Note 9 - Commitments and Contingencies

12 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

9. COMMITMENTS AND CONTINGENCIES

LEASES

We rent office facilities and equipment under various operating leases. Rent expense for all operating leases was $1.4 million, $1.3 million and $1.6 million for fiscal 2013, 2012 and 2011, respectively.

The following table sets forth the future minimum lease commitments under operating leases at September 30, 2013 (amounts in thousands):

September 30,	Future Commitments for Operating Leases
2014	$	1,235
2015		832
2016		819
2017		813
2018		813
Thereafter		2,446
Total	$	6,958

We have rented forklifts and water treatment equipment under various capital leases in past years. We had no lease expense for capital leases for fiscal 2013 and 2012 and $0.1 million for the fiscal 2011.

LEGAL

Legal contingencies have a high degree of uncertainty. We record reserves when losses from contingencies can be reasonably estimated and become probable. The reserves would reflect management’s estimate of the probable cost of ultimate resolution of the matters and are revised accordingly as facts and circumstances change and, ultimately, when matters are brought to closure. If any litigation matter is resolved unfavorably, the Company could incur obligations in excess of management’s estimate of the outcome, and such resolution could have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity. In addition, we may incur additional legal costs in connection with pursuing and defending such actions.

In September and October 2013, a total of 13 purported class actions arising out of the execution of the Merger Agreement were filed against Zoltek and Zoltek’s directors in the Circuit Court of St. Louis County, Missouri by purported shareholders of Zoltek. All but one of the lawsuits also named Toray and/or Merger Sub as defendants. The lawsuits allege, among other things, that (1) each of Zoltek’s directors breached his fiduciary duties to Zoltek’s shareholders in connection with approval of the transactions contemplated by the Merger Agreement, and (2) that Zoltek, Parent and Merger Sub aided and abetted Zoltek’s directors in such breaches of their fiduciary duties. The lawsuits seek, among other things, injunctive relief preventing the parties from completing the merger and directing the Zoltek directors to account to Zoltek and the purported class for all damages suffered as a result of the breaches of fiduciary duties and awards of attorneys’ fees and expenses for the plaintiffs.

Zoltek has filed various motions to dismiss the actions against Zoltek and the individual directors of Zoltek, which motions are pending. The Circuit Court of St. Louis County, Missouri consolidated each of the actions described above under the caption In Re: Zoltek Companies, Inc. Shareholder Litigation on November 26, 2013. On November 27, 2013, the Court entered an order denying a motion filed by certain of the plaintiffs for expedited discovery. Cross Motions filed by the plaintiffs to designate lead plaintiffs and lead counsel are pending before the Court. On December 4, 2013, the Court entered an order appointing co-lead plaintiffs in the action, and in the same order, the Court appointed Goldenberg Heller Antognoli & Rowland, P.C. and Holloran White Schwartz & Gaertner LLP as interim co-lead counsel and appointed Wolf Haldenstein Adler Freeman & Herz LLP and Robbins Geller Rudman & Dowd LLP to the Plaintiffs’ Executive Committee.

We believe that the lawsuits are without merit and intend to defend against them vigorously. There can be no assurance, however, with regard to the outcome of this litigation.

The Company is exposed to various claims and legal proceedings arising out of the normal course of its business. Although there can be no assurance, in the opinion of management, the ultimate outcome of such claims and lawsuits when and if they arise should not have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity. As of September 30, 2013, Zoltek has no recorded material legal reserves.

SOURCES OF SUPPLY

As part of its growth strategy, the Company has developed and manufactures its own precursor acrylic fibers and all of its carbon fibers and technical fibers. The primary source of raw material for the precursor is ACN (acrylonitrile), which is a commodity product with multiple sources.