Over the last 35 years, the golf industry has realized significant growth in both participation and popularity. According to the National Golf Foundation, the number of rounds played in the United States grew from 266.0 million in 1970 to a peak of 518.4 million rounds played in 2000. More recently, however, there has been a slight decline in the number of rounds of golf played from the peak in 2000 to 499.6 million rounds in 2005, according to the National Golf Foundation. The number of rounds of golf played and, in turn, the amount of golf-related expenditures can be attributed to a variety of factors affecting recreational activities including the state of the nation’s economy, weather conditions and discretionary spending. As a result of the factors described above, the golf retail industry is expected to remain stable or grow slightly.

According to industry sources, the golf retail industry is highly fragmented with no single golf retailer accounting for more than 6% of sales nationally in 2005. It is expected that market share gains in the future will lead to the industry being dominated by a small number of large competitors.

The tennis market represented over $1 billion in sales in the United States in 2005. According to the United States Tennis Association, the number of tennis participants in the United States grew 4.9% from 23.6 million in 2004 to 24.7 million in 2005. In addition, while there was growth in the number of tennis players in all categories from 2004 to 2005, the number of avid tennis players, defined as those who play tennis more than 21 times each year, grew 9.6% from 4.7 million in 2004 to 5.2 million in 2005. According to the Tennis Industry Association, in 2005 tennis players purchased $534 million of apparel, $188 million of tennis racquets, $115 million of tennis shoes, $88 million of tennis balls and $77 million of other tennis equipment.

The Company is one of the largest retailers of premier branded golf merchandise. The Company offers a range of golf and tennis apparel including shirts, sweaters, vests, pants, shorts and outerwear along with such accessories as jewelry, watches and leather goods. The Company is able to offer its customers such premier brands as adidas, Callaway, Greg Norman, Nike and Ping. The Company also offers footwear for both golf and tennis for men, women and juniors from such top national brands as adidas, Bite, Callaway, Ecco, Etonic, FootJoy, Lady Fairway, Nike and Oakley.

The Company offers a broad range of nationally recognized golf ball brands including Bridgestone, Callaway, MaxFli, Nike, Titleist and Top-Flite. The Company provides an extensive range of golf and tennis accessories to support its guests’ golf and tennis activities including tees, sunglasses, cleaning and repair kits, towels, tennis bags, tennis strings and golf cart heaters. The premier brands of the accessories that the Company offers include Bushnell, Coleman, Head, Nike, Oakley, Prince, Team Effort and Wilson.

The Company offers a variety of premier national tennis racquet brands, such as Babolat, Head, Prince, Völkl and Wilson. The Company’s proprietary trademarks and service marks include Golfsmith, Black Cat, Crystal Cat, Killer Bee, Lynx, Parallax, Predator, Snake Eyes, Tigress, Zevo, ASI, GearForGolf and GiftsForGolf. The Company’s proprietary brands provide quality products at attractive prices and generally have higher gross margins than the non-proprietary branded products it offers.

The Company offers a large selection of club components, including club heads, shafts and grips. The Company has access to the premier national brands in club components, including Aldila, Fujikura, Golf Pride, Lamkin, Royal Precision, True Temper, UST and Winn.

The Company offers over 33,000 golf and tennis products through its Internet site. The Company also has 24 registered domain names that link to the Internet site. Through its leading Internet site, the Company seeks to extend to the direct-to-consumer channel the innovative services offered in its stores. The Company’s online SmartFit system allows its guests to custom fit their golf clubs to their personal specifications without having to leave the comfort of their home by providing step-by-step instructions to walk them through the online clubfitting process. The Company offers an in-store pickup option for guests who want to order an item online but avoid the delivery expenses and waiting time.

Gross profit increased by $3.0 million, or 13.4%, to $25.8 million in the three months ended April 1, 2006 from $22.8 million in the three months ended April 2, 2005.

Interest expense increased by $0.2 million, or 6.9%, to $3.1 million in the three months ended April 1, 2006 from $2.9 million in the three months ended April 2, 2005.

Interest income decreased by approximately $6,000, or 38.2%, to $11,000 in the three months ended April 1, 2006 from $17,000 in the three months ended April 2, 2005.

Other income increased by $300,000 to $322,000 in the three months ended April 1, 2006 from $23,000 in the three months ended April 2, 2005.