Aldila Inc. reported sales fell 19.3% to $16.7 million from $20.7 million. Golf shaft sales declined 18%. The average selling price of golf shafts decreased by 13% quarter on quarter on a 6% decline in unit sales. Composite materials sales were off 10% in the current quarter versus the 2007 quarter. In the 2007 quarter Aldilla had $572,000 of hockey sales, a business line which Aldilla discontinued in 2007. Earnings nosedived 83% to $458,000, or 9 cents a share, from $2.7 million, or 48 cents, a year ago.
The company's gross profit in the 2008 quarter declined by 37% of which 5% can be attributed to no longer owning 50% of a carbon fiber plant and the balance due to lower average selling prices for golf shafts and lower overall sales volumes. Selling, general & administrative expenses were higher in the current quarter driven by front-loaded marketing programs, increases in selling expenses, legal cost of approximately $81,000 related to the establishment of the credit facility with KeyBank and professional fees of approximately $104,000 in relation to the restatement of the company previously issued financial statements. The company backlog of sales orders of $9.9 million at March 31, 2008 was higher than the $9.5 million reported at March 31, 2007.
“A weakening economy and decreased industry retail sales compared to last year impacted our sales,” said Peter R. Mathewson, Chairman of the Board and CEO. “Market participants appear to be taking a cautious approach to 2008. While we are disappointed with our sales we did remain profitable and we believe we are well positioned for the back half of the year. Production for new programs in which we will participate should begin during the late third quarter and should be in full swing during the fourth quarter,” Mathewson said.
“It is still too early to gauge consumer acceptance of the new interchangeable shaft systems in the market place. One major club company did not ship their retail units to their accounts until late in the quarter. It will be a least another quarter until we get a good indication on how successful the early entrants have been in this new market segment,” Mathewson said.
“We have made some organizational changes to better support our two business units of golf shafts and composite materials. Robert J. Cierzan, who has been serving as our Vice President, Finance / CFO and running our expanding Composite Materials business, will now devote his full time to this critical area and will be promoted to Senior Vice President, Composite Materials. In the last year we have continued to invest in additional capacity and have hired two key people in sales and resin development. Mr. Cierzan now has in place an organization that can support and take advantage of the opportunities we think exist in continuing to grow sales in our Composite Materials Division. Scott M. Bier, our Vice President, Controller, will be promoted to Vice President, Finance / CFO. Mr. Bier has been with the Company since 1998, prior to that he worked at Deloitte. He has worked in various roles throughout the accounting and finance department and has assisted Mr. Cierzan in his duties over the last several years as Mr. Cierzan has gradually spent more and more time growing the Composite Materials business. Mr. Bier is well qualified to excel in his new position. These changes will become effective after the Annual Meeting of Stockholders on May 15, 2008,” said Mathewson.
“Our Vietnam facility continues to ramp up production to meet our targets for year end. The rising value of China's currency versus the U.S. dollar and a new labor law that will negatively impact costs increasingly in the years ahead has made our decision to open a factory in Vietnam all the more timely. This factory gives us options and helps to mitigate the risks of China manufacturing,” Mathewson said.
“Our Composite Materials business declined 10% quarter on quarter. This can be attributed to the timing of customer orders and a general slowdown in the economy as evidenced by lower shipment volumes to the same customer base in 2007. This quarter represents the first negative quarterly comparison since we began focusing on the expansion in this segment of our business. We believe this to be temporary and our investments made in terms of capacity and personnel will resume their momentum in this segment latter in the year when economic factors hopefully improve for our customer base,” said Mathewson.
“The Company ended the quarter with $7.8 million in cash and cash equivalents after paying a one-time five dollar special dividend payment to shareholders totaling $25.8 million during the quarter. The Company placed in service a $15.0 million dollar credit facility with KeyBank during the quarter and borrowed $8.0 million against this facility to help support the dividend payment,” Mathewson said.
“Aldila has enjoyed a great start to the 2008 Tour season. On the PGA Tour, players using Aldila shafts have won 6 events including the World Golf Championship – CA Championship and the Verizon Heritage by Aldila advisory staff member, Boo Weekley. Players using Aldila shafts have also won 3 events on the Nationwide Tour and 6 events on the Champions Tour. On the LPGA Tour we have won every event but 2 and Paula Creamer, an Aldila LPGA staff member, has won twice including last weeks SemGroup Championship. We are also happy to see our entire high performance line continue to do well with players winning using our NV®, VS Proto(TM), DVS(TM), MOI Proto and soon to be released Voodoo shaft. In fact, our new Voodoo shaft is quickly becoming one of the most popular shafts on Tour and has already been used to win 4 events since its introduction. We are tooling up to produce this innovative new shaft concept in the fourth quarter of this year. We also continue to be the leading hybrid shaft on the PGA, Nationwide, LPGA and Champions Tours. Most weeks we have more than twice as many hybrid shafts in play than our nearest competitor,” Mathewson said.
