<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-21872
ALDILA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3645590
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
15822 BERNARDO CENTER DRIVE, SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices)
(619) 592-0404
(Registrant's Telephone No.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
----- -----
As of November 7, 1998 there were 15,462,204 shares of the Registrant's
common stock, par value $0.01 per share, outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1
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ALDILA, INC.
TABLE OF CONTENTS
FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
September 30, 1998 and December 31, 1997 3
Consolidated Statements of Income for the three
months ended September 30, 1998 and 1997 and the
nine months ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALDILA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,006 $ 3,046
Accounts receivable 5,719 4,640
Income taxes receivable - 14
Inventories 14,150 13,186
Deferred tax assets 2,902 2,902
Prepaid expenses and other current assets 1,141 734
---------- ----------
Total current assets 30,918 24,522
PROPERTY, PLANT AND EQUIPMENT 27,136 26,170
TRADEMARKS AND PATENTS 14,378 14,704
GOODWILL 46,554 47,625
DEFERRED FINANCING FEES 78 107
---------- ----------
TOTAL ASSETS $ 119,064 $ 113,128
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,623 $ 4,051
Accrued expenses 3,605 3,696
Income taxes payable 1,127 -
Long-term debt, current portion 4,000 -
---------- ----------
Total current liabilities 14,355 7,747
LONG-TERM LIABILITIES:
Long-term debt 16,000 20,000
Deferred tax liabilities 7,262 7,487
Deferred rent liabilities 532 611
---------- ----------
Total liabilities 38,149 35,845
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
5,000,000 shares; no shares issued
Common stock, $.01 par value; authorized
30,000,000 shares; issued and outstanding
15,462,204 and 15,428,871 shares 155 154
Additional paid-in capital 42,627 42,456
Retained earnings 38,133 34,673
---------- ----------
Total stockholders' equity 80,915 77,283
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 119,064 $ 113,128
---------- ----------
---------- ----------
</TABLE>
3
<PAGE>
ALDILA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ------------------------
1998 1997 1998 1997
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
NET SALES $13,609 $12,772 $53,879 $44,381
COST OF SALES 9,498 8,838 37,952 29,932
-------- -------- -------- --------
Gross profit 4,111 3,934 15,927 14,449
-------- -------- -------- --------
SELLING, GENERAL AND ADMINISTRATIVE 2,079 2,025 7,566 7,376
AMORTIZATION OF GOODWILL 357 357 1,071 1,071
-------- -------- -------- --------
Operating income 1,675 1,552 7,290 6,002
-------- -------- -------- --------
OTHER:
Interest expense 322 162 961 794
Other (income), net (81) (93) (182) (377)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 1,434 1,483 6,511 5,585
PROVISION FOR INCOME TAXES 679 692 3,051 2,485
-------- -------- -------- --------
NET INCOME $755 $791 $3,460 $3,100
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME PER COMMON SHARE $0.05 $0.05 $0.22 $0.20
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME PER COMMON SHARE,
ASSUMING DILUTION $0.05 $0.05 $0.22 $0.20
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
4
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ALDILA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,460 $3,100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,315 4,137
Changes in assets and liabilities:
Accounts receivable (1,079) (1,747)
Inventories (964) (4,663)
Prepaid expenses and other current assets (407) (156)
Accounts payable 1,572 2,233
Accrued expenses (91) (802)
Income taxes payable/receivable 1,141 4
Deferred tax liabilities (225) (205)
Deferred rent liabilities (79) (113)
--------- ---------
Net cash provided by operating activities 7,643 1,788
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (4,108) (10,606)
Other 253 29
--------- ---------
Net cash used for investing activities (3,855) (10,577)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 156 24
Repurchase of common stock - (3,165)
Tax benefit from exercise of stock options 16 7
--------- ---------
Net cash provided by (used for) financing activities 172 (3,134)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,960 (11,923)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,046 19,676
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $7,006 $7,753
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $1,239 $1,226
Income taxes $2,119 $2,679
</TABLE>
5
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ALDILA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. BASIS OF PRESENTATION
The consolidated balance sheet as of September 30, 1998 and the consolidated
statements of income and of cash flows for the three and nine month periods
ended September 30, 1998 and 1997, are unaudited and reflect all adjustments
of a normal recurring nature which are, in the opinion of management,
necessary for a fair presentation of the financial position and results of
operations for the interim periods presented. The consolidated balance sheet
as of December 31, 1997 was derived from the Company's audited financial
statements. Operating results for the interim periods presented are not
necessarily indicative of results to be expected for the fiscal year ending
December 31, 1998. These consolidated financial statements should be read in
conjunction with the Company's December 31, 1997 consolidated financial
statements and notes thereto.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Raw materials $11,340 $ 7,514
Work in process 845 2,108
Finished goods 1,965 3,564
--------- ---------
Inventories $14,150 $13,186
--------- ---------
--------- ---------
</TABLE>
3. LONG-TERM DEBT
Line of Credit - In March of 1998 the Company established a $10.0 million
unsecured line of credit with a financial institution expiring June 30, 1999.
Borrowings under the line of credit bear interest, at the bank reference rate
or the LIBOR rate plus 1.5%, at the election of the Company. The line of
credit requires the maintenance of certain financial ratios. No borrowings
have been made against the line of credit.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW - BUSINESS CONDITIONS
Aldila, Inc. and subsidiaries (the "Company") is principally engaged in
the business of designing, manufacturing and marketing graphite (carbon fiber
based composite) golf club shafts, with approximately 85% of its net sales
resulting from sales to golf club manufacturers for inclusion in their clubs.
As a result, the Company's operating results are substantially dependent not
only on demand by its customers for the Company's shafts, but also on demand
by consumers for clubs including graphite shafts such as the Company's.
In 1998, the Company began production of carbon fiber at its new
facility in Evanston, Wyoming. The Company will use the output of this
facility to satisfy a significant portion of its internal demand for carbon
fiber in the manufacturing of golf club shafts. It also anticipates that it
will produce at this new facility carbon fiber in excess of what it will be
able to use in the manufacturing of golf club shafts. The Company intends to
sell such excess, in some cases in the form of graphite prepreg manufactured
using its existing facility in Poway, California, to other manufacturers of
carbon fiber-based products. The Company has not yet realized significant
revenues from the sale of carbon fiber or graphite prepreg to third parties
through the first nine months of 1998. The Company is also exploring
entering into the manufacture of new carbon fiber-based products in order to
take advantage of this excess carbon fiber capacity and may make acquisitions
of other companies in order to acquire such product lines. The Company
expects that the additional vertical integration offered by its new facility
will assist it in maintaining its position as a low cost manufacturer of
graphite golf club shafts at all price points. Management of the Company
believes that the ability to manufacture carbon fiber will also ultimately
enable the Company to diversify its sales and reduce its dependence on the
overall golf club market, while continuing to leverage the Company's existing
composite materials expertise, which should provide opportunities for growth
that are not currently present in the golf shaft business. The new facility
is undergoing a "shakedown" period and will not be operating at full capacity
in 1998, therefore, the full benefit of this facility to the Company is not
expected to be realized until at least 1999.
Historically, graphite shafts have principally been offered by
manufacturers of higher priced, premium golf clubs, and the Company's sales
have been predominantly of premium graphite shafts. In addition, until
recently, the United States market for graphite shafts was dominated by a
relatively small number of United States-based shaft manufacturers. Both of
these aspects of the graphite shaft market have been changing. As a high
percentage of premium clubs are already sold with graphite shafts, as
compared to a smaller percentage of value priced clubs, the Company
anticipates that growth in graphite shaft usage in the future will be greater
in the value priced segment of the market than in the premium segment.
Management of the Company expects sales of shafts for the value priced club
market to increase significantly over the next several years, although
management also anticipates that sales of premium shafts will continue to
represent a majority of the Company's sales measured in dollars for the
foreseeable future. Over the last several years, the number of shaft
manufacturers of graphite golf shafts serving the United States
7
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premium club market has increased, including affiliates of foreign
manufacturers that had previously not had significant sales in the United
States. These two overall trends in the graphite shaft marketplace have had
the effect, and are expected by management to continue to have the effect for
at least the next several years, of decreasing the average selling price of
the Company's shafts. Although the Company's gross profit margin is being
adversely affected by the reduction in average selling price and continuing
increases in raw material costs, these adverse effects on gross margin should
be mitigated to some extent by efforts being taken by the Company to control
costs, including manufacturing its own graphite prepreg and, starting in 1998
its own carbon fiber, increased automation and increasing the percentage of
its shafts being manufactured in countries with lower labor and overhead
costs. In order to increase its capacity to manufacture shafts in a lower
cost environment, the Company is planning to open a second shaft
manufacturing facility in Zhuhai, China in the first quarter of 1999.
In recent years, the Company's results of operations have been
materially affected on several occasions by dramatic year-to-year changes in
sales to an individual golf club manufacturer customer. Such changes can
result either from decisions by the customer to increase or decrease shaft
purchases from an alternative supplier or from the traditional volatility in
consumer demand for specific clubs. The Company believes that this
volatility is likely to continue in the future, particularly as club
manufacturers seek to gain competitive advantages through an increased rate
of technological innovation in club design. The Company's results will
benefit whenever it has an opportunity to supply shafts for the latest "hot"
club and will be adversely affected whenever sales of clubs containing Aldila
shafts drop dramatically. In particular, in recent years, a significant
portion of the Company's sales has tended to be concentrated in one or two
customers, thereby making the Company's results of operations dependent to a
large extent on continued sales to those customers. In the first nine months
of 1998, sales to Callaway Golf Company and Taylor Made Golf represented 25%
and 17%, respectively, of the Company's total net sales. The Company expects
Callaway and Taylor Made to continue to be the Company's largest customers at
least through 1998. The Company believes that while it will often not be
possible to predict, with any certainty, shifts in demand for particular
clubs, the Company's broad range of club manufacturer customers should reduce
in some cases the extent of the impact on the Company's financial results.
RESULTS OF OPERATIONS
THIRD QUARTER 1998 COMPARED TO THIRD QUARTER 1997
NET SALES. Net sales increased $0.8 million, or 6.6%, to $13.6 million
for the third quarter ended September 30, 1998 (the "1998 Period") from $12.8
million for the third quarter ended in 1997 (the "1997 Period"). The
increase in net sales was attributable to increased shaft unit sales to the
Company's club manufacturer customers as well as a $0.9 million increase in
sales of other carbon fiber products in the 1998 Period. Shaft unit sales
increased 7% in the 1998 Period as compared to the 1997 Period, which was
offset by an 9% decrease in the average selling price of shafts sold, as a
result of a change in product mix to lower priced value shafts.
8
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GROSS PROFIT. Gross profit increased $0.2 million, or 4.5%, to $4.1
million for the 1998 Period from $3.9 million for the 1997 Period. The
Company's gross profit margin decreased to 30.2% in the 1998 Period compared
to 30.8% in the 1997 Period as a result of a charge of $0.2 million against
cost of sales related to the production ramp-up in the new facility in
Evanston, Wyoming.
OPERATING INCOME. Operating income increased $0.1 million, or 7.9%, to
$1.7 million for the 1998 Period from $1.6 million for the 1997 Period, and
increased as a percentage of net sales to 12.3% in the 1998 Period compared
to 12.2% in the 1997 Period. Selling, general and administrative expense
decreased as a percentage of net sales to 15.3% for the 1998 Period as
compared to 15.9% for the 1997 Period primarily as a result of lower
advertising expenses incurred in the 1998 Period as compared to the 1997
Period.
NINE MONTH PERIOD IN 1998 COMPARED TO NINE MONTH PERIOD IN 1997
NET SALES. Net sales increased $9.5 million, or 21.4%, to $53.9 million
for the nine month period ended September 30, 1998 from $44.4 million for the
nine month period ended September 30, 1997. The increase in net sales was
attributable to increased shaft unit sales to the Company's club manufacturer
customers. Shaft unit sales increased 38% in the nine month period ended
September 30, 1998 as compared to the nine month period ended September 30,
1997, which was offset by a 15% decrease in the average selling price of
shafts sold, both as a result of a change in product mix to lower price
shafts as well as continued downward pressure on shaft prices.
GROSS PROFIT. Gross profit increased $1.5 million, or 10.2%, to $15.9
million for the nine month period ended September 30, 1998 from $14.5 million
for the nine month period ended September 30, 1997 principally as a result of
the increase in net sales. The Company's gross profit margin decreased to
29.6% for the nine month period ended September 30, 1998 compared to 32.6%
for the nine month period ended September 30, 1997 as a result of continued
downward pressure on shaft prices and a charge of $0.7 million against cost
of sales related to the production ramp-up in the new facility in Evanston,
Wyoming.
OPERATING INCOME. Operating income increased $1.3 million, or 21.5%, to
$7.3 million for the nine month period ended September 30, 1998 from $6.0
million for the nine month period ended September 30, 1997, and remained
constant as a percentage of net sales at 13.5% for the nine month period
ended September 30, 1998 compared to 13.5% for the nine month period ended
September 30, 1997. Selling, general and administrative expense decreased as
a percentage of net sales to 14.0% for the nine month period ended September
30, 1998 as compared to 16.6% for the nine month period ended September 30,
1997 primarily as a result of lower advertising and other administrative
expenses incurred in the nine month period in 1998 compared to 1997.
9
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LIQUIDITY AND CAPITAL RESOURCES
Since November 1993, the only indebtedness of the Company has been $20.0
million in 6.13% senior notes due 2001. Generally, the Company has not
required borrowings to finance its operations or provide working capital but
it may require additional financing to support its working capital needs on a
short-term basis. The Company's $20.0 million in 6.13% senior notes require
semi-annual principal payments of $4.0 million beginning September 30, 1999
through September 30, 2001. In March of 1998, the Company established a
$10.0 million unsecured line of credit from a financial institution expiring
June 30, 1999 which is available to support any short-term working capital
requirements.
Cash (including cash equivalents) provided by operating activities for
the nine month period in 1998 was $7.6 million compared to $1.8 million
provided by operating activities for the nine month period in 1997. This
increase resulted principally from the increase in net income and decrease in
cash used for working capital items in 1998 as compared to 1997. The Company
used $4.1 million for capital expenditures during the nine month period ended
September 30, 1998, primarily related to the completion of construction of a
new facility for the manufacture of carbon fiber. Other than maintenance
capital expenditures in the ordinary course of business (which the Company
does not expect to be significant), the only planned capital expenditures
over the next twelve months are in connection with the new China facility and
additional expansion of prepreg capacity. Management anticipates capital
expenditures over the next 12 months to approximate $3.0 million to $5.0
million.
The Company may from time to time consider the acquisition of businesses
complementary to the Company's business. The Company could require
additional debt financing if it were to engage in a material acquisition in
the future.
YEAR 2000
The Company recognizes the need to ensure its operations will not be
adversely impacted by the inability of the Company's information systems and
the information systems of its major customers and suppliers to process data
having dates on or after January 1, 2000 (the "Year 2000" issues).
The Company has evaluated its information technology ("IT") and non-IT
systems, including but not limited to computer hardware and software, alarm
systems, manufacturing equipment and software, and all other mechanical
equipment, to determine areas of exposure to potential Year 2000 issues.
Based on this evaluation, a plan was developed and implemented to identify
and resolve all of the internal Year 2000 issues. The Company has tested
its critical systems and believes them to be Year 2000 compliant. However,
the Company has not completed the testing phase for its non critical systems.
The Company believes that it will complete its Year 2000 plan by the end of
the second quarter 1999.
10
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Included in the Company's plan is the evaluation of its external Year 2000
exposure and risk. The Company is still in the process of contacting its
major external customers and suppliers to determine their Year 2000 readiness
and evaluate risk factors associated with them.
To date, the Company has not spent a significant amount in identifying and
fixing Year 2000 issues and estimates it will not incur a significant amount
for remediation of its remaining Year 2000 issues. In addition, based on its
efforts to date, the Company does not anticipate any significant risk of
failure leading to material financial impact resulting from the Year 2000
issue. Consequently, the Company does not intend to create a contingency plan.
There can be no assurance that the Company's efforts to achieve Year 2000
compliance will be successful or that third parties with whom the Company has
material relationships will be Year 2000 compliant by January 1, 2000. An
interruption of the Company's ability to conduct its business due to a Year
2000 problem with a third party could have an adverse effect on the company.
SEASONALITY
Because the Company's customers have historically built inventory in
anticipation of purchases by golfers in the spring and summer, the principal
selling season for golf equipment, the Company's operating results have been
affected by seasonal demand for golf clubs, which has generally resulted in
the highest sales occurring in the second quarter. The timing of customers'
new products introductions has frequently mitigated the impact of seasonality
in recent years.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
With the exception of historical information (information relating to
the Company's financial condition and results of operations at historical
dates or for historical periods), the matters discussed in this Management's
Discussion and Analysis of Financial Condition and Results of Operations are
forward-looking statements that necessarily are based on certain assumptions
and are subject to certain risks and uncertainties. These forward-looking
statements are based on management's expectations as of the date hereof, that
necessarily contain certain assumptions and are subject to certain risks and
uncertainties. The Company does not undertake any responsibility to update
these statements in the future. The Company's actual future performance and
results could differ from that contained in or suggested by these forward
looking statements as a result of
11
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a variety of factors, including (i) risks associated with the addition of the
new facility in China (such as the need to obtain required governmental
permits and approvals, potential construction delays, and the need to hire
and train additional employees), (ii) the ability to produce high volumes of
carbon fiber at lower cost at the Evanston, Wyoming facility, which has been
undergoing a "shakedown" period following its commencement of production
earlier in 1998, (iii) changes in demand by the Company's customers for
graphite golf shafts, graphite prepreg or 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
(iv) the availability of raw materials for the Company's manufacturing
operations (principally carbon fiber and acrylic fiber) at anticipated
prices, (v) the ability of the Company to develop new customer relationships
with non golf users of prepreg and carbon fiber, and (vi) risks
resulting from the increasing portion of the Company's 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) and (vii) the Company's ability to vacate and
sublease its Rancho Bernardo facility on a timely basis and in the manner
anticipated (which in turn depends in part on the market for leased real
property of this type in the vicinity of Rancho Bernardo).
The Company's Report on Form 10-K for the year ended December 31, 1997 (the
"Form 10-K") presents a more detailed discussion of these and other risks
related to the forward looking statements in this 10-Q, in particular under
"Business Risks" in Part I, Item 1 of the Company's Form 10-K and
Management's Discussion and Analysis of Financial Condition and Results of
Operation" in Part I, Item 7 of the Form 10-K.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11.1 - Statement re: Computation of Net Income per
Common Share
(b) Exhibit 27.1 - Financial Data Schedule
(c) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant
during the quarter ended September 30, 1998.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: ALDILA, INC.
November 7, 1998 \s\ Robert J. Cierzan
---------------------------------------
Robert J. Cierzan
Vice President, Finance
Signing both in his capacity as
Vice President and as Chief
Accounting Officer of the Registrant
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EXHIBIT 11.1
ALDILA, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- ---------------------
1998 1997 1998 1997
------- -------- -------- ---------
<S> <C> <C> <C> <C>
BASIC:
Net income $ 755 $ 791 $ 3,460 $ 3,100
Weighted average number of common shares outstanding 15,462 15,483 15,448 15,691
------- -------- -------- ---------
Net Income per common share $ 0.05 $ 0.05 $ 0.22 $ 0.20
------- -------- -------- ---------
------- -------- -------- ---------
ASSUMING DILUTION:
Net income $ 755 $ 791 $ 3,460 $ 3,100
Weighted average number of common shares outstanding 15,462 15,483 15,448 15,691
The number of shares resulting from the assumed
exercise of stock options reduced by the number
of shares which could have been purchased with
the proceeds from such exercise, using the average
market price during the period 95 184 206 115
------- -------- -------- ---------
Weighted average number of common and
common equivalent shares 15,557 15,667 15,654 15,806
------- -------- -------- ---------
Net Income per common share, assuming dilution $ 0.05 $ 0.05 $ 0.22 $ 0.20
------- -------- -------- ---------
------- -------- -------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,006
<SECURITIES> 0
<RECEIVABLES> 5,719
<ALLOWANCES> 0
<INVENTORY> 14,150
<CURRENT-ASSETS> 30,918
<PP&E> 27,136
<DEPRECIATION> 0
<TOTAL-ASSETS> 119,064
<CURRENT-LIABILITIES> 14,355
<BONDS> 20,000
0
0
<COMMON> 155
<OTHER-SE> 80,760
<TOTAL-LIABILITY-AND-EQUITY> 119,064
<SALES> 53,879
<TOTAL-REVENUES> 53,879
<CGS> 37,952
<TOTAL-COSTS> 45,518
<OTHER-EXPENSES> 1,071<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 961
<INCOME-PRETAX> 6,511
<INCOME-TAX> 3,051
<INCOME-CONTINUING> 3,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,460
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
<FN>
<F1>GOODWILL AMORTIZATION
</FN>
</TABLE>
