SOURCE: Aldila

May 02, 2007 16:15 ET

Aldila Reports Financial Results for First Quarter 2007

POWAY, CA -- (MARKET WIRE) -- May 2, 2007 -- ALDILA, INC. (NASDAQ: ALDA) announced today net sales of $20.7 million and net income of $2.7 million ($0.48 fully diluted per share) for the three months ended March 31, 2007. In the comparable 2006 first quarter, the Company had net sales of $20.8 million and net income of $4.3 million ($0.78 fully diluted per share).

"Our first quarter of 2006 was the highest sales quarter of our NV™ shaft product line and as such, created a very high benchmark for 2007 performance comparison," said Mr. Peter R. Mathewson, Chairman of the Board and CEO. "Our golf shaft sales declined 4% in the first quarter of 2007 versus the first quarter of 2006. The average selling price of golf shafts decreased by 5% quarter on quarter on a 1% increase in unit sales. Branded golf shaft sales decreased 19% and co-branded golf shaft sales increased 5% versus the first quarter of 2006 and together represented 53% of our golf shaft sales in the current quarter as compared to 57% in the comparable quarter of last year. The average selling prices of branded and co-branded shafts were 7% and 1% lower, respectively, in the first quarter of 2007 compared to the first quarter of 2006," Mr. Mathewson said.

"While our revenues were strong in the quarter, our margins suffered from our shaft mix, higher material costs and start-up cost of our new Vietnam factory that is operating but not yet contributing meaningful production. We are seeing an increasingly competitive environment as the worldwide shortage of carbon fiber eases. We believe our competitors are no longer seeing the shortage of carbon fiber material that benefited us over the last couple of years. Our gross profit declined by $2.5 million in the first quarter of 2007 to $7.2 million from $9.7 million in the first quarter of 2006. Lower gross margin in the first quarter of 2007 of 35% versus 47% in the first quarter of 2006 resulted from competitive pricing pressure in the golf shaft market, the shift in mix to less branded products, higher material and manufacturing costs, and lower absorption of United States golf manufacturing costs. Operating margins were affected by increases in cost related to SOX compliance and other accounting expenses, higher audit fees and administrative cost at our Vietnam facility as compared to the first quarter of 2006. In the first quarter of 2007 the Company did not repurchase any shares under its current Stock Repurchase Plan. The Company's backlog of sales orders of $9.5 million at March 31, 2007 was lower than the $12.3 million reported at March 31, 2006. Our cash balance was $18.1 million at the end of our first quarter in 2007 which was up $2.9 million from year end 2006 after supporting $2.3 million in capital expenditures," Mr. Mathewson said.

"It has been an incredible start for Aldila on Tour in 2007. Players using Aldila shafts have won eight of the first seventeen events on the PGA Tour and have won five of seven events on the Nationwide Tour. Aldila shafts were used by the winner of The Masters as well as the winner of the World Golf Championship-Accenture Match Play Championship; two of the year's first limited field events for the world's top players. The Aldila VS Proto™ and NV™ continue to be the top wood shaft series on both the PGA Tour and Nationwide Tour in 2007. The PGA Tour is the ultimate proving ground for new golf shaft technology and Aldila's new product prototypes are being well received on Tour. In fact, the winner of the recent Verizon Heritage, a PGA Tour event, won with a prototype of our soon to be released Aldila MOI Proto shaft," Mr. Mathewson said.

"Our Vietnam factory has begun operations and will ramp up its production during the remainder of the year and will take on significant production in 2008. With this new state of the art factory we believe we are set with enough Asian capacity to allow us opportunities to grow our unit sales long term," said Mr. Mathewson.

"We have elected to discontinue our hockey operation in the third quarter of this year and have notified our customer of this decision. We are working to finish our remaining orders over the next few months and then cease operations. We do not expect this decision to have a material impact on our business," Mr. Mathewson said.

"Our composite material business continues to thrive with a sales increase of 34% over the comparable quarter last year and represented 14% of consolidated sales for the first quarter of 2007," said Mr. Mathewson.

"Carbon Fiber Technology LLC ("CFT"), our joint venture carbon fiber facility, ran well during the quarter," Mr. Mathewson said.

Aldila will host a conference call at 5 p.m. Eastern time, on Wednesday, May 2, 2007, with Peter R. Mathewson, Chairman and CEO and Robert J. Cierzan, Chief Financial Officer, to review Aldila's 2007 first quarter financial results. For telephone access to the conference call dial 888-693-3477 or 973-582-2710 for international calls and request connection to the Aldila conference call. Conference ID# is 8756499. 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. Such forward-looking statements include, but are not limited to, implications concerning the acceptance of the NV™ shaft and that its success will continue to attract new customer accounts. 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. The forward-looking statements in this press release are particularly subject to the risks that:

--  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 product offerings, including the Aldila NV™ shaft line and
    product offerings outside the golf industry, will not continue to achieve
    success with consumers or OEM customers;
--  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)


                                                  March 31,   December 31,
                                                    2007          2006
                                                ------------- ------------
ASSETS
CURRENT ASSETS:
          Cash and cash equivalents             $      18,088 $     15,182
          Restricted cash                               1,627        1,444
          Accounts receivable                           9,886        8,862
          Income taxes receivable                         304        1,237
          Inventories                                  12,677       13,691
          Deferred tax assets                           1,383        1,360
          Prepaid expenses and other current
           assets                                         667          795
                                                ------------- ------------
               Total current assets                    44,632       42,571
PROPERTY, PLANT AND EQUIPMENT                          10,755        8,794
INVESTMENT IN JOINT VENTURE                             3,195        3,091
DEFERRED TAXES                                          1,144        1,144
OTHER NON-CURRENT ASSETS                                  299          296
                                                ------------- ------------
TOTAL ASSETS                                    $      60,025 $     55,896
                                                ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
          Accounts payable                      $       5,249 $      4,479
          Dividends payable                               830            -
          Accrued expenses                              1,911        2,042
          Other current liability                         137            -
                                                ------------- ------------
               Total current liabilities                8,127        6,521
LONG-TERM LIABILITIES:
          Deferred rent and other long-term
           liabilities                                    679           49
                                                ------------- ------------
               Total liabilities                        8,806        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 5,529,250
           shares as of March 31, 2007
           and 5,524,250 shares as of
           December 31, 2006                               55           55
          Additional paid-in capital                   49,981       49,903
          Accumulated earnings (deficit)                1,183         (632)
                                                ------------- ------------
               Total stockholders' equity              51,219       49,326
                                                ------------- ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $      60,025 $     55,896
                                                ============= ============




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




                                                    Three months ended
                                                          March 31,
                                                ------------- ------------
                                                    2007          2006
                                                ------------- ------------


NET SALES                                       $      20,662 $     20,770
COST OF SALES                                          13,472       11,102
                                                ------------- ------------
          Gross profit                                  7,190        9,668
                                                ------------- ------------

SELLING, GENERAL AND ADMINISTRATIVE                     3,372        2,861
                                                ------------- ------------
          Operating income                              3,818        6,807
                                                ------------- ------------

OTHER INCOME (EXPENSE):
          Interest income                                 199          158
          Other, net                                       43           (8)
          Equity in earnings of joint venture             105           46
                                                ------------- ------------

INCOME BEFORE INCOME TAXES                              4,165        7,003
PROVISION FOR INCOME TAXES                              1,470        2,661
                                                ------------- ------------

NET INCOME                                      $       2,695 $      4,342
                                                ============= ============


NET INCOME PER COMMON SHARE                     $        0.49 $       0.80
                                                ============= ============

NET INCOME PER COMMON SHARE,
          ASSUMING DILUTION                     $        0.48 $       0.78
                                                ============= ============

WEIGHTED AVERAGE NUMBER OF COMMON
         SHARES OUTSTANDING                             5,525        5,408
                                                ============= ============

WEIGHTED AVERAGE NUMBER OF COMMON
         AND COMMON EQUIVALENT SHARES                   5,588        5,545
                                                ============= ============


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


                                                    Three months ended
                                                         March 31,
                                                ------------  ------------
                                                    2007          2006
                                                ------------  ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
          Net income                            $      2,695  $      4,342
          Depreciation and amortization                  376           292
          Stock-based compensation                        61            38
          Loss on disposal of fixed assets                 9             1
          Undistributed income of joint
           venture, net                                 (104)          (86)
          Changes in working capital items, net        2,193        (4,392)
                                                ------------  ------------
                      Net cash provided by
                       operating activities            5,230           195
                                                ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchases of property, plant and
           equipment                                  (2,341)         (741)
                                                ------------  ------------
                       Net cash used for
                        investing activities          (2,341)         (741)
                                                ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
          Proceeds from issuance of common
           stock                                          17         1,433
                                                ------------  ------------
                      Net cash provided by
                       financing activities               17         1,433
                                                ------------  ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS              2,906           887

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD        15,182        15,821
                                                ------------  ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD        $     18,088  $     16,708
                                                ============  ============


Contact Information

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