Aldila (ALDA)

[HenryTo]

Been doing well since I featured it last year:

http://www.marketthoughts.com/zs20040628.html

Just read the first paragraph of that commentary and don't mind my other picks.

The reason why I am posting this is that I am again interested (now over 100% higher) in the stock again. The stock is number one on the IBD Leisure Products industry list (which is ranked 193). Trailing P/E is only around 10 and the latest quarterly earnings report saw an increase of earnings of over 50%. The industry they are in is pretty easy to understand as well - as they are a developer of golf products. Insiders still own 1/3 of the company and there is no analyst coverage.

Bill - whenever you get a chance, would you mind doing a quick financial analysis of this company? Anyone else that knows about the golf industry should definitely comment as well. I am going to spend the rest of this week on model research as well as looking at individual stocks.

Thanks,

Henry

[Goodfella]

First thought it had been smashed in 2002. lcoser inspection, it had a stock split. Splitting your stock down to 75c/share a sign of extreme confidence?!

[HenryTo]

Stock is up 8.9% in AH trading - after having been up 4.8% for the day.

It was "only" at 22.60 when I first mentioned it again last Monday. The stock is now trading at 28.80 in AH trading.

[Goodfella]

POWAY, CA, Oct 26, 2005 (MARKET WIRE via COMTEX) -- ALDILA, INC. (ALDA) today reported net sales of $19.3 million for the third quarter ended September 30, 2005, which was an increase of $8.6 million, or 79% from net sales of $10.8 million in the comparable period of 2004. The Company reported net income of $3.8 million, or $0.68 fully diluted per share for the third quarter ended September 30, 2005, which represents an increase of $443,000 from net income of $3.3 million, or $0.62 fully diluted per share for the comparable period of 2004. In the 2004 third quarter the Company benefited from a $2.7 million, or $0.52 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 $0.10 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 $0.33 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(TM) 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(TM) Series of shafts is the most popular shaft series on Tour. This year after numerous wins, PGA Tour professionals using Aldila NV(TM) 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(TM) Hybrid and the new VS Proto Hybrid shaft are dominating the PGA and Nationwide Tours. The NV(TM) 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. is a leader among manufacturers of graphite golf shafts used in clubs assembled and marketed throughout the world by major golf club companies, component distributors and custom clubmakers. Aldila manufactures and assembles hockey sticks and blades, in addition to the manufacture of composite prepreg material for its golf shaft business and external sales. Aldila also manufactures carbon fiber for internal use through an ownership interest in CFT.

This press release contains forward-looking statements based on our expectations as of the date of this press release. These statements necessarily reflect assumptions that we make in evaluating our expectations as to the future. Such forward-looking statements include, but are not limited to, implications concerning the acceptance of the NV(TM) shaft and that its success will continue to attract new customer accounts. Forward-looking statements are 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. Our filings with the Securities and Exchange Commission present a detailed discussion of the principal risks and uncertainties related to our future operations, in particular our Annual Report on Form 10-K for the year ended December 31, 2004, under "Business Risks" in Part I, Item 1, and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Part I, Item 7 of the Form 10-K, and reports on Form 10-Q and Form 8-K. The forward-looking statements in this press release are particularly subject to the risks that:

[HenryTo]

Thanks, Bill, for the quick earnings analysis. Fundamentals aside, the volume in this stock isn't something to write home about either. I remember buying some of this back in 2004 and having to do three or four trades at different times just so I don't overpay. i.e. The spread is high in this illiquid stock.

[nodoodahs]

I have a few points of concern:
1. If you remove the dividends paid in 2004 and YTD 2005 the reliance on financing cash would be positive (although small, 2-3% of assets).
2. YTD 2005 the net income exceeds the operating cash flow, which always bugs me. That shows in the low "earnings quality" metric.
3. Accts Rec'l as a percent of revenue increased in the most recent year, this is sometimes a sign of channel stuffing.
4. Liabilities as a percent of OCF had been decreasing, but YTD 2005 they are increasing again, and it's more a function of increasing liability than decreasing OCF.
5. Dilution of shares from issuance of capital stock.

It's certainly not the happiest set of finance reports I've ever downloaded, but it's not KKD or GM, either. Depending on what you think of the rest of the story ... I did note a lot of insider selling, but I don't know the history of the company, if it's family-owned and you can satisfy yourself that they're just diversifying ...

Calculated Field 2001 2002 2003 2004 YE Jun 05
Revenue Growth n/a -5.3% 0.8% 39.7% 18.9%
Net Income Growth n/a -94.6% -39.3% -647.1% 26.9%
Total Assets Growth n/a -10.6% -7.1% 45.2% 10.2%
Total Liabilities Growth n/a -15.8% -4.2% 52.2% 31.4%
Net Worth Growth n/a -9.6% -7.6% 43.9% 5.4%
Profit Margin [Net Income / Revenue] -129.8% -7.5% -4.5% 17.6% 18.8%
ROA [Net Income / Average Total Assets] n/a -8.5% -5.9% 26.2% 25.4%
ROE [Net Income / Average Shareholder Equity] n/a -10.1% -7.0% 31.3% 31.9%
Earnings Quality [should exceed 1.00] 0.09 (0.96) (2.00) 1.03 0.79
Gross Margin [Gross Operating Profit / Revenue] 22.0% 17.6% 23.8% 36.7% 36.0%
Cash Generating Power [should exceed 1.00] (0.09) 1.00 1.05 0.97 2.57
Intangibles as Percent of Assets 0.0% 0.0% 0.0% 0.0% 0.0%
Inventory as Percent of Sales 29.0% 22.7% 20.6% 15.7% 16.2%
Accounts Receivable as Percent of Sales 11.9% 14.9% 12.2% 11.7% 13.4%
Reliance on Financing Cash [should be negative] -25.2% 0.0% -0.7% 0.7% -11.9%
Total Liabilities / OCF 8.14 1.92 1.15 0.73 1.02
Current Liabilities / OCF 7.86 1.88 1.13 0.73 1.03
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[Goodfella]

I have owned this stock before a while ago. I have a habit of buying momentum plays without knowing anything about the company.


I kinda wish i had not seen this. As usual i got out way too soon sold in single figures


Dont know anything about the fundamentals. sounds good though

Goodluck