UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 6, 2009

 

HAYNES INTERNATIONAL, INC.

(Exact name of registrant as specified in
its charter)

 

Delaware

 

001-33288

 

06-1185400

(State or other
jurisdiction of
incorporation or
organization)

 

(Commission File
Number)

 

(I.R.S. Employer
Identification No.)

 

 

 

 

 

1020 West Park Avenue

 

 

Kokomo, Indiana

 

46904-9013

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (765) 456-6000

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o              Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o              Soliciting material pursuant to Rule 14a-12 under the Exchange Act(17CFR240.14a-12)

 

o              Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act(17CFR240.14d-2(b))

 

o              Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act(17CFR240.13e-4(c))

 

 

 


 

The information in Items 2.02 and 9.01 of this Form 8-K is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

 

Item 2.02.   Results of Operations and Financial Condition.

 

On August 6, 2009, Haynes International, Inc. (the “Company”) issued a press release announcing results for the third fiscal quarter ended June 30, 2009. The full text of the press release is furnished as exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

 

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Effective August 6, 2009, the salaries of Mark Comerford, the President and Chief Executive Officer, and the other named executive officers as set forth in the Company’s Definitive Proxy Statement on Form 14A for the fiscal year ended September 30, 2008, who are Marcel Martin, Vice President - Finance and Chief Financial Officer; James A. Laird, Vice President — Marketing, Research and Development; and Scott R. Pinkham, Vice President — Manufacturing (Messrs. Comerford, Martin, Laird and Pinkham are herein referred to collectively as the “ named executive officers ”) have been temporarily reduced by 15%.  In addition, the cash bonus component of the fiscal 2009 management incentive plan has been eliminated for the named executive officers, as well as the other members of the Company’s management team.  Mr. Comerford’s employment agreement with the Company has been amended to reflect these actions.  A copy of the amendment is attached hereto as Exhibit 10.1.

 

Item 9.01.  Financial Statement and Exhibits

 

(a)

 

Not applicable.

 

 

 

(b)

 

Not applicable.

 

 

 

(d)

 

Exhibits

 

 

 

10.1

 

Amendment No. 1 to Executive Employment Agreement and Consent by and between Haynes International, Inc. and Mark Comerford, dated August 6, 2009.

 

 

 

99.1

 

Haynes International, Inc. press release, issued August 6, 2009.

 

2


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Haynes International, Inc.

 

 

 

 

Date: August 7, 2009

By:

/s/ Marcel Martin

 

Marcel Martin

 

Vice President, Finance and Chief Financial Officer

 

3

Exhibit 10.1

 

AMENDMENT NO. 1 TO

EXECUTIVE EMPLOYMENT AGREEMENT

AND CONSENT

 

This Amendment No.1 to Executive Employment Agreement and Consent (the “Amendment”) amends that certain Executive Employment Agreement (the “Original Agreement”) entered into as of September 8, 2008, by and between Haynes International, Inc. (the “Company”), a Delaware corporation, and Mark M. Comerford (the “Executive”).  All capitalized terms used but not defined herein shall have the meanings set forth in the Original Agreement.

 

NOW, THEREFORE, in consideration of the Executive’s continued employment with the Company and  the mutual promises, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and pursuant to Sections 5(d) and 1(e)(4) of the Original Agreement, the Executive and the Company do hereby agree to the following

 

Agreement

 

1.                Effective as of August 2, 2009, Section 1(d)(i) of the Original Agreement is hereby amended and restated in its entirety as follows:

 

(i)            Annual Salary .  During the Employment Term and effective for all pay periods commencing on and after August 10, 2009, the Executive’s annual base salary of $425,000.00 per year will be reduced by 15% to an annual base salary of $361,250, which reduced base salary will remain in effect until restored to the original base salary by action of the Board.  Such salary, together with any subsequent increases as directed by the Board from time to time, being hereinafter referred to as the “Annual Salary.”

 

2.                Effective as of August 6, 2009, Section 1(d)(ii)(B) of the Original Agreement is hereby amended to add the following at the end of the section:

 

Notwithstanding the preceding provisions, the Executive shall not be entitled to any cash bonuses under the fiscal 2009 management incentive plan or (or any other plan for fiscal 2009).

 

3.                The Executive consents to the following:

 

a.                A reduction of 15% in the Executive’s annual base salary as described in paragraph 1 of this Amendment; and

 

b.               a reduction in the Executive’s annual cash bonus potential under the fiscal 2009 management incentive plan or (or any other plan for fiscal 2009) to zero.  The Executive acknowledges and agrees that he will not be entitled to, nor receive, any bonus of any kind for fiscal 2009.

 

4.                This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. The validity, meaning and effect of this Amendment shall be determined in accordance with the laws of the State of Indiana applicable to contracts made and to be performed in that State.

 

This Amendment Number One to Executive Employment Agreement and Consent is executed as of the 6 th  day of August, 2009.

 


 

 

HAYNES INTERNATIONAL, INC.

 

 

 

 

By:

/s/ Marcel Martin

 

 

 

Marcel Martin

 

Vice President – Finance, Chief Financial Officer

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

/s/ Mark Comerford

 

 

 

Mark Comerford

 

Exhibit 99.1

 

 

NEWS RELEASE

 

FOR IMMEDIATE RELEASE

 

Contact:

 

Marcel Martin

 

 

 

 

Chief Financial Officer and

Vice President of Finance

 

 

 

 

Haynes International, Inc.

 

 

 

 

765-456-6129

 

HAYNES INTERNATIONAL, INC. REPORTS THIRD QUARTER FISCAL 2009 FINANCIAL RESULTS AND

ANNOUNCES FURTHER COST REDUCTION MEASURES

 

·                   Net revenues of $98.3 million for the third quarter of fiscal 2009, a decrease of $68.0 million compared to the third quarter of fiscal 2008.

 

·                   Net loss of $(10.9) million, or $(0.91) per diluted share, for the third quarter of fiscal 2009, compared to net income of $17.6 million, or $1.46 per diluted share, for the third quarter of fiscal 2008.

 

·                   Cash provided by operating activities in the first nine months of fiscal 2009 of $97.0 million. Cash balance at June 30, 2009 of $83.9 million and a revolver balance of zero.

 

·                   Inventory balance as of June 30, 2009 of $198.9 million, a decrease of $106.0 million from September 30, 2008.

 

·                   Additional cost reduction measures, including a 6% reduction in personnel, temporary salary reductions of between 5% to 15% and elimination of fiscal 2009 management incentive plan.

 

GRAPHIC   GRAPHIC   GRAPHIC   GRAPHIC   GRAPHIC

 

KOKOMO, IN, August 6, 2009 — Haynes International, Inc. (NASDAQ GM: HAYN) a leading developer, manufacturer and marketer of technologically advanced high performance alloys, today reported financial results for the third fiscal quarter and nine months ended June 30, 2009.

 

“During the third quarter, we continued our efforts to realign our cost structure and manage our working capital as we battle through the downturn. These efforts began in the first quarter of fiscal 2009 and have included trimming melt schedules and production hours on an ongoing basis, and reducing the workforce in January 2009. In recent weeks, we saw order entry pricing and volume appear to stabilize at very low levels.  As a result we took further actions this week to reduce the cost structure of our business in order to reflect these new operating levels,” said Mark Comerford, President and Chief Executive Officer.  “At the same time, we increased our cash position substantially in the quarter, and we are able to continue investing in our equipment and market development.  We are focused on restructuring the business to prepare for the eventual upturn.”

 

Quarterly Results

 

Net revenues were $98.3 million in the third quarter of fiscal 2009, a decrease of $68.0 million, or 40.9%, from $166.3 million in the same period of fiscal 2008.  Volume was 4.4 million pounds in the third quarter of fiscal 2009, a decrease of 1.8 million pounds, or 26.6%, from 6.2 million pounds in the same period of fiscal 2008.  Average selling price per pound was $22.45 in the third quarter of fiscal 2009, a decreased of 16.1% from the selling price per pound of $26.75 in the same period of fiscal 2008.

 

Cost of sales decreased to $106.5 million in the third quarter of fiscal 2009, compared to $126.2 million in the same period of fiscal 2008.  Cost of sales was 108.3% of net revenues in the third quarter of fiscal 2009, compared to 75.9% in the same period of fiscal 2008. Cost of sales in the third quarter of fiscal 2009 decreased in dollars as compared to the same quarter of the prior year, due to the lower volume between periods. However, cost of sales per pound increased due to the recognition of higher raw material cost from inventory, reduced absorption of fixed manufacturing cost caused by lower production volumes in the third quarter of fiscal 2009 compared to the

 


 

same period in fiscal 2008 and a higher percentage of specialty products as a percent of the total mix. This higher per pound cost and increased competition combined with weaker demand (which lowered net revenue and average selling prices), resulted in cost of sales being a higher percentage of net revenues as compared to the same period in fiscal 2008.

 

Selling, general and administrative expenses were $8.8 million in the third quarter of fiscal 2009, a decrease of 19.7% from $11.0 million in the same period of fiscal 2008 due to reductions in workforce and other spending reductions. Selling, general and administrative expenses increased to 9.0% of net revenues in the third quarter of fiscal 2009 compared to 6.6% for the same period of fiscal 2008 due primarily to a decreased level of revenues.

 

Research and technical expense remained relatively flat at $0.8 million in the third quarter of fiscal 2009 and $0.8 million in the same period of fiscal 2008.

 

As a result of the above factors, operating loss in the third quarter of fiscal 2009 was $(17.8) million compared to operating income of $28.3 million in the same period of fiscal 2008.

 

Income tax expense decreased to a benefit of $(6.9) million in the third quarter of fiscal 2009 from an expense of $10.7 million in the same period of fiscal 2008 primarily due to a pretax loss.  The effective tax rate for the third quarter of fiscal 2009 was 38.5% compared to 37.8% in the same period of fiscal 2008.

 

As a result of the above factors, net income decreased by $28.5 million to a net loss of $(10.9) million in the third quarter of fiscal 2009 from net income of $17.6 million in the same period of fiscal 2008.

 

Results for nine months ended March 31, 2009

 

Net revenues were $353.0 million in the first nine months of fiscal 2009, a decrease of $123.1 million, or 25.9%, from $476.2 million in the same period of fiscal 2008.  Volume for all products was 14.5 million pounds in the first nine months of fiscal 2009, a decrease of 16.9% from 17.5 million pounds in the same period of fiscal 2008. The average selling price per pound decreased by 10.8% to $24.27 per pound in the first nine months of fiscal 2009 from $27.20 per pound in the same period of fiscal 2008.

 

Cost of sales decreased to $335.5 million in the first nine months of fiscal 2009, compared to $365.9 million in the same period of fiscal 2008.  Cost of sales were 95.0% of net revenues in the first nine months of fiscal 2009, compared to 76.8% of net revenues in the same period of fiscal 2008. Cost of sales in the first nine months of fiscal 2009 decreased in dollars as compared to the same period of the prior year, due to lower volume between periods. However, cost of sales per pound increased due to higher raw material cost from inventory, reduced absorption of fixed manufacturing costs caused by lower production volumes and a higher percentage of specialty products as a percent of total mix.  In the first nine months of fiscal 2008, cost of sales was partially offset by a $3.7 million (0.8% of net revenue) pension curtailment gain, which was recorded due to an amendment to freeze future pension benefit accruals for non-union employees in the U.S.  The higher per pound cost and increased competition combined with weaker demand (which lowered net revenue and average selling prices), resulted in cost of sales being a higher percentage of net revenues as compared to the same period of fiscal 2008.

 

Selling, general and administrative expenses were $27.7 million in the first nine months of fiscal 2009, a decrease of $3.3 million from $31.1 million for the same period of fiscal 2008. This decline is due to reductions in workforce and other spending reductions. Selling, general and administrative expenses as a percentage of net revenues increased to 7.9% in the first nine months of fiscal 2009 compared to 6.5% for the same period of fiscal 2008 due primarily to decreased revenues.

 

Research and technical expense decreased to $2.4 million in the first nine months of fiscal 2009 from $2.6 million in the same period of fiscal 2008 due to the reduction in workforce during the second quarter of fiscal 2009.

 

An impairment charge to goodwill of $43.7 million was recorded in the second quarter of fiscal 2009 due to weakening of the U.S. economy and the global credit crisis resulting in a reduction of the Company’s market capitalization below its total shareholder’s equity value for a sustained period of time.

 

As a result of the above factors, operating loss in the first nine months of fiscal 2009 was $(56.3) million compared to operating income of $76.6 million in the same period of fiscal 2008.

 

2


 

Interest expense decreased to $0.6 million in the first nine months of fiscal 2009 from $1.0 million for the same period of fiscal 2008.  The decrease is attributable to a lower average debt balance during the third quarter of fiscal 2009 (zero revolver at June 30, 2009).

 

Income tax expense decreased to a benefit of $(7.5) million in the first nine months of fiscal 2009 from an expense of $29.3 million in the same period of fiscal 2008 due to a pretax loss. The effective tax rate for the first nine months of fiscal 2009 was 13.1% compared to 38.7% in the same period of fiscal 2008. The decrease in the effective tax rate is primarily attributable to the impairment of goodwill, a change in the reinvestment policy of a foreign entity and lower U.S. taxable income.

 

As a result of the above factors, net income decreased by $95.8 million to a net loss of $(49.3) million in the first nine months of fiscal 2009 from net income of $46.5 million in the same period of fiscal 2008.

 

Cost Reduction Measures

 

The Company also announced today that it has reduced its worldwide workforce by 6%, temporarily reduced salaries between 5% and 15% for salaried employees, and eliminated the cash bonus component of the fiscal 2009 management incentive plan.  These measures follow actions on January 16, 2009 which reduced the Company’s workforce by 12% and froze salaries for all employees.

 

The annualized savings of the personnel reductions announced today are expected to be approximately $4.1 million. The savings that will be reflected in the fourth quarter of fiscal 2009 will be approximately $0.7 million offset by approximately $1.0 million in severance costs. Total personnel reductions in fiscal 2009 represent cost reductions of approximately $13.6 million on an annualized basis, of which approximately $7.1 million will be included in the results of fiscal 2009.

 

Planned capital spending in fiscal 2009 is expected to be between $10.0 to $12.0 million, compared to an original target of approximately $15.1 million.  The Company evaluated planned spending, postponing certain projects and spending until such time as financial conditions improve.  In light of the significant capital expenditures in recent years to upgrade operations, increase capacity and reduce unplanned downtime, management does not believe that the postponement of the current projects will have a material unfavorable impact on operations in the short- or long-term.

 

In addition to the actions noted, the Company continues to adjust its production schedules for all its manufacturing facilities, initiating planned furloughs and outages ranging from one day to one week in length in order to limit further personnel reductions while continuing to meet customer delivery requirements at these lower sales volumes.  Cost savings associated with these measures will be dependent upon the level of volume, as well as product mix, but are anticipated to be approximately $6.0 million on an annualized basis.

 

Comparative Cash Flow Analysis

 

During the first nine months of fiscal 2009, the Company’s primary sources of cash were cash from operations and borrowings under its U.S. revolving credit facility with a group of lenders led by Wachovia Capital Finance Corporation (Central).  At June 30, 2009, Haynes had cash and cash equivalents of $83.9 million compared to cash and cash equivalents of $7.1 million at September 30, 2008.

 

Net cash provided by operating activities was $97.0 million in the first nine months of fiscal 2009 compared to $30.5 million in the same period of fiscal 2008.  Several items contributed to this favorable difference.  Cash generated from a decrease in accounts receivable of $44.6 million was $33.0 million higher than the same period of fiscal 2008. Cash generated from reduced inventory balances of $104.5 million was $138.1 million higher than the same period of fiscal 2008, as a result of both lower levels of inventory required to support a lower sales level,  lower average inventory cost per pound as high cost inventory flows through cost of sales and positive results from efforts to improve inventory management. Net loss of $(49.3) million was $95.8 million lower than prior year net income of $46.5 million, partially offset by the goodwill impairment charge of $43.7 million. Also offsetting the positive items were the use of cash from; (i) a combination of a reduction in taxes payable and an increase in taxes receivable of $29.4 million primarily caused by the tax payment of $15.0 million related to the upfront fee paid to the Company pursuant to the conversion services agreement with Titanium Metals Corporation and current year pretax losses which will be carried back to prior years, (ii) $17.4 million use of cash from lower accounts payable caused by lower raw material purchases in both pounds and price, and (iii) $11.7 million use of cash from pension and postretirement benefits primarily caused by higher

 

3


 

contributions to the pension plan. Net cash used in investing activities was $7.4 million in the first nine months of fiscal 2009 compared to $17.9 million in the same period of fiscal 2008, primarily as a result of lower capital expenditures.  Net cash used in financing activities included a repayment of borrowings on the revolving credit facility of $11.8 million as a result of cash generated from operations, resulting in a balance on the revolver at June 30, 2009 of zero.

 

Outlook

 

General

 

The Company expects a continued low level of revenue as a result of the credit crisis and global recession for at least the remainder of fiscal 2009 and first six months of fiscal 2010. Management believes that the Company’s performance through the next three quarters will range from break-even to a small loss in each quarter. It is expected that the weakest results in the next three quarters will occur in the first quarter of fiscal 2010, because typically this quarter is impacted by fewer ship days and extended customer shutdowns. Management expects results in the fourth quarter of fiscal 2009 and first half of fiscal 2010, to be negatively impacted by continued reduced absorption of fixed manufacturing cost, which inflates cost of goods sold, and the competitive environment, which puts downward pressure on prices. However, a portion of this reduced absorption is expected to be offset by lower spending from the cost saving initiatives undertaken in fiscal 2009. Higher per pound manufacturing costs due to the recognition of higher raw material costs from inventory, which impacted the first three quarters of fiscal 2009, is not expected to have a material impact on the fourth quarter of fiscal 2009 and the first half of fiscal 2010, provided that volume and pricing remain stable.

 

A reduction in economic activity and the increasingly competitive environment manifests itself, in part, as a reduction in the Company’s backlog.  Backlog dollars declined by approximately 26% from March 31, 2009 to June 30, 2009, and backlog pounds declined by approximately 20% in that same period while the backlog average selling price dropped by 8%.  Backlog dollars declined by approximately 55% from June 30, 2008 to June 30, 2009 due to a decline in backlog pounds of approximately 46% and a reduction in backlog average selling price of approximately 16% in the period.

 

The Company continues to adjust production schedules, reduce costs and manage cash flow, while still moving forward with initiatives that are important to its long-term success. The Company also reduced inventories substantially in the third quarter and intends to reduce inventory levels further. As a result of recent equipment upgrades, service center value-added capabilities and its favorable liquidity position the Company believes it is well-positioned to deal with the challenges of the downturn and ultimately manage the upturn more effectively than in prior periods.

 

Earnings Conference Call

 

The Company will host a conference call on Friday, August 7, 2009 to discuss its results for the third quarter of fiscal 2009 for the period ended June 30, 2009.  Mark Comerford, President and Chief Executive Officer, and Marcel Martin, Chief Financial Officer and Vice President of Finance, will host the call and be available to answer questions.

 

To participate, please dial the teleconferencing number shown below five minutes prior to the scheduled conference time.

 

Date:

Friday, August 7, 2009

Dial-In Numbers:

877-407-8033 (Domestic)

Time:

9:00 a.m. Eastern Time

 

201-689-8033 (International)

 

8:00a.m. Central Time

7:00 a.m. Mountain Time

6:00 a.m. Pacific Time

 

 

 

A live Webcast of the conference call will be available at www.haynesintl.com .

 

For those unable to participate a replay will be available from Friday, August 7 th  at 11:00 a.m. ET, through 11:59 p.m. ET on Friday, August 21, 2009. To listen to the replay, please dial:

 

Domestic:

877-660-6853

International:

201-612-7415

Replay Access:

Account: 286

Conference: 328980

 

4


 

A replay of the Webcast will also be available at www.haynesintl.com until September 11, 2009.

 

About Haynes International

 

Haynes International, Inc. is a leading developer, manufacturer and marketer of technologically advanced, high performance alloys, primarily for use in the aerospace, land-based gas turbine and chemical processing industries.

 

Regulation G Disclosure

 

This press release and the financial statements included in this release include non-GAAP financial measures. The non-GAAP financial information should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. However, we believe that non-GAAP reporting, giving effect to the adjustments shown in the reconciliation contained in the attached financial statements, provides meaningful information and therefore we use it to supplement our GAAP guidance. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the reconciliations and to provide an additional measure of performance.

 

The Company recorded a non-cash goodwill impairment charge in the second quarter of 2009. This type of charge has not occurred frequently and the Company believes that excluding this charge will provide investors with a basis to compare the Company’s core operating results in different periods without this variability.

 

Cautionary Note Regarding Forward-Looking Statements

 

This press release contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this press release are forward-looking.    In many cases, you can identify forward-looking statements by terminology, such as “may”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. The forward-looking information may include, among other information, statements concerning the Company’s outlook for fiscal year 2009 and beyond, overall volume and pricing trends, cost reduction strategies and their anticipated results, and capital expenditures.  There may also be other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts.  Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors, many of which are beyond the Company’s control.

 

The Company has based these forward-looking statements on its current expectations and projections about future events.  Although the Company believes that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate. As a result, the forward-looking statements based upon those assumptions also could be incorrect.  Risks and uncertainties, some of which are discussed in Item 1A. of Part 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008, may affect the accuracy of forward-looking statements.

 

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

5


Schedule 1

 

HAYNES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2008

 

2009

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

166,340

 

$

98,325

 

$

476,188

 

$

353,042

 

Cost of sales

 

126,223

 

106,493

 

365,946

 

335,463

 

Gross profit (loss)

 

40,117

 

(8,168

)

110,242

 

17,579

 

Selling, general and administrative expense

 

11,007

 

8,837

 

31,059

 

27,719

 

Research and technical expense

 

819

 

757

 

2,566

 

2,396

 

Impairment of goodwill

 

—

 

—

 

—

 

43,737

 

Operating income (loss)

 

28,291

 

(17,762

)

76,617

 

(56,273

)

Interest income

 

(92

)

(42

)

(149

)

(70

)

Interest expense

 

114

 

87

 

951

 

566

 

Income (loss) before income taxes

 

28,269

 

(17,807

)

75,815

 

(56,769

)

Provision for (benefit from) income taxes

 

10,705

 

(6,863

)

29,345

 

(7,460

)

Net income (loss)

 

$

17,564

 

$

(10,944

)

$

46,470

 

$

(49,309

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

1.47

 

$

(0.91

)

$

3.91

 

$

(4.11

)

Diluted

 

$

1.46

 

$

(0.91

)

$

3.87

 

$

(4.11

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

11,921,541

 

12,002,754

 

11,882,929

 

11,990,667

 

Diluted

 

12,045,253

 

12,002,754

 

12,013,792

 

11,990,667

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP net income:

 

 

 

 

 

 

 

 

 

Net income (loss) excluding non-cash charge for goodwill impairment

 

$

17,564

 

$

(10,944

)

$

46,470

 

$

(6,440

)

Charge for goodwill impairment

 

—

 

—

 

—

 

(43,737

)

Goodwill tax benefit

 

—

 

—

 

—

 

868

 

Net income (loss) as reported

 

$

17,564

 

$

(10,944

)

$

46,470

 

$

(49,309

)

 

 

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP EPS:

 

 

 

 

 

 

 

 

 

Earnings per share excluding non-cash charge for goodwill impairment

 

$

1.46

 

$

(0.91

)

$

3.87

 

$

(0.53

)

Charge per share for goodwill impairment

 

—

 

—

 

—

 

(3.65

)

Goodwill tax benefit

 

—

 

—

 

—

 

0.07

 

Diluted income (loss) earnings per share

 

$

1.46

 

$

(0.91

)

$

3.87

 

$

(4.11

)

 

6


 

Schedule 2

 

HAYNES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share data)

 

 

 

September 30,
2008

 

June 30,
2009

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

7,058

 

$

83,916

 

Restricted cash – current portion

 

110

 

110

 

Accounts receivable, less allowance for doubtful accounts of $1,354 and $1,638, respectively

 

99,295

 

53,674

 

Inventories

 

304,915

 

198,881

 

Income taxes receivable

 

—

 

21,915

 

Deferred income taxes

 

9,399

 

8,492

 

Other current assets

 

2,573

 

1,255

 

Total current assets

 

423,350

 

368,243

 

 

 

 

 

 

 

Property, plant and equipment (at cost)

 

134,523

 

141,554

 

Accumulated depreciation

 

(27,221

)

(34,684

)

Net property, plant and equipment

 

107,302

 

106,870

 

 

 

 

 

 

 

Deferred income taxes – long term portion

 

32,310

 

30,720

 

Prepayments and deferred charges

 

2,741

 

2,675

 

Restricted cash – long term portion

 

220

 

110

 

Goodwill

 

43,737

 

—

 

Other intangible assets, net

 

7,907

 

7,457

 

Total assets

 

$

617,567

 

$

516,075

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

41,939

 

$

26,347

 

Accrued expenses

 

12,729

 

9,836

 

Income taxes payable

 

7,482

 

—

 

Accrued pension and postretirement benefits

 

15,016

 

14,675

 

Revolving credit facilities

 

11,812

 

—

 

Deferred revenue – current portion

 

2,500

 

2,500

 

Current maturities of long-term obligations

 

1,515

 

110

 

Total current liabilities

 

92,993

 

53,468

 

 

 

 

 

 

 

Long-term obligations (less current portion)

 

1,582

 

1,487

 

Deferred revenue (less current portion)

 

42,830

 

40,954

 

Non-current income taxes payable

 

276

 

276

 

Accrued pension and postretirement benefits

 

100,343

 

89,026

 

Total liabilities

 

238,024

 

185,211

 

Commitments and contingencies

 

—

 

—

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.001 par value (40,000,000 shares authorized, 11,984,623 and 12,096,829 issued and outstanding at September 30, 2008 and June 30, 2009, respectively)

 

12

 

12

 

Preferred stock, $0.001 par value (20,000,000 shares authorized, 0 shares issued and outstanding)

 

—

 

—

 

Additional paid-in capital

 

225,821

 

227,654

 

Accumulated earnings

 

155,831

 

106,522

 

Accumulated other comprehensive loss

 

(2,121

)

(3,324

)

Total stockholders’ equity

 

379,543

 

330,864

 

Total liabilities and stockholders’ equity

 

$

617,567

 

$

516,075

 

 

7


 

Schedule 3

 

HAYNES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

Nine Months Ended
June 30,

 

 

 

2008

 

2009

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

46,470

 

$

(49,309

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

6,561

 

7,649

 

Amortization

 

824

 

766

 

Impairment of goodwill

 

—

 

43,737

 

Stock compensation expense

 

1,216

 

994

 

Excess tax benefit from option exercises

 

(2,842

)

9

 

Deferred revenue - portion recognized

 

(1,875

)

(1,876

)

Deferred income taxes

 

1,767

 

2,858

 

Loss on disposal of property

 

223

 

165

 

Change in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

11,587

 

44,591

 

Inventories

 

(33,595

)

104,503

 

Other assets

 

(934

)

1,388

 

Accounts payable and accrued expenses

 

8,953

 

(17,418

)

Income taxes

 

4,715

 

(29,371

)

Accrued pension and postretirement benefits

 

(12,578

)

(11,658

)

Net cash provided by operating activities

 

30,492

 

97,028

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Additions to property, plant and equipment

 

(15,041

)

(7,463

)

Asia distribution expansion and acquisition

 

(3,000

)

—

 

Change in restricted cash

 

110

 

110

 

Net cash used in investing activities

 

(17,931

)

(7,353

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net decrease in revolving credit

 

(13,202

)

(11,812

)

Proceeds from exercise of stock options

 

1,939

 

848

 

Excess tax benefit from option exercises

 

2,842

 

(9

)

Payment for debt issuance costs

 

—

 

(316

)

Payments on long-term obligations

 

(139

)

(1,449

)

Net cash provided by (used in) financing activities

 

(8,560

)

(12,738

)

 

 

 

 

 

 

Effect of exchange rates on cash

 

139

 

(79

)

Increase in cash and cash equivalents

 

4,140

 

76,858

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

5,717

 

7,058

 

Cash and cash equivalents, end of period

 

$

9,857

 

$

83,916

 

 

8