<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, 2000
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)
12140 COMMUNITY ROAD, POWAY, CALIFORNIA 92064
(Address of principal executive offices)
(858) 513-1801
(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 13, 2000 there were 15,462,204 shares of the Registrant's common
stock, par value $0.01 per share, outstanding.
--------------------------------------------------------------------------------
<PAGE>
ALDILA, INC.
TABLE OF CONTENTS
FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations for the three
months ended September 30, 2000 and 1999 and
the nine months ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALDILA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------------- ---------------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,428 $ 4,077
Marketable securities 3,052 4,513
Accounts receivable 4,763 4,807
Inventories 9,964 12,326
Deferred tax assets 4,010 4,010
Prepaid expenses and other current assets 632 741
-------------------- ---------------------
Total current assets 27,849 30,474
PROPERTY, PLANT AND EQUIPMENT 9,592 11,298
INVESTMENT IN JOINT VENTURE 7,386 7,181
TRADEMARKS AND PATENTS 13,507 13,833
GOODWILL 43,699 44,770
DEFERRED FINANCING FEES 159 256
OTHER ASSETS 415 191
-------------------- ---------------------
TOTAL ASSETS $ 102,607 $ 108,003
==================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,179 $ 3,258
Accrued expenses 3,066 3,693
Income taxes payable 1,687 167
Long-term debt, current portion 8,000 8,000
-------------------- ---------------------
Total current liabilities 15,932 15,118
LONG-TERM LIABILITIES:
Long-term debt - 8,000
Deferred tax liabilities 6,202 6,338
Deferred rent liabilities 51 398
-------------------- ---------------------
Total liabilities 22,185 29,854
-------------------- ---------------------
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 shares 155 155
Additional paid-in capital 42,627 42,627
Retained earnings 37,640 35,367
-------------------- ---------------------
Total stockholders' equity 80,422 78,149
-------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 102,607 $ 108,003
==================== =====================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ALDILA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
NET SALES $ 10,820 $ 10,305 $ 44,615 $ 33,480
COST OF SALES 8,177 9,019 33,281 27,249
--------------- --------------- -------------- ---------------
Gross profit 2,643 1,286 11,334 6,231
--------------- --------------- -------------- ---------------
SELLING, GENERAL AND ADMINISTRATIVE 2,013 1,598 6,153 5,294
AMORTIZATION OF GOODWILL 357 357 1,071 1,071
PLANT CONSOLIDATION - - (566) -
--------------- --------------- -------------- ---------------
Operating income (loss) 273 (669) 4,676 (134)
--------------- --------------- -------------- ---------------
OTHER EXPENSE (INCOME):
Interest expense 227 346 744 1,024
Other, net (184) 3 (431) 16
Equity in earnings of joint venture (69) - (139) -
--------------- --------------- -------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 299 (1,018) 4,502 (1,174)
PROVISION (BENEFIT) FOR INCOME TAXES 262 (264) 2,229 (41)
--------------- --------------- -------------- ---------------
NET INCOME (LOSS) $ 37 $ (754) $ 2,273 $ (1,133)
=============== =============== ============== ===============
NET INCOME (LOSS) PER COMMON SHARE $ 0.01 $ (0.05) $ 0.15 $ (0.07)
=============== =============== ============== ===============
NET INCOME (LOSS) PER COMMON SHARE,
ASSUMING DILUTION $ 0.01 $ (0.05) $ 0.15 $ (0.07)
=============== =============== ============== ===============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 15,462 15,462 15,462 15,462
=============== =============== ============== ===============
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES 15,717 15,462 15,600 15,462
=============== =============== ============== ===============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ALDILA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,273 $ (1,133)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,077 4,699
Loss on disposal of fixed assets 54 11
Changes in assets and liabilities:
Accounts receivable 44 (411)
Inventories 2,362 3,529
Prepaid expenses and other current assets 151 536
Accounts payable (79) (1,237)
Accrued expenses (104) (1,179)
Income taxes payable 1,520 (941)
Deferred tax liabilities (136) (156)
Deferred rent liabilities (347) (90)
------------- -------------
Net cash provided by operating activities 8,815 3,628
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (445) (874)
Investment in marketable securities 1,461 -
Investment in joint venture (205) -
Other (275) -
------------- -------------
Net cash provided by (used for) investing activities 536 (874)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit - 283
Principal payments on long-term debt (8,000) (4,000)
Other, net - (270)
------------- -------------
Net cash used for financing activities (8,000) (3,987)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,351 (1,233)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,077 1,972
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,428 $ 739
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 892 $ 1,277
Income taxes $ 974 $ 484
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
ALDILA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. BASIS OF PRESENTATION
The consolidated balance sheet as of September 30, 2000 and the
consolidated statements of operations and of cash flows for the three and nine
month periods ended September 30, 2000 and 1999, 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, 1999 was derived from the Aldila, Inc. and
subsidiaries' (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, 2000. These consolidated
financial statements should be read in conjunction with the Company's December
31, 1999 consolidated financial statements and notes thereto.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials $ 5,184 $ 6,026
Work in process 2,310 3,658
Finished goods 2,470 2,642
---------------- -----------------
Inventories $ 9,964 $ 12,326
================ =================
</TABLE>
3. LONG-TERM DEBT
SENIOR NOTES - The Company placed $20.0 million in principal amount of
senior notes with an institutional investor on November 30, 1993. $8.0 million
in principal remains outstanding at September 30, 2000. The notes bear interest
at 6.13%, payable semi-annually on March 31 and September 30. Semi-annual
principal payments of $4.0 million, plus accrued interest, are due on March 31
and September 30 through September 30, 2001. The senior notes contain certain
restrictions, including limitations on additional borrowings, the payment of
dividends and capital stock repurchases. Under the most restrictive provision of
the senior notes, the Company must meet consolidated fixed charge coverage
ratios at specified levels. As of September 30, 2000, the Company was in
compliance with all covenants under the senior notes. The fair value of the
fixed rate senior notes approximates their carrying amount based on the
estimated current incremental borrowing rates for similar obligations with
similar terms.
6
<PAGE>
REVOLVING CREDIT AGREEMENT - On July 9, 1999, Aldila Golf Corp.
("Aldila Golf"), a wholly-owned subsidiary of the Company, entered into a Loan
and Security Agreement (the "Agreement") with a financial institution which
provides Aldila Golf with up to $12.0 million in secured financing. The
Agreement has a three year term and is secured by substantially all of the
assets of Aldila Golf and guaranteed by the Company. Advances under the
Agreement are made based on eligible accounts receivables and inventories of
Aldila Golf and bear interest at the Adjusted Eurodollar rate (as defined) plus
2.5% or at the bank reference rate at the election of the Company. The Agreement
requires the Company to maintain a minimum level of tangible net worth (as
defined). As of September 30, 2000, the Company was in compliance with all
covenants under the Agreement and there were no outstanding borrowings.
4. COMMITMENT AND CONTINGENCIES
The Company completed a Lease Termination Agreement ("Termination
Agreement") with the landlord of the Rancho Bernardo manufacturing facility
subsequent to December 31, 1999. The Termination Agreement allows the Company to
buy itself out of the remaining years (through 12/31/2001) of the lease for a
sum of $900,000. The Termination Agreement was finalized and the payment was
made on February 18, 2000. As such, the Company recovered approximately $0.6
million against previously taken plant consolidation charges.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW - BUSINESS CONDITIONS
The Company is principally engaged in the business of designing,
manufacturing and marketing graphite (carbon fiber based composite) golf club
shafts, with approximately 90% 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 established a manufacturing facility in Evanston,
Wyoming for the production of carbon fiber. During 1998 and through the first
ten months of 1999, the Company used the material from this facility to satisfy
a significant portion of its internal demand for carbon fiber in the
manufacturing of golf club shafts. During 1999, the Company also produced and
sold carbon fiber from this facility to unrelated entities for the manufacture
of other carbon-based products. On October 29, 1999, SGL Carbon Fibers and
Composite, Inc. ("SGL") purchased a 50% interest in the Company's carbon fiber
manufacturing operation. The Company and SGL entered into an agreement to
operate the facility as a limited liability company with equal ownership
interests between the venture partners. The Company and SGL also entered into
supply agreements with the new entity, Carbon Fiber Technology LLC ("CFT"), for
the purchase of carbon fiber at cost plus an agreed mark-up. The cost allocable
to each partner in the venture is dependent in part on the percentage of CFT's
output each partner acquires. Profits and losses of CFT are shared equally by
the partners. The Company anticipates that the carbon fiber from this facility
will primarily be consumed by the joint venture partners; however, any excess
carbon fiber produced at this facility could be marketed for sale to unrelated
third parties. The Company also manufactures prepreg for it's internal use and
for sales to third parties. The Company does not expect third party sales at CFT
nor the sale of prepreg to have a significant effect on either its sales or
profitability for several years.
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. However, in recent years the
Company has realized substantial sales growth in the value priced segment of the
graphite shaft market. The Company now competes aggressively with primarily
United States based shaft manufacturers for premium graphite shafts and also
against primarily foreign based shaft manufacturers for lower priced value shaft
sales. The Company continues to maintain a broad customer base in the premium
shaft market segment. While the Company's market share in the value segment is
not as great as the premium segment, the Company has advanced rapidly in
securing new customers in this segment in recent years. Presently, there exists
substantial excess graphite shaft manufacturing capacity both in the United
States and in other countries. This has had the effect, and is expected by
management to continue to have the effect for at least the next several years,
of decreasing the selling prices of the Company's shafts. Although the Company's
gross profit margin is being adversely affected by the reduction in selling
prices, the adverse effects on gross margin have been mitigated in the past to
some extent by steps taken by the Company to control costs, including obtaining
lower
8
<PAGE>
prices for its raw materials and manufacturing its own graphite prepreg, and
should be mitigated to some extent in the future as the Company increases the
percentage of its shafts being manufactured in countries with lower labor and
overhead costs.
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 among several customers, thereby making the Company's results of
operations dependent to a large extent on continued sales to TaylorMade-adidas
Golf Co. ("TaylorMade"), Callaway Golf Company ("Callaway") and Ping. In 1999
sales to TaylorMade, Callaway and Ping represented 17%, 12% and 10%,
respectively, of the Company's total net sales. The Company expects TaylorMade,
Callaway and Ping to continue to be the Company's largest customers, at least
through 2000. 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 2000 COMPARED TO THIRD QUARTER 1999
NET SALES. Net sales increased $0.5 million, or 5%, to $10.8 million for
the third quarter ended September 30, 2000 (the "2000 Period") from $10.3
million for the third quarter ended 1999 (the "1999 Period"). The increase in
net sales was attributable to increased shaft unit sales to the Company's club
manufacturer customers which was partially offset primarily by no carbon fiber
sales in the 2000 Period which were $1.5 million in the 1999 Period, and also by
a decrease in the average shaft unit selling price of shafts sold in the 2000
Period. Shaft unit sales increased 28.2% in the 2000 Period as compared to the
1999 Period, and the average selling price of shafts sold decreased 1.0% in the
2000 Period.
GROSS PROFIT. Gross profit increased $1.4 million, or 105.5%, to $2.6
million for the 2000 Period from $1.3 million for the 1999 Period as a result of
the increase in net sales and less expensive carbon fiber consumed in the 2000
Period. The Company's gross profit margin increased to 24.4% in the 2000 Period
compared to 12.5% in the 1999 Period primarily as a result of increased volume,
which resulted in a lower overall cost per unit.
OPERATING INCOME. Operating income increased $0.9 million, or 140.8%, to
$0.3 million for the 2000 Period from a loss of ($0.7) million for the 1999
Period, and increased as a percentage of net sales to 2.5% in the 2000 Period
compared to (6.5)% in the 1999 Period. Selling, general
9
<PAGE>
and administrative expense increased to $2.0 million in the 2000 Period from
$1.6 million in the 1999 Period primarily resulting from higher incentive
charges partially offset by reductions in other expenditures. Selling, general
and administrative expense increased as a percentage of net sales to 18.6% for
the 2000 Period compared to 15.5% for the 1999 Period.
INCOME (LOSS) BEFORE INCOME TAXES. Income (loss) before income taxes
increased $1.3 million to $0.3 million for the 2000 Period from $(1.0) million
for the 1999 Period. The majority of the increase is attributed to the increase
in operating income.
INCOME TAXES. The Company recorded a provision for income taxes of $0.3
million in the 2000 Period compared to a benefit of $0.3 million in the 1999
Period. The increase in the income tax provision was a result of the Company's
higher income before income taxes.
NINE MONTH PERIOD IN 2000 COMPARED TO THE NINE MONTH PERIOD IN 1999
NET SALES. Net sales increased $11.1 million, or 33.3%, to $44.6 million
for the nine month period ended September 30, 2000 from $33.5 million for the
nine month period ended September 30, 1999. The increase in net sales was
attributable to increased shaft unit sales which was partially offset primarily
by no carbon fiber sales in the 2000 Period which were $3.6 million in the 1999
Period. Shaft unit sales increased by 75.3% and the average selling price of
shafts sold decreased 9.0% in the nine month period ended September 30, 2000 as
compared to the nine month period ended September 30, 1999.
GROSS PROFIT. Gross profit increased $5.1 million, or 81.9%, to $11.3
million for the nine month period ended September 30, 2000 from $6.2 million for
the nine month period ended September 30, 1999. The Company's gross profit
margin increased to 25.4% for the nine month period ended September 30, 2000
compared to 18.6% for the nine month period ended September 30, 1999, primarily
as a result of increased volume which results in a lower overall cost per unit.
Gross profit margin was negatively impacted in the nine month period ended
September 30, 2000 from the carry over of higher cost inventories from 1999. The
impact of the 1999 higher cost inventories resulted in an approximate 3%
reduction in gross profit reported. Gross profit margin in the nine month period
ended September 30, 2000 was impacted positively by an approximate $0.3 million
adjustment to inventory reserves.
OPERATING INCOME. Operating income increased $4.8 million, or 3,589.6%, to
$4.7 million for the nine month period ended September 30, 2000 from $(0.1)
million for the nine month period ended September 30, 1999, and increased as a
percentage of net sales to 10.5% for the nine month period ended September 30,
2000 compared to (0.4%) for the nine month period ended September 30, 1999.
Selling, general and administrative expense increased by 16.2% to $6.2 million
for the nine month period ended September 30, 2000 from $5.3 million for the
nine month period ended September 30, 1999. The increase in the nine months
ended September 30, 2000 was a result of higher incentive charges partially
offset by reductions in other expenditures. Selling, general and administrative
expense decreased as a percentage of net sales to 13.8% for the nine month
period ended September 30, 2000 compared to 15.8% for the nine month period
ended September 30, 1999, primarily as a result of the increase in net sales. In
addition,
10
<PAGE>
operating income was positively impacted in the nine month period ended
September 30, 2000 by the recovery of $0.6 million in previously recorded plant
consolidation charges.
INCOME (LOSS) BEFORE INCOME TAXES. Income (loss) before income taxes
increased $5.7 million to $4.5 million for the nine month period ended September
30, 2000 from ($1.2) million for the nine month period ended September 30, 1999,
primarily as a result of higher operating income.
INCOME TAXES. The Company recorded a provision for income taxes of $2.2
million in the nine month period ended September 30, 2000 compared to a benefit
of $41,000 in the nine month period ended September 30, 1999, which was
primarily as a result of the affect of higher income before taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has in place a $12.0 million revolving credit facility from a
financial institution, which is secured by substantially all the assets of
Aldila Golf and guaranteed by the Company. Borrowings under the line of credit
bear interest, at the election of Aldila Golf, at the bank reference rate or at
the adjusted Eurodollar rate plus 2.5%. Availability for borrowings under the
Line of Credit was approximately $5.6 million as of September 30, 2000. There
were no borrowings under the line of credit during the quarter ended September
30, 2000. The Company has $8.0 million in principal amount of senior notes
outstanding which bear interest at 6.13%. Semi-annual principal payments of $4.0
million, plus accrued interest, are due on March 31 and September 30 through
September 30, 2001.
Cash provided by operating activities in the nine month period ended
September 30, 2000 was $8.8 million compared to $3.6 million provided by
operating activities for the nine month period ended September 30, 1999. This
increase resulted principally from the increase in net income and an increase in
cash provided by working capital items, which was partially offset by a decrease
in depreciation and amortization in the nine month period ended September 30,
2000. The Company used $0.5 million for capital expenditures during the nine
month period ended September 30, 2000. Management anticipates capital
expenditures will not exceed $1.0 million for 2000. The Company may also incur
capital expenditures over the next several years to expand and enhance the
production capacity of the CFT operation in Evanston, Wyoming in order to take
advantage of new opportunities brought to CFT and further reduce production
costs for the carbon fiber acquired by the Company, in addition to an obligation
to support one half of CFT's fixed annual cost. The Company believes that it
will have adequate cash resources, including anticipated cash flow and borrowing
availability to meet its obligations at least through 2001.
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.
11
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements". SAB 101 provides the SEC staff's
views in applying generally accepted accounting principles to selected revenue
recognition issues. The Company will be required to adopt SAB 101 in the fourth
quarter of the 2000 fiscal year. The Company does not expect the adoption of SAB
101 will have a material effect on our financial position or results of
operations.
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
product 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 contain
forward-looking statements based on our expectations as of the date hereof.
These forward-looking statements 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.
The Company's Report on Form 10-K for the year ended December 31, 1999 (the
"Form 10-K") presents a detailed discussion of the principal risks and
uncertainties related to the forward-looking statements in this 10-Q, in
particular under "Business Risks" in Part I, Item 1 of the Form 10-K and
Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part I, Item 7 of the Form 10-K. The forward-looking statements
in this 10-Q are particularly subject to the risks that
- we will not maintain or increase our market share at our
principal customers;
- demand for clubs manufactured by our principal customers will
decline, thereby affecting their demand for our shafts;
- our principal customers will be unwilling to satisfy a
significant portion of their demand with shafts manufactured
in Mexico or China instead of with shafts manufactured in the
United States;
- we will not achieve success marketing shafts to club
assemblers based in China;
12
<PAGE>
- our international operations will be adversely affected by
political instability, currency fluctuation, export/import
regulation and other risks typical of multi-national
operations, particularly those operating in less developed
countries; and
- Carbon Fiber Technology LLC will be unsuccessful as a result,
for example, of internal operational problems, raw material
supply problems, changes in demand for carbon fiber based
products, or difficulties in operating a joint venture.
13
<PAGE>
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, 2000.
14
<PAGE>
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 13, 2000 \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
15
