Aldila, Inc. reported net sales of $19.3 million for the third quarter ended September 30, 2005, a 79% increase from net sales of $10.8 million for last year's third quarter. The company reported net income of $3.8 million, or 68 cents per fully diluted share for the third quarter ended September 30, 2005, which represents an increase of 15.2% from net income of $3.3 million, or 62 cents per fully diluted share for the comparable period of 2004.
In the 2004 third quarter the company benefited from a $2.7 million, or 52 cents fully diluted per share reduction in its provision for income taxes. Before the effect of the income tax expense adjustments in 2004, the company's net income was $533,000, or 10 cents fully diluted per share. On a pretax basis, Aldila's income before tax grew 659% in the 2005 quarter to $5.5 million from $722,000 in the comparable 2004 quarter.
“It is a pleasure to continue to report exceptional financial results as we have now recorded seven straight quarters of profitable operations. Our third quarter net income represents the best third quarter in Aldila's history,” said Mr. Peter R. Mathewson, chairman and CEO.
“For the nine months ended September 30, 2005 net sales were $59.0 million, which represented an increase of $18.6 million, or 46% from net sales of $40.3 million in the comparable period of 2004. The company reported net income of $10.7 million in the 2005 period, or $1.97 fully diluted per share, which represented an increase of $2.9 million over net income of $7.8 million and fully diluted earnings per share of $1.49 in the comparable period of the prior year. During the nine month period ended September 30, 2004, the company benefited from a $1.7 million, or 33 cents fully diluted per share reduction in its provision for income taxes. Before the effect of the income tax expense adjustment, the company's net income was $6.1 million, or $1.16 fully diluted per share for the nine month period ended September 30, 2004,” Mr. Mathewson said.
“Our strong third quarter sales increase of 79% was driven by an increase in our branded and co-branded shaft business. The average selling price of golf shafts increased by 22%, on a 65% increase in unit sales quarter on quarter. Driven by continued strong sales of our flagship NV shaft line our third quarter 2005 branded sales exceeded our branded sales in the third quarter 2004 by 80%,” said Mr. Mathewson.
“Gross margin in the 2005 third quarter grew sequentially to 40.7% from 37.2% over the 2005 second quarter due to 1% higher selling prices for golf shafts in the quarter, along with increased contribution from our non-golf business and a lower charge for inventory obsolescence in the quarter. In the 2005 third quarter, the Company recorded a charge for inventory obsolescence of $78,000, versus a charge of $385,000 recorded for the second quarter of 2005. SG&A spending in the 2005 third quarter was affected by expenses for Sarbanes Oxley Section 404 Compliance in the amount of $223,000. The company's backlog of sales orders as of September 30, 2005 of $9.7 million was 32% higher than at September 30, 2004,” Mr. Mathewson said.
“To give another perspective to our growth, our sales this quarter were up 79% over the third quarter 2004, more than double our sales of $8.0 million in the third quarter of 2003 and almost triple our sales of $6.5 million in the third quarter 2002. Our nine month sales in 2005 of $59 million is $6 million ahead of the total sales in 2004 of $53 million, and $21 million higher than total sales in 2003 of $38 million,” said Mr. Mathewson.
“We are very pleased by the apparent trend of OEM club companies to embrace branded shafts for their drivers, fairways and hybrid clubs. We believe this trend will continue until it essentially becomes a branded graphite shaft market, much like the steel shaft market with its basically all branded offerings,” Mr. Mathewson said.
“Our Tour results this year have steadily improved as a greater number of players are realizing the performance benefits of our shafts. The NV Series of shafts is the most popular shaft series on Tour. This year after numerous wins, PGA Tour professionals using Aldila NV shafted drivers have won more than $23 million in Tour earnings. On the Nationwide Tour, players using Aldila shafts have won more than all other shaft companies. The NV Hybrid and the new VS Proto Hybrid shaft are dominating the PGA and Nationwide Tours. The NV Hybrid has been the most popular hybrid shaft on the PGA Tour, at 86% of the events, and 96% of the events on the Nationwide Tour,” said Mr. Mathewson.
“The hybrid club segment continues to expand. Hybrid club sales have been mainly single unit purchases to date but with the appearance of new innovative iron sets comprised of a mix of traditional iron heads and hybrid heads entering the market for the 2006 season, multiple unit sales per set will begin. Long irons are being replaced by the superior playability of hybrid clubs. This is good news for the graphite shaft industry as approximately 85% of hybrid club sales are comprised of graphite shafted hybrid clubs,” Mr. Mathewson said.
“Our third party sales of composite prepreg materials continues to flourish with growth in the quarter of about 55% over the third quarter 2004. Sales are up 59% for the nine month period, year on year and represent 9% of our consolidated sales. Installation work for our new resin filmer is on schedule and will be operational in February of 2006,” said Mr. Mathewson.
“Our hockey business had its best quarter of the year. Prospects look much brighter for the remainder of this year and all indications point towards a better beginning to 2006 versus the uncertainty caused by the NHL lock out in the first half of 2005. Hockey sales increased 81% over the sluggish second quarter of 2005,” Mr. Mathewson said.
“Our balance sheet remains strong with $19.4 million in cash and no debt at September 30, 2005. Operations continue to provide strong cash flow, which has enabled Aldila to payout $6.9 million in interim dividends through September 30, 2005, which included a $1.00 per share one time special dividend,” said Mr. Mathewson.
ALDILA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
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2005 2004 2005 2004
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NET SALES $ 19,327 $ 10,772 $ 58,956 $ 40,330
COST OF SALES 11,461 8,248 35,537 25,703
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Gross profit 7,866 2,524 23,419 14,627
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SELLING, GENERAL AND ADMINISTRATIVE 2,633 1,892 7,513 6,656
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Operating income 5,233 632 15,906 7,971
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OTHER EXPENSE (INCOME):
Other, net (180) (19) (419) (4)
Equity in earnings of joint venture (69) (71) (193) (209)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 5,482 722 16,518 8,184
PROVISION (BENEFIT) FOR INCOME TAXES 1,721 (2,596) 5,804 419
-------- -------- -------- --------
NET INCOME $ 3,761 $ 3,318 $ 10,714 $ 7,765
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NET INCOME PER COMMON SHARE $ 0.71 $ 0.65 $ 2.05 $ 1.55
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NET INCOME PER COMMON SHARE,
ASSUMING DILUTION $ 0.68 $ 0.62 $ 1.97 $ 1.49
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