift in
product mix during the quarter. While still quite positive, the gross
margin for these two product categories is somewhat lower than that of our
premium steel golf shafts. In addition, we continue to experience commodity
pressure and higher energy costs than the same period during 2005.
Compounding these issues, the US dollar, while retreating somewhat in
recent months, remains markedly stronger than this time during 2005, and in
fact our revenue and Adjusted EBITDA were negatively impacted by $0.5
million during the first quarter related to foreign exchange rates in the
British Pound, Japanese Yen and Australian Dollar. Given this headwind, we
did embark on a number of productivity and cost containment programs during
the quarter in an effort to mitigate the impact to our overall
profitability. We have several initiatives in process at our manufacturing
facilities centered around quality improvement and waste reduction, and we
continue to refocus our efforts surrounding supply chain logistics in order
to improve delivery time and reduce overall freight cost. In addition, we
also addressed targeted reductions to our SG&A area to reduce costs there
by approximately $0.5 million during the quarter. These actions, combined
with continued cost savings from the complete transition of graphite
operations from our California facility into our new China plant, allow us
to continue to be optimistic about the direction and profitability of the
Company."
Outlook
Commenting about the Company's outlook for the future, Mr. Hennessy
said, "As indicated previously, we believe the sluggish environment for
irons will continue through the current quarter, but should be reversed
during the second half of the year when new iron introductions are
scheduled at several major golf equipment OEM's. While we expect to
continue to grow our share in the graphite golf and performance sports
categories, similar to the first quarter we do not believe this growth will
fully compensate for the decline in premium steel golf shaft sales. On a
positive note, it does appear that inventory in the distribution channel is
at a very manageable level, and will not result in the overall industry
correction experienced during 2004. This, combined with the current OEM
launch schedule for the back half and our own internal new product
pipeline, provides some encouragement that in the third and fourth quarters
we will see overall top line growth as we combine improved steel golf shaft
sales with the momentum developing in our other business segments."
Mr. Hennessy continued, "On the profitability front, we do expect to be
faced with similar unfavorable product mix issues during the second
quarter, as well as continued pressure from energy sources and commodities.
Contrary to these negative pressures, we do anticipate some relief from
foreign currency exchange rates in the months ahead. Along with our
productivity initiatives, we hope this will help to mitigate some of the
negative pressure on our gross profit line. In addition, we will continue
to monitor our SG&A spending very closely, and make necessary, targeted
reductions that will improve profitability without compromising our
marketing and advertising programs which are driving brand awareness."
