Exhibit 99
[ZOLTEK logo]
FOR IMMEDIATE RELEASE NASDAQ NMS SYMBOL: "ZOLT"
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ZOLTEK UPDATES SECOND QUARTER RESULTS AND PREVIOUSLY REPORTED
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ACCOUNTING MATTERS
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ST. LOUIS, MISSOURI -- MAY 20, 2005 -- Zoltek Companies, Inc. today
announced its complete operating results for second quarter of its 2005
fiscal year. This report had been delayed because Zoltek needed additional
time to address unexpected financial accounting and reporting issues related
to the issuance of convertible debt in January, March and October of 2004
and February 2005. After carefully reviewing the matter, Zoltek's management
determined that the conversion feature and warrants to purchase common stock
associated with these instruments should be classified as derivative
liabilities, resulting in possible non-cash expense or income arising from
fluctuations in the market value of the Company's shares and corresponding
changes in the fair value of associated convertible debentures and
warrants and amortization expense associated with debt discount.
"Zoltek management had concluded that the Company was obliged to
comply with the derivative accounting regulations, even though this may make
it more difficult for shareholders and others to evaluate the Company's
financial results," Zsolt Rumy, Zoltek's Chairman and Chief Executive
Officer said. He added that shareholders should be prepared for the fact
that the accounting treatment could cause wide swings in reported results
that have no bearing on cash flows or underlying business fundamentals.
Moreover, shareholders should keep in mind that the accounting treatment
will result in "inverse fluctuation" between the performance of the
Company's stock price and reported results of operations. In future periods,
further appreciation in share prices - while clearly desirable from a
shareholder perspective - would result in substantial charges in the
Company's income statements.
For this reason, Rumy said that he would concentrate his remarks on
the Company's operating results rather than its net results for the just
completed quarter and next several quarters.
For the quarter ended March 31, 2005, Zoltek reported that net
sales increased 37% to $15.8 million, from net sales of $11.5 million in the
second quarter of fiscal 2004. For the first six months of fiscal 2005,
Zoltek's net sales increased 48% to $29.3 million compared to $19.7 million
of sales in the corresponding period of the prior fiscal year. Carbon fiber
sales accounted for most of the increased sales for the quarter and six
months.
For the three months ended March 31, 2005, Zoltek reported an
operating loss from continuing operations of $2.0 million, compared to an
operating loss from continuing operations of $1.3 million in the second
quarter of fiscal 2004. For the six months ended March 31, 2005, Zoltek's
operating loss
[ZOLTEK logo]
Zoltek Updates Second Quarter Results And Previously Reported Accounting Matters
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May 20, 2005
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from continuing operations was $3.6 million, compared to an operating loss
from continuing operations of $4.0 million in the first six months of fiscal
2004. Zoltek's operating losses from continuing operations during the first
six months of fiscal 2005 resulted in large measure from its capacity growth
initiatives. The Company incurred start-up costs and production
inefficiencies associated with the restart of its Abilene, Texas carbon
fibers manufacturing facility, which had been idled for four years, and the
expansion of its acrylic precursor production capacity at its plant in
Hungary. For example, management estimates that approximately $1.3 million
and $3.2 million of the operating losses reported from continuing operations
for the three and six months ended March 31, 2005, respectively, were
attributable to the start-up and post start-up operating inefficiency of the
installed carbon fiber lines in its Abilene facility.
"We are working our way through some start-up problems. We remain
confident that we can meet the rising demand for our carbon fibers and reach
break-even and, ultimately, begin to make a profit with our existing
production facilities when we are fully operational," Rumy said. "The demand
for our fibers continues to be strong and, for the foreseeable future, the
only practical limitation on our sales is our ability to produce. Along with
the restart of the Abilene facility, we continue to implement our program to
increase carbon fibers capacity in Hungary by 1,000 tons per year. "
He added: "In order for Zoltek to refinance its debt and raise
sufficient funds to restart the Abilene facility, add new precursor capacity
and to increase the carbon fiber capacity, it was necessary for Zoltek to
complete a series of convertible debt financing transactions. We were
fortunate to have accessed the needed capital. However, the derivative
accounting for these transactions is complex and has the potential to cause
very significant fluctuations in Zoltek's financial performance until all
the debentures are converted and the warrants are exercised. In the end,
however, upon settlement of the derivative liabilities through conversion or
exercise, such liabilities will be reclassified to equity. There will be no
impact on our cash flows."
In view of the accounting treatment mentioned above, the Company
announced that its financial results for the fiscal year ended September 30,
2004 and interim periods ended June 30, September 30 and December 31, 2004
would be restated to reflect additional non-operating gains and losses
related to the classification and accounting for the conversion feature and
the related warrants to purchase the Company's common stock associated with
convertible debt issued by the Company in
[ZOLTEK logo]
Zoltek Updates Second Quarter Results And Previously Reported Accounting Matters
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January, March and October 2004. As a result of the restatement, the Company
intends to file an amended Form 10-K and amended Form 10-Q reports for the
periods affected by the restatement.
As a result of the delay in filing Zoltek's Form 10-Q for the
fiscal quarter ended March 31, 2005, on May 18, 2005 Zoltek received a
notification from Nasdaq that it is not in compliance with the filing
requirements for continued listing on Nasdaq, and that its common stock is
therefore subject to delisting from the Nasdaq National Market. In addition,
as of today Nasdaq added a fifth character, "E," to the Company's trading
symbol "ZOLT" to denote the filing delinquency. Zoltek expects to file the
Form 10-Q shortly and believes that, upon that filing it will be in
compliance with all applicable continued listing requirements. The Company
will seek to resolve the Nasdaq action informally with its staff. If that is
unsuccessful, it intends to submit a timely request for a hearing before a
Nasdaq Listing Qualifications Panel, which request will stay delisting
action pending the hearing and a determination by the Nasdaq Listing
Qualifications Panel. However, there can be no assurance that the Panel will
grant Zoltek 's request for continued listing.
Zoltek Companies, Inc. will host a conference call to review second
quarter 2005 results and answer questions on Monday, May 23, 2005, at 10:00
am CT. The conference dial-in number is (719) 457-2661. The confirmation
code is 2349135. Individuals who wish to participate should dial in five
minutes prior to the scheduled start time.
FOR FURTHER INFORMATION CONTACT:
ZSOLT RUMY, CEO OR KEVIN SCHOTT, CFO
3101 MCKELVEY ROAD
ST. LOUIS, MO 63044
(314) 291-5110
This press release contains forward-looking statements, which are based upon
the current expectations of the Company. Because these forward-looking
statements are inherently subject to risks and uncertainties, there are a
number of factors that could cause the Company's plans, actions and actual
results to differ materially. Among these factors are the Company's ability
to: re-activate its formerly idle manufacturing facilities on a timely and
cost-effective basis, to meet current order levels for carbon fibers;
successfully add new capacity for the production of carbon fiber and
precursor raw material; execute plans to exit its specialty products
business and reduce costs; achieve profitable operations; maintain its
Nasdaq National Market listing and raise new capital and increase its
borrowing at acceptable costs; manage changes in customers' forecasted
requirements for the Company's products; continue investing in application
and market development; manufacture low-cost carbon fibers and profitably
market them; and penetrate existing, identified and emerging markets. The
timing and occurrence (or non-occurrence) of transactions and events that
determine the future effect of these factors on the Company, as well as
other factors, may be beyond the control of the Company. The Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date of this press release.
[ZOLTEK logo]
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Zoltek is an applied technology and materials company. Zoltek's Carbon Fiber
and Technical Fiber Business Units are primarily focused on the
manufacturing and application of carbon fibers used as reinforcement
material in composites, oxidized acrylic fibers for heat/fire barrier
applications and aircraft brakes, and composite design and engineering to
support the Company's materials business. Zoltek's Hungarian-based Specialty
Products Business Unit, which the Company is pursuing plans to exit,
manufactures and markets industrial materials.
[ZOLTEK logo]
Zoltek Updates Second Quarter Results And Previously Reported Accounting Matters
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ZOLTEK COMPANIES, INC.
SUMMARY FINANCIAL RESULTS
(Amounts In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
March 31
2005 2004
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(Restated)
Net sales...........................................................................$ 15,772 $ 11,537
Cost of sales, excluding available unused capacity costs............................ 14,860 9,523
Available unused capacity costs..................................................... 524 1,259
Application and development costs................................................... 824 758
Operating loss from continuing operations........................................... (2,048) (1,345)
Interest expense and amortization of financing fees................................. (3,762) (1,203)
Gain (loss) on value of warrants and conversion feature............................. 9,128 (5,574)
Income tax expense.................................................................. 104 111
Net income (loss) from continuing operations........................................ 2,240 (8,505)
Net loss from discontinued operations, net of taxes................................. (94) (1,192)
Net income (loss)................................................................... 2,146 (9,697)
Net income (loss) per share:
Basic income (loss) per share:
Continuing operations.....................................................$ 0.13 $ (0.52)
Discontinued operations................................................... (0.01) (0.07)
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Total...............................................................$ 0.12 $ (0.59)
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Diluted income (loss) per share:
Continuing operations.....................................................$ 0.12 $ (0.52)
Discontinued operations................................................... (0.01) (0.07)
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Total...............................................................$ 0.11 $ (0.59)
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Weighted average common shares outstanding - basic.................................. 17,783 16,341
Weighted average common shares outstanding - diluted................................ 23,425 16,341
[ZOLTEK logo]
Zoltek Updates Second Quarter Results And Previously Reported Accounting Matters
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ZOLTEK COMPANIES, INC.
SUMMARY FINANCIAL RESULTS (CONTINUED)
(Amounts In Thousands Except Per Share Data)
Six Months Ended
March 31
2005 2004
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(Restated)
Net sales .........................................................................$ 29,290 $ 19,688
Cost of sales, excluding available unused capacity costs............................ 27,256 16,526
Available unused capacity costs..................................................... 1,049 2,686
Application and development costs................................................... 1,652 1,504
Operating loss from continuing operations........................................... (3,690) (3,968)
Interest expense and amortization of financing fees................................. (6,617) (1,859)
Loss on value of warrants and conversion feature.................................... (16,426) (5,574)
Income tax expense.................................................................. 219 189
Net loss from continuing operations................................................. (27,350) (11,750)
Net loss from discontinued operations, net of taxes................................. (467) (1,638)
Net loss ........................................................................... (27,817) (13,388)
Net loss per share:
Basic and diluted loss per share:
Continuing operations....................................................$ (1.60) $ (0.72)
Discontinued operations.................................................. (0.03) (0.10)
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Total net loss.....................................................$ (1.63) $ (0.82)
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Weighted average common shares outstanding.......................................... 17,107 16,326