SOURCE: Aldila

November 09, 2007 16:15 ET

Aldila Announces Results for Third Quarter 2007

POWAY, CA--(Marketwire - November 9, 2007) - ALDILA, INC. (NASDAQ: ALDA) announced today net sales of $13.2 million for the three months ended September 30, 2007 and net income of $687,000, ($0.12 fully diluted per share). In the comparable 2006 third quarter, the Company had net sales of $16.3 million and net income of $2.9 million, ($0.51 fully diluted per share). In the 2006 third quarter the Company benefited from a settlement as a class member in a civil suit against certain carbon fiber producers in the amount of $2.2 million pretax. Excluding the benefit from the settlement, the Company's net income would have been $1.4 million, or $0.26 fully diluted per share. For the nine months ended September 30, 2007, net sales were $51.5 million and net income was $5.0 million, ($0.90 fully diluted per share). In the nine month period of 2006, net sales were $54.5 million and net income was $9.9 million, ($1.77 fully diluted per share).

"Sales of golf shafts and related products declined 22% in our third quarter 2007 from the comparable quarter of 2006," said Mr. Peter R. Mathewson, Chairman of the Board and CEO. "Sales of composite prepreg materials in the third quarter of 2007 were flat as compared to the 2006 period and represented 17% of consolidated net sales in the current quarter. The average selling price of golf shafts sold decreased 1% quarter on quarter on a 19% decrease in unit sales. Our selling, general and administrative (SG&A) expense was higher in the current quarter as compared to the comparable quarter of 2006 predominantly due to expenses related to our modified Dutch auction Tender Offer, which closed on September 28, 2007 in which 370,845 shares were tendered," said Mr. Mathewson.

"While we are disappointed in the third quarter results, historically it is our weakest quarter and we remained profitable in the quarter even as our sales declined significantly. Our ending backlog increased by 5% at September 30, 2007 to $12.2 million from $11.5 million at September 30, 2006. Historically, the majority of the dollar volume of the Company's backlog has been shipped during the following three months after the close of a quarter. However, the backlog as of September 30, 2007 contains a higher percentage of orders that are scheduled for shipment beyond the following three months, particularly in the first quarter of 2008. In the 2007 third quarter the Company repurchased 12,662 shares of its common stock under the Company's previously announced Stock Repurchase Plan ('Plan'). That Plan was terminated upon the announcement of the Dutch auction Tender Offer on August 20, 2007," Mr. Mathewson said.

"Our total balance of cash, cash equivalents and restricted cash at September 30, 2007 remains strong at $17.7 million after paying $2.5 million in dividends, spending $5.1 million on our capital spending program and $486,000 repurchasing 32,661 shares of Aldila common stock during the nine month period ended September 30, 2007. Of this cash balance, $6.2 million was used to settle the Company's Dutch auction Tender Offer during the first week of October. Although our inventories have risen to $16.1 million at the end of the 2007 third quarter, we fully expect them to be reduced by year end," said Mr. Mathewson.

"We remain optimistic with how we are positioned for the future. We will begin sales of our new DVS™ shaft family in December 2007. We anticipate the inclusion of this shaft in several OEM wood club programs in 2008. Our premium shaft offerings of NV™, NVS™, VS Proto™, MOI™ and soon DVS™, represent a growing menu of shafts we offer our OEM club partners and the avid golfers of the world," Mr. Mathewson said.

"With the January 2008 USGA rule change allowing further adjustability of clubs, the door will be open for the introduction of quick connecting systems to attach the shaft to a metal wood head. A golfer will have the ability to purchase multiple branded shafts with different playing characteristics to use with his favorite driver head featuring a quick connect system. These will appear first in drivers and then we expect it to follow suit in fairway woods and hybrids. We anticipate this rule change to have a positive effect in our efforts to sell premium branded shafts. We believe that club companies will enter this new market cautiously and in a limited fashion as they explore how to best capitalize on this rule change," said Mr. Mathewson.

"On the PGA and Nationwide Tours our number of shafts in play, week to week, continue to excel. With only a few tournaments remaining in the 2007 season, players using Aldila shafts have won 19 events on the PGA Tour and nearly half of all the events on the Nationwide Tour. The recently introduced Aldila DVS™, along with the VS Proto™ and NV™, continue to be the leading wood and hybrid shaft series on the PGA and Nationwide Tours. Aldila also won the Grand Slam of Shafts in 2007 as the leading shaft for both woods and hybrids at every major championship on the PGA Tour in 2007. Paula Creamer, a member of the Aldila Advisory Staff, led the U.S. Women's team to victory in the Solheim Cup, playing her customary pink NV™. We have also added Stuart Appleby and Boo Weekley to the Aldila Advisory Staff. Appleby has two wins this year on Tour. Weekley won for the first time on the PGA Tour at the Verizon Heritage Championship playing an Aldila MOI™ driver shaft. On the consumer side, The Darrell Consumer Survey for 2007 found Aldila to be the leading shaft brand in total shaft usage for Drivers, Fairway Woods and Hybrid clubs. In the Hybrid club category, Aldila outpaced its nearest competitor by nearly a 4 to 1 margin," said Mr. Mathewson.

"Our Vietnam factory has achieved several key shaft qualifications on some high volume programs allowing us to ramp up production for the remainder of the year. Our goal for Vietnam during 2007 has been to qualify shaft programs and establish a good run rate based on a two shift operation by year end. This will allow us to utilize our Vietnam factory as a key contributor in 2008. The immediate benefit in 2008 will be the shifting of a significant portion of our Mexican production to our Asian factories and the cost savings involved in the process. We will also have the benefit of additional overall capacity located in a low cost area," Mr. Mathewson said.

"Our composite material sales were flat in the quarter but up 13% year to date. We are on schedule to have our new, wide prepreg line in place by the end of this year. This production line will be a key component in increasing our prepreg sales in 2008 and beyond. Carbon Fiber Technology LLC ('CFT'), our joint venture carbon fiber factory, ran well during the quarter. We continue to work on developing a reliable precursor supplier for the future," Mr. Mathewson said.

Aldila will host a conference call at 5 p.m. Eastern time, on Tuesday, November 13, 2007, with Peter R. Mathewson, Chairman and CEO, and Robert J. Cierzan, Chief Financial Officer, to review Aldila's 2007 Third Quarter Financial Results. For telephone access to the conference call dial 866-225-9256, for international calls dial 416-641-6141 and request connection to the Aldila conference call, ID # 3241995. A live web cast of the conference call can be accessed on the Aldila web site at http://www.aldila.com. An archive of the web cast will be available through our web site for 90 days following the conference call.

This press release contains forward-looking statements based on our expectations as of the date of this press release. These statements necessarily reflect assumptions that we make in evaluating our expectations as to the future. Forward-looking statements are necessarily subject to risks and uncertainties. Our actual future performance and results could differ from that contained in or suggested by these forward-looking statements as a result of a variety of factors. Our filings with the Securities and Exchange Commission present a detailed discussion of the principal risks and uncertainties related to our future operations, in particular our Annual Report on Form 10-K for the year ended December 31, 2006, under "Business Risks" in Part I, Item 1, and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Part I, Item 7 of the Form 10-K, and reports on Form 10-Q and Form 8-K, all of which can be obtained at www.sec.gov.

The forward-looking statements in this press release are particularly subject to the risks that:

--  our NV™ and VS Proto™ shaft lines and that their success may not
    continue to attract new customer accounts;
--  our product offerings, including the Aldila NV™ and Aldila VS
    Proto™ shaft lines and product offerings outside the golf industry, will
    not achieve or maintain success with consumers or OEM customers;
--  we will not maintain or increase our market share at our principal
    customers;
--  demand for clubs manufactured by our principal customers will decline,
    thereby affecting their demand for our shafts;
--  the market for graphite shafts will continue to be extremely
    competitive, affecting selling prices and profitability;
--  our international operations will be adversely affected by political
    instability, currency fluctuations, export/import regulations or other
    risks typical of multi-national operations, particularly those in less
    developed countries;
--  CFT will be unsuccessful as a result, for example, of internal
    operational problems, raw material supply problems, changes in demand for
    carbon fiber based products, or difficulties in operating a joint venture;
--  the Company will not be able to acquire adequate supplies of carbon
    fiber, other than that being produced at CFT, at reasonable market prices;
--  acts of terrorism, natural disasters, or disease pandemics interfere
    with our manufacturing operations or our ability to ship our finished
    product to meet customer demand.
    

For additional information about Aldila, Inc., please go to the Company's web site at www.aldila.com.

                      ALDILA, INC. AND SUBSIDIARIES
                  CONSOLIDATED BALANCE SHEETS - UNAUDITED
                    (In thousands, except share data)

                                                September 30, December 31,
                                                    2007          2006
                                                ------------- ------------
ASSETS

CURRENT ASSETS:
          Cash and cash equivalents             $      17,030 $      3,882
          Marketable securities                             - $     11,300
          Restricted cash                                 637        1,444
          Accounts receivable                           5,207        8,862
          Income taxes receivable                       1,496        1,237
          Inventories                                  16,109       13,691
          Deferred tax assets                           1,521        1,360
          Prepaid expenses and other current
           assets                                         490          795
                                                ------------- ------------
               Total current assets                    42,490       42,571

PROPERTY, PLANT AND EQUIPMENT                          12,596        8,794

INVESTMENT IN JOINT VENTURE                             3,134        3,091

DEFERRED TAXES                                          1,436        1,144

OTHER NON-CURRENT ASSETS                                  271          296
                                                ------------- ------------
TOTAL ASSETS                                    $      59,927 $     55,896
                                                ============= ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
          Accounts payable                      $       4,891 $      4,479
          Accrued expenses                              2,343        2,042
          Other current liability                         137            -
                                                ------------- ------------
               Total current liabilities                7,371        6,521

LONG-TERM LIABILITIES:
          Deferred rent                                   169           49
          Other long-term liabilities                     655            -
                                                ------------- ------------
               Total liabilities                        8,195        6,570
                                                ------------- ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
          Preferred stock, $.01 par value;
           authorized 5,000,000 shares; no
           shares issued
          Common stock, $.01 par value;
           authorized 30,000,000 shares; issued
           and outstanding 5,525,080 shares as
           of September 30, 2007 and 5,524,250
           shares as of December 31, 2006                  55           55
          Additional paid-in capital                   49,801       49,903
          Retained earnings (accumulated deficit)       1,876         (632)
                                                ------------- ------------
               Total stockholders' equity              51,732       49,326
                                                ------------- ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $      59,927 $     55,896
                                                ============= ============




                      ALDILA, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF OPERATIONS  - UNAUDITED
                  (In thousands, except per share data)

                                    Three months ended   Nine months ended
                                        September 30,     September 30,
                                    ------------------- -------------------
                                      2007      2006      2007      2006
                                    --------  --------- --------- ---------

NET SALES                           $ 13,201  $  16,329 $  51,478 $  54,496
COST OF SALES                          9,796     12,216    34,951    34,529
                                    --------  --------- --------- ---------
          Gross profit                 3,405      4,113    16,527    19,967
                                    --------  --------- --------- ---------

SELLING, GENERAL AND ADMINISTRATIVE    2,709      2,526     9,737     7,918
                                    --------  --------- --------- ---------
          Operating income               696      1,587     6,790    12,049
                                    --------  --------- --------- ---------

OTHER INCOME (EXPENSE):
          Interest income                267        189       716       531
          Other, net                      (7)     2,183         4     2,171
          Equity in earnings of
           joint venture                  90         72       280       167
                                    --------  --------- --------- ---------

INCOME BEFORE INCOME TAXES             1,046      4,031     7,790    14,918
PROVISION FOR INCOME TAXES               359      1,170     2,747     5,030
                                    --------  --------- --------- ---------

NET INCOME                          $    687  $   2,861 $   5,043 $   9,888
                                    ========  ========= ========= =========


NET INCOME PER COMMON SHARE         $   0.12  $    0.51 $    0.91 $    1.79
                                    ========  ========= ========= =========

NET INCOME PER COMMON SHARE,
 ASSUMING DILUTION                  $   0.12  $    0.51 $    0.90 $    1.77
                                    ========  ========= ========= =========

WEIGHTED AVERAGE NUMBER OF COMMON
 SHARES OUTSTANDING                    5,522      5,567     5,523     5,516
                                    ========  ========= ========= =========

WEIGHTED AVERAGE NUMBER OF COMMON
 AND COMMON EQUIVALENT SHARES          5,583      5,631     5,584     5,590
                                    ========  ========= ========= =========




                      ALDILA, INC. AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
                              (In thousands)

                                                        Nine months ended
                                                           September 30,
                                                        ------------------
                                                          2007      2006
                                                        --------  --------

CASH FLOWS FROM OPERATING ACTIVITIES:
          Net income                                    $  5,043  $  9,888
          Depreciation and amortization                    1,184       944
          Stock-based compensation                           210       161
          Loss on disposal of fixed assets                   100         8
          Undistributed income of joint venture, net        (329)     (263)
          Changes in other assets & liabilities, net      14,521    (7,510)
                                                        --------  --------
              Net cash provided by operating activities   20,729     3,228
                                                        --------  --------

CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchases of property, plant and equipment      (5,137)   (3,233)
          Proceeds from sales of property, plant and
           equipment                                          67         -
          Distribution from joint venture                    286       169
                                                        --------  --------
              Net cash used for investing activities      (4,784)   (3,064)
                                                        --------  --------

CASH FLOWS FROM FINANCING ACTIVITIES:
          Repurchases of common stock                       (486)   (1,211)
          Benefit from exercise of stock options              40     1,678
          Proceeds from issuance of common stock             134     2,270
          Dividend payments                               (2,485)   (2,495)
                                                        --------  --------
              Net cash (used for) provided by financing
               activities                                 (2,797)      242
                                                        --------  --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                 13,148       406

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD             3,882     1,921
                                                        --------  --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                $ 17,030  $  2,327
                                                        ========  ========

Contact Information

  • Investor/Media Contacts:
    Robert J. Cierzan
    Vice President, Finance
    Sylvia J. Castle
    Investor Relations
    Aldila, Inc.
    (858) 513-1801