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Zoltek Companies Inc. Reports Operating Results (10-Q)

May 11, 2009 | About:
10qk

Zoltek Companies Inc. (ZOLT) filed Quarterly Report for the period ended 2009-03-31.

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 $276.3 million; its shares were traded at around $8.03 with a P/E ratio of 22.3 and P/S ratio of 1.5.

Highlight of Business Operations:

The Companys cost of sales decreased by 24.4%, or $8.7 million, to $26.9 million in the second quarter of fiscal 2009 from $35.6 million in the second quarter of fiscal 2008. Carbon fiber cost of sales decreased by 27.6%, or $8.1 million, to $21.4 million for the second quarter of fiscal 2009 from $29.5 million for the second quarter of fiscal 2008. The decrease in carbon fiber cost of sales reflected decreased sales of 30.9% discussed above and costs associated with the start-up of the Mexico facility. Technical fiber cost of sales increased $0.1 million and other cost of sales decreased $0.6 million due to decreased sales discussed above.

The Companys gross profit decreased by 35.0%, or $4.9 million, to $9.1 million in the second quarter of fiscal 2009 from $14.0 million in the second quarter of fiscal 2008. Carbon fiber gross profit percentage decreased to 26.2% for the second quarter of fiscal 2009 compared to 29.6% for the second quarter of fiscal 2008. Carbon fiber gross profit decreased from $12.4 million to $7.6 million during these same respective periods. The decrease in carbon fiber gross profit and gross profit percentage resulted in part due from costs associated with the start-up of the Mexico facility. Technical fiber gross profit decreased from $1.5 million, or 22.5% of sales, in the second quarter of fiscal 2008 to $1.3 million, or 20.2% of sales, during the corresponding period of fiscal 2009. The decrease in technical fiber gross profit and gross profit percentage resulted from decreased shipments to the primary aircraft brake customers. The gross profit of the other products remained flat for the second quarter ended fiscal 2009 to $0.2 million compared to the second quarter ended fiscal 2008 of $0.2 million.

Operating income in the second quarter of fiscal 2009 was $2.1 million, a decrease of $6.2 million from the operating income of $8.3 million reported during the second quarter of fiscal 2008. This decline resulted primarily from a decrease in gross profit of $4.9 million. Carbon fiber operating income declined from $10.3 million in the second quarter of fiscal 2008 to $4.7 million in the second quarter of fiscal 2009. The decrease resulted from the 30.9% decrease in sales discussed above and the costs incurred during the start-up of our Mexico facility. Operating income from technical fibers decreased from $0.9 million in the second quarter of fiscal 2008 to $0.6 million in the second quarter of fiscal 2009 due to decreased shipments to aircraft brake customers and the inability of the business to absorb certain fixed costs due to decreased production. Corporate/other operating loss increased from a loss of $2.9 million in the second quarter of fiscal 2008 to a loss of $3.3 million in the second quarter of fiscal 2009. Selling, general and administrative expenses also increased and are described above.

The Companys cost of sales decreased by 14.8%, or $9.6 million, to $55.3 million during the first six months of fiscal 2009 from $64.9 million during the first six months of fiscal 2008. Carbon fiber cost of sales decreased by 17.2%, or $9.3 million, to $45.1 million during the first six months of fiscal 2009 from $54.4 million for the first six months of fiscal 2008. The decreases in carbon fiber cost of sales resulted from the decreased sales of 18.9% discussed above, offset by costs associated with the start-up of our Mexico facility. Technical fiber cost of sales increased $0.4 million, or 4.4%, to $9.2 million for the first six months of fiscal 2009 from $8.8 million for the first six months of fiscal 2008. The increases in technical fiber cost of sales resulted from the increased sales of 1.4% discussed above, as well as the inability of the business to absorb certain fixed costs due to decreased production of technical fiber products. The cost of sales of other products decreased for the first six months of fiscal 2009 to $1.0 million compared to the first six months of fiscal 2008 of $1.6 million.

The Companys gross profit decreased by 21.8%, or $5.4 million, to $19.4 million during the first six months of fiscal 2009 from $24.8 million during the first six months of fiscal 2008. Carbon fiber gross profit percentage decreased to 26.9% for the first six months of fiscal 2009 compared to 28.3% for the first six months of fiscal 2008. Carbon fiber gross profit decreased from $21.5 million to $16.6 million during these same respective periods. The decrease in carbon fiber gross profit and gross profit percentage were adversely affected by the costs associated with the start-up of our Mexico facility. Technical fiber gross profit decreased from $2.8 million, or 24.1% of sales, for the first six months of fiscal 2008 to $2.6 million, or 21.9% of sales, during the corresponding period of fiscal 2009. The decrease in technical fiber gross profit and gross profit percentage resulted from the inability of the business to absorb certain fixed costs due to decreased production of technical fiber products. The gross profit of the other products decreased for the first six months of fiscal 2009 to $0.3 million compared to $0.5 million for the first six months of fiscal 2008.

Operating income was $5.5 million for the first six months of fiscal 2009 compared to income of $13.1 million in the first six months of fiscal 2008. Carbon fiber operations reported operating income of $11.2 million for the first six months of fiscal 2009 compared to income of $18.2 million in the first six months of fiscal 2008. The decrease was due to decreased sales of 18.9% discussed above and the costs incurred during the start up of our Mexico facility. Operating income in technical fibers increased $0.1 million, from $1.0 million for the first six months of fiscal 2008 to $1.1 million for the first six months of fiscal 2009, as sales increased $0.2 million due to increased orders from the European aircraft brake customers. Corporate/other reported an operating loss of $6.8 million for the six months ended March 31, 2009 compared to a loss of $6.0 million for the six months ended March 31, 2008.

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