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Zoltek Companies Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 9, 2009 10:02PM

Zoltek Companies Inc. (ZOLT) filed Quarterly Report for the period ended 2008-12-31. Zoltek Companies Inc. is an applied technology and advanced materials company. Their primary focus is the manufacturing and marketing of carbon fibers. The most significant current application for carbon fibers produced by Zoltek is for aircraft brake manufacturers who use their fibers as base materials for the carbon/carbon brake systems used in most newly designed aircraft. Zoltek Companies Inc. has a market cap of $243.59 million; its shares were traded at around $8.65 with a P/E ratio of 15.5 and P/S ratio of 1.31.

Highlight of Business Operations:

The Company’s sales decreased 3.6%, or $1.5 million, to $38.6 million in the first quarter of fiscal 2009 from $40.1 million in the first quarter of fiscal 2008. Carbon fiber sales decreased 4.1%, or $1.4 million, to $32.7 million in the first quarter of fiscal 2009 from $34.1 million in the first quarter of fiscal 2008 primarily due to reaction by several smaller customers and Gamesa Group to weak global economic conditions in the current year quarter. These customers postponed or cancelled orders during the quarter which resulted in reduced sales going into calendar year end. The Company’s orders from other significant customers, such as Vestas Wind Systems, remained steady. Technical fiber sales increased 4.6%, or $0.3 million, to $5.3 million in the first quarter of fiscal 2009 from $5.0 million in the first quarter of fiscal 2008. Sales of other products and services decreased $0.3 million to $0.6 million during the first quarter of fiscal 2009 from $0.9 million during fiscal 2008 related to our Energy sales division.

The Company’s cost of sales decreased by 3.2%, or $0.9 million, to $28.4 million in the first quarter of fiscal 2009 from $29.3 million in the first quarter of fiscal 2008. Carbon fiber cost of sales decreased by 4.9%, or $1.3 million, to $23.7 million for the first quarter of fiscal 2009 from $25.0 million for the first quarter of fiscal 2008. The decrease in carbon fiber cost of sales reflected decreased sales of 4.1% discussed. Technical fiber cost of sales increased $0.3 million, or 7.8%, to $4.0 million for the first quarter of fiscal 2009 from $3.7 million for the first quarter of fiscal 2008. The increase in technical fiber cost of sales resulted from the increased sales of 4.6% discussed above. The cost of sales of the other products remained flat for the first quarter ended fiscal 2009 to $0.6 million compared to the first quarter ended fiscal 2008 of $0.6 million.

The Company’s gross profit decreased by $0.5 million, to $10.3 million, or 26.6% of sales in the first quarter of fiscal 2009 from $10.8 million, or 26.8% of sales in the first quarter of fiscal 2008. Carbon fiber gross profit percentage increased to 27.5% for the first quarter of fiscal 2009 compared to 26.9% for the first quarter of fiscal 2008. Carbon fiber gross profit decreased from $9.2 million to $9.0 million during these same respective periods. The increase in carbon fiber gross profit percentage resulted from improved production efficiencies from using Mexico precursor in U.S. production as well as a decline in the value of the Forint in which we pay a significant amount of expenses. Technical fiber gross profit remained flat from $1.3 million, or 26.2% of sales, in the first quarter of fiscal 2008 to $1.3 million, or 24.0% of sales, during the corresponding period of fiscal 2009. The decrease in technical fiber gross profit percentage resulted from lower quantities produced during the quarter. The gross profit of the other products decreased for the first quarter ended fiscal 2008 to $0.01 million compared to the first quarter ended fiscal 2007 of $0.3 million.

Selling, general and administrative expenses for continuing operations were $4.8 million in the first quarter of fiscal 2009 compared to $4.1 million reported for the first quarter of fiscal 2008. Approximately $0.1 million of the increase related to staffing of management positions, particularly at our Corporate office. The Company also recorded $0.9 million for the cost of employee services received in exchange for equity instruments under SFAS 123 (R) during the first quarter of fiscal 2009, an increase of $0.4 million from first quarter fiscal 2008 expense. Accounting and audit fees increased by $0.1 million as the Company changed independent auditors during the first quarter of fiscal 2009.

Operating income from the first quarter of fiscal 2009 was $3.5 million, a decrease of $1.3 million from the operating income of $4.8 million incurred during the first quarter of fiscal 2008. This decline resulted primarily from a decrease in gross profit of $0.5 million. Carbon fiber operating income declined from $7.8 million in the first quarter of fiscal 2008 to $6.5 million in the first quarter of fiscal 2009. The decline resulted from lower sales as discussed above. Operating income from technical fibers increased from $0.1 million in the first quarter of fiscal 2008 to $0.5 million in the first quarter of fiscal 2009. Other products/ headquarters operating loss increased from a loss of $3.1 million in the first quarter of fiscal 2008 to a loss of $3.6 million in fiscal 2009 due to increases in staffing of management positions at headquarters and fiscal year-end audit expenses.

Operating activities used $2.6 million of cash for the first quarter of fiscal 2009 compared to cash provided of $1.8 million in the first quarter of fiscal 2008. Inventory levels increased by $8.4 million and $7.0 million during the first quarter of fiscal 2009 and 2008, respectively, due to year-end inventory management by our customers as they brought down inventories to increase their cash positions. Cash flows were also negatively affected during the first quarter of fiscal 2009 by a $5.8 million settlement paid in October related to litigation involving an investment banker. Cash flows were positively affected by operating income before depreciation by $7.9 million and $8.2 million for the first quarter of fiscal 2009 and 2008, respectively. Cash flows were affected by cash collections which reduced accounts receivables by $4.7 million and $5.7 million during the first quarter of fiscal 2009 and 2008, respectively.

Read the The complete Report



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