Zoltek Reports Larger Loss, Increased Carbon Fiber Sales
ST. LOUIS, MISSOURI - November 29, 2000 - Zoltek Companies, Inc. today announced fourth quarter and fiscal year 2000 results.
Excluding discontinued operations, total sales for the quarter ended September, 30, 2000 were $23.9 million, compared to $18.0 million in the prior year quarter, an increase of 32%. Zoltek reported a net loss of $1.8 million from continuing operations in the recently completed quarter, compared to a net loss of $715,000 in the fourth quarter of fiscal 1999. Without discontinued operations, total sales for fiscal 2000 were $81.4 million, compared to $68.5 million in fiscal 1999, an increase of 19%. Zoltek reported a net loss of $4.0 million from continuing operations in fiscal 2000, compared to a net loss of $2.6 million in fiscal 1999.
“The losses from continuing operations are disappointing and we are continuing to take steps designed to return to profitable operations in 2001,” said Zsolt Rumy, Zoltek’s Chairman and Chief Executive Officer. “However, we consider the strategic installed excess capacity costs of $4.7 million and the application development costs of over $2.0 million during fiscal 2000 to be investments in the future. And these expenses far exceed our operating losses.”
Rumy also noted that Zoltek’s sales of carbon fibers - its core products - were up 8% in dollar terms for the year, while sales volumes were up 27%. “We are encouraged by continuing expansion of sales in the aircraft brakes, conductive plastics and other newer markets, even if our overall progress is not as fast as we would like. Our margins in the carbon fiber business have been depressed as a result of dumping by old-line, high-priced, aerospace-oriented producers in existing commercial markets, such as sporting goods and conductive plastics. But our most important efforts today, including most of our spending on research and development and marketing, are focused on supporting new applications for carbon fibers in automobile manufacturing, infrastructure repair, new construction and other fields. While our progress measured in current sales is still small, we believe the potential is enormous. We continue to see mounting evidence that our strategy is valid as big auto makers and others are indeed making needed investments in new equipment and processes to support major breakthrough developments based on the light weight and great strength of carbon fibers.”
As stated in our third quarter report, we were very disappointed in the financial performance of SP Systems, our subsidiary which was acquired early in fiscal year 2000. In the process of developing a plan to reverse this trend, we realized a turn-around would take too long and would require substantial additional financing and a significant management effort, diluting our prime strategic efforts in the carbon fiber business. Therefore, we decided that divesting the business while maintaining strategic supply relationships with SP Systems was the best alternative. We recorded a loss in discontinued operations of $3.2 million in the fourth quarter of fiscal year 2000 for the accumulated operating losses and the calculated impairment of the goodwill for the SP Systems business. The recognition of these costs contributed to the net loss for the quarter ended September 30, 2000 of $5.0 million and a net loss for the fiscal year 2000 of $8.7 million.
Subsequent to the end of fiscal 2000, the sale was completed and SP Systems was acquired by its management group with financing from a merchant banking firm. The sale price was approximately $54.0 million before expenses, and was composed of $30.0 million cash, a $5.0 million note receivable and a return of the 2.5 million shares of Zoltek common stock issued in the original purchase. The cash received from the sale of SP Systems was used to repay outstanding borrowings of the Company. In summary, the impact of the sale of SP Systems was an increase of $5.0 million in notes receivable; and a decrease of $8.4 million in the value of the 2.5 million shares that were returned to Zoltek - based on $11 per share price at the time of the acquisition and a $7.625 per share price at the time of the sale. “Though the recognition of the goodwill impairment has resulted in a one-time non-cash loss, the real impact on our financial situation from the sale was entirely beneficial. We have reduced our financial leverage to a comfortable amount and removed what had been a drag against current and future operating results and increased the book value to $7.58 per share,” said Zsolt Rumy. “Going forward, we will refocus our management and financial resources on returning our business to profitability, while concentrating on our primary mission, which is expanding and developing new applications for our low-cost, high-performance carbon fibers and bringing about the commercialization of carbon fibers and carbon fiber composites as a basic building material.”
With the divestiture of SP Systems, Zoltek’s downstream composites intermediate business consists of three principal components: Zoltek Composites (formerly Cape Composites), a manufacturer of carbon and glass fiber prepreg materials; Entec Composite Machines, which designs, manufactures and sells machines which process carbon and glass fiber composite materials; and its controlling investment in Hardcore Composites, which is a leader in design and production of large composite structures, such as bridge decks and marine pilings.
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 Specialty Products Business Unit manufactures and markets acrylic fibers, nylon products and industrial materials.
For further information contact:
Zsolt Rumy, CEO or Dan Greenwell, CFO
3101 McKelvey Road
St. Louis, MO 63044
(314) 291-5110
SUMMARY FINANCIAL RESULTS
(Amounts In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
September 30
2000 1999
Net sales $ 23,882 $ 18,045
Unused capacity costs (1,260) (1,065)
Operating loss from continuing operations (1,860) (953)
Net loss from continuing operations (1,809) (715)
Discontinued operations:
Loss from operations (500) -
Loss on impairment of goodwill (2,700) -
Net loss on discontinued operations (3,200) -
Net loss (5,009) (715)
Basic and diluted net loss per share:
Continuing operations ($0.10) ($0.04)
Discontinued operations ($0.17) -
Total ($0.27) ($0.04)
Weighted average shares outstanding 18,701 16,201
(Audited)
Fiscal Year Ended
September 30
2000 1999
Net sales $ 81,381 $ 68,525
Unused capacity costs (4,658) (3,953)
Operating loss from continuing operations (5,301) (3,328)
Net loss from continuing operations (3,991) (2,642)
Discontinued operations:
Loss from operations (1,994) -
Loss on impairment of goodwill (2,700) -
Net loss on discontinued operations (4,694) -
Net loss (8,685) (2,642)
Basic and diluted net loss per share:
Continuing operations ($0.22) ($0.16)
Discontinued operations ($0.25) -
Total ($0.47) ($0.16)
Weighted average shares outstanding 18,360 16,209