Aldila Inc. reported Q3 sales fell 19% to $13.2 million from $16.3
million. Net income fell 76% to $687,000, or 12 cents a share, from
$2.9 million, or 51 cents, a year ago. Excluding a year-ago special
credit, net income in the latest quarter was down 59.9%.
The 2006 third quarter benefited from a settlement as a class member in
a civil suit against certain carbon fiber producers in the amount of
$2.2 million pretax. Excluding the benefit from the settlement, net
income would have been $1.4 million, or 26 cents, a year ago.
“Sales of golf shafts and related products declined 22% in our third
quarter 2007 from the comparable quarter of 2006,” said Peter R.
Mathewson, chairman and CEO. “Sales of composite prepreg materials in
the third quarter of 2007 were flat as compared to the 2006 period and
represented 17% of consolidated net sales in the current quarter. The
average selling price of golf shafts sold decreased 1% quarter on
quarter on a 19% decrease in unit sales. Our selling, general and
administrative (SG&A) expense was higher in the current quarter as
compared to the comparable quarter of 2006 predominantly due to
expenses related to our modified Dutch auction Tender Offer, which
closed on September 28, 2007 in which 370,845 shares were tendered.”
“While we are disappointed in the third quarter results, historically
it is our weakest quarter and we remained profitable in the quarter
even as our sales declined significantly. Our ending backlog increased
by 5% at September 30, 2007 to $12.2 million from $11.5 million at
September 30, 2006. Historically, the majority of the dollar volume of
the company's backlog has been shipped during the following three
months after the close of a quarter. However, the backlog as of
September 30, 2007 contains a higher percentage of orders that are
scheduled for shipment beyond the following three months, particularly
in the first quarter of 2008. In the 2007 third quarter the company
repurchased 12,662 shares of its common stock under the company's
previously announced Stock Repurchase Plan ('Plan'). That Plan was
terminated upon the announcement of the Dutch auction Tender Offer on
August 20, 2007.”
For the nine months ended September 30, sales were $51.5 million and
net income was $5.0 million, or 90 cents a share. In the year-ago
period, sales were $54.5 million and net income was $9.9 million, or
$1.77 a share.
“Our total balance of cash, cash equivalents and restricted cash at
September 30, 2007 remains strong at $17.7 million after paying $2.5
million in dividends, spending $5.1 million on our capital spending
program and $486,000 repurchasing 32,661 shares of Aldila common stock
during the nine month period ended September 30, 2007. Of this cash
balance, $6.2 million was used to settle the company's Dutch auction
Tender Offer during the first week of October. Although our inventories
have risen to $16.1 million at the end of the 2007 third quarter, we
fully expect them to be reduced by year end,” said Mathewson.
“We remain optimistic with how we are positioned for the future. We
will begin sales of our new DVS(TM) shaft family in December 2007. We
anticipate the inclusion of this shaft in several OEM wood club
programs in 2008. Our premium shaft offerings of NV(TM), NVS(TM), VS
Proto(TM), MOI(TM) and soon DVS(TM), represent a growing menu of shafts
we offer our OEM club partners and the avid golfers of the world,”
Mathewson said.
“With the January 2008 USGA rule change allowing further adjustability
of clubs, the door will be open for the introduction of quick
connecting systems to attach the shaft to a metal wood head. A golfer
will have the ability to purchase multiple branded shafts with
different playing characteristics to use with his favorite driver head
featuring a quick connect system. These will appear first in drivers
and then we expect it to follow suit in fairway woods and hybrids. We
anticipate this rule change to have a positive effect in our efforts to
sell premium branded shafts. We believe that club companies will enter
this new market cautiously and in a limited fashion as they explore how
to best capitalize on this rule change,” said Mathewson.
“On the PGA and Nationwide Tours our number of shafts in play, week to
week, continue to excel. With only a few tournaments remaining in the
2007 season, players using Aldila shafts have won 19 events on the PGA
Tour and nearly half of all the events on the Nationwide Tour. The
recently introduced Aldila DVS(TM), along with the VS Proto(TM) and
NV(TM), continue to be the leading wood and hybrid shaft series on the
PGA and Nationwide Tours. Aldila also won the Grand Slam of Shafts in
2007 as the leading shaft for both woods and hybrids at every major
championship on the PGA Tour in 2007. Paula Creamer, a member of the
Aldila Advisory Staff, led the U.S. Women's team to victory in the
Solheim Cup, playing her customary pink NV(TM). We have also added
Stuart Appleby and Boo Weekley to the Aldila Advisory Staff. Appleby
has two wins this year on Tour. Weekley won for the first time on the
PGA Tour at the Verizon Heritage Championship playing an Aldila MOI(TM)
driver shaft. On the consumer side, The Darrell Consumer Survey for
2007 found Aldila to be the leading shaft brand in total shaft usage
for Drivers, Fairway Woods and Hybrid clubs. In the Hybrid club
category, Aldila outpaced its nearest competitor by nearly a 4 to 1
margin,” said Mathewson.
“Our Vietnam factory has achieved several key shaft qualifications on
some high volume programs allowing us to ramp up production for the
remainder of the year. Our goal for Vietnam during 2007 has been to
qualify shaft programs and establish a good run rate based on a two
shift operation by year end. This will allow us to utilize our Vietnam
factory as a key contributor in 2008. The immediate benefit in 2008
will be the shifting of a significant portion of our Mexican production
to our Asian factories and the cost savings involved in the process. We
will also have the benefit of additional overall capacity located in a
low cost area,” Mathewson said.
“Our composite material sales were flat in the quarter but up 13% year
to date. We are on schedule to have our new, wide prepreg line in place
by the end of this year. This production line will be a key component
in increasing our prepreg sales in 2008 and beyond. Carbon Fiber
Technology LLC ('CFT'), our joint venture carbon fiber factory, ran
well during the quarter. We continue to work on developing a reliable
precursor supplier for the future,” Mathewson said.
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,
------------------- -------------------
2007 2006 2007 2006
-------- --------- --------- ---------
NET SALES $ 13,201 $ 16,329 $ 51,478 $ 54,496
COST OF SALES 9,796 12,216 34,951 34,529
-------- --------- --------- ---------
Gross profit 3,405 4,113 16,527 19,967
-------- --------- --------- ---------
SELLING, GENERAL AND ADMINISTRATIVE 2,709 2,526 9,737 7,918
-------- --------- --------- ---------
Operating income 696 1,587 6,790 12,049
-------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 267 189 716 531
Other, net (7) 2,183 4 2,171
Equity in earnings of
joint venture 90 72 280 167
-------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 1,046 4,031 7,790 14,918
PROVISION FOR INCOME TAXES 359 1,170 2,747 5,030
-------- --------- --------- ---------
NET INCOME $ 687 $ 2,861 $ 5,043 $ 9,888
======== ========= ========= =========
NET INCOME PER COMMON SHARE $ 0.12 $ 0.51 $ 0.91 $ 1.79
======== ========= ========= =========
NET INCOME PER COMMON SHARE,
ASSUMING DILUTION $ 0.12 $ 0.51 $ 0.90 $ 1.77
======== ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,522 5,567 5,523 5,516
======== ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES 5,583 5,631 5,584 5,590
======== ========= ========= =========
