Accounting & Tax

At Zoltek, Errors Are Found and CFO Is Out

Carbon-fiber supplier for wind turbines will restate for statement mistakes at a unit, and CEO takes over finance on interim basis.
Stephen TaubMay 5, 2008

Zoltek Cos. announced that CFO Kevin J. Schott resigned, effective May 2, and that Chairman and CEO Zsolt Rumy assumed his finance duties on an interim basis.

In the same news release, however, the St. Louis-based supplier of carbon fibers used in wind turbine blades and other equipment said that its audit committee had determined that its financial statements issued for the periods ended Sept. 30 and the 2007 full year should no longer be relied upon. It did not directly suggest a connection between the CFO’s departure and the problems with the financial reports.

The company said that it had become aware of financial-statement errors resulting from a payment totaling $175,000 by a subsidiary of the company in September 2007 that was not properly authorized or reported in the company’s financial records. Zoltek also identified a similar payment of $75,000 in January 2008.

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Attempts by CFO.com to reach Kevin Schott for comment, and to get a further explanation from Zsolt Rumy, were not immediately successful.

Zoltek said that its audit committee has launched an investigation to determine whether any of the transactions have occurred. “Zoltek is working diligently to complete this investigation in the near term,” it added.

In a regulatory filing, the company said it is assessing the appropriate accounting, but that at this time it believes the unauthorized September payment should have been recorded as an expense item of $175,000 in the fourth quarter. It added that it is possible that the previously reported “other current assets” of $10.9 million on the company’s balance sheet as of Sept. 30 may have been overstated by $175,000, and that previously reported accumulated “other comprehensive income” of $10.3 million on the balance sheet as of Dec. 31 may have been overstated by $175,000.

In addition, the company’s previously reported net losses of $2.5 million and $1.8 million for the fiscal year and fourth quarter may have been understated by $175,000.

Zoltek also said it is conducting a search for a permanent CFO, either by promoting someone from within the company or by recruiting an individual from the outside.