Aldila Posts Q4 Loss

For the year ended Dec. 31, 2010, net sales were $54.7 million and net income of $2.3 million, or 43 cents, as compared to net sales of $49.8 million and a net loss of $243,000, or 5 cents, for the prior year.

“We had a very successful year in 2010 as compared to 2009. Our sales increased in both of our divisions, with our Composite Materials Division experiencing a 56% increase in sales year over year. Although we experienced a successful year in 2010, we began to see a slowing through the third and into the fourth quarter of 2010 in our Composite Products Division. Our sales slowed down in the fourth quarter in our Composite Products Division. Most of the decline in Composite Products Division during the fourth quarter of 2010 was attributed to the OEM production shaft segment, where we experienced a 40% decline versus the fourth quarter last year. This would point to a conservative outlook and inventory adjustment measures on the part of several OEM partners going in to the first quarter of 2011. We expect a weaker than normal first half to this year due to a conservative outlook on the part of the industry and timing of older programs winding down and new programs set to launch after mid-year. Our backlog of $5.5 million as of December 31, 2010 is 48% off from the $10.6 million as of December 31, 2009. The decrease is attributed to sales backlog in the Composite Products Division. The ending backlog for the Composite Materials Division was up 27%,” said Peter R. Mathewson, Chairman of the Board & CEO.

“We have seen a multi-year slide in golf equipment sales industry wide. This decline is approximately 18% below the sales number in 2007. In the key club category of Drivers, the decline is over 20% in units sold versus 2006 and price compression has dragged down the average selling price of Drivers from $236 in 2006 to around $210 in 2010, which continues to put pressure on golf shaft pricing. Fairway, Hybrid and Iron club categories have suffered as well over the last several years and while the macro-economic landscape has improved, the only visible change has been a slowing in the decline of equipment sales. While it appears golf equipment sales have troughed, the return to a more normalized sales level could be slow in coming and require several years to climb back to a healthy level. With no organic growth domestically to offset the impact of an economic downturn, the golf industry will continue to struggle. We believe we can deal with this environment, as we have been through this numerous times before to various degrees. We will win our share of programs based on our brand and innovative shaft technology platforms, superior customer service, long relationships, state of the art factories and our vertical integration. We believe we continue to fare better than most of our competitors,” said Mathewson.

“We continue to enjoy a high profile on the Tour during 2010. Aldila shafts were used to win 15 events on the PGA Tour and 15 events on the Nationwide Tour. Our shafts remained the most popular shafts in play on Tour with more wood shafts and hybrid shafts in play than any other shaft manufacturer. Players using our shafts in their drivers won over $43 million on the PGA Tour during 2010. The PGA Tour's Player of the Year used our Aldila RIP® to win the U.S. Open as well as 3 other events worldwide. Two players on the PGA Tour broke the 60 barrier shooting 59's using Aldila wood shafts. In addition to the Player of the Year, the Comeback Player of the Year and the Rookie of the Year also played Aldila shafts during 2010. In addition to an incredible year on the PGA Tour, Aldila shafts were also the most popular wood and hybrid shafts with PGA Club Professionals during their national championship. Our Tour representatives did an outstanding job during 2010 promoting Aldila and working with the players to maximize the performance of their clubs. Currently they are testing and getting feedback on an experimental Aldila RIP® iron shaft. The RIP® iron surpasses the performance of any previous shaft offered for use in irons, steel or graphite,” said Mathewson.

“We feel professional golf is the ultimate proving ground for new technology and the overwhelming number of Aldila shafts in play on Tour is evidence of our performance advantage over the competition. After successful testing on Tour, we introduced our new Aldila RIP® shaft during 2010 and it was included in many major manufacturer product lines. During 2011, we will be expanding our RIP® Series with the introduction of the RIP® Beta and the RIP® Gamma. While the original RIP® Alpha is a stiff tip shaft that promotes a lower launch, the Beta version incorporates a softer tip for a slightly higher launch and longer carry. The Gamma version has the same launch characteristics of the original Alpha design with a higher balance point for use with heavier heads to achieve a conventional swing weight. The RIP® Beta and Gamma will be included in new product introductions from major club manufacturers during 2011,” said Mathewson.

“Our Aldila engineers have designed and patented multiple golf shaft technologies that provide the foundation for Aldila product innovations for years to come. The Aldila Technology Triad of Micro Laminate®, S-core™ and RIP® Technology are all unique, performance enhancing design technologies that will allow Aldila to continue to be at the forefront of golf shaft performance. Whether used separately or in harmony with one another, each shaft design platform provides players from Tour level to the weekend warrior with the ability to get the most out of their favorite golf clubs,” Mathewson said.

“In our Composite Materials Division our sales increased 56% for 2010 versus 2009, following a classic v-shaped recovery from the decline in sales experienced in 2009. The sales represent the highest ever for the division. We continue to build our organization so we can continue to grow in the years ahead. We have completed a major facelift to the facility to create a very clean interior production environment and one that shows well during customer visits. We are adding new state of the art resin mixing equipment and continue to interview candidates to fill some key positions,” said Mathewson.

“We closed on the Victory Archery acquisition at the end of the year 2010. We have been interested for a number of years in the branded carbon arrow industry because of its potential to offer unique synergies to our business model. The Victory brand is very well regarded and we believe it is positioned for growth. We will be able to apply our world class expertise in high volume production of carbon fiber based tubular structures with our own produced raw materials to this new endeavor. This will be a point of differentiation and competitive advantage. No other arrow brand currently offers total control of the manufacturing experience, producing its own raw material and producing arrows in its own factory. This has been the business model we have used successfully for many years in our market-leading graphite golf shaft business,” said Mathewson.

“We attended the Archery Trade Association Show in Indianapolis on January 6-8th, 2011. We displayed a new trade booth for the show featuring Aldila as the new owner of Victory Archery. We were very pleased with the general industry reception to the positives of Victory joining Aldila and the potential synergies of this combination. We came away with the belief that this will be a good acquisition for Aldila and that we can grow the business and the brand,” said Mathewson.