Ames Companies 10-Q 2007 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark one)

		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

        For the quarterly period ended December 30, 2006

OR

		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

        For the transition period from                                      to                                     

Commission File Number 333-118086

AMES TRUE TEMPER, INC.

(Exact name of registrant as specified in its charter)

Delaware			22-2335400
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
465 Railroad Avenue, Camp Hill, Pennsylvania (Address of principal executive offices)			17011 (Zip Code)

(717) 737-1500

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such a period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes             No

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes             No

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes             No

As of February 13, 2007 the Registrant had 1,000 shares of its common stock, $1.00 par value, outstanding.

ATT HOLDING CO.

INDEX

Part I.    Financial Information						Page No.
Item 1.			Financial Statements
			Condensed Consolidated Balance Sheets of ATT Holding Co. as of December 30, 2006 (unaudited) and September 30, 2006			1
			Condensed Consolidated Statements of Operations of ATT Holding Co. for the thirteen-week periods ended December 30, 2006 and December 31, 2005 – unaudited			2
			Condensed Consolidated Statements of Cash Flows of ATT Holding Co. for the thirteen-weeks ended December 30, 2006 and December 31, 2005 – unaudited			3
			Notes to Condensed Consolidated Financial Statements – unaudited			4
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			20
Item 4.			Controls and Procedures			21
Part II.    Other Information and Signature
Item 1.			Legal Proceedings			22
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			22
Item 3.			Defaults Upon Senior Securities			22
Item 4.			Submission of Matters to a Vote of Security-Holders			22
Item 5.			Other Information			22
Item 6.			Exhibits			22
			Signature			23

Table of Contents

Item 1.    Financial Statements

ATT Holding Co.
Condensed Consolidated Balance Sheets
(In Thousands)

			December 30, 2006						September 30, 2006
			(unaudited)
Assets
Current assets:
Cash and cash equivalents				$	4,912					$	5,638
Restricted cash					2,081						2,081
Trade receivables, net					52,113						66,418
Inventories					170,317						141,239
Deferred income taxes					9,920						8,521
Prepaid expenses and other current assets					6,379						6,673
Total current assets					245,722						230,570
Property, plant and equipment, net					71,145						72,680
Intangibles, net					77,822						78,450
Goodwill					56,600						58,359
Other noncurrent assets					14,943						15,720
Total assets				$	466,232					$	455,779
Liabilities and stockholders’ deficit
Current liabilities:
Trade accounts payable				$	50,961					$	39,773
Accrued interest payable					10,247						7,325
Accrued expenses and other current liabilities					26,543						30,131
Revolving loan					79,448						66,608
Current portion of long-term debt					531						528
Total current liabilities					167,730						144,365
Deferred income taxes					26,142						26,325
Long-term debt					300,905						301,012
Accrued retirement benefits					7,538						7,812
Other liabilities					5,471						6,992
Total liabilities					507,786						486,506
Stockholders’ deficit:
Preferred stock-Series A					—						—
Common stock-Class A					—						—
Common stock-Class B					—						—
Additional paid-in capital					110,500						110,500
Predecessor basis adjustment					(13,539	)					(13,539	)
Retained deficit					(146,773	)					(137,597	)
Accumulated other comprehensive income					8,258						9,909
Total stockholders’ deficit					(41,554	)					(30,727	)
Total liabilities and stockholders’ deficit				$	466,232					$	455,779

See accompanying notes.

1

Table of Contents

ATT Holding Co.
Condensed Consolidated Statements of Operations
(In Thousands)

			Thirteen weeks ended December 30, 2006						Thirteen weeks ended December 31, 2005
			(unaudited)
Net sales				$	84,942					$	88,531
Cost of goods sold					62,615						67,289
Gross profit					22,327						21,242
Selling, general and administrative expenses					20,702						17,879
Loss on disposal of fixed assets					535						113
Amortization of intangible assets					373						448
Operating income					717						2,802
Interest expense					8,622						7,379
Other expense					129						74
Loss before income taxes					(8,034	)					(4,651	)
Income tax expense (benefit)					1,142						(1,441	)
Net loss				$	(9,176	)				$	(3,210	)

See accompanying notes.

2

Table of Contents

ATT Holding Co.
Condensed Consolidated Statements of Cash Flows
(In Thousands)

			Thirteen weeks ended December 30, 2006						Thirteen weeks ended December 31, 2005
			(unaudited)
Operating activities
Net loss				$	(9,176	)				$	(3,210	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense					3,890						2,652
Amortization of intangible assets					373						448
Amortization of loan fees					638						633
Provision for deferred taxes					(1,549	)					(2,061	)
Provision for bad debts					(319	)					(104	)
Noncash interest expense					14						87
Amortization of bond discount					27						27
Loss on sale of fixed assets					535						113
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable					14,624						(1,150	)
Inventories					(29,078	)					(16,221	)
Prepaid expenses and other assets					336						36
Accounts payable					11,188						5,026
Accrued expenses and other liabilities					(1,453	)					333
Net cash used in operating activities					(9,950	)					(13,391	)
Investing activities
Purchase of fixed assets					(3,293	)					(4,044	)
Proceeds from sale of fixed assets					164						208
Net cash used in investing activities					(3,129	)					(3,836	)
Financing activities
Repayments of long-term debt					(131	)					(127	)
Borrowings on revolver, net					12,840						—
Debt issuance costs					—						(142	)
Net cash provided by (used in) financing activities					12,709						(269	)
Effect of exchange rate changes on cash					(356	)					(7	)
Change in cash and cash equivalents					(726	)					(17,503	)
Cash and cash equivalents at beginning of period					5,638						21,394
Cash and cash equivalents at end of period				$	4,912					$	3,891

See accompanying notes.

3

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

1.    Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and, therefore, do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete annual financial statements. The accompanying financial information reflects all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. As our business has historically been seasonal, the results of operations for the thirteen-week period ended December 30, 2006 are not necessarily indicative of the results to be expected for the full fifty-two week fiscal year ending September 29, 2007. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto in the financial statements for the year ended September 30, 2006, which is included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006.

The consolidated balance sheet at September 30, 2006 has been derived from the audited consolidated balance sheet at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. Certain amounts in the accompanying financial statements have been reclassified to conform to the December 30, 2006 presentation.

All entities and assets owned by ATT Holding Co. subsequent to June 27, 2004 are referred to collectively as the ‘‘Company.’’ All entities and assets owned by ATT Holding Co. on June 27, 2004 or prior are referred to collectively as the ‘‘Predecessor.’’

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

2.    Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards No. 158, ‘‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of SFAS statements No. 87, 88, 106 and 132(R)’’, (SFAS 158), to improve financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit post-retirement plan as an asset or liability was issued. SFAS 158 requires employers to recognize in its changes of financial position the funded status of a benefit plan, measured as the difference between plan assets at fair value and the benefit obligation. For pension plans, the benefit obligation is the projected benefit obligation; for any other post-retirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated benefit obligation. If plan assets exceed plan liabilities, an asset would be recognized, and if plan liabilities exceed plan assets, a liability would be recognized. In addition, SFAS 158 requires changes in the funded status of a defined benefit post-retirement plan be recognized in comprehensive income in the year in which the changes occur. SFAS 158 does not change the amount of the expense recorded in a company’s statement of income related to defined benefit post-retirement plans. SFAS 158 is effective for fiscal years ending after June 15, 2007. The Company is currently evaluating what effect, if any, adoption of SFAS 158 will have on the Company’s consolidated financial statements, which will not be determined until the September 29, 2007 measurement date of the assets and benefit obligations of the defined benefit plans.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, ‘‘Fair Value Measurements’’, (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring

4

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

fair value in generally accepted accounting principles (‘‘GAAP’’), and expands disclosures about fair value measurements. The statement applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, SFAS 157 does not require any new fair value measurements. However, for some entities, the application of SFAS 157 will change current practice. The Company is required to adopt SFAS 157 in the first quarter of fiscal year 2009. The Company is currently evaluating what effect, if any, adoption of SFAS 157 will have on the Company’s consolidated financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, ‘‘Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,’’ (SAB 108). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosure using both the rollover approach and the iron curtain approach. The rollover approach quantifies misstatements based on the amount of the error in the current year financial statements whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origin. Financial statements would require adjustment when either approach results in quantifying misstatement that is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. SAB 108 is effective in the fiscal year ending September 29, 2007. The adoption of SAB 108 had no impact on the Company’s financial position or statement of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,’’ (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for the fiscal year ending September 27, 2008. The Company is currently evaluating what effect, if any, adoption of FIN 48 will have on the Company’s consolidated financial statements.

3.    Acquisitions and Purchase Accounting

Acquisition of Predecessor

On June 28, 2004, the Company completed the sale of all outstanding common and preferred stock of the Predecessor to affiliates of Castle Harlan, Inc., a private equity group. CHATT Holdings Inc., the ‘‘buyer’’, and CHATT Holdings LLC, the ‘‘buyer parent’’, were created to make the acquisition of the Company. Approximately 87% of the equity interests of the buyer parent are owned by affiliates of Castle Harlan, and the remainder was issued to members of our management who held capital stock in the Predecessor, in lieu of cash consideration that they otherwise would have been entitled to receive in the acquisition. In addition, certain members of management that did not hold equity in the Predecessor purchased an equity interest in the buyer parent for cash.

The acquisition of the Predecessor was accounted for as a purchase in accordance with SFAS No. 141, Business Combinations, and Emerging Issues Task Force (EITF) Issue No. 88-16, Basis in Leveraged Buyout Transactions. As such, the acquired assets and assumed liabilities have been recorded at fair market value for the interests acquired and estimates of assumed liabilities by new investors and at the carryover basis for continuing investors. The acquired assets and assumed liabilities were assigned new book values in the same proportion as the residual interests of the continuing investors and the new interests acquired by the new investors. Under EITF 88-16, the Company was revalued at the merger date to the fair value to the extent of the majority stockholder’s approximately 87% controlling interest in the Company. The remaining approximately 13% is

5

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

accounted for at the continuing stockholders’ carryover basis in the Company. An adjustment of $13,539 to record this effect is included as a reduction of stockholders’ equity under the caption ‘‘Predecessor basis adjustment.’’ The excess of the purchase price over the historical basis of the net assets acquired has been applied to adjust net assets to their fair values to the extent of the majority stockholder’s approximately 87% ownership.

Acquisition of Acorn and Hound Dog

On April 7, 2006, Ames True Temper, Inc. (‘‘ATT’’), a direct wholly-owned subsidiary of the Company, acquired Acorn Products, Inc. (‘‘Acorn’’), a Delaware corporation and the parent company of UnionTools, Inc. (‘‘Union’’), a business engaged in the manufacture and distribution of non-powered lawn and garden tools, pursuant to an Agreement and Plan of Merger (the ‘‘Acorn Merger Agreement’’) among ATT, Acorn and ATTUT Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of ATT (‘‘Merger Sub’’). Pursuant to the Acorn Merger Agreement, ATT acquired all of the issued and outstanding capital stock of Acorn through the merger of Merger Sub with and into Acorn, with Acorn surviving as a wholly-owned subsidiary of ATT (the ‘‘Acorn Merger’’). The Acorn Merger was consummated simultaneously with the execution of the Acorn Merger Agreement. The aggregate cash consideration paid by ATT on the day of the transaction was $46,394.

On April 12, 2006, HD Acquisition Corp. (‘‘HDAC’’), a wholly-owned subsidiary of ATT, completed the acquisition of substantially all of the assets and intellectual property of Hound Dog Products, Inc. (‘‘Hound Dog’’), a business that designs, markets and distributes non-powered lawn and garden tools. The transaction was consummated simultaneously with the execution of an Asset Purchase Agreement (the ‘‘Asset Purchase Agreement’’) among HDAC, Hound Dog and the shareholders of Hound Dog. The cash consideration paid by HDAC on the day of the transaction was $5,161.

These businesses were acquired to expand the Company’s product lines. The operating results of the acquired companies have been included in the accompanying consolidated statements of operations from the respective dates of acquisition. The acquisitions of Acorn and Hound Dog are being accounted for as purchases in accordance with SFAS No. 141, Business Combinations. The financial statements as of December 30, 2006 reflect a preliminary allocation of the purchase price based upon available information and are subject to further refinement. The Company expects any refinements to occur by the end of the second quarter of fiscal 2007 and primarly relate to pending litigation, state escheat audit results and the closure of certain facilities. The Hound Dog acquisition is subject to purchase price adjustments that are contingent upon the achievement of certain financial goals. Any contingent payment realized will be added to the cost of the acquisitions in excess of the fair value of the net assets acquired. Goodwill resulting from this transaction is not deductible for income tax purposes. The following represents the preliminary allocation of purchase price for the Acorn and Hound Dog acquisitions:

Revolver debt used for purchase price including acquisition costs, net of cash acquired				$	50,126
Other liabilities assumed					19,535
Fair value of assets acquired, primarily accounts receivable, inventory and fixed assets					(47,434	)
Identified intangible assets, primarily tradenames and patents					(4,830	)
Cost in excess of fair value of net assets acquired (goodwill)				$	17,397

In connection with the Acorn acquisition, the Company formulated restructuring plans for the integration of the acquired business. See Footnote 4 for additional information regarding these plans.

6

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

As of the date of ownership change, Acorn had approximately $88,000 of federal net operating loss carryforwards.  Due to the ownership change, the net operating losses of Acorn will be limited under Internal Revenue Code §382 and limited as well under the normal expiration dates of federal net operating loss carryfowards. It is currently projected that ATT will be able to utilize only $1,100 of the losses.  In order to avoid negative tax consequences of allowing net operating losses to expire unutilized, ATT will elect to relinquish the portion of the net operating losses that are in excess of the amounts to be utilized.

4.    Restructuring

Restructuring Related to Acquisition of Predecessor

In connection with the acquisition of the Predecessor on June 28, 2004, the Company began to assess and formulate an exit and restructuring plan that includes reductions of workforce, facility closures and changes in business strategies. The Company’s plan met the conditions of EITF 95-3. This exit and restructuring plan is intended to increase operating efficiencies. At June 28, 2004, the Company recorded a liability of $4,782 related to the reductions of workforce and facility closures and $4,795 related to changes in business strategies for a product line. Adjustments have been made to these reserves as the cost estimates are refined and finalized. The Company expects to complete the implementation of these plans within the next one to three years. During the period ended December 30, 2006, the Company reduced the restructuring reserve based on payments and the refinement of cost estimates during the period.

At December 30, 2006, the remaining restructuring reserves of $2,433 were included in accrued expenses and other current liabilities and related to portions of the exit plans that are not yet complete. Changes to the restructuring reserves are as follows:

Balance as of September 30, 2006				$	3,470
Accretion of Interest					57
Purchase Accounting Adjustments					(284	)
Payments					(810	)
Balance as of December 30, 2006				$	2,433

Restructuring Related to Acquisition of Acorn

At date of acquisition, the Company recorded a reserve of $1,547 associated with certain facility closures and reductions in workforce as part of a facility consolidation plan. The Company appropriately met the conditions as outlined in EITF 95-3 to record such charges as liabilities in a purchase accounting combination. This plan was executed beginning in the third quarter of fiscal 2006 and is expected to be completed in fiscal 2007. As the Company obtains additional information regarding costs to close certain facilities, adjustments may be made to the restructuring reserves. These restructuring reserves were included in accrued expenses and other current liabilities and related to portions of the exit plan that have not yet been completed. In addition, certain employees were given retention packages totaling approximately $2,987 to transition their current roles over 4-12 months. These costs are being recognized over the retention period and have not been included in the purchase price or as a reduction to the net assets acquired. During the quarter ended December 30, 2006, the Company’s operating results reflect a charge of $671 related to the recognition of these retention packages. Severance payments for these retention packages began in the Company’s fourth quarter of fiscal 2006 and will carry into fiscal 2007. The balance of the restructuring reserve at December 30, 2006 is $371 which is included in accrued expenses and other current liabilities.

7

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

Balance as of September 30, 2006				$	1,175
Payments					(804	)
Balance as of December 30, 2006				$	371

5.     Inventories

Inventories are as follows:

			December 30, 2006						September 30, 2006
Finished goods				$	119,662					$	94,903
Work in process					21,867						21,398
Raw materials					37,818						33,626
					179,347						149,927
Less inventory reserves					(9,030	)					(8,688	)
				$	170,317					$	141,239

6.     Goodwill and Other Intangibles

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company is required to test goodwill and indefinite lived intangible assets for impairment on at least an annual basis. There can be no assurance that future impairment tests will not result in a charge to earnings. There was a revision to goodwill during the thirteen weeks ended December 30, 2006, as a result of the refinement of the cost estimates relating to the restructuring reserve and the impact of foreign currency exchange rates. The cost of other acquired intangible assets, including primarily customer relationships and covenants not to compete, is amortized on a straight-line basis over the estimated lives of 2 to 19 years. Amortization of other intangibles amounted to $373 for the thirteen weeks ended December 30, 2006. The estimated aggregate amortization expense for each of the succeeding periods is as follows: $1,105 for the remainder of fiscal 2007; $1,337 in fiscal 2008; $1,221 in fiscal 2009; $1,211 in fiscal 2010; $1,200 in fiscal 2011 and $3,451 thereafter.

The changes in carrying amount of goodwill for the thirteen week period ended December 30, 2006 are as follows:

Goodwill at September 30, 2006				$	58,359
Revision of purchase price allocation					(1,080	)
Currency translation adjustments					(679	)
Goodwill at December 30, 2006				$	56,600

8

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

The following table reflects the components of intangible assets other than goodwill:

			December 30, 2006						September 30, 2006
Finite lived intangible assets:
Technology (patents)				$	1,356					$	1,356
Non-compete agreements					976						976
Customer relationships					11,633						11,672
					13,965						14,004
Accumulated amortization:
Technology (patents)					(697	)					(619	)
Non-compete agreements					(907	)					(902	)
Customer relationships					(2,836	)					(2,546	)
					(4,440	)					(4,067	)
Net finite lived intangible assets					9,525						9,937
Indefinite lived intangible assets:
Trade names					68,297						68,513
Total Intangibles, net				$	77,822					$	78,450

The above amounts include identified intangible assets related to the Acorn and Hound Dog acquisitions and are subject to further refinement as discussed in Note 3.

7.     Income Taxes

At the end of each interim reporting period, we estimate the effective tax rate expected to be applicable for the full fiscal year. The rate determined is used in providing for income taxes on a year-to-date basis. The tax effect of significant unusual items is reflected in the period in which they occur. The decrease in the effective tax rate was primarily due to the mixture of tax rates for domestic and foreign income and the recording of a deferred tax asset valuation allowance. The valuation allowance is primarily attributable to the uncertainty regarding the realization of the net operating losses.

8.     Debt Arrangements

Senior Subordinated Notes

On June 28, 2004, we completed a private offering of $150.0 million in aggregate principal amount at maturity of 10% Senior Subordinated Notes due July 15, 2012. The Senior Subordinated Notes are fully and unconditionally guaranteed by the Company on a senior subordinated basis. On August 10, 2004, we filed a registration statement with respect to new notes having substantially identical terms as the original notes, as part of an offer to exchange registered notes for the privately issued original Senior Subordinated Notes. The new notes evidence the same debt as the original Senior Subordinated Notes, are entitled to the benefits of the indenture governing the original Senior Subordinated Notes and are treated under the indenture as a single class with the original notes. The exchange offer was completed on November 24, 2004.

The new Senior Subordinated Notes are unsecured senior subordinated obligations and rank behind all of our existing and future senior debt, including borrowings under the Amended and

9

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

Restated Senior Secured Credit Agreement, equally with any of our future senior subordinated debt, ahead of any of our future debt that expressly provides for subordination to the new Senior Subordinated Notes and effectively behind all of the existing and future liabilities of our subsidiaries, including trade payables. The Company also guarantees the new Senior Subordinated Notes on a senior subordinated basis. This guarantee ranks behind all existing and future senior debt of the Company, including the guarantee of the Amended and Restated Senior Secured Credit Facility and the Senior Floating Rate Notes, equal to all future senior subordinated indebtedness and ahead of all future debt that expressly provides that it is subordinated to the guarantee.

We pay interest on the new Senior Subordinated Notes semi-annually in cash, in arrears, on January 15 and July 15 at an annual rate of 10.0%. The indenture governing new Senior Subordinated Notes contains various affirmative and negative covenants, subject to a number of important limitations and exceptions, including but not limited to those limiting our ability and the ability of our restricted subsidiaries to borrow money, guarantee debt or sell preferred stock, create liens, pay dividends on or redeem or repurchase stock, make certain investments, sell stock in our restricted subsidiaries, restrict dividends or other payments from restricted subsidiaries, enter into transactions with affiliates and sell assets or merge with other companies.

The indenture governing the new Senior Subordinated Notes contains various events of default, including but not limited to those related to non-payment of principal, interest or fees; violations of certain covenants; certain bankruptcy-related events; invalidity of liens; non-payment of certain legal judgments; and cross defaults with certain other indebtedness. We may redeem the Senior Subordinated Notes on or after July 15, 2008, except we may redeem up to 35% of the new Senior Subordinated Notes prior to July 15, 2007 with the proceeds of one or more public equity offerings. We are required to redeem the new Senior Subordinated Notes under certain circumstances involving changes of control.

Senior Floating Rate Notes

On January 14, 2005, ATT completed the offering of $150,000 Senior Floating Rate Notes due 2012. The proceeds of this offering were used by the Company to repay the entire balance of Term Loan B, which amounted to $139,300. Additionally, the proceeds were used to pay transaction fees and repay a portion of the revolving credit facility. As a result of the transaction, the Company recorded a charge of $4,102 to interest expense to write-off the portion of prepaid bank fees related to Term Loan B.

The Senior Floating Rate Notes, issued at a 0.5% discount, bear interest at a floating rate per annum, reset quarterly, equal to LIBOR plus 4%, which was 9.37% at December 30, 2006. The Senior Floating Rate Notes pay interest quarterly in cash in arrears on January 15, April 15, July 15 and October 15 of each year. The Senior Floating Rate Notes mature on January 15, 2012, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the Indenture. The Company guarantees the Senior Floating Rate Notes.

The Senior Floating Rate Notes are unsecured, unsubordinated obligations of ATT. They are effectively subordinated to all existing and future secured debt, to the extent of the assets securing such debt, including borrowings under the Amended and Restated Senior Secured Credit Agreement, pari passu with all future senior unsecured indebtedness, senior in right of payment to all existing and future senior subordinated debt, including the Senior Subordinated Notes, and effectively behind all of the existing and future liabilities of ATT’s subsidiaries, including trade payables.

Interest Rate Swaps

In connection with the issuance of the Senior Floating Rate Notes, ATT entered into interest rate swaps (the ‘‘Swaps’’) with Bank of America, N.A. and Wachovia Bank, N.A. Pursuant to the Swap

10

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

with Bank of America, N.A., which became effective on January 17, 2006, ATT swaps 3-month LIBOR rates for fixed interest rates of 4.31% on a notional amount of $100,000 for the period from January 17, 2006 through January 15, 2008, $66,667 for the period from January 16, 2008 to January 15, 2009 and $33,333 for the period from January 16, 2009 through January 15, 2010. Pursuant to the Swap with Wachovia Bank, N.A., effective January 15, 2006, ATT swaps 3 month LIBOR rates for fixed interest rates of 4.29% on a notional amount of $50,000 for the period from January 15, 2006 through January 15, 2008, $33,333 for the period from January 16, 2008 to January 15, 2009 and $16,667 for the period from January 16, 2009 through January 15, 2010. These swaps fix the variable rate portion of the Senior Floating Rate Notes, while there is an additional margin of 4.00% that is fixed.

The Company has accounted for the interest rate swaps in accordance with Statement of Financial Accounting Standards (‘‘SFAS’’) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities and SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (collectively, ‘‘SFAS 133’’).  SFAS 133 establishes accounting and reporting standards for derivative instruments and hedging activities.  SFAS 133 requires that all derivatives be recognized as either assets or liabilities at fair value. The Company has accounted for the swaps as cash flow hedges. As of December 30, 2006, the interest rate swaps were recorded as an asset of $2,523. For the thirteen-week period ended December 30, 2006, the change in fair value was accumulated as other comprehensive income of $64, net of deferred taxes of $33.

Term Note

On July 19, 2005, the Company entered into a $2,700 Term Note, Loan and Security Agreement and Subordination Agreement with a Lender. This note is payable in monthly installments over five years. The interest rate per annum is equal to 2.5% and secured by certain collateral, which was agreed to by the Administrative Agent of the Senior Secured Credit Facility. Under the terms of this note, the Company is required to create 108 jobs at the new manufacturing facility in Pennsylvania within three years of the completion of the facility. The Term Note contains customary events of default (subject to customary exceptions, thresholds and grace periods), including, without limitation: nonpayment of principal, interest, fees and failure to perform or observe certain covenants. As of December 30, 2006, the Company was in compliance with these covenants.

Amended and Restated Senior Secured Credit Agreement

On April 7, 2006, in conjunction with the acquisition of Acorn, ATT entered into an amended and restated Senior Secured Credit Agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, Acorn, Union, and Ames True Temper Properties, Inc. (‘‘ATTP’’); together with ATT (the ‘‘Borrowers’’), the Company, as guarantor, and each lender from time to time thereto (the ‘‘Credit Agreement’’). The Credit Agreement amends and restates ATT’s existing credit facility with, among others, Bank of America, N.A. Pursuant to the Credit Agreement, the lenders made available a five-year revolving credit facility of up to $130,000 in order to finance the acquisition of Acorn, pay fees and expenses associated with the acquisition, repay outstanding debt and provide for ongoing working capital.

11

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

Borrowings outstanding under the revolving credit facility as of December 30, 2006 and September 30, 2006 were $79,448 and $66,608, respectively. The Company had letters of credit outstanding totaling $4,392 and $4,392 as of December 30, 2006 and September 30, 2006, respectively. The total amount available under the revolving credit facility at December 30, 2006 was $38,144. The interest rate for base rate loans under the revolving credit facility is calculated as the higher of 1) the prevailing Federal Funds rate plus 50 basis points or 2) the administrative agent’s prime interest rate plus an applicable rate determined by the Company’s consolidated leverage ratio as defined in the Credit Agreement. The interest rate for base rate loans under the revolving credit facility was 9.25% at December 30, 2006.

Total indebtedness is as follows:

			December 30, 2006						September 30, 2006
Revolving loan facility dated 4/7/06, expires 2011				$	79,448					$	66,608
Term Note due 2010					1,972						2,103
Senior Floating Rate Notes due 2012					150,000						150,000
10% Senior Subordinated Notes due 2012					150,000						150,000
Total debt					381,420						368,711
Less short-term revolving loan facilities					(79,448	)					(66,608	)
Less current portion of long-term debt					(531	)					(528	)
Less unamortized discount					(536	)					(563	)
Long-term debt				$	300,905					$	301,012

The Credit Agreement and the Senior Subordinated Notes contain various affirmative and negative covenants customary for similar credit facilities (subject to customary exceptions and certain existing obligations and liabilities), including, but not limited to, restrictions (with exceptions) on: liens; debt; loans, acquisitions, joint ventures and other investments; mergers and consolidations, sales, transfers and other dispositions of property or assets; dividends, distributions, redemptions and other restricted payments; changes in the nature of the Company’s business; transactions with affiliates; and prepayment, redemption or repurchase of certain debt. In addition, the Credit Agreement and term note require that the Company meet certain financial covenants. Capital expenditures are subject to fiscal year limitations of $16,125 in 2007 and $15,000 thereafter. In the event the Company triggers Cash Dominion as defined in the Credit Agreement, the Company is required to maintain a minimum consolidated EBITDA of $41,000 for any period of four quarters ending on the last day of any fiscal quarter. As of December 30, 2006, the Company was in compliance with all applicable debt covenants.

9.     Pension and Other Post-retirement Benefits

			Pension Benefits												Other Benefits
			Thirteen weeks ended												Thirteen weeks ended
			December 30, 2006						December 31, 2005						December 30, 2006						December 31, 2005
Service Cost				$	796					$	888					$	—					$	1
Interest Cost					2,138						1,652						27						36
Expected return on plan assets					(2,894	)					(2,418	)					—						—
Amortization of unrecognized net loss					(12	)					128						(28	)					—
Net periodic benefit cost				$	28					$	250					$	(1	)				$	37

12

Table of Contents

ATT HOLDING CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)

Employer Contributions

During the thirteen-week periods ended December 30, 2006 and December 31, 2005, the Company contributed $275 and $45, respectively, to its defined benefit pension plans.

During the thirteen-week period ended December 30, 2006, the Company made no contributions to its post-retirement benefit plans. During the thirteen-week period ended December 31, 2005, the Company contributed $56 to its post-retirement benefit plan.

On December 31, 2006, the Union pension and other benefit plans were merged into the ATT’s pension and other benefit plans.

10.     Other Comprehensive Loss

			Thirteen weeks ended December 30, 2006						Thirteen weeks ended December 31, 2005
Net loss				$	(9,176	)				$	(3,210	)
Other comprehensive (loss) income:
Currency translation adjustment					(1,587	)					15
Fair value adjustments of swaps, net of tax					(64	)					483
Comprehensive loss				$	(10,827	)				$	(2,712	)

11.     Segment Information

The Company’s operations are classified into one business segment. These operations are conducted primarily in the United States, and to a lesser extent, in Canada and Europe. The following table presents certain data by geographic areas:

			Thirteen weeks ended December 30, 2006												Thirteen weeks ended December 31, 2005
			Net Sales						(Loss) Earnings Before Income Taxes						Net Sales						(Loss) Earnings Before Income Taxes
United States				$	68,698					$	(8,703	)				$	69,985					$	(6,795	)
Europe					1,517						(171	)					1,156						(76	)
Canada					14,727						840						17,390						2,220
Total				$	84,942					$	(8,034	)				$	88,531					$	(4,651	)

			Identifiable Assets
			December 30, 2006						September 30, 2006
United States				$	406,753					$	399,890
Europe					6,508						6,589
Canada					52,971						49,300
Total				$	466,232					$	455,779

13

Table of Contents

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion relates to the consolidated financial performance and results of operations of our parent, ATT Holding Co. A separate discussion for Ames True Temper, Inc. is not presented since our parent has no operations or assets separate from its investment in Ames True Temper, Inc. and since the Senior Subordinated Notes and the Senior Floating Rate Notes are guaranteed by our parent. The following discussion of our parent’s results of operations and financial condition should be read in conjunction with our financial statements and notes thereto included elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements. All statements other than statements of historical fact are ‘‘forward-looking statements’’ for purposes of federal and state securities laws. Forward-looking statements may include the words ‘‘may,’’ ‘‘will,’’ ‘‘plans,’’ ‘‘estimates,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘expects,’’ ‘‘intends’’ and similar expressions. Although we believe that such statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected or assumed in our forward-looking statements. These factors, risks and uncertainties include, among others, the following: our liquidity and capital resources; sales levels to existing and new customers; increased concentration of our customers; seasonality and adverse weather conditions; competitive pressures and trends; changing consumer preferences; new product and customer initiatives; risks relating to foreign sourcing and foreign operations and availability of raw materials; our ability to successfully consummate and integrate acquisitions; and general economic conditions. Our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. We do not intend, and we undertake no obligation, to update any forward-looking statement.

Overview

Ames True Temper, Inc. (‘‘ATT’’, ‘‘us’’, ‘‘we’’, ‘‘our’’ or the ‘‘Company’’) is a leading North American manufacturer and marketer of non-powered lawn and garden tools and accessories. We offer the following 14 distinct product lines with over 4,800 active SKUs: long handle tools, wheelbarrows, planters, hose reels, snow tools, striking tools, decorative accessories, lawn carts, pruning tools, repair handles, garden hoses, Hound Dog, brooms and specialty tools. We sell our products primarily in the U.S. and Canada through (1) retail centers, including home centers and mass merchandisers, (2) wholesale chains, including hardware stores and garden centers, and (3) industrial distributors.

In June 2004, affiliates of Castle Harlan, Inc., a New York-based private-equity investment firm, together with certain of our employees, completed the acquisition of our company from Wind Point Partners. In order to acquire our company, CHATT Holdings Inc., ‘‘the buyer’’, and CHATT Holdings LLC, ‘‘the buyer parent’’, were formed. Upon completion of the acquisition, affiliates of Castle Harlan, Inc. (Castle Harlan Partners IV, L.P., or CHP IV, and affiliates) owned approximately 87% of the buyer-parent and management owned approximately 13%. In order to finance the acquisition, repay our outstanding debt and pay related fees and expenses:

	(a)	we entered into a $215.0 million senior credit facility consisting of a $75.0 million revolving credit facility and a $140.0 million term loan, as described in ‘‘Debt and Other Obligations;’’

	(b)	we issued $150.0 million of 10% senior subordinated notes, as described in ‘‘Debt and Other Obligations’’; and

	(c)	the buyer parent received a $110.5 million equity capital contribution from CHP IV and its affiliates and management.

On April 7, 2006, we acquired Acorn, the parent company of Union, a business engaged in the manufacture and distribution of non-powered lawn and garden tools, pursuant to an Agreement and Plan of Merger (the ‘‘Acorn Merger Agreement’’) among us, Acorn and ATTUT Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of ours (‘‘Merger Sub’’). Pursuant to the Acorn

14

Table of Contents

Merger Agreement, we acquired all of the issued and outstanding capital stock of Acorn through the merger of Merger Sub with and into Acorn, with Acorn surviving as a wholly-owned subsidiary of ours (the ‘‘Acorn Merger’’). The Acorn Merger was consummated simultaneously with the execution of the Acorn Merger Agreement. The aggregate cash consideration paid by us on the day of the transaction was $46.4 million.

On April 12, 2006, HD Acquisition Corp. (‘‘HDAC’’), a wholly-owned subsidiary of ours, completed the acquisition of substantially all of the assets and property of Hound Dog, a business that designs, markets and distributes non-powered lawn and garden tools. The transaction was consummated simultaneously with the execution of an Asset Purchase Agreement (the ‘‘Asset Purchase Agreement’’) among HDAC, Hound Dog and the shareholders of Hound Dog. The cash consideration paid by HDAC on the day of the transaction was $5.2 million.

These businesses were acquired to expand the Company’s product lines. The operating results of the acquired companies have been included in the accompanying consolidated statements of operations from the respective dates of acquisition. Prior to the end of fiscal year 2006, Acorn, Union and HDAC were merged into Ames True Temper.

Results of Operations

Thirteen weeks ended December 30, 2006 compared to thirteen weeks ended December 31, 2005

Net Sales.    Net sales for the thirteen-week period ended December 30, 2006 decreased $3.6 million, or 4.1%, to $84.9 million compared to $88.5 million for the thirteen weeks ended December 31, 2005. Overall net sales decreased primarily from lower sales volumes due to a slow retail quarter for the major retailers, primarily in the snow tool category, but were partially offset by incremental sales volume from the Union acquisition.

Gross Profit.    Gross profit for the thirteen weeks ended December 30, 2006 increased $1.1 million to $22.3 million from $21.2 million for the thirteen weeks ended December 31, 2005. This was due to a favorable mix of product sales, with higher gross margins, partially offset by increased commodity costs, primarily steel and resin. Gross profit as a percentage of net sales increased to 26.3% from 24.0% during this period.

Selling, General and Administrative (‘‘SG&A’’) Expenses.    SG&A expenses for the thirteen weeks ended December 30, 2006 increased $2.8 million to $20.7 million from $17.9 million for the thirteen weeks ended December 31, 2005. The increase relates primarily to incremental costs associated with the Union acquisition, increased professional services, new product development costs and higher distribution expenses, partially offset by recoveries under U.S. anti-dumping provisions and lower variable selling costs, such as commissions and certain customer programs.

Amortization of Intangible Assets.    During the thirteen weeks ended December 30, 2006, we recorded $0.4 million in amortization expense, as compared to $0.4 million during the thirteen-week period ended December 31, 2005.

Interest Expense.    Interest expense for the thirteen weeks ended December 30, 2006 increased $1.2 million to $8.6 million from $7.4 million during the thirteen weeks ended December 31, 2005. The increase was a result of borrowings under our revolving credit facility for the acquisitions of Union and Hound Dog in April 2006 and higher average interest rates as compared to prior year. For the thirteen weeks ended December 31, 2005, there was no balance under our revolving credit facility.

Income Tax Expense (Benefit).    Income tax expense for the thirteen weeks ended December 30, 2006, was $1.1 million or approximately 14.2% of loss before taxes. Income tax benefit for the thirteen weeks ended December 31, 2005 was $1.4 million, or approximately 31.0% of loss before taxes. At the end of each interim reporting period, we estimate the effective tax rate expected to be applicable for the full fiscal year. The rate determined is used in providing for income taxes on a year-to-date basis. The tax effect of significant unusual items is reflected in the period in which they occur. The decrease in the effective tax rate was primarily due to the mixture of tax rates for domestic

15

Table of Contents

and foreign income and the recording of an additional deferred tax asset valuation allowance. Deferred income taxes are provided for the future tax consequences attributable to the differences between the carrying amounts of assets and liabilities and their respective tax base. Deferred tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not that some portion of the deferred tax assets will not be realized. As of December 30, 2006 and September 30, 2006, a deferred tax asset valuation allowance was necessary for a portion of our deferred tax assets. We believe that our projections of future taxable income makes it more likely than not that the remainder of our deferred tax assets will be realized. If our projection of future taxable income changes in the future, we may be required to reduce deferred tax assets by an additional valuation allowance.

Liquidity and Capital Resources

Our principal liquidity requirements are to service our debt and meet our working capital and capital expenditure needs. Subject to our performance, which, if adversely affected, could adversely affect the availability of funds, we expect to be able to meet our liquidity requirements for the foreseeable future through cash provided by operations and through borrowings available under our senior credit facility. We cannot assure you, however, that this will be the case.

Cash Flows

Cash used in operating activities for the thirteen weeks ended December 30, 2006 was $10.0 million, compared to $13.4 million of cash used in operating activities for the thirteen weeks ended December 31, 2005. This lower cash usage in fiscal 2007 as compared to fiscal 2006 is primarily the result of higher seasonal inventory build as a result of the acquisitions of Union and Hound Dog offset by higher collections of accounts receivables. During our first two quarters of the fiscal year, we typically use our available cash and our revolving loan facility to fund our seasonal build of inventory. Cash used in investing activities of $3.1 million and $3.8 million for the thirteen-week periods ended December 30, 2006 and December 31, 2005, respectively, was due primarily to the purchase of fixed assets. Cash provided by financing activities was $12.7 million for the thirteen weeks ended December 30, 2006 primarily the result of borrowings on the revolver for seasonal working capital needs, and was offset by repayments of long-term debt. Cash used in financing activities was $0.3 million for the thirteen weeks December 31, 2005 and was primarily related to the repayments of debt and the incurrence of debt issuance costs.

Debt and Other Obligations

Senior Secured Credit Facility as Amended and Restated on April 7, 2006

On April 7, 2006, we entered into an amended and restated credit agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, Acorn, Union, and Ames True Temper Properties, Inc. (‘‘ATTP’’); together with the Company, (the ‘‘Borrowers’’), ATT Holding Co., as guarantor, and each lender from time to time thereto (the ‘‘Credit Agreement’’). The Credit Agreement amends and restates our existing credit facility with, among others, Bank of America, N.A. Pursuant to the Credit Agreement, the lenders made available a five-year revolving credit facility of up to $130.0 million, including a sub-facility for letters of credit in an amount not to exceed $15.0 million and a sub-facility for swing-line loans in an amount not to exceed $15.0 million. The Borrowers’ obligations under the credit agreement are guaranteed by ATT Holding Co. The credit facilities will be collateralized by substantially all of our assets, including our domestic subsidiaries, and guaranteed by ATT Holding Co. Future domestic subsidiaries will be required to guarantee the obligations and grant a lien on substantially all of their assets.

The interest rate applicable to the loans under the senior secured credit agreement is either: (1) the ‘‘Eurodollar Rate’’ plus a margin of 1.75% to 2.75% or (2) the ‘‘Base Rate’’ plus a margin of 0.50% to 1.50%. The initial applicable margin for loans based on the Eurodollar Rate will be 2.25%, and the applicable margin for loans based on the Base Rate will be 1.00%. ‘‘Eurodollar Rate’’ is

16

Table of Contents

defined as the London interbank offered rate, adjusted for statutory reserve requirements. The ‘‘Base Rate’’ is the higher of: (1) prime rate publicly announced by Bank of America, N.A. or (2) the Federal Funds effective rate plus 0.50%, adjusted for statutory reserve requirements. The applicable margin may under certain limited circumstances be increased slightly, if Bank of America, N.A. cannot otherwise syndicate the credit facility.

As set forth in the Credit Agreement, the total outstanding amount of all loans and letter of credit obligations under the Credit Agreement shall not exceed the lesser of (1) $130.0 million and (2) the borrowing base, which includes specific percentages of eligible inventory, eligible equipment, eligible accounts receivable and eligible real estate of the Borrowers, minus (b) certain reserves, all as set forth in the Credit Agreement.

The terms of the Credit Agreement include various covenants that restrict our ability to, among other things, incur additional liens, incur additional indebtedness and make additional investments. In addition, the Borrowers are prohibited from incurring capital expenditures exceeding $16.125 million in fiscal year 2007 and $15.0 million in any fiscal year thereafter (subject to the right to carry over the unused portion to the following year). In addition, under certain circumstances the Borrowers will be required to have consolidated EBITDA of at least $41.0 million for each period of four fiscal quarters. The Credit Agreement also includes customary events of default, including, without limitation, payment defaults, cross defaults to other indebtedness and bankruptcy related defaults. As of December 30, 2006, we were in compliance with all of our financial covenants. As of December 30, 2006, we had $79.4 million of borrowings on the revolving portion of our senior credit facility, with $2.4 million of letters of credit outstanding. At December 30, 2006, based on the borrowing base calculation, the revolver limit was $120.0 million, with $38.1 million available under the revolving credit facility. In addition, the Company had $2.0 million of letters of credit outstanding with another financial institution as of December 30, 2006. These letters of credit were supported by $2.1 million of restricted cash in the form of an escrow deposit at this financial institution.

Senior Subordinated Notes

On June 28, 2004, we completed a private offering of $150.0 million in aggregate principal amount at maturity of 10% Senior Subordinated Notes due July 15, 2012. The Senior Subordinated Notes are fully and unconditionally guaranteed by our parent, ATT Holding Co., on a senior subordinated basis. On August 10, 2004, we filed a registration statement with respect to new notes having substantially identical terms as the original notes, as part of an offer to exchange registered notes for the privately issued original Senior Subordinated Notes. The new notes evidence the same debt as the original Senior Subordinated Notes, are entitled to the benefits of the indenture governing the original Senior Subordinated Notes and are treated under the indenture as a single class with the original notes. The exchange offer was completed on November 24, 2004.

The Senior Subordinated Notes are unsecured senior subordinated obligations and rank behind all of our existing and future senior debt, including borrowings under the senior credit facility, equally with any of our future senior subordinated debt, ahead of any of our future debt that expressly provides for subordination to the Senior Subordinated Notes and effectively behind all of the existing and future liabilities of our subsidiaries, including trade payables.

We pay interest on the Senior Subordinated Notes semi-annually in cash, in arrears, on January 15 and July 15 at an annual rate of 10.0%. The indenture governing Senior Subordinated Notes contains various affirmative and negative covenants, subject to a number of important limitations and exceptions, including but not limited to those limiting our ability and the ability of our restricted subsidiaries to borrow money, guarantee debt or sell preferred stock, create liens, pay dividends on or redeem or repurchase stock, make certain investments, sell stock in our restricted subsidiaries, restrict dividends or other payments from restricted subsidiaries, enter into transactions with affiliates and sell assets or merge with other companies.

The indenture governing the Senior Subordinated Notes contains various events of default, including but not limited to those related to non-payment of principal, interest or fees; violations of certain covenants; certain bankruptcy-related events; invalidity of liens; non-payment of certain legal

17

Table of Contents

judgments; and cross defaults with certain other indebtedness. We may redeem the Senior Subordinated Notes on or after July 15, 2008, except we may redeem up to 35% of the Senior Subordinated Notes prior to July 15, 2007 with the proceeds of one or more public equity offerings. We are required to redeem the Senior Subordinated Notes under certain circumstances involving changes of control.

Senior Floating Rate Notes

On January 14, 2005, we completed a private offering of $150.0 million principal amount at maturity of our Senior Floating Rate Notes due 2012, which was issued at a 0.5% discount. Net proceeds for the offering were used to repay our term loan B in full, repay a portion of our revolving credit facility and pay related fees and expenses. The Senior Floating Rate Notes are fully and unconditionally guaranteed by our parent on a senior unsecured basis. On March 25, 2005 we filed a registration statement with respect to new notes having substantially identical terms as the original notes, as part of an offer to exchange registered notes for the privately issued original Senior Floating Rate Notes. The new notes evidence the same debt as the original Senior Floating Rate Notes, are entitled to the benefits of the indenture governing the original Senior Floating Rate Notes and are treated under the indenture as a single class with the original notes. The exchange offer was completed on May 23, 2005.

The Senior Floating Rate Notes are unsecured, unsubordinated obligations and are effectively subordinated to all of our existing and future secured debt, to the extent of the assets securing such debt, including borrowings under the senior secured credit facility, pari passu with all future senior unsecured indebtedness, senior in right of payment to all existing and future senior subordinated debt, including our Senior Subordinated Notes due 2012, and effectively behind all of the existing and future liabilities of our subsidiaries, including trade payables.

We pay interest on the Senior Floating Rate Notes quarterly in cash, in arrears, on January 15, April 15, July 15 and October 15 at a rate per annum, reset quarterly, equal to LIBOR plus 4.0%, starting on April 15, 2005. The indenture governing the Senior Floating Rate Notes contains various affirmative and negative covenants, subject to a number of important limitations and exceptions, including but not limited to those limiting our ability and the ability of our restricted subsidiaries to borrow money, guarantee debt or sell preferred stock, create liens, pay dividends on or redeem or repurchase stock, make specified types of investments, sell stock in our restricted subsidiaries, restrict dividends or other payments from restricted subsidiaries, enter into transactions with affiliates and sell assets or merge with other companies.

The indenture governing the Senior Floating Rate Notes contains various events of default, including but not limited to those related to non-payment of principal, interest or fees; failure to perform or observe certain covenants; inaccuracy of representations and warranties in any material respect, cross defaults with certain other indebtedness, certain bankruptcy related events, monetary judgment defaults and material non-monetary judgment defaults, ERISA defaults and change of control. We can redeem the Senior Floating Rate Notes, in whole or in part, at any time on or after January 15, 2007. In addition, we may redeem up to 35% of the Senior Floating Rate Notes prior to January 15, 2007 with the net proceeds of one or more public equity offerings. We are required to redeem the Senior Floating Rate Notes under certain circumstances involving changes of control.

Other Debt

On July 19, 2005, we entered into a $2.7 million Term Note, Loan and Security Agreement and Subordination Agreement with a Lender. This note is payable in monthly installments over five years. The interest rate per annum is equal to 2.5% and secured by certain collateral, which was agreed to by the Administrative Agent of the Senior Secured Credit Facility, as amended and restated. Under the terms of this note, we are required to create 108 jobs at the new manufacturing facility in Pennsylvania within three years of the completion of the facility. The Term Note contains customary events of default (subject to customary exceptions, thresholds and grace periods), including, without limitation, nonpayment of principal, interest, fees and failure to perform or observe certain covenants. As of December 30, 2006, we were in compliance with these covenants.

18

Table of Contents

Interest Rate Swaps

In connection with the offering of the Senior Floating Rate Notes, on January 11, 2005, we entered into interest rate swaps (the ‘‘Swaps’’) with Bank of America, N.A. and Wachovia Bank, N.A to hedge variable interest rate debt. Pursuant to the Swap with Bank of America, N.A., which became effective on January 17, 2006, we swap 3 month LIBOR rates for fixed interest rates of 4.31% on a notional amount of $100.0 million for the period from January 17, 2006 through January 15, 2008, approximately $66.7 million for the period from January 15, 2008 to January 15, 2009 and approximately $33.3 million for the period from January 15, 2009 through January 15, 2010. Pursuant to the Swap with Wachovia Bank, N.A., effective January 15, 2006, we swap 3 month LIBOR rates for fixed interest rates of 4.29% for a notional amount of $50 million for the period from January 15, 2006 through January 15, 2008, approximately $33.3 million for the period from January 15, 2008 to January 15, 2009 and approximately $16.7 million for the period from January 15, 2009 through January 15, 2010. These swaps fix the variable rate portion of the Senior Floating Rate Notes, while there is an additional margin of 4.00% that is fixed.

The interest rate swaps are accounted for in accordance with Statement of Financial Accounting Standard (‘‘SFAS’’) No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities and SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (collectively, ‘‘SFAS 133’’).  SFAS 133 establishes accounting and reporting standards for derivative instruments and hedging activities.  SFAS 133 requires that all derivatives be recognized as either assets or liabilities at fair value. The Company has accounted for the swaps as cash flow hedges. As of December 30, 2006, the interest rate swaps were recorded as an asset of $2.5 million. For the thirteen-week period ended December 30, 2006, the change in fair value was accumulated as other comprehensive income of $0.1 million, net of deferred taxes.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards No. 158, ‘‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of SFAS statements No. 87, 88, 106 and 132(R)’’, (SFAS 158), to improve financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit post-retirement plan as an asset or liability was issued. SFAS 158 requires employers to recognize in its changes of financial position the funded status of a benefit plan, measured as the difference between plan assets at fair value and the benefit obligation. For pension plans, the benefit obligation is the projected benefit obligation; for any other post-retirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated benefit obligation. If plan assets exceed plan liabilities, an asset would be recognized, and if plan liabilities exceed plan assets, a liability would be recognized. In addition, SFAS 158 requires changes in the funded status of a defined benefit post-retirement plan be recognized in comprehensive income in the year in which the changes occur. SFAS 158 does not change the amount of the expense recorded in a company’s statement of income related to defined benefit pos-retirement plans. SFAS 158 is effective for fiscal years ending after June 15, 2007. The Company is currently evaluating what effect, if any, adoption of SFAS 158 will have on the Company’s consolidated financial statements, which will not be determined until the September 29, 2007 measurement date of the assets and benefit obligations of the defined benefit plans.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, ‘‘Fair Value Measurements’’, (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (‘‘GAAP’’), and expands disclosures about fair value measurements. The statement applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, SFAS 157 does not require any new fair value measurements. However, for some entities, the application of SFAS 157 will change current practice. The Company is required to adopt SFAS 157 in the first quarter of fiscal year 2009. The Company is currently evaluating what effect, if any, adoption of SFAS 157 will have on the Company’s consolidated financial statements.

19

Table of Contents

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, ‘‘Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,’’ (SAB 108). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosure using both the rollover approach and the iron curtain approach. The rollover approach quantifies misstatements based on the amount of the error in the current year financial statements whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origin. Financial statements would require adjustment when either approach results in quantifying misstatement that is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. SAB 108 is effective in the fiscal year ending September 29, 2007. The adoption of SAB 108 had no impact on the Company’s financial position or statement of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,’’ (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for the fiscal year ending September 27, 2008. The Company is currently evaluating what effect, if any, adoption of FIN 48 will have on the Company’s consolidated financial statements.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

The Company’s cash flows and earnings are subject to fluctuations resulting from changes in interest rates, foreign currency exchange rates and raw material costs.  We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Our policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures.  We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives.  We monitor our underlying market risk exposures on an ongoing basis and believe that we can modify or adapt our hedging strategies as needed.

Our primary market risk is interest rate exposure with respect to our floating rate debt. The interest rate of the Senior Floating Rate Notes at December 30, 2006 was 9.25%. In connection with the offering of the Senior Floating Rate Notes, we entered into two interest rate swaps. These swaps effectively fix the variable interest rate portion of the Senior Floating Rate Notes at notional amounts of $150.0 million for two years beginning January 15, 2006, subsequently amortizing at a rate of $50.0 million per year until the maturity in 2010. The swaps fix the 3 month LIBOR rates at either 4.29% or 4.31% for the duration of the contracts. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Debt and Other Obligations — Senior Floating Rate Notes’’ and ‘‘— Interest Rate Swaps.’’

We conduct foreign operations in Canada and Ireland and utilize international suppliers and manufacturers. As a result, we are subject to risk from changes in foreign exchange rates. These changes result in cumulative translation adjustments, which are included in accumulated other comprehensive income (loss). We do not consider the potential loss resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates, as of December 30, 2006 to be material.

We purchase certain raw materials such as resin, steel, and wood that are subject to price volatility caused by unpredictable factors. Where possible, we employ fixed rate raw material purchase contracts and customer price adjustments to help us to manage this risk. We do not currently use derivatives to manage raw materials risk.

20

Table of Contents

Item 4.    Controls and Procedures

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, and based on their evaluation, the principal executive officer and principal financial officer have concluded that these controls and procedures are effective. There were no changes in our internal controls that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

21

PART II.    OTHER INFORMATION AND SIGNATURE

Item 1.     Legal Proceedings

During December 2004, a customer of Union’s was named in litigation that involved the company’s products. The complaint asserted causes of action against the defendant for improper advertisement to the consumer. The allegation suggests that advertisements lead the consumer to believe that the hand tools sold were manufactured in the boundaries of the United States. The allegation asserts cause of action against the customer for common law fraud. In the event that courts would deem a judgment against our customer, there is a possibility that the customer would seek legal recourse for a unspecified amount in contributory damages.

From approximately 1993 through 1999, we manufactured and sold 647,000 wheelbarrows with poly wheel hubs. Various claims were submitted, and lawsuits filed, to recover for injuries sustained while inflating tires on these wheelbarrows. In 2002, we participated in a voluntary ‘‘fast track’’ recall of these wheelbarrows with the Consumer Product Safety Commission. We again voluntarily recalled these wheelbarrows in June 2004 in cooperation with the Consumer Product Safety Commission. However, less than 1% of the total products sold were returned, leaving an unknown number in service. To date, we have responded to 31 claims involving this product. All open claims have been resolved. We are currently named as a defendant in one wheelbarrow claim. Although we believe that we have sufficient insurance coverage in place to cover these claims, a successful claim may exceed the limits of our coverage.

We are involved in various claims and legal actions that arise in the ordinary course of business. We do not believe that the ultimate resolution of any of these actions will have a material adverse effect on our consolidated financial position, results of operations, liquidity or capital resources.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.     Defaults Upon Senior Securities

None

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

None

Item 5.     Other Information

None

Item 6.     Exhibits

Exhibit 31.1			Certification of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2			Certification of Principal Financial Officer Pursuant to Rules 13a-14 and 15d-14, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002
Exhibit 32.2			Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002

22

AMES TRUE TEMPER, INC.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMES TRUE TEMPER, INC.

Date: February 13, 2007			/s/ Richard Dell
			Richard Dell
			Chief Executive Officer             (Principal Executive Officer             and Authorized Signatory)

Date: February 13, 2007			/s/ David M. Nuti
			David M. Nuti             Chief Financial Officer             (Principal Financial Officer)

23

AMES TRUE TEMPER, INC.

EXHIBIT INDEX

Exhibit						Description
	31	.1				Certification of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2				Certification of Principal Financial Officer Pursuant to Rules 13a-14 and 15d-14, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	.1				Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2				Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

24