PART I

Item 1. Business

Purchase Agreement for True Temper Corporation

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 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 senior management purchased all of the outstanding shares of TTC (“Gilbert Global Acquisition”). 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 the selling shareholders. These payments were financed with the net proceeds of a new senior credit facility and new 83¤8% senior subordinated notes due 2011.

The Gilbert Global Acquisition was accounted for by the Company’s parent company using the purchase method of accounting. As the Company is a wholly owned subsidiary of TTC, the Company has “pushed down” the effect of the purchase method of accounting to its financial statements. The Company’s financial statements and accompanying notes, shown in Item 8 of this annual report, present the historical cost basis results of the Company as “predecessor company” through March 14, 2004, and the results of the Company as “successor company” from March 15, 2004 through December 31, 2006. Accordingly, certain elements of the successor company presentation are not comparable to the predecessor company presentation due to the different basis of accounting.

For purposes of the following discussion, contained in Items 1 and 7, regarding the Company’s results of operations and cash flow, the Company has combined the results of the predecessor and successor companies in order to more effectively compare the results to the other years. Material variances caused by the different basis of accounting have been disclosed where applicable.

General

We are the world’s leading designer, manufacturer and marketer of golf shafts. Since the 1930s, we have manufactured golf shafts under the widely recognized True Temper brand. In 2005, over 70% of our revenue was generated through the sale of steel golf shafts. We believe that our share of the worldwide steel shaft market was approximately 78% in 2006 and that our share is more than five times greater than that of the next largest market participant. We are a leading supplier of premium steel shafts to top domestic golf club original equipment manufacturers and distributors, including Callaway, Cleveland, Golfsmith, Golf Works, Mizuno, Nike, Ping, TaylorMade, Titleist, Adams and Wilson. From 1987 to 2006, our steel shafts were played by the winners of 76 of the PGA’s 80 major championships, including 19 of the last 20 Masters champions. We are also one of the world’s largest manufacturers of premium graphite (carbon fiber based composites) golf shafts, with an estimated share of approximately 12% of this highly fragmented market. In addition to golf shafts, through our Performance Sports business, we also design, manufacture and market products such as steel and titanium alloy bicycle frames, composite bicycle components, such as forks and handlebars, and graphite hockey sticks.

Our golf shaft products 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, Royal Precision or Grafalloy brand name, label or trademark affixed to the shaft), including a full range of premium and commercial grade steel shafts and a full line of premium graphite shafts. We design, manufacture and market a number of steel shaft product lines, including:

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

· Dynamic Gold SL, which delivers the playing characteristics of Dynamic Gold with 20% less weight;

· Rifle, providing frequency matched shafts for the ultimate consistency throughout each set of irons;

· Project X, which features a varying shaft taper rate throughout the set producing a flat, penetrating trajectory;

· Black Gold, which offers a low-to-mid ball flight while combining Frequency Tuned™ technology with proprietary Grip-toTip™ taper profile;

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

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

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

· GS75, the lightest steel golf shaft in the world weighing in at only 75 grams;

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

· Numerous co-branded products, including Callaway’s Memphis 10, Nike’s Speedstep, Ping’s JZ and ZZ Lite and Wilson’s Fat Shaft.

We also design, manufacture and market several lines of premium graphite shafts under the Grafalloy brand name. Our graphite shafts have a strong presence at the professional level and have been played by winners on each of the professional tours, including the PGA, EPGA, LPGA, Champions and Nationwide Tours. Our most popular graphite shaft brands include:

· Grafalloy Blue, which is a graphite shaft designed specifically to improve performance in today’s oversized metal woods;

· Grafalloy ProLaunch Blue, a graphite shaft designed with today’s high performance heads and low-spin balls to help players achieve optimal launch conditions to reduce ball spin and maximize distance;

· Grafalloy Prolaunch Red, features Prolaunch technology in a design specifically engineered to produce a lower, more penetrating trajectory;

· Grafalloy Prototype Comp NT, which incorporates today’s nano technology for the most consistent carbon fiber alignment; and

· Grafalloy ProLite, which has won more professional tournaments than any other graphite shaft in history.

We believe that we are the only golf shaft company in the world which is capable, within its own facilities, of manufacturing both steel and graphite golf shafts in large volumes. This unique competitive advantage allowed us to design, develop, manufacture and sell the first commercially viable multi-material golf shaft combining both steel and graphite into one shaft. Our BiMatrx RXi and BiMatrx Rocket shafts utilize a patented multi-material technology to combine the torsional stability and consistent performance benefits of steel with the light-weight flexible benefits of graphite into one shaft.

In addition, this expertise in various materials was instrumental in our ability to develop the next generation of golf shafts using patented Nanofuse® material. The first brand launch using this

revolutionary material is the Grafalloy Epic shaft which has been proven to not only improve distance but also to reduce dispersion up to 35%.

Through our Performance Sports business, we have utilized the capabilities developed in our golf shaft business to pursue other branded recreational sports equipment markets that have similar competitive dynamics, manufacturing requirements, and raw material applications. We focus on the premium segment of the bicycle market where innovation, quality and branding are highly valued by the consumer, and products are often customized to suit the individual consumer’s specific requirements. Our value-added premium bicycle component products generally have higher margins than component parts made for bicycles sold in mass channel retail stores. In the hockey components market, we focus on the composite shafts used in a variety of original 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 at approximately 61%, or $2.8 billion. Spending in the golf equipment industry is highly concentrated among avid golfers (golfers that play more than 25 rounds of golf per year) who account for approximately 57% of the total spending on golf equipment despite only accounting for approximately 23% of the golfing population.

There are three basic components needed to manufacture a golf club: the shaft, the club head and the grip. The shaft is critical to the performance of a golf club as it is vital in controlling the consistency and distance of a golf shot. While branded premium shafts are important to the performance and marketing of golf clubs, these shafts represent a relatively small portion of the overall cost of a golf club, typically under 10% of the retail sales price.

The golf shaft market is comprised primarily of steel and graphite shafts. We believe that in 2006 the two largest participants in the worldwide steel shaft market comprised an aggregate market share over 90%. We believe that this concentration in the steel shaft market is due to the high barriers to entry created by the technical expertise and capital investment necessary to participate in the market as well as the customized manufacturing process required for the production of premium steel shafts. The production of graphite shafts is less capital intensive and requires less investment than steel shaft manufacturing. Although recently there has been some consolidation among graphite shaft manufacturers, the graphite shaft industry is fragmented, with the top five market participants representing approximately 50% of the worldwide market in 2006. We believe that the relatively lower barriers to entry account for this fragmentation.

We believe that from 1991 to 1995, graphite shafts gained share in the overall shaft market due to the light-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 such as our SensiCore insert, along with the introduction of lighter weight steel alloys in products such as our Dynamic Gold SL and GS75 shafts, have resulted in steel shafts that have the vibration damping and light-weight characteristics of graphite shafts together with the consistent performance and distance control qualities of steel shafts. We believe that these design improvements contributed to the growth in share of steel shafts in the overall shaft market from approximately 50% in 1995 to between 60% to 65% in 2006.

Products

We design, manufacture and market steel and graphite golf shafts, as well as a variety of high strength, tight tolerance components for the hockey, bicycle and other recreational sports markets. Our proprietary shafts, which accounted for approximately 24% of our net sales in 2006, are custom designed, and frequently co-branded in partnership with our customers, to accommodate specific golf club head designs. As an example, our proprietary models include co-branded products such as Callaway’s Memphis 10, Nike’s

Speedstep, Ping’s JZ and ZZ Lite and Wilson’s Fat Shaft. Our branded products with the True Temper, Royal Precision or Grafalloy names and designs are typically sold to golf club original equipment manufacturers, distributors and various custom club assemblers, and are used to either assemble new clubs or to replace the shafts in existing clubs.

Steel Golf Shafts. We manufacture a wide range of steel golf shaft lines with unique design features and performance characteristics. Our steel golf shafts can be divided into the following two major product categories:

(1) Premium grade steel shafts; and

(2) Commercial grade steel shafts.

Premium steel shafts, such as our Dynamic Gold, Rifle, Project X, Black Gold, Dynamic Gold SL and GS75 product lines, are high performance products with tighter design tolerances and quality specifications that sell for higher average selling prices and generate higher profit margins than commercial grade steel shafts. Our commercial grade steel shafts are manufactured to a different specification and sell for a lower average selling price to original equipment manufacturers who produce and sell opening price point golf club sets, typically to entry-level players who purchase their products through mass channel retail stores.

Graphite Golf Shafts. We manufacture a wide range of graphite golf shaft lines, which are offered in a variety of weights, torques and flexes. Our graphite golf shafts are currently being 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 and price. Historically, most of the graphite golf shafts that we produced were higher quality and higher priced premium grade shafts that are sold to golf equipment distributors, and to original equipment manufacturers for their custom product offerings. Beginning in 2004, with the establishment of our lower cost China manufacturing facility, we also began producing and selling certain lower price point graphite shafts. These products are currently used primarily as stock offerings in original equipment manufacturer iron programs.

Golf Shafts with Combined Materials. During the last several years, we have developed golf shafts that combine multiple materials such as steel and graphite into one shaft. Late in 2000, we introduced a proprietary custom iron product for a customer that combines a steel shaft with a graphite tip 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 shaft with a steel tip section that was designed for use in driver and fairway wood applications.

Golf Shafts with New Materials. In early 2007 we will be introducing driver and fairway wood shafts constructed of patented Nonofuse® material, which utilizes today’s most advanced nanotechnology to produce a stronger, lighter shaft which incorporates the benefits of both graphite and steel.

Performance Sports Products. We also manufacture and sell a wide variety of high performance components for the bicycle, hockey and other recreational sports markets. In 2006, we sold our performance sports products to a broad range of original equipment manufacturers and distributors.

Customers

We maintain long-standing relationships with a highly diversified customer base. We are a leading supplier of shafts to the top domestic golf club original equipment manufacturers and distributors, including Callaway, Cleveland, Golfsmith, Golf Works, Mizuno, Nike, Ping, TaylorMade, Titleist, Adams and Wilson. In 2006, we had in excess of 600 customers, including approximately 540 golf club manufacturers/retailers and approximately 80 distributors.

For many years, we have maintained a broad and diversified customer base in the golf equipment market. In 2006, our top ten customers represented approximately 69% of our net sales, and our top customer accounted for approximately 13% of our net sales.

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

Competition

We operate in a highly competitive environment. We believe that we compete principally on the basis of:

· our ability to provide a broad range of high quality steel and graphite shafts at competitive prices;

· our ability to deliver customized products in large quantities on a timely basis through distribution channels around the world;

· the acceptance of steel and graphite shafts in general, and our shafts in particular, by professional and amateur golfers alike; and

· our ability to develop and produce innovative new products that provide performance features which benefit golfers of all skill levels.

We believe that our share of the worldwide steel shaft market was approximately 78% in 2006 and that our share is more than four times greater than the share of the next largest market participant. We believe that we compete primarily with three other steel golf shaft manufacturers: Far East Machinery Co., Ltd., located in Taiwan which produces commercial grade golf shafts, Nippon Shaft Co., Ltd., a Japanese manufacturer of premium golf shafts, and Summit Sports World Wide Co., Ltd. which produces limited volumes of commercial grade golf shafts.

Unlike steel, the graphite shaft manufacturing industry is highly fragmented with a large number of suppliers selling to only a few customers. We believe there are approximately 50 graphite shaft manufacturers worldwide. A few of these companies reside in North America and many are located in Far East Asia. We do not believe that there are any graphite suppliers currently with a market share in graphite that is comparable to the market share we have in steel. We believe we are one of the five largest producers of branded premium grade graphite shafts in the world and we estimate that our market share is approximately 12%. Our major competitors in the premium grade branded graphite shaft market include Aldila, Inc., United Sports Technologies, Inc., Graphite Design International, and Fujikura Composites.

We believe that we are the only golf shaft company in the world which is capable, within its own facilities, of manufacturing both steel and graphite golf shafts in large volumes.

Design & Development

We design and develop products for both proprietary/co-branded market applications and for the True Temper, Royal Precision, Grafalloy branded product range.

The larger golf club manufacturers often request exclusively designed proprietary or co-branded steel and graphite golf shafts for their club systems, which require golf shafts, heads and grips engineered to work together. We are committed to serving this market by maintaining our role as a leader in innovative shaft designs for both steel and graphite materials technology. Shaft designs and modifications are frequently the direct result of our efforts combined with those of our customers to develop an exclusive

shaft specifically designed for that customer’s clubs. We use a computer aided design analysis system to evaluate a new shaft’s design with respect to weight, torque, flex point, tip and butt flexibility, swing weight and other critical shaft design criteria.

In addition to our proprietary/co-branded products, we are very active in designing and developing new products under our various brand names that meet the performance needs of golfers of all ages and skill levels. We develop these branded products based upon our internal research and evaluation of consumer needs and preferences.

The materials typically used in production of our designs include several different high strength steel alloys, advanced composites of graphite and glass fibers with thermosetting epoxy resin systems, and today’s most advanced nano materials.

Using state of the art technology, we generate a design which is then analyzed by computer for stiffness and strength properties. Our research and development efforts focus on innovative technology and new materials as an essential precursor to successful new product development. Our design research focuses on improvements in shaft aesthetics since cosmetic appearance has become increasingly important to customers. To supplement our design and development we employ extensive testing that includes laboratory durability tests, robotic performance testing involving extensive ball flight/trajectory analysis and individual player evaluation.

In 2003, we opened a 14 acre test facility that enables us to better evaluate our products. We have our own private driving range where we perform qualitative player testing and quantitative mechanical testing with a Miya 5 swing robot. Our facility utilizes the newest, state of the art, TrackMan doppler radar system to track all aspects of ball flight and trajectory. We believe that we are the only shaft manufacturer with our own driving range that is capable of this type of product testing.

In addition, our pursuit of strategic vendor alliances complement our abilities and needs, an approach which allows us to exploit technical capabilities beyond our own while minimizing the risk and investment required to enter the market with new products.

Research and development costs for the years ended December 31, 2006, 2005 and 2004 were $1.9 million, $1.8 million and $1.5 million, respectively.

Manufacturing

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

Steel Shaft Manufacturing Process. The process of manufacturing a steel shaft has many distinct phases. Generally, a large steel coil is unrolled and then formed lengthwise, welded and cut into cylinders. The tubing is then treated and fitted over a metal rod or “mandrel” that is used to determine the precise inside diameter of the cylinder as it is drawn. The tubing is stretched, cut into sections, and then weighed and balanced. Later, through a process that we pioneered, the sections are tapered to give each shaft model a particular flex and frequency. The shafts are cleaned, straightened, heat-treated and tempered. The shafts are straightened by machines designed and built by us. The shafts are plated with layers of nickel to prevent corrosion and then covered with a fine layer of chrome. Finally, shafts are dried, polished and inspected for cosmetic flaws before our name and logo is affixed to the shaft.

Graphite Shaft Manufacturing Process. There are two processes which are used to manufacture a graphite shaft: flag-wrapping and filament-winding. Most of our graphite shafts are produced using the flag-wrapping technique. The flag-wrapping method uses graphite fiber materials or “prepreg” in sheet form, which requires refrigeration until use. Each new roll of prepreg is allowed to reach room

temperature before the material is cut into pennant-shaped patterns called flags for each particular shaft design. Layer by layer, various combinations of prepreg flags are wrapped around mandrels specified for each particular shaft design. The layered materials are then encased in thin layers of clear tape for compaction and heated at high temperatures to harden the material. At the end of the process, the shafts are painted and stylized using a variety of colors, patterns and designs. The filament-winding process, on the other hand, begins with a spool, rather than a sheet, of graphite fiber, which is fed onto the reel of a machine which then wraps the fiber around a mandrel by turning the mandrel and simultaneously moving the graphite fiber from one end of the mandrel to the other. Once the mandrel is wrapped, the process uses the same encasing and heating techniques as the flag wrapping process.

Raw Materials. We use several raw materials to produce steel golf shafts, including several steel alloys sourced from three primary vendors, nickel crowns and plating chemicals, Sensicore inserts and various sundry supplies, boxes and labels. Graphite shafts are produced with a variety of graphite fiber materials in both sheet and spool form that we source from several different vendors. In addition, graphite shafts are finished with a wide variety of paints, inks and heat transfer labels. We believe that there are adequate alternative suppliers of these materials and, therefore, we do not believe that we are dependent on any one supplier.

In addition to the raw materials discussed above, we also use a substantial amount of natural gas and electricity in our manufacturing processes. Suppliers for these types of energy sources are limited, and prices are subject to general market and industry conditions.

Marketing and Promotion

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

For example, we have maintained a strong presence among PGA Tour players, particularly since 1981, when we began sending our PGA Tour van to all major PGA events. The tour van functions as a golf club custom shop on wheels, visiting over 30 professional tour events during 2006. Typically, the van is located near the practice tee and lends technical support to the tour professionals while simultaneously promoting the True Temper, Royal Precision and Grafalloy brands to representatives of original equipment manufacturers. In addition, we provide technical support to the players on the Champions, Nationwide and LPGA Tours as well as the European and Japanese PGA Tours.

Although we do not pay any professional golfer to endorse or play our shafts, we believe that the use of our products by professional golfers enhances our reputation for quality and performance while also promoting the use of our shafts. Due to our strong reputation and service, we estimate that nearly 98% of professional golfers around the world use our product in competition. We clearly recognize the influence that a professional golfer, or very low handicap golfer, can have on consumer preferences, so we also engage in special promotional efforts with local club and teaching professionals, and we contribute shafts to college athletic programs, to encourage the use of our product so they provide positive feedback on the True Temper, Royal Precision and Grafalloy brands to their constituents.

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

Advertising and promotional costs for the years ended December 31, 2006, 2005 and 2004 were $3.7 million, $3.5 million and $3.5 million, respectively.

Distribution & Sales

We primarily sell our shafts to original equipment manufacturers, retailers and distributors. Typically, distributors resell our products to custom club assemblers, pro shops and individuals. Sales to golf club manufacturers/retailers accounted for approximately 84% of our net golf shaft sales in 2006, and sales to distributors represented approximately 16% of our 2006 net golf shaft sales.

We believe that we have one of the most experienced and respected sales staffs in the industry. Our sales and marketing department includes domestic sales managers, international sales managers, a customer service group and a team of design professionals that provides field support to our sales representatives. We believe that our international market presence, which comprised approximately 36% of our total 2006 net sales, provides an opportunity for future growth. We market our products in Japan, Europe, Australia and Southeast Asia and maintain a distribution operation in each region. Financial information by geographic segment is contained in Note 14 to the consolidated financial statements located elsewhere in this annual report.

Employees

As of December 31, 2006, we had 821 full-time employees, including 20 in sales and marketing, 40 in research, development and manufacturing engineering, 715 in production and the balance in administrative and support roles.

The hourly employees at our steel plant in Amory, Mississippi are represented by the United Steel Workers of America. In June 2003, the United Steel Workers union at our Amory, Mississippi facility voted to accept a new collective bargaining agreement that covers 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 are good.

Intellectual Property

As of December 31, 2006, we held 55 patents worldwide relating to various products and proprietary technologies, including the SensiCore technology, and had four patent applications pending. We also hold numerous trademarks related to, among other things, our True Temper, Grafalloy, Royal Precision and Alpha Q branded products. We do not believe that our competitive position is dependent solely on patent or trademark protection, or that our operations are dependent on any individual patent or trademark.

Environmental, Health And Safety Matters

We are subject to federal, state and local environmental and workplace health and safety laws and regulations, including requirements governing discharges to the air and water, the handling and disposal of solid and hazardous wastes, and the remediation of contamination associated with releases of hazardous substances. In December 2003, a review was conducted by independent environmental consultants and, based upon such report, we believe that we are currently in material compliance with environmental and workplace health and safety laws and regulations. Nevertheless, our manufacturing operations involve the use of hazardous substances and, as is the case with manufacturers in general, if a release of hazardous

substances occurs or has occurred on or from our facilities, we may be 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 maintaining compliance with, and believe we are currently in material compliance with, our environmental obligations. Despite such efforts, the possibility exists that instances of noncompliance could occur or be identified, the penalties or corrective action costs associated with which could be material.

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

We have made, and will continue to make, capital expenditures to comply with current and future environmental obligations. Because environmental requirements are becoming increasingly stringent, our expenditures for environmental compliance may increase in the future.

Item 1A. Risk Factors

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations.

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

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

· increase our vulnerability to increases in interest rates because our secured credit facility, under which our indebtedness was $115.4 million as of December 31, 2006, is subject to a variable interest rate;

· limit our ability to fund future working capital, capital expenditures, research and development costs, acquisitions and other general corporate requirements;

· require a 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 other general corporate purposes;

· limit our flexibility to plan for, or react to, changes in our business and the industry in which we operate;

· place us at a competitive disadvantage compared to our competitors that have less debt; and

· limit our ability to borrow additional funds.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

We may not be able to generate the cash we need to service our indebtedness. Our ability to make payments on and to refinance our indebtedness, and to fund planned capital expenditures and research and development 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 our control. Based on our current level of operations, we believe our cash flow from operations,

available cash and available borrowings under our senior bank facilities will be adequate to meet our future liquidity needs.

Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us under our senior bank facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We might not be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Our success depends on the continued popularity of golf and the growth of the market for golf clubs.

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

A reduction in discretionary consumer spending could reduce sales of our products.

Sales of golf clubs are dependent on discretionary consumer spending which may be affected by general economic conditions and could result in a decrease in consumer spending on golf equipment. In addition, our future results of operations could be affected adversely by a number of other factors that influence discretionary consumer spending, including consumer concerns over international and military conflicts around the world, unseasonal weather patterns, demand for our existing and future products, new product introductions by our competitors, an overall decline in participation in golf activities, shifting consumer preferences between graphite and steel golf shafts or other materials that we currently do not produce, and competitive pressures that otherwise result in lower than expected average selling prices. Any one or more of these factors could result in our failure to achieve our expectations as to future sales or earnings. Because most operating expenses are relatively fixed in the short-term, we may be unable to adjust spending to compensate for any unexpected sales shortfall, which could adversely affect our results of operations.

Our new product development efforts may not be successful.

We may not be able to continue to develop competitive products, develop or use technology on a timely or competitive basis or otherwise respond to emerging market trends. Because the introduction of new golf shafts using steel, graphite or other composite and combined materials is critical to our future success, our continued growth will depend, in large part, on our ability to successfully develop and introduce new products in the marketplace. Should golf consumers prefer to use golf clubs made from materials other than steel or graphite, there could be a material adverse effect on the results of our operations. In addition, the design of new golf clubs is also greatly influenced by the rules and interpretations of the U.S. Golf Association, or USGA, and the Royal and Ancient Golf Club of St. Andrews, or St. Andrews. Although the golf equipment standards established by the USGA and St. Andrews generally apply to competitive events sanctioned by those organizations, we believe that it is critical 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 be changed in ways that adversely affect the sales of our current or future products.

We are subject to work stoppages at our facilities, which could seriously impact the profitability of our business.

If any labor disruption or work stoppages affect our employees, the results of our operation could be adversely affected. At December 31, 2006, we employed approximately 821 full-time individuals. Of these, approximately 379 hourly employees at our Amory, Mississippi facility are represented by the United Steel Workers of America. Our collective bargaining agreement with the United Steel Workers of America will expire on June 30, 2007. We may not be able to reach an agreement on a new collective bargaining agreement. If a work stoppage or other labor disruption were to occur, our results of operations may be materially adversely affected.

We face intense competition with other golf shaft designers and manufacturers, and our inability to compete effectively for any reason could adversely affect our business.

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

Our profitability would be adversely affected if the operation of our Amory manufacturing plant were interrupted or shut down.

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

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

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

Consolidation of our customer base could adversely affect our business.

If the industry and customer base continues to consolidate, then it is possible a consolidation of several of our existing customers into one company could represent a significant portion of our annual revenues. If this was to occur, and this customer selected an alternative shaft supplier, it could have a material adverse effect on our results of operations. If this consolidated company were to remain our

customer it could represent an increased credit risk due to its size in relation to our total accounts receivable.

Fluctuations in the cost and availability of raw materials could adversely affect our business.

Since we are dependent upon certain suppliers for steel, nickel, graphite prepreg and other materials, we are subject to price increases and delays in receiving materials. Although we have several sources for most of the key raw materials we purchase, and we attempt to establish purchase price commitments for one-year periods, we are subject to price increases for raw materials used in the manufacture of golf shafts and to delays in receiving these materials. As key components to the manufacture of golf shafts, a substantial price increase to one or more of these raw materials or any extended delay in their delivery could result in a material adverse effect on our results of operations.

Fluctuations in the cost and availability of energy sources to us could adversely affect our business.

Our graphite shaft manufacturing operations in Southern California and China are dependent upon a consistent and affordable supply of electricity. If there is a prolonged shortage of electrical supply to these facilities and/or a significant increase in the cost of electrical power, we may need to temporarily or permanently close our graphite shaft operations, which could materially adversely affect our results of operations. In addition, our steel shaft manufacturing plant located in Mississippi relies upon a consistent and affordable supply of both natural gas and electrical power in order to conduct normal operations. If our Mississippi facility should experience a shortage in supply of either power source or a significant increase in cost, it could have a material adverse affect on our results of operations.

Fluctuations in the availability of energy sources to our customers could adversely affect our business.

There are a significant number of golf equipment assemblers that are headquartered and conduct manufacturing operations in Southern California. In the aggregate, these companies account for a significant share of the golf equipment market and also account for a considerable portion of our sales revenue. With the disruption of electrical power to California and other Western states in recent years there is a risk that our customers’ manufacturing operations may be adversely affected by power shortages. If this were to occur they may reduce their purchases of shafts from us causing a significant adverse impact to our revenues and results of operations.

Fluctuations in cost of health insurance could adversely affect our business.

Health insurance coverage is a valuable benefit in retaining and attracting employees and has been subject to significant price increases by health industry providers. Since we do not plan to eliminate providing health benefits to our employees, the rising costs could have a material adverse affect on the results of our operations.

If we are unable to protect our intellectual property rights, our business and prospects may be harmed.

The patents we hold relating to certain of our products and technologies may not offer complete protection against infringement of our proprietary rights by others. As of December 31, 2006 we held 55 patents worldwide relating to various products and proprietary technologies, including the SensiCore technology, and had four patent applications pending. Patents may not be issued from the pending patent applications. Moreover, these patents may have limited commercial value or may not protect our products. Additionally, the U.S. patents that we hold do not preclude competitors from developing or marketing products similar to our products in international markets. We may infringe on others’ intellectual property rights. One or more adverse judgments with respect to these intellectual property rights could negatively impact our ability to compete and could adversely affect our business.

We are subject to various environmental, health and safety laws and regulations that govern, and impose liability, for our activities and operations. If we do not comply with these laws and regulations, our business could be materially and adversely affected.

We are subject to federal, state, and local environmental and workplace health and safety laws, regulations and requirements which, if contravened, could result in significant costs to us. Our manufacturing operations involve the use of hazardous substances and should there be a release of such substances from our facilities, we may be held liable. The penalties or corrective action costs associated with noncompliance could be material. In addition, we may receive notices of potential liability pursuant to federal or state laws for cleanup costs associated with waste recycling or disposal facilities at which wastes associated with our operations have allegedly come to be located.

Fluctuations in certain general economic conditions could increase our minimum pension liability under our defined benefit pension plan.

We maintain an employer sponsored defined benefit pension plan for the hourly employees at our Amory, Mississippi steel golf shaft plant. We are subject to Financial Accounting Standards 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 market performance and low general interest rates can both reduce the total value of the assets of the plan as well as increase our minimum pension liability under the plan. If these economic conditions are severe enough they could have a significant adverse effect on the funding status of our plan and our overall results of operations.

If we do not retain our key personnel and attract and retain other highly skilled employees our business will suffer.

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

We are subject to risks relating to our international operations.

We are subject to risks customarily associated with foreign operations, including:

· fluctuations in currency exchange rates;

· import and export license requirements;

· trade restrictions;

· changes in tariffs and taxes;

· restrictions on the transfer of funds into or out of a country;

· unfamiliarity with foreign laws and regulations;

· difficulties in staffing and managing international operations;

· general economic and political conditions; and

· unexpected changes in regulatory requirements.

These risks could have a material adverse effect on our business, prospects, results of operations and financial condition.

We are subject to product liability claims and other litigation.

From time to time, we are subject to product liability claims involving personal injuries allegedly relating to our products. Currently pending claims and any future claims are subject to the uncertainties related to litigation, and the ultimate outcome of any such proceedings or claims cannot be predicted.

We may not be able to identify suitable acquisition candidates, and even if we do, we may not be able to acquire those candidates or successfully integrate their operations with ours.

We continuously review acquisition prospects that would complement our current product offerings, increase our size and geographic scope of operations or otherwise offer growth and operating efficiency opportunities. Any future acquisition may not be successfully completed or, if completed, any such acquisition may not be effectively integrated into our business. Acquisitions may entail numerous risks and impose costs on us, including, among others, difficulties associated with assimilating acquired operations or products, diversion of management’s attention and adverse effects on existing business relationships with suppliers and customers. In addition, any future acquisitions could result in the incurrence of debt or contingent liabilities and other intangible assets, which could have a material adverse effect on our business, financial condition or results 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 financial markets, the industries in which we operate, our operations and our profitability.

Terrorist attacks may negatively affect our operations and your investment. There can be no assurance that there will not be further terrorist attacks worldwide. These attacks have contributed to economic instability in the United States and elsewhere, and further acts of terrorism, violence or war could further affect the industries in which we operate, our business and our results of operations. In addition, terrorist attacks or hostilities may directly impact our physical facilities or those of our suppliers or customers and could impact our sales, our supply chain, our production capability and our ability to deliver our products and services to our customers. The consequences of any terrorist attacks or hostilities are unpredictable, and we may not be able to foresee events that could have an adverse effect on our operations or your investment.

Risks Associated 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. This document contains forward-looking statements, including but not limited to, Item 1 of Part I “Business” and Item 7 of Part II “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. All statements which address operating performance, events or developments that we expect, plan, believe, hope, wish, forecast, predict, intend, or anticipate will occur in the future are forward looking statements within the meaning of the Act.

The forward-looking statements are based on management’s current views and assumptions regarding future events and operating performance. 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 to differ materially from the estimates or predictions contained in our Company’s forward-looking statements. Additional information concerning the Company’s risk factors is contained from time to time in the Company’s public filings with the SEC; and most recently in Item 1A of Part I of this Annual Report on Form 10-K.

The Company’s views, estimates, plans and outlook as described within this document may change subsequent to the release of this statement. The Company is under no obligation to modify or update any

or all of the statements it has made herein despite any subsequent changes the Company may make in its views, estimates, plans or outlook for the future.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our administrative offices and manufacturing facilities currently occupy approximately 500,000 square feet. Our shafts are manufactured at separate facilities, a steel shaft facility located in Amory, Mississippi and composite graphite shaft facilities located in El Cajon, California and Guangzhou, China. In addition, we have a multi-material shaft assembly facility located in Olive Branch, Mississippi. Our executive offices are located in a leased facility in Memphis, Tennessee. The following table sets forth certain information regarding significant facilities operated by us as of December 31, 2006:

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	March 2007
Composite Shaft Mfg.	San Diego, California	17,885		Leased	December 2011(3)
Building	Olive Branch, Mississippi	45,500		Leased	July 2007
Test Facility	Robinsonville, Mississippi	1,000	(2)	Leased	March 2008

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

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

(3) We expect to take possession of the San Diego property in March 2007.

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

Item 3. Legal Proceedings

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

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

There were no matters submitted to a vote of security holders during 2006.

PART II

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

There is no public market for the Company’s equity securities. All of the Company’s capital stock is owned by True Temper Corporation.

The Company paid no dividends on its shares of common stock in 2005 or 2006.

The Company’s various debt instruments impose restrictions on the payment of dividends by means of covenants. The Company was in compliance with all debt covenants as of December 31, 2006.

There were no purchases of the Company’s equity securities by or on behalf of the Company or any affiliated purchaser during the fourth quarter of 2006.

Item 6. Selected Financial Data

Set forth below are our selected historical financial data for the five fiscal years ended December 31, 2006. The historical financial data were derived from our audited consolidated financial statements and the notes thereto (except the ratio of earnings to fixed charges data), for which the December 31, 2006, 2005, and 2004 financial statements are included herein. As more fully described in Note 3 to the audited consolidated financial statements located elsewhere in this annual report, the Company went through a business combination on March 15, 2004. Accordingly, the following selected financial data is presented for both the predecessor and successor companies.

	Successor Company												Predecessor Company
									Period from				Period from
	Years Ended								March 15 to				January 1 to				Years Ended
	December 31,				December 31,				December 31,				March 14,				December 31,
	2006				2005				2004				2004				2003				2002
	(Dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Net sales		$	108,005			$	117,594			$	78,120			$	20,247			$	116,206		$	107,401
Gross profit		34,811				47,232				18,016				8,376				46,736			42,240
Selling, general and administrative expenses		14,226				14,660				9,520				3,635				14,747			13,578
Amortization of intangible assets(1)		14,343				13,840				10,984				—				—			—
Impairment charge on long-lived assets(2)		—				357				—				—				—			—
Business development, start-up and transition costs(3)		2,688				208				738				100				869			312
Transaction and reorganization expenses(4)		—				—				25				5,381				—			—
Loss on early extinguishment of long-term debt(4)		—				—				—				9,217				—			777
Operating income (loss)		3,554				18,167				(3,251		)		(9,957		)		31,120			27,573
Interest expense, net		20,525				18,631				13,491				2,498				13,017			12,236
Income tax (benefit) expense		(6,279		)		33				(6,350		)		(2,845		)		7,113			5,992
Net income (loss)		(10,767		)		(466		)		(10,464		)		(9,608		)		10,858			9,252
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital(6)		$	26,281			$	27,403			$	25,324			$	14,551			$	15,372		$	14,828
Total assets		353,699				349,836				360,825				178,057				179,616			183,380
Total debt(7)		240,406				220,725				232,725				106,030				113,730			124,730
Total stockholder’s equity		90,282				99,764				101,330				39,064				48,793			43,068
OTHER FINANCIAL DATA:
Cash provided by operating activities		$	941			$	15,936			$	6,702			$	2,982			$	21,402		$	19,903
Cash used in investing activities		(20,464		)		(2,031		)		(1,182		)		(330		)		(3,460		)	(1,164		)
Cash provided by (used in) financing activities		17,845				(12,509		)		(5,019		)		(8,205		)		(16,623		)	(19,846		)
Depreciation		2,616				2,725				2,420				671				2,906			3,252
Capital expenditures(8)		4,888				2,612				1,232				330				3,460			1,164
Ratio of earnings to fixed charges(9)		0.2x				1.0x				—				—				2.3x			2.2x

(1) As of January 1, 2002 the Company adopted the provisions of SFAS No. 141, Business Combinations. This statement requires the identification and valuation of intangible assets acquired in a business combination. Identifiable intangible assets determined to have definitive lives must be amortized over those expected useful

lives. Certain intangible assets with definitive lives were identified, and the amortization expense during the period from March 15, 2004 through December 31, 2006 relates to the amortization of these intangibles. See Note 4 to the financial statements included elsewhere in this annual report for further discussion.

(2) Impairment charge on long-lived assets reflects the 2005 write-down, and subsequent disposal, of certain manufacturing equipment originally obtained through the acquisition of substantially all of the tangible personal property of Apollo Sports in 2000. Apollo Sports was a steel golf shaft competitor in England that went out of business in 2000. A significant portion of the assets acquired were subsequently transferred to True Temper’s Amory, Mississippi facility. This write-off represents the remainder of the assets located in the United Kingdom that were deemed unusable.

(3) Reflects various start-up business expenses related to the opening of the Company’s composite manufacturing operation in China, and the related down-sizing costs incurred at the Company’s El Cajon, California facility. Also reflects costs associated with the acquisition of assets from a former competitor in the steel golf shaft industry, Royal Precision. These costs include acquisition-related fees and expenses, as well as transportation and integration expenses associated with the transfer of production equipment and inventory to True Temper facilities. For a more complete discussion of business development and start-up costs see Note 2(j) to the financial statements included elsewhere in this annual report.

(4) 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 purchase agreement with the Company’s direct parent company, True Temper Corporation, pursuant to which TTS Holdings LLC and certain of the Company’s senior management purchased all of the outstanding shares of True Temper Corporation. 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 the selling shareholders. These payments were financed with the net proceeds of a new senior credit facility and new 83¤8% senior subordinated notes due 2011. As a result of this transaction, the Company incurred certain expenses for legal, investment banking and other matters; and also recognized a loss on early extinguishment of its 107¤8% senior subordinated notes due 2008. See Note 3 to the financial statements included elsewhere in this annual report for further discussion.

(6) Working capital includes current assets less current liabilities, excluding cash and cash equivalents.

(7) Total debt includes both the current and long-term portions of debt.

(8) Capital expenditures in 2006 include $2,400 of steel golf manufacturing equipment from Royal Precision.

(9) Earnings in 2004 were insufficient to cover fixed charges. The amount of the ratio of earnings to fixed charges deficiency for the period from March 15 to December 31, 2004 was $2,946 and for the period from January 1 to March 14, 2004 was $9,870.

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

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH 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 graphite golf shafts for original equipment manufacturers and distributors in the golf equipment industry. In addition, the Company produces and sells a variety of performance sports products that offer high strength and tight tolerance components produced with steel alloys and composite carbon fiber graphite materials for the bicycle, hockey and other recreational sports markets. In 2006, golf shaft net sales represented 92% of total net sales, and performance sports net sales represented 8%.

Purchase Agreement for True Temper Corporation

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 purchase agreement with the Company’s direct parent company, TTC, pursuant to which TTS Holdings LLC and certain of the Company’s senior management purchased all of the outstanding shares of TTC (“Gilbert Global Acquisition”). 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 the selling shareholders. These payments were financed with the net proceeds of a new senior credit facility and new 83¤8% senior subordinated notes due 2011.

The Gilbert Global Acquisition was accounted for by TTC using the purchase method of accounting. As the Company is a wholly owned subsidiary of TTC, the Company has “pushed down” the effect of the purchase method of accounting to its financial statements. The Company’s consolidated financial statements and accompanying notes, shown in Item 8 of this annual report, present the historical cost basis results of the Company as “predecessor company” through March 14, 2004, and the results of the Company as “successor company” after that date. Accordingly, certain elements of the successor company presentation are not comparable to the predecessor company presentation due to the different basis of accounting.

For purposes of the following discussion, contained in Item 7 and 7A, regarding the Company’s results of operations and cash flow, the Company has combined the results of the predecessor and successor companies in order to more effectively compare the results to other years. Material variances caused by the different basis of accounting have been disclosed where applicable.

Year in Review—2006

The past year presented True Temper with a variety of challenges on both the revenue and cost fronts. Several factors contributed to an overall net sales decline of approximately 8.2%, but the primary driver throughout 2006 was a lack of exciting new golf club products introduced into the market. This trend was particularly prevalent in the iron category, which is one area where the Company maintains a large marketshare position.

Compounding this slowdown on the top line, 2006 also brought meaningful commodity inflation that put pressure on the Company’s gross profit percentages. The most noteworthy increase came in the carbon fiber prepreg market, which impacted the cost of the Company’s graphite golf shafts, hockey sticks and bicycle components. While these cost pressures were widespread throughout the industry, affecting

competitors, suppliers and customers, the increase in carbon fiber pricing was especially detrimental to True Temper’s operations during 2006 as it impacted the Company’s fastest growing business categories.

During the year, as revenue softened and the cost of commodities increased, the Company implemented a variety of cost control initiatives throughout its manufacturing facilities and corporate offices in order to offset these negative factors. These efforts helped to mitigate the negative impact on gross profit, and provided an overall reduction in selling, general and administrative expenses of approximately $0.4 million as compared to 2005.

On a positive note, the Company was successful in completing a strategic acquisition of a leading competitor’s assets when it purchased much of Royal Precision, a former steel golf shaft manufacturer. After competing with True Temper for many years, Royal Precision ceased operations in June 2006, and True Temper purchased select production equipment, inventory, and the intellectual property related to this competitor’s successful Rifle, Project X and other premium steel shaft brands.

Outlook—2007

In 2007 the Company plans to enhance its position in the steel golf shaft market, further penetrate the graphite shaft market, and continue its diversification strategy through building momentum in various performance sports categories. In keeping with this plan, several new product initiatives have recently been unveiled, including:

· GS75, the lightest weight steel golf shaft in the market today;

· CX20 and GS20, two new premium Alpha Q composite bicycle forks; and

· EPIC, a new concept shaft incorporating today’s latest nano-technology.

In addition, the Company is continually developing additional new carbon fiber based hockey and bicycle components in order to maintain the momentum achieved in these markets during 2006, which saw over 30% revenue gains versus 2005. During 2007 the Company also plans on diversifying into other rapidly expanding carbon fiber sports equipment categories, in order to leverage its design and manufacturing capabilities.

In addition to these internal growth drivers, it is anticipated that the overall golf market, and the iron category in particular, will experience some level of global rebound during the coming year, as the number of planned new product launches from key golf equipment companies should increase versus 2006. Based on current timing of such launches, it is anticipated that the overall revenue gains will be most prominent beginning in mid 2007 and continuing through the back half of the year.

On the cost front, with the exception of the very volatile nickel market, it is anticipated that most raw material and energy sources will remain relatively flat to the 2006 levels. Offsetting the nickel inflation, product pricing and productivity programs should contribute to improved gross profit read-through for the full year.

Lastly, as discussed in more detail in Note 16 to the financial statements included elsewhere in this annual report, during early 2007 the Company closed on an acquisition of a steel golf shaft manufacturing company in Suzhou, China. This is a startup operation, and 2007 will represent a significant step forward for the Company’s global operations and supply chain as this new manufacturing location is commissioned and production begins to ramp up.

Although the Company expects that these internal and external factors will favorably benefit its business, such outcomes are subject to uncertainties and unforeseeable factors relating to internal operations and the overall business environment, all of which are difficult to predict and many of which are beyond the Company’s control. Actual future results may vary materially as a result of various risks and

uncertainties, including but not limited to, a reduction in discretionary consumer spending or a general downturn in the economy. See Item 1A “Risk Factors” for a complete discussion of these and other risk factors.

Results of Operations

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

	Successor Company			Successor Company			Combined Company			Successor Company			Predecessor Company
	Year Ended December 31, 2006			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
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		67.8			59.8			73.2			76.9			58.6
Gross profit		32.2			40.2			26.8			23.1			41.4
Selling, general and administrative expenses		13.2			12.5			13.4			12.2			18.0
Amortization of intangible assets		13.3			11.8			11.2			14.1			—
Business development, start-up and transition costs		2.5			0.2			0.9			0.9			0.5
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)		3.3			15.4			(13.4	)		(4.2	)		(49.2	)
Interest expense, net		19.0			15.8			16.3			17.3			12.3
Other expenses, net		0.1			—			0.1			0.1			—
Loss before income taxes		(15.8	)		(0.4	)		(29.8	)		(21.5	)		(61.5	)
Income tax (benefit) expense		(5.8	)		0.0			(9.3	)		(8.1	)		(14.1	)
Net loss		(10.0	)%		(0.4	)%		(20.4	)%		(13.4	)%		(47.5	)%

Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

Net Sales for 2006 decreased approximately $9.6 million, or 8.2%, to $108.0 million from $117.6 million in 2005.

Golf shaft sales decreased approximately $11.7 million, or 10.6%, to $99.1 million from $110.8 million in 2005. This decline in net sales resulted primarily from a reduction in unit sales of two product types; (i) premium steel golf shafts for irons, wedges and putters, and (ii) stock original equipment manufacturer (“OEM”) graphite golf shafts for irons. The unit sales reduction in premium steel shafts was driven by several factors, but was predominantly impacted by the lack of exciting new product introductions in the iron, wedge and putter categories from the leading golf equipment companies. The decline in unit sales of stock OEM graphite shafts relates primarily to the timing of certain OEM iron launches using the Company’s proprietary graphite iron shafts.

Performance sports sales increased approximately $2.1 million, or 31.2%, to $8.9 million in 2006 from $6.8 million in 2005. This increase in revenue was driven primarily by continued sales growth in the Company’s bike and hockey categories, which remain the strategic focus for the performance sports segment, and comprise the majority of the segment’s new products initiatives.

Net sales to international customers decreased approximately $4.1 million, or 9.7%, to $38.3 million in 2006 from $42.4 million in 2005. This decrease resulted primarily from the same overall golf industry factors and Company specific issues described above.

Gross Profit for 2006 decreased approximately $12.4 million, or 26.3%, to $34.8 million from $47.2 million in 2005. Gross profit as a percentage of net sales decreased to 32.2% in 2006 from 40.2% in 2005. The decrease in gross profit as a percentage of net sales was driven primarily by four key factors: (i) an increase in the cost of raw materials and energy sources, (ii) unfavorable fluctuations in foreign currency exchange rates, (iii) the unfavorable impact of certain fixed costs in the Company’s manufacturing facilities spread over reduced unit volume, and (iv) the expected decline in profit margins due to the mix of products sold being more heavily weighted toward graphite golf and performance sports. These factors were partially offset by increased selling prices to the Company’s customers in January 2006 on steel and graphite golf products, as well as select performance sports product offerings.

Selling, General and Administrative (“SG&A”) Expenses for 2006 decreased approximately $0.5 million, or 3.0%, to $14.2 million from $14.7 million in 2005. SG&A as a percentage of net sales increased to 13.2% in 2006 from 12.5% in 2005. This increase in SG&A as a percentage of net sales was due primarily to the decrease in sales between periods. The decrease in SG&A spending between periods was in response to the softness on the gross profit line, as the Company put specific expense controls in place to ensure the best possible read-through to operating profit. These cost controls encompass a variety of functional areas within the organization, and are representative of both permanent cost savings as well as the delay in certain non-essential business activities.

During 2006 the Company spent approximately $0.1 million on its initial compliance project related to Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”). In 2005 the Company spent approximately $0.2 million on SOX initial compliance.

Amortization of Intangible Assets for 2006 was $14.3 million. The majority of intangible assets were acquired in connection with the Gilbert Global Acquisition. Intangible assets with definitive lives are being amortized using a straight-line method over periods from 2 to 59 years. Amortization of intangible assets in 2005 was $13.8 million.

Business Development, Start-Up and Transition Costs for 2006 increased approximately $2.5 million, to $2.7 million, from $0.2 million in 2005. The increase in these costs relates primarily to expenses associated with the acquisition of assets from a former competitor in the steel golf shaft industry, Royal Precision. Costs include acquisition related fees and expenses, as well as transportation and integration expenses associated with the transfer of production equipment and inventory to True Temper facilities.

Impairment Charge On Long-Lived Assets for 2005 was $0.4 million and was incurred in conjunction with the write-down, and subsequent disposal, of certain manufacturing equipment originally obtained through the acquisition of substantially all of the tangible, personal property of Apollo Sports in 2000. Apollo Sports was a steel golf shaft competitor in England that went out of business in 2000. A significant portion of the assets acquired were subsequently transferred to the Company’s Amory, Mississippi facility. This write-off represents the remainder of the assets located in the United Kingdom that were deemed unusable. No such charges were incurred during 2006.

Operating Income for 2006 decreased approximately $14.6 million to $3.6 million from $18.2 million in 2005. Operating income as a percentage of net sales decreased to 3.3% in 2006 from 15.4% in 2005. This decrease reflects the profit impact of the items described above.

Interest Expense, net for 2006 increased approximately $1.8 million to $20.5 million from $18.7 million in 2005. This increase was driven primarily by the increase in outstanding principal amounts of variable rate bank debt associated with the financing required for the acquisition of assets from Royal Precision, as well

as an increase in the variable interest rate on the Company’s bank debt as reflected by the rise in short term borrowing rates in the overall economy.

Income Tax Expense for 2006 changed to a benefit of approximately $6.3 million from an income tax expense of approximately $0.0 in 2005. The effective tax rate during these periods differs from the U.S. federal statutory rate of 34% due primarily to the incremental tax rate for state and foreign income tax purposes.

Net Loss for 2006 decreased approximately $10.3 million to a net loss of $10.8 million from a net loss of $0.5 million in 2005. This decrease reflects the profit impact from the items described above.

Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004 (Combined Company)

Net Sales for 2005 increased approximately $19.2 million, or 19.5%, to $117.6 million from $98.4 million in 2004.

Golf shaft sales increased approximately $18.5 million, or 20.0%, to $110.8 million in 2005 from $92.3 million in 2004. This improvement in revenue was driven by several factors, including a favorable shift in the mix of steel golf shafts sold towards more premium, branded products. In addition, the Company generated greater unit sales of graphite golf shafts, which can be attributed to several factors, including:

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

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

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

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

Performance sports sales increased approximately $0.7 million, or 12.3%, to $6.8 million in 2005 from $6.0 million in 2004. This increase in revenue was driven primarily by sales growth in the Company’s bike and hockey categories, which remain the strategic focus for the performance sports segment, and comprise the majority of 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 in 2004. This increase resulted primarily from the same overall golf industry factors and Company specific issues described above, related to golf shaft sales activity. In addition, the Company has seen a marked increase in its penetration into the steel golf shaft market in Japan; due primarily to its new, light-weight steel shaft offerings that are being well received by the Japanese golfers and overseas OEM club companies.

Gross Profit for 2005 increased approximately $20.8 million, or 79.0%, to $47.2 million from $26.4 million 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 accounting to record the Gilbert Global Acquisition, the Company increased the value of inventory, to reflect its estimated fair value at the date of acquisition, by $11.7 million which was subsequently reflected in cost of sales corresponding with the related subsequent sales activity during 2004. This inventory fair value adjustment and related recognition in cost of sales is a non-cash transaction and affects only the 2004 results of operations. The following paragraph describes the gross profit results of the Company excluding the impact of this purchase accounting adjustment.

Gross Profit for 2005 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 increase in gross profit as a percentage of net sales was driven primarily by (i) increased selling prices for golf shaft products, (ii) favorable product mix in the premium steel golf shaft segment, (iii) improved foreign currency exchange rates, and (iv) favorable operating improvements from productivity and cost control programs at the Company’s manufacturing facilities, including the labor cost savings realized from the transition of graphite product manufacturing to Guangzhou, China. These favorable factors were partially offset by (i) an increase in the cost of raw materials and natural gas and (ii) the impact of general inflation on the Company’s other labor and overhead costs.

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

During 2005 the Company spent approximately $0.2 million on its initial compliance project related to Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”). In 2004 the Company spent approximately $0.1 million on SOX initial compliance.

Amortization of Intangible Assets for 2005 was $13.8 million. Intangible assets were acquired in connection with the Gilbert Global Acquisition. Intangible assets with definitive lives are being amortized using a straight-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 through December 31, 2004.

Business Development, Start-Up and Transition Costs for 2005 decreased approximately $0.6 million, or 75.2%, to $0.2 million from $0.8 million in 2004. These costs represent various start-up business expenses related to the opening of the Company’s composite manufacturing operation in Southern China, and the related down-sizing costs incurred at the Company’s El Cajon, California facility. The decrease in cost reflects the fact that this project is substantially complete.

Transaction and Reorganization Expenses for 2004 were $5.4 million and were incurred in conjunction with the sale and purchase agreement for TTC which closed on March 15, 2004. These transaction related expenses include (i) investment banking merger and acquisition fees; (ii) legal fees; and (iii) other incidental costs and expenses related to the sale of TTC. No such transaction and reorganization expenses were incurred during 2005.

Loss on the Early Extinguishment of Long-Term Debt for 2004 was $9.2 million. The costs recorded as loss on the early extinguishment of long-term debt include (i) the write-off of the remaining deferred financing costs related to our 10 7¤8% senior subordinated notes and our 2002 senior credit facility, and (ii) the early extinguishment call 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 (Loss) for 2005 increased approximately $31.4 million to $18.2 million from an operating loss of $13.2 million in 2004. Operating income loss as a percentage of net sales increased to 15.4% in 2005 from a loss of 13.4% in 2004. This increase reflects the profit impact of the items described above.

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

Interest Expense, net for 2005 increased approximately $2.7 million to $18.7 million from $16.0 million in 2004. This increase was driven primarily by the increase in outstanding principal amounts of variable rate bank debt and fixed rate bonds associated with the Gilbert Global Acquisition, offset somewhat by a decrease in the interest rate on the Company’s fixed rate debt between periods.

Income Tax Expense for 2005 changed to approximately $0.0 compared to an income tax benefit of $9.2 million in 2004. The effective tax rate during these periods differs from the U.S. federal statutory rate of 34% due primarily to the incremental tax rate for state and foreign income tax purposes. For the period from January 1, 2004 through March 14, 2004, the effective tax rate also differs due to the nondeductible nature of a portion of transaction and reorganization expenses.

Net Loss for 2005 increased approximately $19.6 million to a net loss of $0.5 million from a net loss of $20.1 million in 2004. This increase reflects the profit impact from the items described above.

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

Liquidity and Capital Resources

The following table shows cash flow activity by source. Discussion of cash flow activity is noted below.

	2006			2005
Net cash provided by operating activities	$	941		$	15,936
Net cash used in investing activities	$	(20,464	)	$	(2,031	)
Net cash provided by (used in) financing activities	$	17,845		$	(12,509	)

General

At the beginning of 2004, the Company had a senior credit facility (the “2002 Senior Credit Facility”) which included a $15.0 million non-amortizing revolving credit facility and a $14.0 million term loan. Amounts under the revolving credit facility were available on a revolving basis through December 31, 2007. The term loan required quarterly cash interest and principal payments continuing through December 2007.

In addition, the Company had $99.7 million in 107¤8% Senior Subordinated Notes Due 2008 (the “107¤8% Notes”). The 107¤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 and at certain redemption prices.

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

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

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

The 2004 Senior Credit Facility and the Notes contain provisions which, among other things, limit the Company’s ability to (i) incur additional indebtedness, (ii) make acquisitions and capital expenditures, (iii) sell assets, (iv) create liens or other encumbrances, (v) make certain payments and dividends, or (vi) merge or consolidate. In addition, both the senior credit facility and the Notes contain customary change of control provisions that could, under certain circumstances, cause accelerated debt repayment. The 2004 Senior Credit Facility also required the Company to maintain certain specified financial ratios and tests including minimum interest coverage and fixed charge coverage ratios, and maximum leverage ratios.

On September 24, 2004 the Company executed an amendment to its 2004 Senior Credit Facility (the “First Amendment”). The First Amendment provided adjustments to certain specified financial ratios and tests included in the 2004 Senior Credit Facility. As part of the First Amendment, the margin adder on LIBOR based loans was increased from 2.50% to between 2.75% and 3.00%, depending on financial ratios, from September 24, 2004 through December 31, 2005.

On March 27, 2006 the Company amended and restated its 2004 Senior Credit Facility (the “2006 Restated Credit Facility”). The 2006 Restated Credit Facility includes additional term loans under the Company’s existing Senior Secured Credit Facilities of approximately $18.0 million, amendments that enable the Company to pursue future acquisitions, and the necessary flexibility to execute on the Company’s global strategic and operational initiatives. The proceeds of the additional term loans were used primarily to acquire certain assets from former steel golf shaft competitor Royal Precision, as more fully discussed in Note 3 to the financial statements included elsewhere in this annual report.

On January 22, 2007 the Company executed an amendment to its 2006 Restated Credit Facility (the “Second Amendment”). The Second Amendment was made effective as of December 20, 2006. The Second Amendment was executed in conjunction with a second lien financing effort and related acquisition, as more fully described in Note 16 to the financial statements located elsewhere in this annual report. In addition to allowing the flexibility for such second lien financing, the Second Amendment also provided adjustments to certain specified financial ratios and tests included in the 2006 Restated Credit Facility. As part of the Second Amendment, the margin adder on LIBOR based loans was increased to between 3.00% and 3.25%, depending on financial ratios, beginning January 22, 2007.

Both the 2006 Restated Credit Facility and the 83¤8% Notes contain covenants and events of default, including substantial restrictions and provisions which, among other things, limit the Company’s ability to incur additional indebtedness, make acquisitions and capital expenditures, sell assets, create liens or other encumbrances, make certain payments and dividends, or merge or consolidate. The 2006 Restated Credit Facility also requires the Company to maintain certain specified financial ratios and tests including minimum interest coverage and fixed charge coverage ratios, and maximum leverage ratios. Furthermore, the 2006 Restated Credit Facility requires certain mandatory prepayments including payments from the net proceeds of certain asset sales and a portion of the Company’s excess cash flow as defined within the credit agreement.

At December 31, 2006, the Company was in compliance with all of the covenants in both the 2006 Restated Credit Facility, as amended, and the 83¤8% Notes.

Discussion of Cash Flows for Years Ended December 31, 2006 and 2005

Net cash provided by operating activities decreased approximately $15.0 million between periods, which relates primarily to the decrease in earnings during 2006 and the additional costs for the acquisition

and integration of assets from Royal Precision. Overall working capital requirements were relatively flat during 2006, with an increase in inventory, due in part to additional graphite raw material purchases secured in a tight market, being effectively offset by a related increase in accounts payable and a decrease in accounts receivable due to improved collection efforts and overall lower sales revenue.

Net cash used in investing activities increased $18.4 million during 2006, primarily as a result of the acquisition of certain assets from Royal Precision. Assets acquired include production equipment, inventory and intellectual property.

Net cash provided by financing activities totaled $17.8 million during 2006, as compared to the $12.5 million used in financing activities during 2005. This increase in cash provided by financing activities relates primarily to (i) additional borrowings of term debt totaling $18.0 million during 2006, used primarily to finance the acquisition of certain assets from Royal Precision, (ii) additional borrowings under the revolving credit agreement for working capital and general corporate purposes which totaled $5.0 million, (iii) a net decline in repayments of term debt between periods of $8.7 million, and (iv) the payment of $1.3 million of debt issuance costs during 2006 related to the additional borrowings.

Existing Contractual Cash Obligations

The following table reflects the Company’s contractual cash obligations for principal payments on long-term debt and operating leases as of December 31, 2006 (dollars in millions):

	Total		2007			2008 through 2009			2010 through 2011			Thereafter
Long-Term Debt(1)	$	240.4		$	1.2		$	7.5		$	231.7		$	—
Operating Leases	3.4			1.1			1.3			1.0			—
Purchase Commitments(2)	0.5			0.5			—			—			—
Total(3)	$	244.3		$	2.8		$	8.8		$	232.7		$	—

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

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

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

Future Cash Generation and Use

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

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

· To make additional investments in the business, which may include, among other things, capital expenditures, business acquisitions, and/or expenditures for business development and expansion in China.

In addition to the debt service obligations for principal and interest payments, the Company’s liquidity needs largely relate to working capital requirements and capital expenditures for machinery and equipment. From 2002 through 2006 the Company’s full year capital expenditures ranged from $1.6 million to $4.9 million. At this time, the Company believes this to be a reasonable range for forecasted capital expenditures in the near future. The Company intends to fund its current and long-term working capital, capital expenditure and debt service requirements through cash flow generated from operations. However, since there can be no assurance of future performance, as of December 31, 2006, the Company has the $20.0 million revolving credit facility available for future cash requirements (as reduced by any outstanding draws, of which there were $5.0 million as of December 31, 2006). The maximum amount the Company

may use of the $20.0 million revolving credit facility is limited by the financial covenants contained within the 2006 Restated Credit Facility and is reduced by any outstanding letters of credit. As of December 31, 2006, the Company believes that cash flow generated from operations, in addition to other financing sources, will be sufficient to meet its cash obligations for the ensuing 12 month period.

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

On January 22, 2007, the Company executed an amendment to its 2006 Restated Credit Facility (the “Second Amendment”). The Second Amendment was made effective as of December 20, 2006, and was approved by the Company, Credit Suisse acting as administrative agent and collateral agent, and by a majority of the lenders who were party to the 2006 Restated Credit Facility at the effective date. The Second Amendment was executed in conjunction with a second lien financing effort, described more fully below, and related acquisition. In addition to allowing the flexibility for such second lien financing, the Second Amendment also provided adjustments to certain specified financial ratios and tests included in the 2006 Restated Credit Facility. As part of the Second Amendment, the margin adder on LIBOR based loans was increased to between 3.00% and 3.25%, depending on financial ratios, beginning January 22, 2007.

On January 22, 2007, the Company executed a Second Lien Credit Agreement (the “Second Lien”). The Second Lien includes additional term loans of approximately $45 million, with the provision that approximately $25 million of the proceeds were used to pay down the debt under the 2006 Restated Credit Facility. The Second Lien is variable rate debt, which provides for interest at the Company’s option, at (1) the base rate of the bank acting as administrative agent plus a margin adder of 4.50%, or (2) under a LIBOR option with a borrowing spread of LIBOR plus 5.50%. The maturity date of the Second Lien is June 30, 2011. The Second Lien does not amortize.

On February 26, 2007, the Company acquired CN Precision, a steel golf shaft manufacturing company located in Suzhou, China. CN Precision was founded in 2005, and is currently in the final stages of equipment installation.

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

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

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

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

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

The 2004 activity includes the result of the Gilbert Global Acquisition as noted above. On March 15, 2004, the proceeds from issuing the 2004 Senior Credit Facility and the proceeds from issuing the 83¤8% Notes, plus cash generated from operations during the first quarter, and cash on hand at the beginning of that quarter were used to (i) repay the outstanding principal 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 and the 83¤8% Notes, (iv) pay for transaction and reorganization expenses, and (v) make a distribution of the net remaining equity to the selling shareholders.

Seasonality

In general, the component supplier sales to golf equipment companies and distributors are seasonal, and tend to precede the warm weather golf season. However, there are exceptions, especially for those suppliers that sell to the high volume opening price point golf club manufacturers who sell their product through mass channel retail stores and generate strong volumes during the holiday gift-giving season. Our business does experience some seasonal fluctuations, based on a five year average, approximately 55% of our net sales are generated in the first half of the year, and the remaining 45% of our net sales are generated in the second half.

Inflation

With the exception of natural gas, nickel, carbon fiber prepreg material, and medical costs, the Company’s historical financial results have not been significantly impacted by inflationary pressures. The key cost elements outlined above have impacted financial results, or are expected to impact future results, and are described in more detail below.

During 2005 and 2006 the Company experienced an increase in costs for natural gas used in its steel product manufacturing plant in Amory, Mississippi. Based upon current market conditions and natural gas contracts for 2007, the Company expects overall natural gas costs to be flat to down slightly during 2007. The Company believes its natural gas price inflation has been and will continue to be consistent with that experienced by others using this same energy source.

During 2005 and 2006 the Company experienced an increase in costs for nickel, which is used in the manufacture of steel golf shafts. Based upon current market conditions, the Company expects overall nickel costs to be materially higher during 2007. The Company believes its nickel price inflation has been and will continue to be consistent with that experienced by others using this same raw material.

During 2005 and 2006 the Company experienced an increase in costs for carbon fiber prepreg material which is used in the manufacture of graphite golf shafts, hockey sticks and bicycle components. Based upon current market conditions and purchase price agreements for 2007, the Company expects overall carbon fiber prepreg costs to be down slightly during 2007. The Company believes its carbon fiber prepreg price inflation has been and will continue to be consistent with that experienced by others using this same raw material.

During 2005 and 2006 the Company experienced an increase in costs for the medical benefits provided to employees in the United States. Based upon current market conditions and projected medical inflation trends, the Company expects overall medical costs to be higher in 2007 than experienced in 2006. The Company believes its medical cost inflation has been and will continue to be consistent with that experienced by other US based companies providing employer sponsored medical benefits to their employees.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the appropriate application of certain accounting policies, many of which require Company management to make estimates and assumptions about future events and their impact on amounts reported in the consolidated financial statements and accompanying notes. Since future events and their impact cannot be determined with absolute certainty, the actual results will inevitably differ from management’s estimates. Such differences may be material to the consolidated financial statements.

The Company believes that its application of accounting policies, and the estimates inherently required therein, are reasonable under the circumstances. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, the Company has found its application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

The Company’s accounting policies are more fully described in Note 2 to its consolidated financial statements located elsewhere in this annual report. Certain critical accounting policies and estimates are described below.

Revenue Recognition. The Company derives substantially all of its revenue from the sales of golf shafts and performance sports products. Revenue is recognized when all of the following conditions exist: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the revenue amount is determinable and (iv) collection is reasonably assured. Valuation allowances are established for estimated returns, allowances, and discounts at the time revenue is recognized.

Pension and Other Postretirement Obligations. Pension and other postretirement benefits costs and obligations are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, expected return on plan assets, rates of salary increase, health care cost trend rates, mortality rates, and other factors. These assumptions are updated on an annual basis prior to the beginning of each year. The Company considers current market conditions, including interest rates, in making these assumptions. The Company develops the discount rates by considering the yields available on high-quality fixed income investments with maturities corresponding to the related benefit obligation. The Company’s discount rate for both its defined benefit pension plan and its unfunded post-retirement health plan was 6.00% and 5.75% at December 31, 2006 and 2005, respectively. As discussed further in Note 10 to the consolidated financial statements, located elsewhere in this annual report, the Company develops the expected return on pension plan assets by considering various factors, which include its targeted asset allocation percentages, historic returns, and expected future returns. The Company’s expected long-term rate of return assumption for assets in its defined benefit plan was 8.50% for 2006 and 2005.

The Company believes that the assumptions used are appropriate; however, differences in actual experience or changes in the assumptions may materially affect the Company’s financial position or results of operations. In accordance with accounting principles generally accepted in the United States, actual results that differ from the actuarial assumptions are accumulated and, if in excess of a specified corridor, amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. Also, gains and losses resulting from changes in assumptions are amortized over the expected remaining service period of active plan participants or, for retired participants, the average remaining life expectancy, to the extent that such amounts exceed 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the beginning of the year. The Company expects that its pension and other postretirement benefit costs in 2007 will be relatively consistent with those recognized in 2006.

Impairment of Long-Lived Assets, Including Goodwill. The Company accounts for long-lived assets in accordance with the provisions of Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144) and evaluates goodwill for impairment under Statement No. 142, Goodwill and Other Intangible Assets (Statement 142). The Company evaluates goodwill for impairment on an annual

basis, and periodically evaluates long-lived assets, including goodwill, for indicators that would suggest that the carrying amount of the assets may not be recoverable. The judgments regarding the existence of such indicators are based on factors such as operating performance, market conditions, and legal factors. The valuation of long-lived assets, including goodwill, requires the use of judgment in evaluating these indicators.

In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

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

Inventory Valuation. Inventories are stated at the lower of cost or market, cost being determined on the first-in, first-out method. The Company assesses the valuation of its inventories and reduces the carrying value of those inventories that are obsolete or in excess of the Company’s forecasted usage to their estimated net realizable value. The Company estimates the net realizable value of such inventories based on analyses and assumptions including, but not limited to, historical usage, future demand and market requirements. Reductions to the carrying value of inventories are recorded in cost of goods sold. If the future demand for the Company’s products is less favorable than the Company’s forecasts, then the value of the inventories may be required to be reduced, which could result in material additional expense to the Company and have a material adverse impact on the Company’s consolidated financial statements.

Valuation for Deferred Income Taxes. The Company’s consolidated financial statements include an estimate of income taxes assessed in each legal jurisdiction in which it operates. These income taxes include both a current amount, as well as a deferred portion which results from a variety of temporary book versus tax treatment differences, as well as tax-basis net operating loss carryforwards. These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheet. Once established, any deferred tax asset must be evaluated to determine the likelihood that the Company will generate sufficient future taxable income to utilize the full amount. When facts and circumstances warrant, the Company will establish, increase or reduce valuation allowances associated with deferred tax assets in order to reflect which assets meet the more likely than not realizability test.

Impact of Recently Issued Accounting Standards

Information regarding recent accounting pronouncements is contained in Note 2 to the Consolidated Financial Statements, which is incorporated herein by this reference.

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
	Years ended								Period from March 15				Period from January 1
	December 31,				December 31,				To December 31,				To March 14,
	2006				2005				2004				2004
NET SALES		$	108,005			$	117,594			$	78,120			$	20,247
Cost of sales		73,194				70,362				60,104				11,871
GROSS PROFIT		34,811				47,232				18,016				8,376
Selling, general and administrative expenses		14,226				14,660				9,520				3,635
Amortization of intangible assets		14,343				13,840				10,984				—
Business development, start-up and transition costs		2,688				208				738				100
Transaction and reorganization expenses		—				—				25				5,381
Impairment charge on long-lived assets		—				357				—				—
Loss on early extinguishment of long-term debt		—				—				—				9,217
OPERATING INCOME (LOSS)		3,554				18,167				(3,251		)		(9,957		)
Interest expense, net		20,525				18,631				13,491				2,498
Other expenses (income), net		75				(31		)		72				(2		)
LOSS BEFORE INCOME TAXES		(17,046		)		(433		)		(16,814		)		(12,453		)
Income tax (benefit) expense		(6,279		)		33				(6,350		)		(2,845		)
NET LOSS		$	(10,767	)		$	(466	)		$	(10,464	)		$	(9,608	)

See accompanying notes to consolidated financial statements.

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,
	2006				2005
ASSETS
CURRENT ASSETS
Cash		$	3,055			$	4,733
Receivables, net		16,819				17,949
Inventories		23,208				19,633
Prepaid expenses and other current assets		2,731				2,591
Deferred tax assets		1,381				1,781
Total current assets		47,194				46,687
Property, plant and equipment, net		14,482				12,210
Goodwill		150,883				150,883
Intangible assets, net		133,262				132,629
Deferred financing costs		6,367				6,504
Other assets		1,511				923
Total assets		$	353,699			$	349,836
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt		$	1,257			$	245
Accounts payable		6,697				4,410
Accrued expenses and other current liabilities		9,904				9,896
Total current liabilities		17,858				14,551
Deferred tax liabilities		206				6,312
Long-term debt, net of current portion		239,149				220,480
Pension and post-retirement obligations		6,204				8,729
Total liabilities		263,417				250,072
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		(21,697		)		(10,930		)
Accumulated other comprehensive income (loss)		36				(1,249		)
Total stockholder’s equity		90,282				99,764
Commitments and contingent liabilities (See Note 12)		—				—
Total liabilities and stockholder’s equity		$	353,699			$	349,836

See accompanying notes to consolidated financial statements.

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

CONSOLIDATED STATEMENTS OF
STOCKHOLDER’S EQUITY AND COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

													Accumulated
						Additional							Other
	Common Stock					Paid-In			Accumulated				Comprehensive
	Shares		Par Value			Capital			Deficit				Income (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
Net loss										(10,767		)					(10,767		)
Minimum pension liability, net of taxes														1,211			1,211
Mark to market adjustment on derivative instruments, net of taxes														74			74
Comprehensive loss, net of taxes																	(9,482		)
Balance at December 31, 2006		100		$	—	$	111,943			$	(21,697	)		$	36		$	90,282

See accompanying notes to consolidated financial statements.

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
	Years ended December 31,						Period from March 15 To December 31,				Period from January 1 To March 14,
	2006			2005			2004				2004
OPERATING ACTIVITIES
Net loss	$	(10,767	)	$	(466	)		$	(10,464	)		$	(9,608	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	2,616			2,725				2,420				671
Amortization of deferred financing costs	1,387			1,449				1,034				109
Amortization of intangible assets	14,343			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				—
Transaction and reorganization expenses	—			—				25				5,381
Loss on early extinguishment of long-term debt	—			—				—				9,217
Deferred income taxes	(6,492		)	(201		)		(6,432		)		(2,898		)
Changes in operating assets and liabilities, net of acquisitions:
Receivables, net	1,130			(3,371		)		(255		)		1,273
Inventories	(2,975		)	2,277				(3,454		)		(2,800		)
Prepaid expenses and other assets	(140		)	(514		)		(463		)		(68		)
Accounts payable	2,287			54				(2,015		)		1,379
Accrued interest	(34		)	(38		)		3,761				1,993
Other assets and liabilities	(414		)	(119		)		(142		)		(1,667		)
Net cash provided by operating activities	941			15,936				6,702				2,982
INVESTING ACTIVITIES
Purchases of property, plant and equipment	(4,888		)	(2,612		)		(1,232		)		(330		)
Proceeds from sales of property, plant and equipment	—			784				50				—
Purchase of other assets	(15,450		)	—				—				—
Other investing activity	(126		)	(203		)		—				—
Net cash used in investing activities	(20,464		)	(2,031		)		(1,182		)		(330		)
FINANCING ACTIVITIES
Proceeds from issuance of bank debt	23,000			—				110,000				—
Proceeds from issuance of Senior Subordinated Notes	—			—				125,000				—
Principal payments on bank debt	(3,319		)	(12,000		)		(2,275		)		(7,700		)
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	(1,250		)	—				(8,678		)		—
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	(586		)	(509		)		(248		)		(42		)
Net cash provided by (used in) financing activities	17,845			(12,509		)		(5,019		)		(8,205		)
Net increase (decrease) in cash	(1,678		)	1,396				501				(5,553		)
Cash at beginning of period	4,733			3,337				2,836				8,389
Cash at end of period	$	3,055		$	4,733			$	3,337			$	2,836

See accompanying notes to consolidated financial statements.

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. and subsidiaries (“True Temper” or the “Company”) is primarily engaged in the design, manufacture and sale of steel and composite golf shafts as well as a variety of other high strength, tight tolerance tubular components for the bicycle, hockey and other recreational sports markets. True Temper’s manufacturing plants and related facilities are located in Memphis, Tennessee; Amory and Olive Branch, Mississippi; El Cajon, California; and Guangzhou, China. The majority of True Temper’s sales are to golf club manufacturers and distributors primarily located in the United States, Europe, Japan, Australia and Southeast Asia. True Temper operates as a wholly-owned operating subsidiary of True Temper Corporation (“TTC’’).

The consolidated financial statements include the financial statements of True Temper and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

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 purchase agreement with the Company’s direct parent company, True Temper Corporation, pursuant to which TTS Holdings LLC and certain of the Company’s senior management purchased all of the outstanding shares of TTC. 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 the selling shareholders. These payments were financed with the net proceeds of a new senior credit facility and new 83¤8% senior subordinated notes due 2011.

This transaction was accounted for by TTC using the purchase method of accounting. As the Company is a wholly owned subsidiary of True Temper Corporation, the Company has “pushed down” the effect of the purchase method of accounting to the consolidated financial statements of True Temper Sports, Inc. These financial statements and accompanying notes present the historical cost basis results of the Company as “predecessor company” through March 14, 2004, and the results of the Company as “successor company” from March 15, 2004 through December 31, 2006; accordingly, the successor company presentation is not comparable to the predecessor company presentation due to the different basis of accounting. The financial statements have also been separated by a vertical dashed line into predecessor company and successor company results.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the revenue amount is determinable and collection is reasonably assured. Valuation allowances are established for estimated returns, allowances and discounts at the time revenue is recognized.

(b) Use of Estimates

The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and

liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of goodwill, intangible assets and property, plant and equipment; valuation allowances for receivables, inventories and deferred income tax assets; valuation of derivative instruments; and assets and obligations related to employee benefits. Actual results could differ from those estimates.

(c) Trade Accounts Receivable

Trade receivables are net of allowances for doubtful accounts of $477 and $411 as of December 31, 2006 and 2005, respectively.

(d) Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method.

(e) Deferred Financing Costs

Costs associated with the issuance of debt are deferred and amortized as a component of interest expense over the life of the related debt, using a method that approximates the interest method.

(f) Property, Plant and Equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation. Depreciation is provided over the estimated useful life of each asset using the straight-line method. Leasehold improvements are amortized over the shorter of the related asset’s useful life or the applicable lease term including option periods when appropriate. In general, the estimated useful lives for both predecessor 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 capitalized software				2-4 years
Leasehold improvements				6-15 years

(g) Goodwill and Other Intangible Assets

Goodwill represents the excess of cost over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are instead tested for impairment at least annually in accordance 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 their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

The Company assesses its goodwill and other indefinite-lived intangible assets for impairment on an annual basis. If an indication of impairment exists, the Company compares the carrying amount of the reporting unit to its estimated fair value. If the reporting unit’s carrying value exceeds its fair value, the Company allocates the fair value to all of the assets and liabilities of the reporting unit and determines the implied fair value of the goodwill and indefinite-lived intangible assets. An impairment

loss would be recognized to the extent that a reporting unit’s recorded goodwill or other indefinite-lived intangible assets exceeded the implied fair value. The Company performed its annual impairment testing in the fourth quarter of 2006. No impairment was determined upon performing these impairment tests.

(h) Derivative Instruments and Foreign Currencies

The Company uses forward foreign exchange contracts (“Instruments” or “Derivative Instruments”) in its management of foreign currency exchange rate exposures. Instruments that are designated hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Certain Hedging Activities, as amended, must be effective at reducing the risks associated with the underlying exposure 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 high degree of inverse correlation with changes in the market value or cash flows of the underlying hedged item.

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

The changes in the market value of Derivative Instruments designated as hedging instruments for anticipated foreign currency sales are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) in stockholder’s equity. To the extent an Instrument is no longer effective as a hedge due to a change in the underlying exposure, gains and losses are recognized currently in the consolidated statements of operations as a component of cost of sales.

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

At December 31, 2006, the Company had outstanding forward foreign currency contracts designated as hedging instruments which totaled $5.5 million.

True Temper recorded a gain (loss) in operations on foreign currency of $50 and ($172) for the years ended December 31, 2006 and 2005, respectively, $79 for the period January 1, 2004 to March 14, 2004, and ($40) for the period March 15, 2004 to December 31, 2004.

The following table summarizes the contractual notional amounts of True Temper’s forward exchange contracts as of December 31, 2006 and 2005 (in U.S. dollars):

	2006		2005
Pound Sterling	$	5,521	$	2,099
Yen	1,277		2,250
Australian dollar	284		457
Total	$	7,082	$	4,806

(i) Impairment of Long-Lived Assets

SFAS No. 144 provides a single accounting model for long-lived assets held and used and to be disposed of. SFAS No. 144 also changes the criteria for classifying an asset as held for sale; and broadens the scope of businesses to be disposed of that qualify for reporting as discontinued operations and changes the timing of recognizing losses on such operations.

In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or

changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

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

(j) Business Development, Start-up Costs and Transition Costs

Costs associated with business development, start-up and transition costs are comprised of costs related to opening a composite manufacturing operation in Guangzhou, China and the related down-sizing costs incurred at the Company’s El Cajon, California facility. These costs include travel, consulting, legal and other professional services, personnel recruiting and compensation, facility rent and other start-up and related shutdown costs. During 2006, business development, start-up and transition costs also reflect the costs associated with the acquisition of assets from a former competitor in the steel golf shaft industry, Royal Precision. These costs include acquisition related fees and expenses, as well as transportation and integration expenses associated with the transfer of production equipment and inventory to True Temper facilities. The costs are expensed as incurred and separately identified in the consolidated statements of operations as a component of operating income (loss).

(k) Advertising and Promotional Costs

Advertising and promotional costs are accounted for in accordance with Statement of Position 93-7 “Reporting on Advertising Costs”, which requires that the cost of producing advertisements be expensed at the time of the first showing of the advertisement or as incurred. True Temper’s policy is to expense costs associated with the production of advertising at the time of first showing of the advertisement. Advertising and promotional costs primarily consist of trade show costs, media spots including print, radio and television, advertising production and agency fees, sponsorships, and product and promotional samples. Advertising and promotional expense was $3,688 and $3,466 for the years ended December 31, 2006 and 2005, respectively, $1,155 for the period January 1, 2004 through March 14, 2004, and $2,314 for the period March 15, 2004 to December 31, 2004. Certain of the Company’s customers participate in a cooperative advertising program where the Company agrees to reimburse these customers for a portion of their advertising costs that feature the Company’s product. Cooperative advertising costs are shown as a reduction of net sales.

(l) Research and Development Costs

Costs associated with the development of new products and changes to existing products are expensed as incurred and are included in selling, general, and administrative expenses. Research and development costs were $1,905 and $1,812 for the years ended December 31, 2006 and 2005,

respectively, $328 for the period January 1, 2004 through March 14, 2004, and $1,180 for the period March 15, 2004 to December 31, 2004.

(m) Retirement Benefits

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

True Temper’s US based salaried employees, and certain international employees, are covered by a non-contributory defined contribution plan. Company contributions to this plan are based on the employee’s age and are calculated as a percentage of compensation. This plan is funded on a current basis. In addition to the non-contributory defined contribution plan, certain post-retirement medical, dental and life insurance benefits are provided to those salaried employees who were employed by the Company prior to January 1, 2000.

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

(n) Income Taxes

The Company is included in the consolidated U.S. federal income tax return of TTC. Income taxes are determined and presented in the Company’s consolidated financial statements using the separate return method, and are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(o) Stock-Based Compensation

On August 10, 2005 TTC issued, to certain employees in return for service, a total of 525,400 stock options and stock appreciation rights (“Equity Incentive Awards”) to purchase common stock of TTC for $13.56 per share. The Equity Incentive Awards have a term of ten years, and vest and become exercisable at various times and under various conditions through August 10, 2012; with certain acceleration features based on performance criteria.

On January 1, 2006 the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”). All equity incentive awards issued subsequent to January 1, 2006 will be accounted for using the guidance provided in this statement, which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values. As allowed by SFAS 123(R), the Company has elected to make this adoption on a prospective basis because the Company meets the definition of a non-public entity. For equity incentive awards issued prior to January 1, 2006, the Company continues to apply the intrinsic-value method of accounting prescribed by Accounting Principles

Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, including Financial Accounting Standards Board Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, An Interpretation of APB Opinion No. 25, issued in March 2000, to account for its fixed-plan Equity Incentive Awards. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price of the Equity Incentive Award.

Since adopting SFAS 123(R), TTC and the Company have not granted any equity incentive awards. There have been no awards exercised or forfeited in 2006. The weighted average remaining contractual life of the Equity Incentive Awards is between eight and nine years.

In addition, TTC has 468,000 equity awards which vest only upon a sale of TTC and achievement of certain other terms as described in the awards. As of December 31, 2006 the events required for vesting of these awards are not expected to occur in the near term.

(p) Fair Value of Financial Instruments

The fair value of financial instruments represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced sale or liquidation. Significant differences can arise between the fair value and carrying amount of financial instruments that are recognized at historical cost amounts.

The following methods and assumptions were used by True Temper in estimating fair value disclosures for financial instruments:

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

Long-Term Debt—The carrying values of the Company’s variable rate debt approximates fair value. The estimated fair value of the Company’s fixed rate debt is based upon interest rates available for the issuance of debt with similar terms and remaining maturities. As of December 31, 2006 and 2005, the Company’s Senior Subordinated Notes had an estimated fair value of $106.3 million and $111.3 million, respectively.

Foreign Currency Contracts—The fair value of forward exchange contracts is estimated using prices established by financial institutions for comparable instruments which was approximately ($0.1) and $0.1 million at December 31, 2006 and 2005, respectively.

The fair value estimates presented herein are based on information available to management as of December 31, 2006. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

(q) Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). This new standard provides guidance for using fair value to measure assets and liabilities and information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards which permit, or in some cases require, estimates of fair market value. SFAS 157 also expands financial statement disclosure requirements about a company’s use of fair

value measurements, including the effect of such measures on earnings. The provisions of SFAS 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007. While the Company is currently evaluating the provisions of SFAS 157, the adoption is not expected to have a material impact on its 2008 consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R) which requires an employer to recognize in its statement of financial position the overfunded or underfunded status of a defined benefit pension or other postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation. Employers must also recognize as a component of other comprehensive income, net of tax, the actuarial and experience gains and losses and the prior service costs and credits. The provisions of SFAS 158 are applicable for the Company beginning on January 1, 2007. The Company is in the process of evaluating the effect, if any, the adoption of SFAS 158 will have on its 2007 consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. This pronouncement prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in the Company’s tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements for uncertain tax positions. The accounting provisions of FIN 48 are effective for the Company beginning January 1, 2007. The cumulative effect of initially adopting FIN 48 will be recorded as an adjustment to opening retained earnings in the year of adoption and will be presented separately. The Company is in the process of evaluating the effect, if any, the adoption of FIN 48 will have on its 2007 consolidated financial statements.

In July 2006, the EITF issued EITF 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement, (“EITF 06-3”) which requires disclosure of the accounting policy for tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction. The Company has adopted the provisions of EITF 06-3 and has made the appropriate disclosures in Note 2 (u).

(r) Supplemental Disclosures of Cash Flow Information

Cash payments for income taxes and interest are as follows:

	Successor Company							Predecessor Company
					Period from			Period from
	Years Ended				March 15 to			January 1 to
	December 31,				December 31,			March 14,
	2006		2005		2004			2004
Income taxes	$	213	$	147		$	89		$	174
Interest	$	19,391	$	17,330		$	8,789		$	348

(s) Accumulated Other Comprehensive Income (Loss)

The accumulated balances for each classification within accumulated other comprehensive income (loss) are as follows:

	Derivative Instruments Mark to Market Adjustment				Minimum Pension Liability Adjustments				Accumulated Other Comprehensive Income (Loss)
Predecessor Company:
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		)
Period change		74				1,211				1,285
December 31, 2006		$	74			$	(38	)		$	36

(t) Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation.

(u) Taxes Collected from Customers and Remitted to Governmental Authorities

The Company collects sales and value added taxes from customers and remits them to governmental authorities in certain jurisdictions. These taxes are presented net in the consolidated statements of operations and are not included in revenues.

(v) Adoption of SAB 108

In September 2006 the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), to address diversity in practice in quantifying financial statement misstatements. SAB 108 requires registrants to consider both the “rollover” method which focuses on the income statement impact of misstatements and the “iron curtain” method which focuses on the balance sheet impact of misstatements to define materiality. The transition provisions of SAB 108 allow a registrant to adjust opening retained earnings for the cumulative effect of immaterial errors relating to prior years. The Company adopted SAB 108 during the year ended December 31, 2006. The adoption of SAB 108 did not have a material impact on the Company’s consolidated financial position or results of operations.

(3) ACQUISITIONS

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 purchase agreement with the Company’s direct parent company, True Temper Corporation, pursuant to which TTS Holdings LLC and certain of the Company’s senior management purchased all of the outstanding shares of True Temper Corporation. 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 the selling shareholders. These payments were financed with the net proceeds of a new senior credit facility and new 83¤8% senior subordinated notes due 2011. These debt instruments are further described in Note 8 below.

The purchase price as stipulated in the January 30, 2004 stock purchase agreement totaled $342.0 million, plus direct acquisition costs and certain working capital adjustments of $18.4 million, less a purchase price adjustment for final working capital of $0.8 million. Following is the allocation of the total 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

In connection with the acquisition, the Company conducted an assessment and valuation of all tangible and intangible assets acquired. The results of this exercise are reflected in the allocation table above. Of particular note was (i) the establishment of intangible assets in an aggregate amount of approximately $157.3 million based on both internal Company assessments and a study conducted by an independent firm specializing in intangible asset valuation; and (ii) the write-up of inventory by approximately $11.7 million to reflect the estimated fair value of inventory at the date of acquisition. Both of these adjustments were completed in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations.

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

In addition, at the time of the transaction the predecessor company recorded certain transaction related expenses totaling $5.4 million. These expenses consisted primarily of investment banking merger

and acquisition fees, legal fees and other incidental costs and expenses typically incurred in an acquisition of this nature.

Also, as a direct result of the early extinguishment of the predecessor company’s long-term debt, expenses totaling $9.2 million were incurred consisting primarily of the write-off of the remaining deferred financing costs related to the 107¤8% senior subordinated notes due 2008 and the 2002 senior credit facility, and the early extinguishment call premium and related interest incurred when the Company redeemed the 107¤8% senior subordinated notes on March 15, 2004.

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

	Year Ended December 31,
	2004
Net sales		$	98,367
Loss before income taxes		(6,633		)
Net loss		(4,203		)

On June 8, 2006 the Company acquired certain business assets of the former golf shaft manufacturer Royal Precision, Inc. (“Royal Precision”) for approximately $17.9 million. The assets acquired were comprised of intangible assets of $14.9 million comprised of patents, trademarks, brand names and design technologies and other intangible assets including customer relationships, $0.6 million in inventory, and $2.4 million in certain steel golf shaft manufacturing equipment.

True Temper has completed the integration of the machinery and equipment into its existing steel golf shaft facility in Amory, Mississippi, and is currently producing and distributing the branded products formerly sold by Royal Precision.

The cash purchase price for the assets acquired is included in the investing section of the Company’s consolidated statement of cash flows for the year ended December 31, 2006. Machinery and equipment acquired will be depreciated over its estimated remaining useful life, between five and ten years. Intangible assets acquired with determinable useful lives will be amortized over periods ranging from eight to ten years.

Certain expenses were incurred to acquire the assets and transition them to the Company’s existing manufacturing sites. Of these costs approximately $2.1 million for the year ended December 31, 2006 were recorded in the Company’s consolidated statement of operations as business development, start-up and transition costs. These costs include acquisition-related fees and expenses, as well as transportation and integration expenses associated with the transfer of production equipment and inventory to True Temper facilities.

(4) INTANGIBLE ASSETS

The following table sets forth the gross value and accumulated amortization for intangible assets at December 31, 2006 and 2005.

	Weighted Average		December 31, 2006								December 31, 2005
	Amortization Period		Gross Value		Accumulated Amortization				Net Book Value		Gross Value		Accumulated Amortization				Net Book Value
Trade name		—	$	22,430		$	—		$	22,430	$	19,455		$	—		$	19,455
Patented technology		8 yrs	12,936			(4,181		)	8,755		11,889			(2,638		)	9,251
Customer-related intangible assets		10 yrs	132,478			(34,520		)	97,958		121,524			(21,820		)	99,704
Lease contract		59 yrs	4,323			(204		)	4,119		4,323			(131		)	4,192
Other		2 yrs	262			(262		)	—		262			(235		)	27
Total intangible assets			$	172,429		$	(39,167	)	$	133,262	$	157,453		$	(24,824	)	$	132,629

The following table sets forth the estimated aggregate future amortization expense for these intangible assets at December 31, 2006:

2007	$	14,938
2008	14,938
2009	14,938
2010	14,938
2011	14,938

(5) INVENTORIES

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

	2006		2005
Raw materials	$	5,168	$	4,556
Work in process	3,553		1,734
Finished goods	14,487		13,343
Total	$	23,208	$	19,633

(6) PROPERTY, PLANT AND EQUIPMENT

Major classes of property, plant and equipment, as of December 31 of the year indicated, are summarized as follows:

	2006		2005
Land improvements	$	121	$	113
Buildings	2,914		2,815
Furniture and office equipment	626		262
Machinery and equipment	15,034		10,924
Computer equipment and capitalized software	540		451
Leasehold improvements	1,458		1,429
Construction in progress	1,788		1,361
	22,481		17,355
Less accumulated depreciation	7,999		5,145
Net property, plant and equipment	$	14,482	$	12,210

(7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities, as of December 31 of the year indicated, consist of the following:

	2006		2005
Accrued compensation, benefits and related payroll taxes	$	3,721	$	4,276
Accrued interest	3,697		3,730
Other	2,486		1,890
Total	$	9,904	$	9,896

(8) BORROWINGS

(a) Long-Term Debt

Long-term debt at December 31, 2006 and 2005 consisted of the following:

	2006		2005
83¤8% Senior Subordinated Notes due 2011	$	125,000	$	125,000
2004 senior credit facility	115,406		95,725
Total debt	240,406		220,725
Less current maturities	1,257		245
Long-term debt	$	239,149	$	220,480

The 83¤8% Senior Subordinated Notes due 2011 (the “Notes”) provide for semi-annual interest payments, in arrears, due on March 15 and September 15. At the option of 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 equity offerings. In addition, at any time prior to March 15, 2008, the Company may also redeem all or a part of the Notes upon the occurrence of a change of control. On or after March 15, 2008 the Notes may be redeemed, at the option 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% on March 15, 2010.

The 2004 senior credit facility has a maturity date of March 15, 2011, and provides for interest on the term loan, at the Company’s option, at (i) the base rate of the bank acting as administrative agent plus a margin adder of 2.00%, or (ii) under a LIBOR option with a borrowing spread of LIBOR plus 2.50% to 3.00%, depending on financial ratios. The Company’s weighted average rate at December 31, 2006 was 8.37%.

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

The 2004 senior credit facility and the Notes contain provisions which, among other things, limit the Company’s ability to (i) incur additional indebtedness, (ii) make acquisitions and capital expenditures, (iii) sell assets, (iv) create liens or other encumbrances, (v) make certain payments and dividends, or (vi) merge or consolidate. In addition, both the senior credit facility and the Notes contain customary change of control provisions that could, under certain circumstances, cause accelerated debt repayment. The 2004 senior credit facility also requires the Company to maintain certain specified financial ratios and tests including minimum interest coverage and fixed charge coverage ratios, and maximum leverage ratios.

On September 24, 2004 the Company executed an amendment to its 2004 senior credit facility (the “Amendment”). The Amendment was approved by the Company, Credit Suisse First Boston acting as administrative agent and collateral agent, and by a majority of the lenders who were party to the 2004 senior credit facility on such date. The Amendment provided adjustments to certain specified financial ratios and tests included in the 2004 senior credit facility. As part of the Amendment, the margin adder on LIBOR based loans was increased from 2.50% to between 2.75% and 3.00%, depending on financial ratios, beginning September 24, 2004 and continuing through December 31, 2005.

On March 27, 2006 the Company amended and restated its 2004 senior credit facility (the “2006 Restatement”). The 2006 Restatement was approved by the Company, Credit Suisse acting as administrative agent and collateral agent, and by a majority of the lenders who were party to the 2004 senior credit facility at that date. The 2006 Restatement includes additional term loans under the Company’s existing Senior Secured Credit Facilities of approximately $15.0 million, amendments that enable the Company to pursue future acquisitions, and the necessary flexibility to execute on the Company’s global strategic and operational initiatives.

On January 22, 2007 the Company executed an amendment to its 2006 Amended and Restated Credit Facility (the “Second Amendment”). The Second Amendment was made effective as of December 20, 2006, and was approved by the Company, Credit Suisse acting as administrative agent and collateral agent, and by a majority of the lenders who were party to the 2006 Amended and Restated Credit Facility at the effective date. The Second Amendment was executed in conjunction with a second lien financing effort and related acquisition, as more fully described in Note 16. In addition to allowing the flexibility for such second lien financing, the Second Amendment also provided adjustments to certain specified financial ratios and tests included in the 2006 Amended and Restated Credit Facility. As part of the Second Amendment, the margin adder on LIBOR based loans was increased to between 3.00% and 3.25%, depending on financial ratios, beginning January 22, 2007. At December 31, 2006, the Company was in compliance with all of the covenants in both the 2006 Amended and Restated Credit Facility and the Notes.

At December 31, 2006, future minimum principal payments on long-term debt were as follows:

2007	$	1,257
2008	1,257
2009	6,257
2010	90,567
2011	141,068
Total	$	240,406

(b) Line of Credit

The Company may borrow, through March 15, 2009, up to $20.0 million under a revolving credit agreement included in the 2004 senior credit facility. The Company pays an annual commitment fee of 0.05% on the unused portion of the revolving credit agreement. Borrowings under the agreement are subject to the same provisions described in the long-term debt section of this Note. The Company had $5.0 million in outstanding borrowings under this line of credit as of December 31, 2006, which is included in the preceding table in this note.

(9) INCOME TAXES

Total income taxes for the periods indicated were allocated as follows:

	Successor Company												Predecessor Company
	Years Ended								Period from March 15 to				Period from January 1 to
	December 31,				December 31				December 31,				March 14,
	2006				2005				2004				2004
Income (loss) from continuing operations		$	(6,279	)		$	33			$	(6,350	)		$	(2,845	)
Stockholder’s equity:
Minimum pension liability		741				(665		)		(100		)		—
Mark to market adjustment on derivative instruments		45				(9		)		9				(74		)
Total income taxes		$	(5,493	)		$	(641	)		$	(6,441	)		$	(2,919	)

The income tax expense (benefit) attributable to loss from continuing operations, for the periods indicated, is as follows:

	Successor Company												Predecessor Company
	Years Ended								Period from March 15 to				Period from January 1 to
	December 31,				December 31,				December 31,				March 14,
	2006				2005				2004				2004
Current:
Federal		$	—			$	—			$	—			$	—
State		40				40				30				10
Foreign		173				194				52				43
Total current		213				234				82				53
Deferred:
Federal		(5,473		)		(169		)		(5,425		)		(2,439		)
State		(1,019		)		(32		)		(1,007		)		(459		)
Total deferred		(6,492		)		(201		)		(6,432		)		(2,898		)
Total		$	(6,279	)		$	33			$	(6,350	)		$	(2,845	)

The actual income tax expense (benefit) attributable to loss from continuing operations differs from the amounts computed by applying the U.S. federal tax rate of 34% to the pretax loss as a result of the following:

	Successor Company												Predecessor Company
	Years Ended								Period from March 15 to				Period from January 1 to
	December 31,				December 31,				December 31,				March 14,
	2006				2005				2004				2004
Computed “expected” tax benefit		$	(5,796	)		$	(147	)		$	(5,717	)		$	(4,235	)
State tax, net of federal benefit		(646		)		5				(645		)		(296		)
Foreign taxes		173				194				52				43
Transaction expenses		—				—				—				1,643
Other		(10		)		(19		)		(40		)		—
Actual income tax expense (benefit)		$	(6,279	)		$	33			$	(6,350	)		$	(2,845	)

The components of deferred tax assets and liabilities at December 31, 2006 and 2005 are as follows:

	2006			2005
Deferred tax assets:
Goodwill	$	32,510		$	35,831
Accrued liabilities	1,132			1,484
Asset impairment	445			704
Net operating loss carryforwards	12,207			7,867
Facility start-up costs	168			253
Pension liability	1,497			722
Post-retirement benefit obligation	112			1,162
Uniform capitalization	312			341
Other	11			—
Gross deferred tax assets	$	48,394		$	48,364
Deferred tax liabilities:
Identifiable intangible assets	$	(44,912	)	$	(50,263	)
Property, plant and equipment	(1,999		)	(2,588		)
Other	(308		)	(44		)
Net deferred tax asset (liability)	$	1,175		$	(4,531	)

At December 31, 2006, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $32,200 which expire between 2019 and 2026.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company’s ability to realize its deferred tax assets depends on the generation of sufficient future taxable income to allow for the utilization of its net operating loss carryforwards and deductible temporary differences. As of December 31, 2006, the Company believes that it is more likely than not that the results of future operations will generate sufficient future taxable income to realize its deferred tax assets.

(10) EMPLOYEE BENEFIT PLANS

True Temper Sports, Inc. has a qualified pension plan for the hourly union employees at its Amory, Mississippi plant. The following tables provide a reconciliation of the changes in the plans’ benefit obligation, fair value of plan assets and a statement of the plans’ funded status for the years ended December 31, 2006 and 2005:

	Years Ended December 31,
	2006				2005
Reconciliation of benefit obligation:
Benefit obligation at beginning of period		$	19,015			$	17,373
Service cost		571				550
Interest cost		1,001				1,026
Actuarial (gains) losses		(2,060		)		455
Benefit payments		(490		)		(389		)
Benefit obligation at end of period		$	18,037			$	19,015
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of period		$	13,044			$	13,387
Actual return (loss) on plan assets		956				(239		)
Employer contributions		250				285
Benefit payments		(490		)		(389		)
Fair value of plan assets at end of year		$	13,760			$	13,044
Funded status:
Funded status at December 31		$	(4,277	)		$	(5,971	)
Unrecognized net actuarial loss		396				2,320
Net amount recognized		$	(3,881	)		$	(3,651	)

The following table provides the amounts recognized in the consolidated balance sheets as of December 31, 2006 and 2005:

	December 31,
	2006				2005
Accrued benefit liability		$	(3,944	)		$	(5,666	)
Accumulated other comprehensive loss		63				2,015
Net amount recognized		$	(3,881	)		$	(3,651	)

The Company expects to make quarterly contributions of $105 to the pension plan in 2007. The following table sets forth the estimated benefit payments, which reflect expected future service, as appropriate, expected to be paid in the periods indicated.

2007	$	528
2008	625
2009	701
2010	775
2011	872
2012–2016	5,722

The following table provides the components of net periodic pension expense for the defined benefit pension plan for the years ended December 31, 2006 and 2005 and the period from March 15 to December 31, 2004 for the Successor Company; and for the period from January 1 to March 14, 2004 for the Predecessor Company:

	Successor Company												Predecessor Company
	Year ended December 31, 2006				Year ended December 31, 2005				Period from March 15 to December 31, 2004				Period from January 1 to March 14, 2004
Service cost		$	571			$	550			$	406			$	180
Interest cost		1,001				1,026				764				203
Expected return on plan assets		(1,092		)		(1,120		)		(862		)		(227		)
Amortization of prior service cost		—				—				—				30
Net periodic pension expense		480				456				308				186
Purchase accounting recognition		—				—				—				2,987
Net periodic pension expense		$	480			$	456			$	308			$	3,173
Weighted average assumptions:
Discount rate:
Benefit obligation		6.00		%		5.75		%		6.00		%		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		%

The following table provides information related to the Company’s pension plan in which accumulated benefit obligations exceeded the fair value of plan assets as of the applicable period end:

	December 31,
	2006			2005
Projected benefit obligation		$	18,037		$	19,015
Accumulated benefit obligation		17,704			18,710
Fair value of assets		13,760			13,044

Assets of the defined benefit pension plan for hourly union employees consist primarily of investments in equity securities, debt securities, and cash equivalents. The weighted-average asset allocations as of December 31, 2006 and 2005 are as follows:

	December 31,
	2006		2005		Target
Equity securities	66.0	%	61.0	%	50-70	%
Debt securities	33.0		33.0		30-50
Cash equivalents	1.0		6.0		0
Total	100.0	%	100.0	%	100.0	%

In addition to the defined benefit pension plan for hourly employees, the Company also maintains a defined contribution plan which covers substantially all United States based employees. Expenses for defined contribution plans amounted to $695 for the year ended December 31, 2006, $635 for the year ended December 31, 2005, $148 for the period January 1, 2004 through March 14, 2004, and $575 for the period March 15, 2004 to December 31, 2004.

The Company also participates in certain unfunded health care plans that provide post-retirement medical, dental, and life insurance benefits to hourly union employees at its Amory, Mississippi plant and to salaried employees hired prior to January 1, 2000. The post-retirement plans are contributory, and include certain cost-sharing features, such as deductibles and co-payments.

The following table sets forth the benefit obligation of the unfunded post-retirement health plans for the years ended December 31, 2006 and 2005:

	Years Ended December 31,
	2006			2005
Reconciliation of benefit obligation:
Benefit obligation at beginning of year	$	3,869		$	3,554
Service cost	136			91
Interest cost	256			220
Participant contributions	208			185
Actuarial loss	1,620			723
Benefits paid	(1,496		)	(904		)
Benefit obligation at end of year	4,593			3,869
Unrecognized net actuarial loss	(2,333		)	(806		)
Accrued benefit costs	$	2,260		$	3,063

The following table provides the components of net periodic expense for the unfunded post- retirement health plans for the years ended December 31, 2006 and 2005 and for the periods from January 1, 2004 through March 14, 2004 and from March 15, 2004 to December 31, 2004:

	Successor Company												Predecessor Company
	Year Ended December 31,				Year Ended December 31,				Period from March 15 to December 31,				Period from January 1 to March 14,
	2006				2005				2004				2004
Service cost		$	136			$	91			$	78			$	20
Interest cost		256				220				162				44
Amortization of prior service costs		—				—				—				(7		)
Recognized net losses		94				—				—				13
Net periodic cost		486				311				240				70
Purchase accounting recognition		—				—				—				1,060
Total amount recognized		$	486			$	311			$	240			$	1,130
Discount rate:
Benefit obligation		6.00		%		5.75		%		6.00		%		6.00		%

The healthcare cost trend rate used to determine the post-retirement benefit obligation was 8.0% for 2006. 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 significant factor in determining the amounts reported, for the year ended December 31, 2006 a one-percentage-point increase or decrease in the trend rate will have only minimal impact due to the claims costs being close to the employer imposed cap.

The following table sets forth the estimated health care benefit payments expected to be paid in the periods indicated.

2007	$	408
2008	400
2009	428
2010	461
2011	454

(11) STOCK OPTIONS

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

At December 31, 2006, there were 15,651 shares available for grant under the 2004 Plan. There were no grants of equity incentive awards during 2006. The per share weighted average fair value of stock options granted during 2005 was $2.41, on the date of grant using the Black Scholes option-pricing model (excluding a volatility assumption) with the following weighted average assumptions:

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

Stock option activity during 2005 and 2006 is as follows:

	Number of Shares		Wtd. Avg. Exercise Price
Granted on August 10, 2005		525,400		$	13.56
Exercised		—		—
Forfeited		—		—
Balance at December 31, 2005		524,400		$	13.56
Granted		—		—
Exercised		—		—
Forfeited		—		—
Balance at December 31, 2006		524,400		$	13.56

At December 31, 2006, the weighted average remaining contractual life of outstanding options was 8.6 years. At December 31, 2006 there were no options exercisable.

In addition, TTC has 468,000 equity awards which vest only upon a sale of TTC and achivement of certain other terms as described in the awards. As of December 31, 2006 the events required for vesting of these awards are not expected to occur in the near term.

(12) COMMITMENTS AND CONTINGENCIES

(a) Lease Obligations

The Company is obligated under various non-cancelable leases for office facilities and equipment. These leases generally provide for renewal options and, in the case of facilities leases, for periodic rate increases based upon economic factors. All non-cancelable leases with an initial term greater than one year have been categorized as either capital or operating leases in conformity with SFAS No. 13, Accounting for Leases, and related interpretations.

Future minimum payments under non-cancelable operating leases with initial terms of one year or more as of December 31, 2006 are as follows:

	Operating Leases
2007		$	1,127
2008		725
2009		571
2010		535
2011		394
Thereafter		—
Total minimum lease payments		$	3,352

Rental expense on operating leases was $1,227 and $1,067 for the years ended December 31, 2006 and 2005, respectively, $210 for the period January 1, 2004 through March 14, 2004, and $812 for the period March 15, 2004 to December 31, 2004.

(b) Product Warranties

The Company generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time and/or usage of the product depending on the nature of the product, the geographic location of its sale and other factors. As of December 31, 2006 and 2005, the Company has accrued $326 and $309, respectively, for estimated product warranty claims. The accrued product warranty costs are based primarily on historical experience of actual warranty claims as well as current information on product costs. Warranty claims expense was $1,033 and $959 for the years ended December 31, 2006 and 2005, respectively, $129 for the period January 1, 2004 through March 14, 2004, and $527 for the period March 15, 2004 to December 31, 2004.

The following table provides the changes in the Company’s product warranties:

Predecessor Company:
January 1, 2003	$	176
Liabilities accrued for warranties issued during the period	129
Warranty claims paid during the period	(91		)
March 15, 2004	$	214
Successor Company:
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 year	959
Warranty claims paid during the year	(803		)
December 31, 2005	$	309
Liabilities accrued for warranties issued during the year	1,033
Warranty claims paid during the year	(1,016		)
December 31, 2006	$	326

(c) Legal Proceedings

The Company has certain contingent liabilities resulting from litigation and claims incidental to the ordinary course of business. Management believes that the probable resolution of such contingencies will not materially affect the consolidated financial position or results of operations of the Company.

(13) RELATED PARTY TRANSACTIONS

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

In accordance with this agreement, Gilbert Global has agreed to provide:

(1) general management services;

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

(3) assistance with the negotiation and analysis of financial alternatives; and

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

In exchange for such services, Gilbert Global or its nominee receives:

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

(2) a transaction fee in an amount equal to 1.25% of the aggregate transaction value in connection with the consummation of any material acquisition, divestiture, financing or refinancing by True Temper or any of its subsidiaries.

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

During 2006, in addition to annual advisory fees of $0.5 million, the Company paid $1.0 million to Gilbert Global for fees associated with financing and acquisition transactions.

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

(14) SEGMENT AND OTHER RELATED DISCLOSURES

(a) Segment Reporting

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

	Successor Company							Predecessor Company
	Years Ended December 31,				Period from March 15 to December 31,			Period from January 1 to March 14,
	2006		2005		2004			2004
Net sales:
Golf shafts	$	99,103	$	110,820		$	73,274		$	19,067
Performance sports	8,902		6,774			4,846			1,180
Total	$	108,005	$	117,594		$	78,120		$	20,247
Gross profit:
Golf shafts	$	33,958	$	45,804		$	17,038		$	8,080
Performance sports	853		1,428			978			296
Total	$	34,811	$	47,232		$	18,016		$	8,376
Depreciation expense:
Golf shafts	$	2,050	$	2,242		$	2,098		$	582
Performance sports	566		483			322			89
Total	$	2,616	$	2,725		$	2,420		$	671
Capital expenditures:
Jointly used assets	$	125	$	143		$	129		$	22
Golf shafts	4,264		1,686			810			286
Performance sports	499		783			293			22
Total	$	4,888	$	2,612		$	1,232		$	330
Total assets:
Jointly used assets	$	4,392	$	1,810		$	1,291		$	1,398
Golf shafts	44,102		42,693			44,237			42,019
Performance sports	4,560		4,210			3,333			2,920
Total	$	53,054	$	48,713		$	48,861		$	46,337

Revenues from two customers of True Temper’s golf shafts segment represented approximately $13,800 or 12.8% and $12,900 or 11.9%, respectively, of the Company’s 2006 net sales; approximately $16,100 or 13.7%, and $14,700 or 12.5%, respectively, of the Company’s 2005 net sales; and approximately $2,900 or 14.2% and $2,200 or 10.6% of the Company’s net sales for the period January 1 to March 14, 2004. Revenues from one customer of True Temper’s golf shafts segment represented approximately $11,000 or 14.1% of the Company’s revenues for the period March 15 to December 31, 2004.

Following are reconciliations of total reportable segment assets to total Company assets, as of December 31, and total reportable segment gross profit to total Company income before income taxes for the periods indicated:

	2006		2005
Total assets:
Total from reportable segments	$	53,054	$	48,713
General corporate and other unallocated assets	300,645		301,123
Total	$	353,699	$	349,836

	Successor Company										Predecessor Company
	Years Ended December 31,						Period from March 15 to December 31,				Period from January 1 to March 14,
	2006			2005			2004				2004
Total reportable segment gross profit	$	34,811		$	47,232			$	18,016			$	8,376
Less:
Selling, general and administrative expenses	14,226			14,660				9,520				3,635
Amortization of intangible assets	14,343			13,840				10,984				—
Business development, start-up and transition costs	2,688			208				738				100
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	20,525			18,631				13,491				2,498
Other expense (income), net	75			(31		)		72				(2		)
Total Company loss before income taxes	$	(17,046	)	$	(433	)		$	(16,814	)		$	(12,453	)

(b) Sales by Geographic Region

The geographic distribution of the Company’s net sales, by location of customer, is summarized as follows:

	Successor Company							Predecessor Company
	Years Ended December 31,				Period from March 15 to December 31,			Period from January 1 to March 14,
	2006		2005		2004			2004
U.S.	$	69,664	$	75,151		$	49,700		$	12,140
International	38,341		42,443			28,420			8,107
Total	$	108,005	$	117,594		$	78,120		$	20,247

Revenues generated from sales into China accounted for approximately $19,300 or 17.9% and $20,900 or 17.7% of True Temper’s total sales for the years ended December 31, 2006 and 2005, respectively, $3,300 or 16.4% of True Temper’s total sales for the period January 1 to March 14, 2004, and $14,200 or 18.2% of True Temper’s total sales for the period March 15 to December 31, 2004. The sales into China are due primarily to our major U.S. based original equipment manufacturers shifting a portion of their assembly operations to that region. Assets by location are not disclosed, as assets located outside the U.S. are immaterial.

(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2006 and 2005.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2006
Net sales	$	31,659		$	30,674		$	21,491		$	24,181
Gross profit	11,574			10,844			6,790			5,603
Net loss	(230		)	(1,745		)	(4,146		)	(4,646		)
2005
Net sales	$	32,103		$	32,565		$	25,520		$	27,406
Gross profit	12,869			13,251			10,443			10,669
Net income (loss)	184			570			(661		)	(559		)

(16) SUBSEQUENT EVENTS

On January 22, 2007, the Company executed an amendment to its 2006 Amended and Restated Credit Facility (the “Second Amendment”). The Second Amendment was made effective as of December 20, 2006, and was approved by the Company, Credit Suisse acting as administrative agent and collateral agent, and by a majority of the lenders who were party to the 2006 Amended and Restated Credit Facility at the effective date. The Second Amendment was executed in conjunction with a second lien financing effort, described more fully below, and related acquisition. In addition to allowing the flexibility for such second lien financing, the Second Amendment also provided adjustments to certain specified financial ratios and tests included in the 2006 Restated Credit Facility. As part of the Second Amendment, the margin adder on LIBOR based loans was increased to between 3.00% and 3.25%, depending on financial ratios, beginning January 22, 2007.

On January 22, 2007, the Company executed a Second Lien Credit Agreement (the “Second Lien”). The Second Lien includes additional term loans of approximately $45 million, with the provision that approximately $25 million of the proceeds were used to pay down the debt under the 2006 Amended and Restated Credit Facility. The Second Lien is variable rate debt, which provides for interest at the Company’s option, at (1) the base rate of the bank acting as administrative agent plus a margin adder of 4.50%, or (2) under a LIBOR option with a borrowing spread of LIBOR plus 5.50%. The maturity date of the Second Lien is June 30, 2011. The Second Lien does not amortize.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The directors and executive officers of True Temper as of December 31, 2006 are as follows:

Name	Age		Position
Scott C. Hennessy		48	Chief Executive Officer, President and Director
Fred H. Geyer		46	Senior Vice President, Chief Operating Officer
Adrian H. McCall		49	Senior Vice President of Global Distribution and Sales
Stephen M. Brown		41	Vice President of Human Resources
Chad Hall		32	Director of Marketing
Graeme Horwood		62	Vice President Engineering, Research and Development
Jason A. Jenne		37	Vice President, Chief Financial Officer and Treasurer
Raeford P. Lucas		41	Vice President of Sales
Steven J. Gilbert		59	Director and Co-Chairman
Steven Kotler		59	Director and Co-Chairman
Richard W. Gaenzle, Jr.		42	Director
Jeffery W. Johnson		38	Director
William P. Lauder		46	Director

Scott C. Hennessy has been the President since 1996, and the Chief Executive Officer and Director since October 1998. Mr. Hennessy joined us in 1994 as Vice President-Sales and Marketing. From 1980 to 1994, Mr. Hennessy held various management positions at Black & Decker in sales, marketing and product development. Mr. Hennessy sits on the Board of Governors of the National Golf Foundation. Mr. Hennessy graduated magna cum laude with a B.S. from the University of Delaware.

Fred H. 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 to 1998, Mr. Geyer held various positions at Emerson Electric Company, including Vice President-Finance in the Air Moving Motor Division. Prior to that, Mr. Geyer worked at Arthur Andersen LLP as a Senior Auditor. Mr. Geyer is a Certified Public Accountant and is a member of the American Institute of Certified Public Accountants. Mr. Geyer graduated magna cum laude with a B.S. in Accounting from the University of Missouri at St. Louis.

Adrian H. McCall has been the Senior Vice President of Global Distribution and Sales since August 2002. From March 1999 to July 2002, Mr. Mc Call served as our Vice President of International Sales and Marketing since March 1999. From September 1995 to March 1999, Mr. McCall served as our Director of International Sales and Marketing. From May 1992 to September 1995, Mr. McCall served as Director of International Operations of The Upper Deck Company, a manufacturer and distributor of baseball cards. Mr. McCall graduated cum laude with a B.S. from the University of Hartford.

Stephen M. Brown has been the Vice President of Human Resources since August 2002. From January 1998 to July 2002, Mr. Brown has 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 management positions with Emerson Electric Company. Mr. Brown received a B.A. from the University of South Carolina.

Chad Hall has been the Director of Marketing since January 2004. From July 2003-December 2003, Mr. Hall served as our Sr. Marketing Manager of Product Development and Tour Operations. From October 2002-June 2003, Mr. Hall served as our Manager of Tour Operations. From April 2001-September 2002, Mr. Hall served as our Marketing Communications Manager. Prior to that, since 1999, Mr. Hall held various product development positions at Bridgestone Sports, USA. Mr. Hall received a B.S. from Liberty University.

Graeme Horwood 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 to 2000, Mr. Horwood held various management positions at Apollo Sports Technologies. Mr. Horwood is a Chartered Engineer as well as a member of the Institute of Mechanical Engineers both in the United Kingdom. Mr. Horwood graduated first class honors with a B.S. from Coventry University.

Jason Jenne has been the Chief Financial Officer and Treasurer since January 2005 and Vice President since August 2003. From September 2002 to August 2003, Mr. Jenne served as the Director of Corporate Finance. From September 1998 to September 2002, Mr. Jenne served as the Corporate Controller. From 1993 to 1998, Mr. Jenne served in various Finance and Accounting positions at Emerson Electric Company. Mr. Jenne graduated magna cum laude with a B.S. from Southern Illinois University.

Raeford P. Lucas has been the Vice President of Sales since November 2006. From June 2006 to October 2006, Mr. Lucas served as our Vice President and General Manager of Royal Precision and Precision Brands. From 2000 to June 2006, Mr. Lucas held various management positions at Royal Precision Inc., including Executive Vice President of Sales and Marketing. Prior to that, Mr. Lucas worked at Outdoor Technologies Group as the General Manager of the Fenwick Golf division. Mr. Lucas received a B.S. from North Carolina State University.

Steven J. Gilbert became a member of and Co-Chairman of the board of directors upon consummation of the Gilbert Global Acquisition. He is a founder and has served as Chairman of the Board of Gilbert Global Equity Partners, L.P. since 1997. From 1992 to 1997, he was the founder and Managing General Partner of Soros Capital L.P., the principal venture capital and leveraged transaction entity of Quantum Group of Funds, and a principal Advisor to Quantum Industrial Holdings Ltd. From 1988 through 1992 he was the Managing Director of Commonwealth Capital Partners, L.P., a private equity investment firm. From 1984 to 1988, Mr. Gilbert was the Managing General Partner of Chemical Venture Partners (now J.P. Morgan Partners), which he founded. Mr. Gilbert is a Director of LCC International, Inc., Optical Capital Group, Inc., CPM Holdings, Inc., the Asian Infrastructure Fund and J O Hambro Investment Management, Ltd. Previously, Mr. Gilbert has been a director of numerous public and private companies. Mr Gilbert received a B.S. from the Wharton School at the University of Pennsylvania, an M.B.A. from the Harvard Graduate School of Business Administration, and a J.D. from Harvard Law School.

Steven Kotler became a member of and Co-Chairman of the board of directors upon consummation of the Gilbert Global Acquisition. He has served as Vice Chairman of Gilbert Global Equity Partners, L.P. since 2000. Prior to joining Gilbert Global in 2000, Mr. Kotler, for 27 years, was with Schroder & Co. and its predecessor firm, Wertheim & Co., where he served as its Chief Executive Officer and President. Mr. Kotler is Co-Chairman of the Board of Directors of True Temper Sports; and is a Director of CPM Holdings, Cowen Group, Inc., and The Archstone Partnerships. Previously, Mr. Kotler has served as a Governor of the American Stock Exchange and a director of numerous public and private companies. Mr. Kotler is a graduate of city College of New York.

Richard W. Gaenzle, Jr. became a member of the board of directors upon consummation of the Gilbert Global Acquisition. He is a founder and 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., the principal venture capital and leveraged transaction entity of Quantum Group of Funds, and a principal Advisor to Quantum Industrial Holdings Ltd. Prior to joining Soros Capital, Mr. Gaenzle held various positions in the investment banking industry. Mr. Gaenzle is Vice Chairman of Optical Capital Group, LLC and a Director of CPM Holdings, Inc. Previously, Mr. Gaenzle has been a director of numerous companies. Mr. Gaenzle received a B.A. from Hartwick College and an M.B.A. from Fordham University.

Jeffrey W. Johnson became a member of the board of directors upon consummation of the Gilbert Global Acquisition. He is a founder and has served as Managing Director of Gilbert Global Equity Partners, L.P. since 1997. Mr. Johnson was previously with Goldman, Sachs & Co. in its mergers and acquisitions department, Hallmark Cards, Inc. and Russell Investment Group. He is a director of

CPM Holdings, Inc. Mr. Johnson received a B.A. from Claremont McKenna College and an M.B.A. from the Harvard Graduate School of Business Administration.

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

Board of Directors and Committees

The Board of Directors held four meetings during 2006 and took action by written consent on two occasions. During 2006, a quorum was achieved at each of the scheduled meetings of the Board of Directors. The standing committees of the Board of Directors include the Audit Committee and the Compensation Committee.

Audit Committee

Steven Kotler, Jeffrey W. Johnson and Richard W. Gaenzle, Jr. are members of the Audit Committee, and Mr. Kotler chairs this committee. The Audit Committee is empowered to: (i) appoint, fix the compensation of, and oversee the work of the Company’s independent registered public accounting firm (including the power to resolve any disagreements between management and the independent registered public accounting firm), with the independent registered public accounting firm reporting directly to the Audit Committee; (ii) pre-approve all audit services and permissible non-audit services; and (iii) engage and determine funding for independent counsel and other advisors as it may relate to certain financial or administrative matters of the Company. The Board of Directors has determined that Mr. Kotler is an “audit committee financial expert” within the meaning of the rules of the Securities and Exchange Commission.

Compensation Committee

Steven J. Gilbert, Steven Kotler and Jeffrey W. Johnson are members of the Compensation Committee, and Mr. Gilbert chairs this committee. The Compensation Committee is responsible for monitoring the Company’s adherence with its compensation philosophy, including ensuring that the compensation paid to its executive officers is fair, reasonable and competitive. The Compensation Committee’s responsibilities, as discussed further in the “Compensation Discussion and Analysis” in Item 11 of this Part III, include, among other duties, the responsibility to establish the base salary, incentive compensation and any other compensation for the Company’s Chief Executive Officer and review and approve the Chief Executive Officer’s recommendations for the compensation of certain executive officers reporting to him. The Compensation Committee also has the full power and authority to interpret the provisions and supervise the administration of the True Temper Corporation 2004 Equity Incentive Plan, including the determination and/or approval of awards to be granted thereunder, and any and all other power and authority to review, interpret and/or administer compensation and benefit programs as may be delegated by the Company’s board of directors to the Compensation Committee from time to time.

Code of Ethics

The Audit Committee has adopted a Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and other senior financial personnel. A copy of the Code of Ethics is available on the Company’s website at www.truetemper.com. The Company will disclose any amendments or waivers to the Code of Ethics on the same website.

Item 11. Executive Compensation

Report on Executive Compensation

The Compensation Committee of the Board of Directors of True Temper Corporation, the Company’s parent company, has furnished the following report for inclusion in this Annual Report on Form 10-K:

The Compensation Committee is responsible for administering the Company’s executive compensation program. Among other things, we review general compensation issues and determine the compensation of the Company’s CEO and all other senior executives and key employees (hereafter collectively referred to as the “Executives”), and make determinations regarding, and administer, all of our employee compensation plans that provide benefits to the Executives.

We have reviewed the Compensation Discussion and Analysis included in this Annual Report on Form 10-K, and discussed the contents hereof with the Company’s management. Based upon our review and discussions with management, we recommended to its Board of Directors the inclusion of the Compensation Discussion and Analysis appearing in this Annual Report on Form 10-K.

	Respectfully submitted,
	The Compensation Committee of the Board of Directors
	Steven J. Gilbert, Chairman
	Steven Kotler
	Jeffrey W. Johnson

No portion of this report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, (collectively, the “Acts”) through any general statement incorporating by reference the Annual Report on Form 10-K in which this report appears in its entirety, except to the extent that the company specifically incorporates this report or a portion of this report by reference. In addition, this report shall not otherwise be deemed to be “soliciting material” or to be “filed” under either of such Acts.

Compensation Discussion and Analysis

Compensation Philosophy and Objectives. The Compensation Committee believes an effective compensation program should be one that is designed to: attract and retain the best possible executive talent; tie annual and long-term cash and equity incentives to the achievement of measurable corporate and individual performance objectives; and align executives’ incentives with overall value creation within the organization. To achieve these objectives, the Compensation Committee implements, maintains and monitors compensation plans which tie a portion of the Executives’ overall compensation to the achievement of established objective goals, including profitability and the efficient use of capital. When establishing these objectives and goals, the Compensation Committee considers those established by companies of similar size, while taking into account the strategic goals and relative performance of True Temper Sports, Inc.

Role of Executive Officers in Compensation Decisions. The Compensation Committee makes all compensation decisions for the Chief Executive Officer, and all decisions relating to equity based compensation awards. The Compensation Committee, together with recommendations and input from the Chief Executive Officer, makes equity and non-equity compensation decisions with respect to the other Executives.

On at least an annual basis, the Compensation Committee reviews the performance of the Chief Executive Officer as compared with the achievement of the Company’s objective goals and any individual goals. The Compensation Committee, together with the Chief Executive Officer, annually reviews the performance of each individual Executive as compared with the achievement of Company goals, as the case may be, together with each Executive’s individual goals. The Compensation Committee can then exercise its discretion in modifying any recommended adjustments or awards to the Executives.

Setting Executive Compensation. Based on the above objectives and philosophies, the Compensation Committee has established annual and long-term cash and equity compensation components to motivate the Executives to achieve, and hopefully exceed, the business goals established by the Company and to

fairly reward such executives for achieving such goals. The Compensation Committee has not retained a compensation consultant to review its policies and procedures with respect to executive compensation. The Compensation Committee periodically conducts an internal benchmark review of the aggregate level and mix of our Executive compensation against companies in our same industry (both public and privately held).

2006 Executive Compensation Components

For the year ended December 31, 2006, the principal components of compensation for the Company’s Executives are described below:

Base Salary. The Company provides Executives and other employees with base salary to compensate them for services rendered during the fiscal year. Base salaries are set to recognize the experience, skills, knowledge and responsibilities required of the Executives in their respective roles. Base salaries are reviewed annually, and will be adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. Base salaries are established for a given position taking into consideration the factors discussed above together with available market or comparable salary data. In 2006, the Compensation Committee approved salary increases for our named executive officers ranging from approximately 4% to 9%. The increases were based on each named executive officer’s individual services rendered, level and scope of responsibility and experience, comparisons to various market pay practices, and the operating performance of the Company during calendar year 2005. The increase range was 4% to 6% for all of the Executives with the exception of one individual who received a 9% increase related to additional job responsibilities. The Compensation Committee determined that the overall increases, which slightly exceeded the general rate of inflation, were warranted based on the Company’s strong financial results during calendar year 2005.

Performance-Based Executive Incentive Compensation Plan. The Company maintains a performance based Executive incentive compensation plan (the “EICP”). The EICP establishes objectives for the calculation of annual cash bonuses for each Executive, subject to Compensation Committee oversight and modification. The EICP provides for annual incentive bonuses which are intended to compensate Executives for achieving or exceeding Company financial goals and for achieving individual annual performance goals. The EICP uses a sliding scale applied to financial performance targets with corresponding achievement levels. No bonus is earned unless a minimum target is achieved. Additional bonus may be earned should the targets be exceeded. In 2006, the Company’s operating performance fell below the minimum target established for payment of cash bonuses under the EICP, which was $30.0 million in Adjusted EBITDA. Accordingly, no cash bonuses were paid to the Executives for calendar year 2006. For 2007, the EICP objectives will again be primarily based on profitability.

Incentives under the EICP are paid in cash and are typically paid in a single installment in the first quarter following the completion of a given fiscal year. The Compensation Committee has reserved the right under the EICP to also pay “discretionary” bonuses. Such discretionary bonuses are paid if the Compensation Committee determines that a particular Executive has exceeded the objectives and/or goals established for such Executive or made a unique contribution to the Company during the year.

Equity Program; Stock Options and Restricted Stock. Under the True Temper Corporation 2004 Equity Incentive Plan (the “Plan”), the Compensation Committee may make various types of awards with respect to True Temper Corporation common stock. True Temper Corporation is a privately held company and its common stock, including any stock issued or obtained pursuant to the Plan, has transfer restrictions. The maximum amount of common stock that can be issued (or in respect of which awards can be issued) under the Plan is limited to 1.0 million shares. Among other things, the Compensation Committee decides which of the Executives or senior managers shall receive awards under the Plan and the type of award made. In the case of stock options granted under the Plan, the Compensation Committee determines strike price, vesting terms, and such other terms or conditions as the Compensation Committee may determine, in their

sole discretion, provided it is allowed under the Plan. The Plan has two types of options, service based options and performance based options. Service based options vest on a pro-rata basis over a period less than five years, have a term of ten years from the date of grant, and expire if not exercised. Performance based options vest upon the satisfactory achievement of certain specified profitability targets, have a term of ten years from the date of grant, and expire if not exercised. In the event of a change of control, as defined in the Plan, all of the outstanding but unvested stock options become vested and exercisable.

The Plan also has certain restricted shares available for grant. Restrictions are lifted in the event of a change of control, and provided that a certain specified stock price is achieved during such transaction.

All of the awards granted to management under the Plan were granted between March 15, 2004 and August 10, 2005. No such awards were granted for calendar year 2006.

There is no program, plan or practice in place for selecting grant dates for awards under the Plan in coordination with the release of material non-public information. The exercise price for the option awards is the fair market value of the stock of True Temper Corporation on the date of grant. The fair market value is determined by the Compensation Committee and the Board of Directors of True Temper Corporation using a variety of analytical tools. The Compensation Committee is not prohibited from granting options at times when they are in possession of material non-public information. However, no inside information was taken into account in determining the number of options previously awarded or the exercise price for those awards, and the Compensation Committee did not “time” the release of any material non-public information to affect the value of those awards.

The Compensation Committee believes that the granting of such awards promotes, on a short term and long term basis, an enhanced personal interest and alignment of those Executives receiving equity awards with the goals and strategies of the Company. The Compensation Committee also believes that the equity grants provide not only financial rewards to such Executives for achieving Company goals but also provide additional incentives for Executives to remain with the Company.

401(k) Plan. The Company’s Executives are eligible to participate in its company-wide 401k plan for salaried employees. The Company matches, at a 50% rate, the first 6% of the employee’s contributions.

Perquisites and Other Personal Benefits. The Company provides the Executives, including other employees generally, with perquisites and other personal benefits that the Company and the Compensation Committee believe are reasonable, competitive and which are consistent with the overall compensation program to enable the Company to attract and retain qualified employees for key positions. The Compensation Committee periodically reviews the perquisites and other benefits provided to the Executives, as well as the other employees.

Tax Treatment. The Company’s Board of Directors considers the anticipated tax treatment of its executive compensation program when setting levels and types of compensation. Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation paid to a company’s chief executive officer or any of its other four most highly compensated executive officers in excess of $1 million in any year, with certain performance-based compensation being specifically exempt from this deduction limit. Compensation received under the EICP is performance-based, and therefore qualifies for the exemption from the deduction limit. As such, during 2006, none of the Company’s employees subject to this limit received Section 162(m) compensation in excess of $1 million. Consequently, the requirements of Section 162(m) should not affect the tax deductions available to the Company in connection with its senior executive compensation program for 2006.

Conclusion. The Company’s compensation policies are designed to reasonably and fairly motivate, retain and reward its Executives for achieving the Company’s objectives and goals.

Compensation Tables

Summary Compensation Table

The table below summarizes the total compensation paid or earned by each of the Named Executive Officers for the year ended December 31, 2006.

(a)	(b)		(c)	(i)		(j)
Name and Principal	Fiscal		Salary	All Other Compensation		Total
Position	Year		$	$(1)		$
Scott C. Hennessy		2006	435,833		41,382	477,215
Chief Executive Officer, President and Director
Jason A. Jenne		2006	162,915		23,199	186,114
Vice President, Chief Financial Officer and Treasurer
Fred H. Geyer.		2006	225,833		29,552	255,385
Senior Vice President, Chief Operating Officer
Adrian H. McCall		2006	192,915		29,224	222,139
Senior Vice President of International Sales and Marketing
Gene Pierce.		2006	168,333		10,509	178,842
Vice President of Operations

(1) Includes company contributions under the Company’s 401(k) plan, certain life insurance benefits; and where applicable, country club dues and car allowance.

None of the amounts attributable to each perquisite or benefit exceeds the greater of $25,000 or 10% of the total amount of perquisites for each named executive officer.

Management Agreements with True Temper Sports, Inc.

Mr. Scott C. Hennessy, Chief Executive Officer, has an employment agreement with True Temper Sports, Inc.

Mr. Hennessy’s Employment Agreement. Under his employment agreement, Mr. Hennessy serves as the Company’s president and chief executive officer. The initial term of the agreement was from March 15, 2004 through December 31, 2005, and is automatically renewed for successive one-year periods unless 60 days’ prior notice is given by either party. In addition, Mr. Hennessy is a member of the Company’s board of directors. He receives an annual base salary of at least $400,000, and is eligible to receive an annual performance bonus of 100% of his base salary if the Company achieves specified performance objectives. In addition, under the employment agreement, Mr. Hennessy is provided certain employee benefits consistent with other employees of the Company. Upon Mr. Hennessy’s termination of employment by the Company without “cause” or by Mr. Hennessy for “good reason” (each as defined in the employment agreement) or upon the Company’s election not to renew his employment, Mr. Hennessy will be entitled to receive the following severance payments and benefits: any accrued but unpaid salary as of the date of the termination, any annual bonus earned but unpaid for the most recently completed fiscal year, reimbursement of any outstanding business expenses, and the continuation of his base salary for a period of 12 months. Additionally, Mr. Hennessy will be subject to certain restrictions on his ability to compete with the Company or solicit any customers or employees for two years after his termination. Mr. Hennessy’s employment agreement may also be terminated for “cause” (as defined in the employment agreement).

Bonus Plan

See “Compensation Discussion and Analysis” for a discussion of the Company’s EICP.

2004 Equity Incentive Plan

See “Compensation Discussion and Analysis” as well as Notes 2 and 11 to the Company’s audited consolidated financial statements, located elsewhere in this annual report, for a discussion of the 2004 Equity Incentive Plan.

Outstanding Equity Awards at Fiscal Year-End

	Option Awards (1)							Stock Awards (1)
(a)	(b)		(c)		(e)		(f)	(g)		(h)
Name	Number of Securities Underlying Unexercised Options - Exercisable		Number of Securities Underlying Unexercised Options - Unexercisable		Option Exercise Price $		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested		Market Value of Shares or Units of Stock That Have Not Vested $(2)
Scott C. Hennessy		—		144,000		13.56	8/10/2015		192,000	2,603,520
Jason A. Jenne		—		36,000		13.56	8/10/2015		36,000	488,160
Fred H. Geyer		—		72,000		13.56	8/10/2015		84,000	1,139,040
Adrian H. McCall		—		50,200		13.56	8/10/2015		60,000	813,600
Gene Pierce		—		28,800		13.56	8/10/2015		24,000	325,440

(1) See Note 11 to the Company’s audited consolidated financial statements, located elsewhere in this annual report, for a description of TTC's share option and restricted stock plans, including vesting schedule.

(2) As the common stock of TTC is held by TTS Holdings, LLC and members of management, there is no established trading market for the common stock and it is not traded on any stock exchange. Since there is not a closing market price at which to establish the market value of the awards reported in column (g), the $13.56 per share exercise price of stock options has been used.

Potential Payments Upon Termination or Change of Control

Other than those described above in the sections titled “Equity Program; Stock Options and Restricted Stock” and “Management Agreements with True Temper Sports, Inc.”, the Company has no contractual payments associated with employment agreements that would be required in the event of a termination or change of control. The Company does maintain a severance policy which is used as a guideline in establishing severance benefits to any salaried employee that is terminated without cause (the “Severance Policy”). The Severance Policy provides, primarily, for salary continuation for periods ranging from three to twelve months depending on length of service. Generally, one week of severance pay is earned for each year of continuous service, with certain minimum amounts of severance provided for specific levels of management within the Company.

Following is a discussion of the potential payments required for each Named Executive Officer; in the case of Mr. Hennessy, payments are governed by his employment agreement, and in the case of all other Named Executive Officers, payments are governed by the Severance Policy.

Scott C. Hennessy. Under the terms of his employment agreement, Mr. Hennessy is entitled to receive the following severance payments and benefits: any accrued but unpaid salary as of the date of the termination, any annual bonus earned but unpaid for the most recently completed fiscal year, reimbursement of any outstanding business expenses, and the continuation of his base salary for a period of 12 months. As of December 31, 2006 the total amount of such payments would have been approximately $440,000. In addition, in the event of a change of control, Mr. Hennessy would be entitled to accelerated vesting of all the option awards, and potentially all of the stock awards, identified in the table above under the heading “Outstanding Equity Awards at Fiscal Year-End”. The specific value of such awards would be

determined based on the terms and conditions of such change of control, including the per share price of common stock exchanged in the transaction.

Adrian H. McCall. Under the terms of the Company’s Severance Policy, Mr. McCall is entitled to receive the following severance payments and benefits: any accrued but unpaid salary as of the date of the termination, reimbursement of any outstanding business expenses, and the continuation of his base salary for a period of at least six months. As of December 31, 2006 the total amount of such payments would have been approximately $98,000. In addition, in the event of a change of control, Mr. McCall would be entitled to accelerated vesting of all the option awards, and potentially all of the stock awards, identified in the table above under the heading “Outstanding Equity Awards at Fiscal Year-End”. The specific value of such awards would be determined based on the terms and conditions of such change of control, including the per share price of common stock exchanged in the transaction.

Gene Pierce. Under the terms of the Company’s Severance Policy, Mr. Pierce is entitled to receive the following severance payments and benefits: any accrued but unpaid salary as of the date of the termination, reimbursement of any outstanding business expenses, and the continuation of his base salary for a period of at least six months. As of December 31, 2006 the total amount of such payments would have been approximately $85,000. In addition, in the event of a change of control, Mr. Pierce would be entitled to accelerated vesting of all the option awards, and potentially all of the stock awards, identified in the table above under the heading “Outstanding Equity Awards at Fiscal Year-End”. The specific value of such awards would be determined based on the terms and conditions of such change of control, including the per share price of common stock exchanged in the transaction.

Jason A. Jenne. Under the terms of the Company’s Severance Policy, Mr. Jenne is entitled to receive the following severance payments and benefits: any accrued but unpaid salary as of the date of the termination, reimbursement of any outstanding business expenses, and the continuation of his base salary for a period of at least six months. As of December 31, 2006 the total amount of such payments would have been approximately $83,000. In addition, in the event of a change of control, Mr. Jenne would be entitled to accelerated vesting of all the option awards, and potentially all of the stock awards, identified in the table above under the heading “Outstanding Equity Awards at Fiscal Year-End”. The specific value of such awards would be determined based on the terms and conditions of such change of control, including the per share price of common stock exchanged in the transaction.

Fred H. Geyer. Under the terms of the Company’s Severance Policy, Mr. Geyer is entitled to receive the following severance payments and benefits: any accrued but unpaid salary as of the date of the termination, reimbursement of any outstanding business expenses, and the continuation of his base salary for a period of at least six months. On February 19, 2007 Mr. Geyer’s employment with True Temper Sports, Inc. was terminated. He will receive total payments of approximately $230,000 during the severance period.

No payments are made if an executive terminates his employment without “good reason” or we terminate his employment for “cause,” or if, under a severance agreement, an executive leaves for other than “good reason” or we terminate their employment for any reason other than without “cause” (including death or disability).

With respect to the employment and severance agreements:

· “cause” generally means (i) the commission of a felony or a crime of moral turpitude; (ii) a willful and material act of dishonesty involving the Company; (iii) a material non-curable breach of the executive’s obligations under the agreement; (iv) material breaches of Company policies or procedures; (v) any other willful misconduct which causes material harm to the Company or its business reputation; (vi) a failure to cure a material breach of the executive’s obligations under any agreements with the Company, including certain agreements related to the executive’s equity participation in the Company, within 30 days after written notice of such breach; or (vii) breaches of any of the executive’s representations contained in agreements with the Company; and

· “good reason” generally means (i) a reduction in the executive’s annual base salary or bonus potential (but not including any diminution related to a broader compensation reduction that is not limited to any particular employee or executive); (ii) a material diminution of the executive’s responsibilities; (iii) relocation of the executive’s primary work place, as assigned to him by the Company, beyond a fifty mile radius; or (iv) a material breach by the Company of any written agreement.

Director Compensation

The Company does not provide compensation to Directors for their service in such capacity.

Compensation Committee Interlocks and Insider Participation

There are no Compensation Committee interlocks (i.e., no executive officer of the Company or of True Temper Corporation serves as a member of the board of directors or the compensation committee of another entity that has an executive officer serving on the Company’s board of directors or True Temper Corporation’s board of directors).

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

All of the outstanding shares of our capital stock are owned by TTC. The following table sets forth information with respect to the beneficial ownership of TTC’s capital stock as of March 1, 2007 by:

(1) all stockholders of TTC that own more than 5% of any class of such voting securities,

(2) each director and named executive officer, and

(3) all directors and executive officers as a group.

Name of Beneficial Owner(1)	Number of Common Shares	Percentage of Outstanding Common Stock
TTS Holdings LLC c/o Gilbert Global Equity Capital, LLC. 320 Park Avenue 17th 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	%

* Less than 1%.

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

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)

	Expected Maturity Date										There-
LONG TERM DEBT	2007		2008		2009		2010		2011		after			Total
Fixed Rate 83¤8% Senior Subordinated Notes	$	—	$	—	$	—	$	—	$	125.0		$	—	$	125.0
Average Interest Rate														8.38		%
Variable Rate Senior Credit Facility	1.2		1.2		6.3		90.6		16.1			—		$	115.4
Average Interest Rate(a)														8.37		%

Financial Statements		Page(s)
The following consolidated financial statements of True Temper Sports, Inc. and subsidiaries are submitted in response to Part II, Item 8:
Report of Independent Registered Public Accounting Firm		36
Consolidated Statements of Operations—for each of the years ended December 31, 2006 and 2005 and for the period from March 15, 2004 to December 31, 2004 (Successor Company) and for the period from January 1, 2004 to March 14, 2004 (Predecessor Company)		37
Consolidated Balance Sheets—December 31, 2006 and 2005		38
Consolidated Statements of Stockholder’s Equity and Comprehensive Income (Loss)—for each of the years ended December 31, 2006 and 2005 and for the period from March 15, 2004 to December 31, 2004 (Successor Company) and for the period from January 1, 2004 to March 14, 2004 (Predecessor Company)		39
Consolidated Statements of Cash Flows—for each of the years ended December 31, 2006 and 2005 and for the period from March 15, 2004 to December 31, 2004 (Successor Company) and for the period from January 1, 2004 to March 14, 2004 (Predecessor Company)		41
Notes to Consolidated Financial Statements		42

		Page
PART I
Item 1	Business		3
Item 1A	Risk Factors		11
Item 1B	Unresolved Staff Comments		17
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		66
Item 9A	Controls and Procedures		66
Item 9B	Other Information		66
PART III
Item 10	Directors, Executive Officers and Corporate Governance		67
Item 11	Executive Compensation		69
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		76
Item 13	Certain Relationships and Related Transactions and Director Independence		77
Item 14	Principal Accountants Fees and Services		78
PART IV
Item 15	Exhibits and Financial Statements Schedule		79
SIGNATURES			80
INDEX TO EXHIBITS			82

	Fiscal Years Ended
	2006	2005
Audit fees	$184,000	$	181,000
Audit-related fees(1)	—	25,000
Tax fees(2)	128,600	37,500
All other fees(3)	—	—
Total fees(4)	$312,600	$	243,500

				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
Predecessor Company
Period from January 1, 2004 to March 14, 2004		$	832		$	30		$	—		$	(4	)		$	858
Successor Company
Period from March 15, 2004 to December 31 2004		858			79			—			(22		)		915
Year ended December 31, 2005		915			165			—			(669		)		411
Year ended December 31, 2006		411			100			—			(34		)		477

	TRUE TEMPER SPORTS, INC.
	By:	/s/ SCOTT C. HENNESSY
	Name:	Scott C. Hennessy
	Title:	President and Chief Executive Officer
	Date:	March 23, 2007

	By:	/s/ STEVEN J. GILBERT
	Name:	Steven J. Gilbert
	Title:	Director and Co-Chairman
	Date:	March 23, 2007
	By:	/s/ STEVEN KOTLER
	Name:	Steven Kotler
	Title:	Director and Co-Chairman
	Date:	March 23, 2007
	By:	/s/ RICHARD W. GAENZLE, JR.
	Name:	Richard W. Gaenzle, Jr.
	Title:	Director
	Date:	March 23, 2007
	By:	/s/ JEFFREY W. JOHNSON
	Name:	Jeffrey W. Johnson
	Title:	Director
	Date:	March 23, 2007
	By:	/s/ WILLIAM P. LAUDER
	Name:	William P. Lauder
	Title:	Director
	Date:	March 23, 2007

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).*

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) (filed as Exhibit 10.8 to True Temper Sports, Inc.’s report on Form 10-K, as filed with the Securities and Exchange Commission on March 28, 2006).*
10.9		First Amendment dated as of December 20, 2006 to the 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, Antares Capital Corporation, Goldman Sachs Credit Partners L.P. and Merrill Lynch Capital), (filed as Exhibit 10.2 to True Temper Sports, Inc.’s report on Form 8-K, as filed with the Securities and Exchange Commission on January 26, 2007).*
10.10		Second Lien Credit Agreement dated as of January 22, 2007, by and among True Temper Corporation, True Temper Sports, Inc., the Lenders identified therein, and Credit Suisse.) (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 January 26, 2007).*
10.11		Summary of severance arrangement dated as of February 19, 2007 between True Temper Sports, Inc. and Fred H. Geyer. **
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.**

Termination Date:	February 19, 2007
Base Salary Continuance:	Base salary continues through February 29, 2008 (the “Severance Period”)
Bonus:	Eligible for 2006 calendar year program (based on company performance, it is not anticipated that any bonus payments will be distributed for the 2006 calendar year)
	Not eligible for 2007 calendar year program
Benefit Continuance:	Medical and dental benefits will be continued at normal contribution rates for Severance Period
Auto Allowance:	Continued through the Severance Period.
Stock:	As governed by the True Temper Corporation 2004 Equity Incentive Plan, and as directed by the True Temper Corporation Board of Directors
Outplacement Support:	Executive level outplacement provided for at least six months
References:	Positive CEO and Board of Director references and recommendations will be provided

Date: March 23, 2007
By:	/s/ Scott C. Hennessy
Name:	Scott C. Hennessy
Title:	President and Chief Executive Officer
	(Principal Executive Officer)

Date: March 23, 2007
By:	/s/ JASON A. JENNE
Name:	Jason A. Jenne
Title:	Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

/s/ SCOTT C. HENNESSY
Scott C. Hennessy
President and Chief Executive Officer (Principal Executive Officer)
March 23, 2007