Aldila, Inc. reported that net sales were were essentially flat in the first quarter, posting revenues of $20.7 million this year versus $20.8 million in the year-ago quarter. However, net income was down nearly 38% to $2.7 million, or 48 cents per diluted per share, compared to $4.3 million, or 78 cents per diluted per share, in Q1 last year.
“Our first quarter of 2006 was the highest sales quarter of our NV(TM) 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(TM) and NV(TM) 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, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)
Three months ended
March 31,
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2007 2006
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NET SALES $ 20,662 $ 20,770
COST OF SALES 13,472 11,102
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Gross profit 7,190 9,668
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SELLING, GENERAL AND ADMINISTRATIVE 3,372 2,861
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Operating income 3,818 6,807
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OTHER INCOME (EXPENSE):
Interest income 199 158
Other, net 43 (8)
Equity in earnings of joint venture 105 46
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INCOME BEFORE INCOME TAXES 4,165 7,003
PROVISION FOR INCOME TAXES 1,470 2,661
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NET INCOME $ 2,695 $ 4,342
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NET INCOME PER COMMON SHARE $ 0.49 $ 0.80
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NET INCOME PER COMMON SHARE,
ASSUMING DILUTION $ 0.48 $ 0.78
