Zoltek Acquires Several Composite Companies
SAINT LOUIS, MISSOURI - November 22, 1999 - Zoltek Companies, Inc. today announced it has completed a series of downstream acquisitions which greatly enhance Zoltek's business and strategically position it to lead an acceleration of the introduction and development of carbon fiber composites across a broad range of mass market applications.
The acquired businesses include: Structural Polymer Systems (SP Systems), which develops, markets and manufactures prepreg (glass and carbon fiber pre-impregnated with resin) materials, special bonding and laminating resins, reinforcement fabrics and consumable materials for composite manufacturing and engineering of composite structures; Cape Composites, which uses proprietary technology for high volume production of prepreg products; and Engineering Technology, Inc. and Composite Machines Company which are market-leading designers and manufacturers of sophisticated filament winding equipment used in the production of all types of tubular composite structures.
"We have consistently identified the need for Zoltek to act as a catalyst in the development of new low-cost, high-volume applications for carbon fiber composites as the final stage in our strategy for commercializing carbon fibers and carbon fiber composites, and this is where we are now getting a major infusion of energy, momentum and insight," said Zsolt Rumy, Zoltek's Chairman and Chief Executive Officer.
"With these acquisitions, we expect three important strategic advantages. First, we have gained direct input into the composites value chain. That is something we need to step up the pace of change within the entire value chain that stretches between Zoltek . as the leading low-cost, low-price producer of carbon fibers . and big potential end product manufacturers. Second, we have added significant marketing and management talent to our global organization. Third and most important, we have acquired leading-edge composite engineering and design technology, and substantial know-how in composite fabrication and processing. This gives us the ability to create integrated solutions for large potential end users and to work directly with them in our ten targeted market sectors, which include automobiles, marine and deep-well oil field services, alternate energy, and construction."
For the largest of the acquisitions, Zoltek paid $30 million in cash . financed through a new bank credit facility . and issued an additional 2.5 million shares of its common stock to purchase SP Systems, of the U.K., a leading European composite designer and producer of composite material used in building large windmill blades, marine structures, automotive parts, and other large composite structures. SP Systems is a clear leader in computerized design of composite structures, and has considerable expertise and historical performance data in various fiber reinforcement products along with proprietary matrix resin systems.
With state-of-the-art research and manufacturing facilities located near Newport on the Isle of Wight, SP Systems had $34.6 million in revenues in 1998 (up from $24.5 million in 1997), and $3.2 million in income from operations (up from $1.5 million in 1997). Through the first nine months of this year SP Systems revenues were up 93% and its operating income was up 143% over the same period last year.
SP Systems was recently awarded a five-year supply contract to supply composite materials to one of Europe's major wind turbine producers. The order . from Gamesa Eolica, the leading wind turbine producer in Spain . confirms SP Systems' position as the leading supplier of composite materials to the wind energy industry in Europe, and virtually ensures that the company's growth will continue in coming years.
Paul Rudling, the Chief Executive Officer of SP Systems, will head Zoltek Intermediates, a new business unit within Zoltek, focused on application and market development, establishing composite design and performance standards and competitive pricing in the value chain. Zoltek will continue to market carbon fibers and support the market and process development of other companies in the value chain.
Noting that SP Systems already had begun to make increasing use of carbon fibers in combination with glass fibers in making stronger and more versatile composite structures, Rudling described SP Systems as "a perfect fit for Zoltek . both strategically and culturally." "We are bringing together two entrepreneurial companies with a shared vision of the future," he said. "While Zoltek has focused on commercializing carbon fibers, SP Systems has pursued a similar strategy, downstream, in working to reduce manufacturing costs and to simplify composite technology from the viewpoint of the ultimate user. I look forward to working with the other companies that are joining Zoltek in really making the future happen."
Cape Composites, Inc. of San Diego, is a manufacturer of carbon fiber prepreg composite materials used in the production of many composite products where unidirectional strength and stiffness are required, such as golf shafts and other sporting goods. Cape Composites reported sales of approximately $6.5 million for the twelve months ended September 30, 1999. Cape Composites is unique in the industry because it is geared for large production volumes, far beyond the needs of the sporting goods market, and it has led the industry in price reduction of carbon fiber prepreg products. Cape Composites' staff, business and facilities will provide the core for the expansion of SP Systems' business in the United States markets.
Zoltek has also acquired Engineering Technology, Inc. (EnTec) and Composite Machines Company, Inc. (CMC), both of Salt Lake City, designers and manufacturers of filament winding and pultrusion equipment used in the production of large-volume composite parts. EnTec and CMC reported aggregated revenues of approximately $7.5 for the twelve months ended September 30, 1999. With EnTec and CMC, Zoltek gains valuable insight and access to critical methodologies and technologies employed in the production of composite tanks, industrial rollers and high performance piping systems, and the production of high-strength, high-stiffness composite tubes and rods.
Over the past three years, Zoltek has led the carbon fibers industry in driving down costs and price (to $8 per pound of carbon fibers for volume users) and in raising productive capacity to ensure ample supplies of material for new high-volume applications. Zoltek is now the world's largest carbon fibers producer based on rated capacity. While anticipated as an interim condition essential to the implementation of the overall strategy, available capacity in excess of current demand has been the major factor adversely affecting Zoltek's operating results in recent quarters.
"One of the upshots of these acquisitions is that they will put Zoltek back on a growth trajectory in both revenues and income for the foreseeable future," Rumy said. "However, we expect the biggest advantage to be in helping to push us over the final barrier that has always existed in the commercialization of a new material. As was the case with aluminum and fiberglass, history shows that every new material faces an intellectual bottleneck at this approximate stage of development, and that is in persuading people in downstream businesses to change long-established processes in order to take advantage of the superior properties of the new material."
Rumy said that Zoltek is considering other acquisitions and is keenly interested in forming strategic application development and composite manufacturing partnerships and joint ventures with others in the composite value chain that share Zoltek's view of the emergence of low-cost, high-performance carbon fiber composites as the building material of the future. It is Zoltek's intent to utilize such relationships to energize the industry to develop a competitive value chain rather than to form exclusive supply relationships.
The forward-looking statements contained in this press release are inherently subject to risks and uncertainties. Zoltek's actual results could differ materially from those currently anticipated due to a number of factors, including the Company's ability to manage rapid growth, development of carbon fiber markets and the recently acquired businesses.
Zoltek is an applied technology and materials company. Zoltek's Carbon Fiber Business Unit is primarily focused on the manufacturing and application of carbon fibers used as reinforcement material in composites. Zoltek's Intermediates Business Unit develops, manufactures and markets reinforcements, specialty resins, consumable supplies and manufacturing equipment for the composite manufacturing industry. It also does composite design and engineering to support the Company's materials business. Zoltek's Hungarian-based subsidiary manufactures and markets acrylic fibers, nylon products and industrial materials.