Aldila Reports Loss for Third Quarter
POWAY, Calif. - Aldila, Inc. (NASDAQ/NMS:ALDA) today reported net sales of $10.3 million and a net loss of $754,000 ($0.05 loss per diluted share) for the third quarter ended September 30, 1999. In the third quarter of 1998, the company had net sales of $13.6 million and net income of $755,000 or $0.05 per diluted share.
For nine months ended September 30, 1999, net sales were $33.5 million and the net loss was $1.1 million ($0.07 loss per diluted share), compared to net sales of $53.9 million and net income of $3.5 million or $0.22 per diluted share in the same period of 1998.
"Aldila has received strong golf shaft orders for new product introductions from two key customers with substantially improved market share at one of these accounts," said Peter R. Mathewson, President and Chief Operating Officer of Aldila Golf Corp. "In addition, the company's China facility is beginning to benefit from opportunities in Asia through shaft sales for clubs assembled in China. Initial orders have been received from local assemblers for deliveries beginning in the fourth quarter of 1999. This represents a new value-added service to Aldila's customers and we view these first orders as a significant event," Mr. Mathewson said.
Aldila's outside customer sales of carbon fiber and composite prepregs represent 15% of total sales in the first nine months of 1999, compared to 2.5% in the same period of 1998. The contribution to operating income from these sales has been minimal for the 1999 nine month period.
Cash flow generated from operations for the nine months ended September 30, 1999 totaled $3.6 million. "These operating cash flows combined with the available revolving line of credit facility established in July 1999, has enabled the company to meet its operating needs and begin scheduled principal repayments on the long term debt obligation, which was reduced to $16.0 million at September 30, 1999," said Gary T. Barbera, Chairman and Chief Executive Officer, Aldila, Inc. "Management expects the combination of positive cash flows from operations, the available line of credit, and proceeds from the sale of a 50% interest in the carbon fiber operation will support the operating needs of Aldila."
In a separate announcement today, Aldila said it has formed a joint venture called Carbon Fiber Technology LLC with SGL Technik GmbH, a 100%-owned subsidiary of SGL CARBON AG ("SGL") (NYSE:SGG). In accordance with the previously announced Letter of Intent, SGL has purchased a 50% interest in Aldila's carbon fiber manufacturing operation in Evanston, Wyoming for approximately $7 million in cash. The joint venture will be managed by Steve Russell, who has been named Chief Executive Officer. Mr. Russell has over 25 years of experience in the carbon fiber business and has headed the Aldila operation since production startup in 1998.
Aldila will continue to manufacture graphite prepreg material in Poway, California for its golf shaft business.
Commenting on the joint venture arrangement, Mr. Barbera said, "We are excited to have completed this joint venture transaction with SGL and look forward to working with them going forward. The combined carbon fiber requirements of SGL and Aldila allows production of carbon fiber at increased volume levels, which will result in lower carbon fiber production costs and benefit our golf shaft business."
Aldila, Inc. is the world's leading manufacturer of graphite golf shafts used in clubs assembled and marketed throughout the world by leading golf club companies, distributors and custom clubmakers. Through vertical integration the company manufactures carbon fiber and composite prepreg for its golf shaft business.
This press release contains forward-looking statements based on our expectations as of the date of this release. These statements necessarily reflect assumptions that we make in evaluating our expectations as to the future. They are also necessarily subject to risks and uncertainties. Our actual future performance and results could differ from that contained in or suggested by these forward-looking statements as a result of a variety of factors, including:
- risks associated with our joint venture with SGL, including (a) the possibility that the carbon fiber facility will not produce sufficiently high volumes of high quality carbon fiber at low cost to meet our demands as well as those of SGL, (b) risks relating to difficulties in operating and managing the carbon fiber facility through the joint venture, including the risk of irreconcilable differences between SGL and Aldila as to the management of the joint venture, and (c) the risk that SGL will be unable to meet its financial obligations as to the joint venture;
- changes in demand by customers for graphite golf shafts, graphite prepreg and carbon fiber (due to factors such as changes in consumer demand for products including the company's products, changes in availability or prices for golf shafts, graphite prepreg or carbon fiber, changes in inventory purchasing practices by the company's customers);
- the availability of raw materials (principally carbon fiber and acrylic fiber) for our manufacturing operations, including the carbon fiber facility, at anticipated prices;
- risks resulting from the increasing portion of our manufacturing operations that is conducted in Mexico and China (including the risk of political instability, export/import regulation, currency exchange rate risk, and cultural differences);
- the ability to develop new customer relationships with non-golf users of graphite prepreg and carbon fiber and changes in demand for carbon fiber and carbon fiber-based products;
- the nature and effectiveness of the competition for our products; and
- the availability of our line of credit facility to the extent necessary to meet Aldila's working capital needs, including in connection with principal payments under the company's outstanding senior notes, next due in March 2000.
Our filings with the Securities and Exchange Commission present a more detailed discussion of some of these and other risks related to the forward-looking statements in this press release, in particular under "Business Risks" in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 1998 (the "Form 10-K"), "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Part I, Item 7 of the Form 10-K, and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Item 2 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.