Aldila Q2 Net Loss Triples on 6.6% Sales Decline

Aldila, Inc. reported net sales of $9.9 million for the second quarter ended June 30, 2003, compared to net sales of $10.6 million in the second quarter of 2002. The company reported a net loss of $471,000 ($0.10 loss per share) for the second quarter of 2003 versus a net loss of $170,000 ($0.03 loss per share giving effect to the reverse stock split) in the 2002 second quarter.

Net cash flow from operating and investing activities for the second quarter of 2003 amounted to $1.3 million.

For the six months ended June 30, 2003 net sales were $20.0 million, compared to $21.9 million in the first six months of 2002. The company reported a net loss of $640,000 ($0.13 loss per share) for the six months ended June 30, 2003 versus a net loss of $368,000 ($0.07 loss per share) for the comparable period in 2002.

Net cash flow of $1.7 million from operating and investing activities for the first six months of 2003 resulted in an increased cash balance at June 30, 2003 of $5.0 million from $3.3 million at December 31, 2002.

“Golf shaft units shipped in the 2003 second quarter decreased 18.2% compared to the second quarter of 2002, and average selling prices increased by 3.3% in the 2003 second quarter, compared to the same period in 2002,” said Peter R. Mathewson, Chairman and CEO, Aldila, Inc. “The number of rounds played has been down for three years now and the East coast has suffered through its rainiest spring in years. The U.S. economy is still weak. All of these negative factors are impacting the golf equipment market.”

“Our 2003 second quarter gross margin of 15.3% was affected by a $427,000 increase for inventory reserves as well as selling some older inventory items below their production costs,” Mr. Mathewson said. “Advertising and promotional spending in support of branded shaft sales for the 2003 six month period has increased by $387,000, compared to the same period in 2002.”

“Our newest shaft introduction, the Aldila NV with its distinctive green paint, is the most talked about shaft in the golf industry. In just a few short months, the NV has become the most played single graphite shaft model on the PGA and Nationwide Tours. In addition, Ben Curtis used the NV in all of his woods during his victory this year at the British Open. The NV is now available from all leading distributors and major club manufacturers' custom club departments,” said Mr. Mathewson.

“Our business with Mission Hockey continues to grow. Our shipments during the first half of this year are well in excess of last year's total units,” said Mr. Mathewson. “The increasing acceptance of the distinctive blue M-1 hockey stick at the NHL level is a good indicator that Mission's hockey stick business will continue to grow.”

“Since Aldila's 2003 Annual Meeting in May, legal, accounting, insurance, banking and other administrative support services have been reviewed. Based upon this review, future spending levels have been reduced, the majority of which will benefit Aldila's financial statements beginning in 2004,” Mr. Mathewson said.

“In June, our Board of Directors entered into a non-binding letter of intent to transfer Aldila's equity interest in Carbon Fiber Technology LLC to its joint venture partner, SGL Carbon Fibers and Composites, Inc. by the first quarter of 2006. As we announced in June, the transaction is subject to certain conditions, some of which are beyond Aldila's control, including a requirement that SGL enter into various agreements with other third parties,” said Mr. Mathewson.

“On June 27, we also announced the authorization of a new share repurchase program whereby up to $1.5 million of common stock shares may be repurchased as business conditions warrant. To date, approximately 13,600 shares have been repurchased at prices from $1.71 to $1.80 per share,” Mr. Mathewson said.

                                 ALDILA, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF OPERATIONS  – UNAUDITED

                              (In thousands, except per share data)

                         Three months ended          Six months ended

                               June 30,                   June 30,

                         ——————          ——————

                         2003          2002          2003          2002

                         —-          —-          —-          —-
NET SALES              $ 9,863        $10,551       $20,027       $21,925

COST OF SALES            8,350          8,721        16,775        18,626

                       ——-        ——-       ——-       ——-

 Gross profit            1,513          1,830         3,252         3,299

                       ——-        ——-       ——-       ——-

SELLING, GENERAL

 AND ADMINISTRATIVE      1,976          2,064         3,902         3,753

                       ——-        ——-       ——-       ——-

  Operating loss          (463)          (234)         (650)         (454)

                       ——-        ——-       ——-       ——-
OTHER EXPENSE

 (INCOME):

  Interest expense           9             32            17            68

  Other, net                15              1            45            36

  Equity in earnings

   of joint venture        (16)           (79)          (72)         (140)

                       ——-        ——-       ——-       ——-
LOSS BEFORE INCOME

 TAXES                    (471)          (188)         (640)         (418)

BENEFIT FOR INCOME

 TAXES                       –            (18)            –           (50)

                       ——-        ——-       ——-       ——-
NET LOSS               $  (471)       $  (170)      $  (640)      $  (368)

                       =======        =======       =======       =======
NET LOSS PER

 COMMON SHARE          $ (0.10)       $ (0.03)      $ (0.13)      $ (0.07)

                       =======        =======       =======       =======
NET LOSS PER

 COMMON SHARE,

 ASSUMING DILUTION     $ (0.10)       $ (0.03)      $ (0.13)       $(0.07)