Ames Companies 10-Q 2007 Q2 Quarterly report

Table of Contents

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 March 31, 2007

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer             Accelerated filer         Non-accelerated filer

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 May 15, 2007 the Registrant had 1,000 shares of its common stock, $1.00 par value, outstanding.

ATT HOLDING CO.

TABLE OF CONTENTS

						Page No.
PART I.    FINANCIAL INFORMATION
Item 1.			Financial Statements (unaudited):
			Condensed Consolidated Balance Sheets as of March 31, 2007 and September 30, 2006			1
			Condensed Consolidated Statements of Operations for the thirteen week periods ended March 31, 2007 and April 1, 2006			2
			Condensed Consolidated Statements of Operations for the twenty-six week periods ended March 31, 2007 and April 1, 2006			3
			Condensed Consolidated Statements of Cash Flows for the twenty-six week periods ended March 31, 2007 and April 1, 2006			4
			Notes to Condensed Consolidated Financial Statements			5
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			26
Item 4.			Controls and Procedures			26
PART II.    OTHER INFORMATION
Item 1.			Legal Proceedings			27
Item 1A.			Risk Factors			27
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			27
Item 3.			Defaults Upon Senior Securities			27
Item 4.			Submission of Matters to a Vote of Security-Holders			27
Item 5.			Other Information			27
Item 6.			Exhibits			27
			Signatures			28

Table of Contents

PART I.     FINANCIAL INFORMATION

Item 1.    Financial Statements

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

(Unaudited)

			March 31, 2007						September 30, 2006
Assets
Current assets:
Cash and cash equivalents				$	1,114					$	5,638
Restricted cash					2,081						2,081
Trade receivables, net					107,852						66,418
Inventories					148,994						141,239
Deferred income taxes					9,942						8,521
Prepaid expenses and other current assets					5,897						6,673
Total current assets					275,880						230,570
Property, plant and equipment, net					70,510						72,680
Intangibles, net					77,492						78,450
Goodwill					57,630						58,359
Other noncurrent assets					13,641						15,720
Total assets				$	495,153					$	455,779
Liabilities and stockholders’ deficit
Current liabilities:
Trade accounts payable				$	52,545					$	39,773
Accrued interest payable					6,803						7,325
Accrued expenses and other current liabilities					29,648						29,944
Revolving loan					102,899						66,608
Current portion of long-term debt					647						715
Total current liabilities					192,542						144,365
Deferred income taxes					29,518						26,325
Long-term debt					300,835						301,077
Accrued retirement benefits					7,412						7,812
Other liabilities					7,614						6,927
Total liabilities					537,921						486,506
Commitments and contingencies
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	)
Accumulated deficit					(147,715	)					(137,597	)
Accumulated other comprehensive income					7,986						9,909
Total stockholders’ deficit					(42,768	)					(30,727	)
Total liabilities and stockholders’ deficit				$	495,153					$	455,779

See accompanying notes.

1

Table of Contents

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

(Unaudited)

			Thirteen Week Period Ended
			March 31, 2007						April 1, 2006
Net sales				$	174,035					$	134,090
Cost of goods sold					131,447						98,904
Gross profit					42,588						35,186
Selling, general and administrative expenses					29,242						25,679
Loss (gain) on disposal of fixed assets					94						(612	)
Amortization of intangible assets					372						449
Operating income					12,880						9,670
Interest expense					9,510						7,902
Other expense					108						57
Income before income taxes					3,262						1,711
Income tax expense					4,204						549
Net (loss) income				$	(942	)				$	1,162

See accompanying notes.

2

Table of Contents

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

(Unaudited)

			Twenty – Six Week Period Ended
			March 31, 2007						April 1, 2006
Net sales				$	258,977					$	222,621
Cost of goods sold					194,062						166,193
Gross profit					64,915						56,428
Selling, general and administrative expenses					49,944						43,558
Loss (gain) on disposal of fixed assets					629						(499	)
Amortization of intangible assets					745						897
Operating income					13,597						12,472
Interest expense					18,132						15,281
Other expense					237						131
Loss before income taxes					(4,772	)					(2,940	)
Income tax expense (benefit)					5,346						(892	)
Net loss				$	(10,118	)				$	(2,048	)

See accompanying notes.

3

Table of Contents

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

(Unaudited)

			Twenty – Six Week Period Ended
			March 31, 2007						April 1, 2006
Operating activities
Net loss				$	(10,118	)				$	(2,048	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense					7,947						5,377
Amortization of intangible assets					745						897
Amortization of loan fees					1,262						1,234
Provision for deferred taxes					4,644						(3,062	)
(Benefit) provision for bad debts					(76	)					104
Noncash interest expense					135						133
Amortization of bond discount					54						54
Loss (gain) on sale of fixed assets					629						(499	)
Changes in assets and liabilities:
Trade receivables					(41,358	)					(49,983	)
Inventories					(7,755	)					(28,611	)
Prepaid expenses and other assets					869						(603	)
Accounts payable					12,772						16,299
Accrued expenses and other liabilities					(3,075	)					1,684
Net cash used in operating activities					(33,325	)					(59,024	)
Investing activities
Cash paid for property, plant and equipment					(7,338	)					(7,429	)
Proceeds from sale of fixed assets					659						1,666
Investment in joint venture					(300	)					—
Return of capital from joint venture					—						100
Net cash used in investing activities					(6,979	)					(5,663	)
Financing activities
Repayments of long-term debt					(364	)					(256	)
Borrowings on revolver, net					36,291						45,900
Debt issuance costs paid					—						(176	)
Net cash provided by financing activities					35,927						45,468
Effect of exchange rate changes on cash					(147	)					(22	)
Change in cash and cash equivalents					(4,524	)					(19,241	)
Cash and cash equivalents at beginning of period					5,638						21,394
Cash and cash equivalents at end of period				$	1,114					$	2,153
Supplemental Cash Flow Information
Interest paid				$	17,392					$	14,069
Income taxes paid				$	1,478					$	1,256

See accompanying notes.

4

Table of Contents

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

1.     Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (‘‘US GAAP’’) and the rules of the Securities and Exchange Commission (‘‘SEC’’). In the opinion of management, all adjustments necessary for a fair presentation have been included. All adjustments were comprised of normal recurring adjustments, except as noted in the Notes to Condensed Consolidated Financial Statements. Due to the seasonal nature of our business, the results of operations for the thirteen and twenty-six week periods ended March 31, 2007 are not necessarily indicative of results for the entire fiscal year ending September 29, 2007. Certain information and notes normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These interim financial statements and the related notes contain the accounts of ATT Holding Co. (the Company) on a consolidated basis and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006.

To maintain consistency with current presentation, the Company reclassified $187 of current portion of capital lease obligations from accrued expenses and other current liabilities to current portion of long-term debt and $65 of long-term portion of capital lease obligations from other liabilities to long-term debt in the September 30, 2006 condensed consolidated balance sheet. In addition, the Company reclassified certain deferred taxes of $2,542 from deferred income taxes and accrued expenses to other current liabilities in the September 30, 2006 condensed consolidated balance sheet. These reclassifications had no effect on previously reported operating income, net loss or stockholders’ deficit.

The condensed consolidated statement of cash flows for the twenty-six week period ended April 1, 2006 reflects a reclassification of $57 of treasury stock, previously shown as a separate component of cash used in investing activities, to accrued expenses and other liabilities.

The accompanying condensed consolidated financial statements include the accounts of ATT Holding Co. and its wholly-owned subsidiaries. All material intercompany transactions have been eliminated in consolidation.

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.’’ ATT Holding Co. is a holding company which has no interest, operations or activities other than through its ownership of 100% of Ames True Temper (ATT).

2.     Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (‘‘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. A two-step process is prescribed whereby the threshold for recognition is a more-likely-than-not test that the tax position will be sustained upon examination based on the technical merits of the position, and the tax position is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settleme nt. FIN 48 is effective for the first quarter of 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.

5

Table of Contents

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

In September 2006, the FASB issued Statement of Financial Accounting Standards (‘‘SFAS’’) 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. This statement is effective for fiscal years beginning after November 15, 2007. The Company is required to adopt SFAS 157 in the first quarter of f iscal 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 FASB issued SFAS 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. 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 obligatio n 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 operations 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 Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 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 February 2007, The FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115’’ (‘‘SFAS 159’’). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company has not yet assessed the impact, if any, on its consolidated financial s tatements of adopting SFAS 159.

6

Table of Contents

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

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 Comp any 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 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, 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 co nsideration 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

7

Table of Contents

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

being accounted for as purchases in accordance with SFAS No. 141, Business Combinations. Prior to the end of fiscal year 2006, Acorn, Union and HDAC were merged into Ames True Temper. The financial statements as of March 31, 2007 reflect a final allocation of the purchase price. The Hound Dog acquisition was subject to a purchase price adjustment that was contingent upon the achievement of certain financial goals. During the quarter the Company made a $602 contingent payment that was added to the cost of the acquisition 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 final 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					18,900
Fair value of assets acquired, primarily accounts receivable, inventory and fixed assets					(47,260	)
Contingent payment to Hound Dog					602
Identified intangible assets, primarily tradenames and patents					(4,830	)
Cost in excess of fair value of net assets acquired (goodwill)				$	17,538

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

The following unaudited pro forma financial information reflects the results of operations as if the acquisition of Acorn had occurred as of the beginning of the periods being presented. Pro forma adjustments include only the effects of events directly attributed to the transaction that are factually supportable and expected to have a continuing impact.

The pro forma data reflected in the table below includes adjustments to conform the acquired business’ accounting policies to the Company’s accounting policies, and interest expense on the acquisition debt and the related income tax effects.

Thirteen Week Period Ended April 1, 2006									Twenty-Six Week Period Ended April 1, 2006
Net Sales			Net income						Net Sales						Net loss
$156,134				$	1,980					$	260,502					$	(4,938	)

The unaudited pro forma financial information does not necessarily reflect the operating results that would have occurred had the acquisition been consummated as of the above date, nor is such information indicative of future operating results. Pro-forma information, reflecting the results of operations of Hound Dog, is not provided as this acquisition did not materially impact the Company’s results of operations.

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 carryforwards. It is currently projected that ATT will be able to utilize approximately $1,100 of the loss carryforwards.  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.

8

Table of Contents

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

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 March 31, 2007, the Company reduced the restructuring reserve based on payments and the refinement of cost estimates.

At March 31, 2007, the remaining restructuring reserves of $2,349 were included in accrued expenses and other current liabilities and other 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					110
Purchase Accounting Adjustments					(284	)
Payments					(947	)
Balance as of March 31, 2007				$	2,349

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. 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 March 31, 2007, the Company’s operating results refl ect a charge of $1 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.

At March 31, 2007, the remaining restructuring reserves of $288 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				$	1,175
Payments					(647	)
Adjustments					(240	)
Balance as of March 31, 2007				$	288

9

Table of Contents

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

5.     Inventories

Inventories are as follows:

			March 31, 2007						September 30, 2006
Finished goods				$	94,725					$	86,380
Work in process					18,292						21,326
Raw materials					35,977						33,533
				$	148,994					$	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 twenty-six weeks ended March 31, 2007, primarily as a result of the refinement of cost estimates relating to the restructuring reserve, the impact of foreign currency exchange rates and the contingent payment related to the Hound Dog transaction. 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 1 to 18 years. Amortization of other intangibl es amounted to $372 and $745 for the thirteen and twenty-six weeks ended March 31, 2007, respectively. The estimated aggregate amortization expense for each of the succeeding periods is as follows: $744 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 twenty-six week period ended March 31, 2007 are as follows:

Goodwill at September 30, 2006				$	58,359
Revision of purchase price allocation					(127	)
Currency translation adjustments					(602	)
Goodwill at March 31, 2007				$	57,630

10

Table of Contents

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

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

			March 31, 2007						September 30, 2006
Finite lived intangible assets:
Technology (patents)				$	1,356					$	1,356
Non-compete agreements					976						976
Customer relationships					11,644						11,672
					13,976						14,004
Accumulated amortization:
Technology (patents)					(775	)					(619	)
Non-compete agreements					(912	)					(902	)
Customer relationships					(3,125	)					(2,546	)
					(4,812	)					(4,067	)
Net finite lived intangible assets					9,164						9,937
Indefinite lived intangible assets:
Trade names					68,328						68,513
Total Intangibles, net				$	77,492					$	78,450

7.     Income Taxes

At the end of each interim reporting period, the Company estimates 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 change in the effective tax rate was primarily due to the recording of an additional deferred tax asset valuation allowance of $3,084 and $6,916 for the thirteen and twenty-six weeks ended March 31, 2007, respectively. The valuation allowance is primarily attributable to the uncertainty regarding the realization of the federal and state deferred tax assets, including net operating loss carryforwards, related to United States operations.

8.     Debt Arrangements

Senior Subordinated Notes

On June 28, 2004, the Company 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 Restated Senior Secured Credit Agreement, equally with any of the Company’s future senior subordinated debt, ahead of any of the Company’s future debt that expressly provides for subordination to the new Senior Subordinated Notes and effectively behind all of the existing and

11

Table of Contents

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

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.

The Company pays 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 the Company’s ability and the ability of the Company’s 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 the Company’s 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. The Company may redeem the Senior Subordinated Notes on or after July 15, 2008, except the Company 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. The Company is 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.

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 9.36% at March 31, 2007. 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 with Bank of America, N.A., which became effective on January 17, 2006, ATT swaps 3-month

12

Table of Contents

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

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 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 an d 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 March 31, 2007, the interest rate swaps were recorded as an asset of $1,598, included in other noncurrent assets in the Company’s consolidated balance sheet. For the twenty-six week period ended March 31, 2007, the change in fair value was recognized as a reduction of other comprehensive income of $633, net of deferred taxes of $390.

Term Note

On July 19, 2005, ATT 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 ATT 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 March 31, 2007, the ATT 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.

Borrowings outstanding under the revolving credit facility as of March 31, 2007 and September 30, 2006 were $102,899 and $66,608, respectively. The Company had letters of credit outstanding totaling $2,692 and $2,410 as of March 31, 2007 and September 30, 2006, respectively. The total amount available under the revolving credit facility at March 31, 2007 was $24,409. In addition, the Company had letters of credit outstanding with another financial institution in the amount of

13

Table of Contents

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

$1,700 and $1,982 as of March 31, 2007 and September 30, 2006, respectively. 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 9.75% at March 31, 2007.

Total indebtedness is as follows:

			March 31, 2007						September 30, 2006
Revolving loan facility dated 4/7/06, expires 2011				$	102,899					$	66,608
Term Note due 2010					1,841						2,103
Capital lease obligations					150						252
Senior Floating Rate Notes due 2012					150,000						150,000
10% Senior Subordinated Notes due 2012					150,000						150,000
Total debt					404,890						368,963
Less short-term revolving loan facilities					(102,899	)					(66,608	)
Less current portion of capital lease obligations					(112	)					(187	)
Less current portion of long-term debt					(535	)					(528	)
Less unamortized discount					(509	)					(563	)
Long-term debt				$	300,835					$	301,077

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 earnings before interest, income taxes, depreciation and amortization modified by certain adjustments as defined in the Credit Agreement (‘‘Adjusted EBITDA’’) of $41,000 for any period of four quarters ending on the last day of any fiscal quarter. As of March 31, 2007, the Company was in compliance with all applicable debt covenants.

14

Table of Contents

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

9.     Pension and Other Post-retirement Benefits

			Pension Benefits												Other Benefits
			Thirteen Week Period Ended												Thirteen Week Period Ended
			March 31, 2007						April 1, 2006						March 31, 2007						April 1, 2006
Service Cost				$	796					$	889					$	—					$	1
Interest Cost					2,139						1,653						27						36
Expected return on plan assets					(2,895	)					(2,420	)					—						—
Amortization of unrecognized net loss					(12	)					128						(28	)					—
Net periodic benefit cost				$	28					$	250					$	(1	)				$	37

			Pension Benefits												Other Benefits
			Twenty-Six Week Period Ended												Twenty-Six Week Period Ended
			March 31, 2007						April 1, 2006						March 31, 2007						April 1, 2006
Service Cost				$	1,592					$	1,777					$	1					$	2
Interest Cost					4,278						3,305						52						72
Expected return on plan assets					(5,789	)					(4,838	)					—						—
Amortization of unrecognized net loss					(25	)					256						(56	)					—
Net periodic benefit cost				$	56					$	500					$	(3	)				$	74

Employer Contributions

During the thirteen-week periods ended March 31, 2007 and April 1, 2006, the Company contributed $142 and $49, respectively, to its defined benefit pension plans. During the twenty-six week periods ended March 31, 2007 and April 1, 2006 the Company contributed $417 and $94, respectively, to its defined benefit pension plans.

During the thirteen-week periods ended March 31, 2007 and April 1, 2006, the Company contributed $0 and $29, respectively, to its post-retirement benefit plans. During the twenty-six week periods ended March 31, 2007 and April 1, 2006, the Company contributed $0 and $85, respectively, to its post-retirement benefit plans.

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

15

Table of Contents

10.     Other Comprehensive Income

			Thirteen Week Period Ended
			March 31, 2007						April 1, 2006
Net (loss) income				$	(942	)				$	1,162
Other comprehensive (loss) income:
Currency translation adjustment					297						(148	)
Fair value adjustments of swaps, net of tax					(569	)					961
Comprehensive (loss) income				$	(1,214	)				$	1,975

			Twenty-Six Week Period Ended
			March 31, 2007						April 1, 2006
Net loss				$	(10,118	)				$	(2,048	)
Other comprehensive (loss) income:
Currency translation adjustment					(1,290	)					(133	)
Fair value adjustments of swaps, net of tax					(633	)					1,444
Comprehensive loss				$	(12,041	)				$	(737	)

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 Week Period Ended
			March 31, 2007												April 1, 2006
			Net Sales						Earnings (Loss) Before Income Taxes						Net Sales						(Loss) Earnings Before Income Taxes
United States				$	152,664					$	1,770					$	114,056					$	(1,068	)
Europe					2,053						(43	)					1,798						48
Canada					19,318						1,535						18,236						2,731
Total				$	174,035					$	3,262					$	134,090					$	1,711

			Twenty-Six Week Period Ended
			March 31, 2007												April 1, 2006
			Net Sales						(Loss) Earnings Before Income Taxes						Net Sales						(Loss) Earnings Before Income Taxes
United States				$	221,362					$	(6,933	)				$	184,041					$	(7,863	)
Europe					3,570						(214	)					2,954						(28	)
Canada					34,045						2,375						35,626						4,951
Total				$	258,977					$	(4,772	)				$	222,621					$	(2,940	)

16

Table of Contents

			Identifiable Assets
			March 31, 2007						September 30, 2006
United States				$	427,665					$	399,890
Europe					6,652						6,589
Canada					60,836						49,300
Total				$	495,153					$	455,779

The Company’s top two customers represented approximately 28% and 20% of net sales for the thirteen-week period ended March 31, 2007 and approximately 29% and 21% for the thirteen-week period ended April 1, 2006. These customers represented approximately 28% and 18% of the net sales for the twenty -six week period ended March 31, 2007 and approximately 30% and 20% for the twenty-six week period ended April 1, 2006.

12.     Joint Venture

During March 2007, the Company entered into a joint venture agreement with Nan Shan International Co., Ltd. for the purpose of manufacturing and marketing certain garden tools. The joint venture is 60% owned by Taiwan Nan Shan Bamboo Ware Co. and 40% owned by the Company. The joint venture will operate under the name Huzhou Lifeng Furniture Industry and Commerce Co., Ltd, which is located in China. The Company has a minority representation on the Board of Directors of the joint venture. The Company has accounted for its investment under the cost method..

13.     Related Party Transactions

The Company is party to a management agreement with Castle Harlan, Inc., an affiliate of a shareholder, under which Castle Harlan, Inc. provides business and organizational strategy, financial and investment management, advisory, merchant and investment banking services to the Company. The Company recorded expenses of $724 and $1,464 for the thirteen and twenty-six weeks ended March 31, 2007, respectively, related to the annual management fees which are included in selling, general and administrative expense. The expense for the thirteen and twenty-six week periods ended April 1, 2006 was $375 and $766, respectively. The management fees are payable quarterly in advance in accordance with the management agreement.

14.     Contingencies

Management continually evaluates the Company’s contingencies, including various lawsuits and claims which arise in the normal course of business, product and general liabilities, worker’s compensation, property losses and other fiduciary liabilities for which the Company is self-insured or retains a high exposure limit. Self-insurance reserves are established based on actuarial estimates. Legal costs incurred in connection with the resolution of claims, lawsuits and other contingencies generally are expensed as incurred. In the opinion of management, its assessment of contingencies is reasonable and related reserves, in the aggregate, are adequate; however, there can be no assurance that future quarterly or annual operating results will not be materially affected by final resolution of these matters. The following matters are the more significant of the Company’s identified contingencies.

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.

The Company is involved in lawsuits and claims, including certain environmental matters, arising out of the normal course of its business. In the opinion of management, the ultimate amount of liability, if any, under pending litigation will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

17

Table of Contents

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

Forward Looking Statements

The following discussion and analysis of our parent’s results of operations and financial condition should be read in conjunction with and is qualified in its entirety by reference to the unaudited condensed consolidated financial statements and accompanying notes of ATT Holding Co. (the Company) as it 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. 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 are identified by terms and phrases such as ‘‘may,’’ ‘‘will,’’ ‘‘plans,’’ ‘‘estimates,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘expects,’’ ‘‘intends’’ and similar expressions and include references to assumptions and related to our future prospects, developments and business strategies. 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.

Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

	•	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

	•	availability and cost 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 included in this report, whether as a result of new information, future events or otherwise, after the date of this report. This report should be read in conjunction with the Company’s most recent financial statements, Item 1A, Risk Factors and the Management Discussion & Analysis (MD&A) included in the Company’s Form 10-K for the fiscal year ended September&nb sp;30, 2006.

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,

18

Table of Contents

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.

For the thirteen-week period ended March 31, 2007 and April 1, 2006, the Company’s net sales within the United States were 87.7% and 85.1% of total net sales, respectively. For the twenty-six week period ended March 31, 2007 and April 1, 2006, the Company’s net sales within the United States were 85.5% and 82.7% of total net sales, respectively.

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 Products, Inc, (‘‘Acorn’’) 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 us, Acorn and ATTUT Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of ours (‘‘Merger Sub’’). Pursuant to the Acorn 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 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 $5.2 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 March 31, 2007 compared to thirteen weeks ended April 1, 2006

Net Sales.    Net sales for the thirteen-week period ended March 31, 2007 increased $39.9 million to $174.0 million compared to $134.1 million for the thirteen weeks ended April 1, 2006. Overall net sales increased primarily from higher sales volumes as a result of the Union and Hound Dog acquisitions, increased sales to certain major retail customers, and decreased customer program

19

Table of Contents

expenses. The increase was partially offset by the recording of store servicing fees for certain customers as a reduction in revenue. In the prior thirteen-weeks ended April 1, 2006, these store servicing fees were recorded as an expense in selling, general and administrative expenses (SG&A). Recording the fees as a reduction to revenue was due to a change in the structure of the store servicing arrangements and the excess of the fees over the fair value of the benefit derived from this arrangement with certain customers.

Gross Profit.    Gross profit for the thirteen weeks ended March 31, 2007 increased $7.4 million to $42.6 million from $35.2 million for the thirteen weeks ended April 1, 2006. This increase was due primarily to increased sales volume and was partially offset by increases in freight and steel costs, and was partially offset by the recording of store servicing fees for certain customers as a reduction in revenue. In the prior thirteen-weeks ended April 1, 2006, these store servicing fees were recorded as an expense in SG&A. Recording the fees as a reduction to revenue was due to a change in the structure of the store servicing arrangements and the excess of the fair value of the benefit derived from this arrangement with certain customers. Gross profit as a percentage of net sales decreased to 24.5% fro m 26.2% during this period due to manufacturing variances related to lower production levels, the mix of products sold and the recording of store servicing fees as described above.

Selling, General and Administrative (‘‘SG&A’’) Expenses.    SG&A expenses for the thirteen weeks ended March 31, 2007 increased $3.5 million to $29.2 million from $25.7 million for the thirteen weeks ended April 1, 2006. The increase relates primarily to selling, commission and distribution expenses due to increased sales and increased compensation and professional service expenses due to the integration of the Union acquisition, partially offset by the recording of store servicing fees for certain customers as a reduction in revenue. In the prior thirteen-weeks ended April 1, 2006, these store servicing fees were recorded as an expense in SG&A.

Amortization of Intangible Assets.    During each of the thirteen weeks ended March 31, 2007 and April 1, 2006, we recorded $0.4 million in amortization expense.

Interest Expense.    Interest expense for the thirteen weeks ended March 31, 2007 increased $1.6 million to $9.5 million from $7.9 million during the thirteen weeks ended April 1, 2006. The increase was a result of borrowings under our revolving credit facility for the Union and Hound Dog acquisitions and higher average interest rates as compared to the prior period.

Income Tax Expense.    Income tax expense for the thirteen weeks ended March 31, 2007 was $4.2 million. Income tax expense for the thirteen weeks ended April 1, 2006 was $0.5 million or approximately 32.1% of income 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. 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 September 30, 2006, a deferred tax asset valuation allowance was necessary for a portion of our deferred tax assets. During the thirteen weeks ended March 31, 2007, based on revised projections of future taxable income we recorded a valuation allowance of $3.1 million on remaining U.S. federal and state deferred tax assets which are not otherwise offset by reversing deferred tax liabilities.

Twenty-six weeks ended March 31, 2007 compared to twenty-six weeks ended April 1, 2006

Net Sales.    Net sales for the twenty-six-weeks ended March 31, 2007 increased $36.4 million, or 17.2%, to $259.0 million compared to $222.6 million for the twenty-six weeks ended April 1, 2006. Overall net sales increased primarily from higher sales volumes as a result of the Union and Hound Dog acquisitions, increased sales to certain major retail customers, and decreased customer program expenses. The increase was partially offset by the recording of store servicing fees for certain customers as a reduction in revenue. In the prior twenty-six weeks ended April 1, 2006, these store servicing fees were recorded as an expense in SG&A. Recording the fees as a reduction to revenue was due to a change in the structure of the store servicing arrangements and the excess of the fees

20

Table of Contents

over the fair value of the benefit derived from this arrangement with certain customers. This increase was partially offset by a decrease in snow tools sales due to a lack of snow in certain major geographic markets in the United States and Canada.

Gross Profit.    Gross profit for the twenty-six weeks ended March 31, 2007 increased $8.5 million to $64.9 million from $56.4 million for the twenty-six weeks ended April 1, 2006. This increase was due primarily to the increase in sales volume and was partially offset by increases in freight and steel costs and the recording of store servicing fees for certain customers as a reduction in revenue. In the prior twenty-six weeks ended April 1, 2006, these store servicing fees were recorded as an expense in SG&A. Recording the fees as a reduction to revenue was due to a change in the structure of the store servicing arrangements and the excess of the fees over the fair value of the benefit derived from this arrangement with certain customers. Gross profit as a percentage of net sales increased to 25.6% fr om 25.3% during this period due to the mix of products sold.

Selling, General and Administrative Expenses.    SG&A expenses for the twenty-six weeks ended March 31, 2007 increased $6.3 million to $49.9 million from $43.6 million for the twenty-six weeks ended April 1, 2006. The increase relates primarily to incremental compensation and professional service expenses as a result of the Union acquisition, higher variable selling costs, such as commission and distribution expenses and new product development costs, partially offset by recoveries under U.S. anti-dumping and the recording of store servicing fees for certain customers as a reduction in revenue. In the prior twenty-six weeks ended April 1, 2006, these store servicing fees were recorded as an expense in SG&A.

Amortization of Intangible Assets.    During the twenty-six weeks ended March 31, 2007, we recorded $0.7 million in amortization expense, as compared to $0.9 million during the twenty-six weeks ended April 1, 2006.

Interest Expense.    Interest expense for the twenty-six weeks ended March 31, 2007 increased $2.8 million to $18.1 million from $15.3 million during the twenty-six weeks ended April 1, 2006. The increase was a result of borrowings under our revolving credit facility for the Union and Hound Dog acquisitions and higher average interest rates as compared to the prior period.

Income Tax Expense (Benefit).    Income tax expense for the twenty-six weeks ended March 31, 2007 was $5.3 million. Income tax benefit for the twenty-six weeks ended April 1, 2006 was $0.9 million, or approximately 30.3% 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. 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 September 30, 2006, a deferred tax asset valuation allowance was necessary for a portion of our deferred tax assets. During the twenty-six weeks ended March 31, 2007, based on revised projections of future taxable income we recorded a valuation allowance of $6.9 million on remaining U.S. federal and state deferred tax assets which are not otherwise offset by reversing deferred tax liabilities

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 twenty-six weeks ended March 31, 2007 was $33.3 million, compared to $59.0 million for the twenty-six weeks ended April 1, 2006. This lower cash

21

Table of Contents

usage in fiscal 2007 as compared to fiscal 2006 is primarily the result of a focused effort to reduce inventory in the the thirteen-weeks ended March 31, 2007. This resulted in a cash usage for inventory of $7.8 in the twenty-six weeks ended March 31, 2007 as compared to the cash usage for inventory of $28.6 in the twenty-six weeks ended April 1, 2006. 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 $7.0 million and $5.7 million for the twenty-six-week periods ended March 31, 2007 and April 1, 2006, respectively, was due primarily to the purchase of fixed assets, partially offset by proceeds from the sale of fixed assets. Cash provided by financing activities was $36.0 million and $45.5 million for the twenty-six weeks ended March 31, 2007 and April 1, 2006, respectively and was primarily the result of net borrowings under the revolving credit facility.

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 Hol ding 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 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 earnings before income taxes, depreciation and amortization (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 March 31, 2007, we were in compliance with all of our financial covenants. As of Marc h 31, 2007, we had $102.9 million of borrowings on the revolving portion of our senior credit facility, with $2.7 million of letters of credit outstanding. At March 31, 2007, based on the borrowing base calculation, the revolver limit was $130.0 million, with

22

Table of Contents

$24.4 million available under the revolving credit facility. In addition, the Company had $1.7 million of letters of credit outstanding with another financial institution as of March 31, 2007. 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 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

23

Table of Contents

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 March 31, 2007, we were in compliance with these covenants.

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 deri vative 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

24

Table of Contents

March 31, 2007, the interest rate swaps were recorded as an asset of $1.6 million. For the twenty-six week period ended March 31, 2007, the change in fair value was recognized as a reduction of other comprehensive income of $0.6 million, net of deferred taxes of $0.4 million.

Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (‘‘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. A two-step process is prescribed whereby the threshold for recognition is a more-likely-than-not test that the tax position will be sustained upon examination based on the technical merits of the position, and the tax position is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. FIN 48 is effective for the first quarter of 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.

In September 2006, the FASB issued SFAS 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. This statement is effective for fiscal years beginning after November 15, 2007. 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 FASB issued SFAS 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 accumula ted 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 Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 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&rs quo;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.

25

Table of Contents

In February 2007, The FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115’’ (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company has not yet assessed the impact, if any, on its consolidated financial statements of adopting SFAS 1 59.

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 March 31, 2007 was 9.75%. 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 March 31, 2007 to be material. We do not currently manage our foreign exchange risk through the use of derivative instruments.

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 manage our raw materials risk through the use of derivative instruments.

Item 4.    Controls and Procedures

We maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in reports under Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosures. Our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period cover by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting them on a timely basis to information required to be included in our submissions and filings with the SEC.

There have not been any changes in our internal control over financial reporting (as term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

26

Table of Contents

PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

Not applicable

Item 1A.    Risk Factors

Not applicable

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

27

Table of Contents

AMES TRUE TEMPER, INC.

SIGNATURES

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: May 15, 2007			/s/ Richard Dell
			Richard Dell
			Chief Executive Officer             (Principal Executive Officer             and Authorized Signatory)

Date: May 15, 2007			/s/ David M. Nuti
			David M. Nuti             Chief Financial Officer             (Principal Financial Officer)

28

Table of Contents

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.

29