10-Q 1 hayn-20220331x10q.htm 10-Q UNITED STATES
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission File Number:  001-33288

HAYNES INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

06-1185400
(I.R.S. Employer Identification No.)

1020 West Park Avenue, KokomoIndiana
(Address of principal executive offices)

46904-9013
(Zip Code)

Registrant’s telephone number, including area code (765456-6000

Securities registered pursuant to Section 12(b) of the Act:

Tile of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

HAYN

NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes No 

As of April 28, 2022, the registrant had 12,458,953 shares of Common Stock, $0.001 par value, outstanding.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Page

PART I

FINANCIAL INFORMATION

Item 1.

Unaudited Condensed Consolidated Financial Statements of Haynes International, Inc. and Subsidiaries

2

Consolidated Balance Sheets (Unaudited) as of September 30, 2021 and March 31, 2022

2

Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended March 31, 2021 and 2022

3

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Six Months Ended March 31, 2021 and 2022

4

Consolidated Statement of Stockholders’ Equity (Unaudited) for the Three and Six Months Ended March 31, 2021 and 2022

5

Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended March 31, 2021 and 2022

6

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

PART II

OTHER INFORMATION

29

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 6.

Exhibits

31

Index to Exhibits

31

Signatures

32

1

PART 1     FINANCIAL INFORMATION

Item 1.        Unaudited Condensed Consolidated Financial Statements

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

    

September 30, 

    

March 31, 

 

2021

2022

 

ASSETS

Current assets:

Cash and cash equivalents

$

47,726

$

12,202

Accounts receivable, less allowance for doubtful accounts of $553 and $618 at September 30, 2021 and March 31, 2022, respectively

 

57,964

 

75,351

Inventories

 

248,495

 

292,097

Income taxes receivable

 

1,292

 

2,001

Other current assets

 

6,129

 

5,176

Total current assets

 

361,606

 

386,827

Property, plant and equipment, net

 

147,248

 

145,658

Deferred income taxes

 

16,397

 

12,311

Other assets

 

10,829

 

10,664

Goodwill

4,789

4,789

Other intangible assets, net

 

5,586

 

5,264

Total assets

$

546,455

$

565,513

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

47,680

$

50,046

Accrued expenses

 

20,100

 

17,899

Income taxes payable

 

379

 

385

Accrued pension and postretirement benefits

 

3,554

 

3,554

Revolving credit facilities

 

21,500

Deferred revenue—current portion

 

2,500

 

2,500

Total current liabilities

 

74,213

 

95,884

Long-term obligations (less current portion)

 

8,301

 

8,111

Deferred revenue (less current portion)

 

10,329

 

9,079

Deferred income taxes

3,459

3,425

Operating lease liabilities

664

846

Accrued pension benefits (less current portion)

 

26,663

 

22,686

Accrued postretirement benefits (less current portion)

79,505

80,172

Total liabilities

 

203,134

 

220,203

Commitments and contingencies

 

 

Stockholders’ equity:

Common stock, $0.001 par value (40,000,000 shares authorized, 12,757,778 and 12,822,397 shares issued and 12,562,140 and 12,458,953 shares outstanding at September 30, 2021 and March 31, 2022, respectively)

 

13

 

13

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

 

 

Additional paid-in capital

 

262,057

 

264,098

Accumulated earnings

 

101,015

 

108,619

Treasury stock, 195,638 shares at September 30, 2021 and 363,444 shares at March 31, 2022

 

(7,423)

 

(14,218)

Accumulated other comprehensive loss

 

(12,341)

 

(13,202)

Total stockholders’ equity

 

343,321

 

345,310

Total liabilities and stockholders’ equity

$

546,455

$

565,513

The accompanying notes are an integral part of these financial statements.

2

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

    

    

Three Months Ended March 31, 

Six Months Ended March 31, 

    

2021

    

2022

    

2021

    

2022

    

Net revenues

$

82,063

$

117,056

$

154,240

$

216,486

    

Cost of sales

 

73,678

93,643

144,868

175,296

Gross profit

 

8,385

 

23,413

 

9,372

41,190

Selling, general and administrative expense

 

11,257

11,782

20,990

23,144

Research and technical expense

 

864

944

1,651

1,849

Operating income (loss)

 

(3,736)

 

10,687

(13,269)

16,197

Nonoperating retirement benefit expense (income)

359

(1,088)

718

(2,176)

Interest income

 

(1)

(6)

(5)

(14)

Interest expense

 

298

514

602

814

Income (loss) before income taxes

 

(4,392)

 

11,267

 

(14,584)

17,573

Provision for (benefit from) income taxes

 

(760)

2,783

(2,925)

4,430

Net income (loss)

$

(3,632)

$

8,484

$

(11,659)

$

13,143

Net income (loss) per share:

Basic

$

(0.29)

$

0.68

$

(0.94)

$

1.05

Diluted

$

(0.29)

$

0.67

$

(0.94)

$

1.04

Weighted Average Common Shares Outstanding

Basic

12,514

12,331

12,503

12,350

Diluted

12,514

12,474

12,503

12,531

Dividends declared per common share

$

0.22

$

0.22

$

0.44

$

0.44

The accompanying notes are an integral part of these financial statements.

3

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

    

    

Three Months Ended March 31, 

Six Months Ended March 31, 

    

2021

    

2022

    

2021

    

2022

    

Net income (loss)

$

(3,632)

$

8,484

$

(11,659)

$

13,143

Other comprehensive income (loss), net of tax:

Pension and postretirement

 

1,527

 

(1)

3,055

(1)

Foreign currency translation adjustment

 

(268)

 

(1,429)

4,582

(860)

Other comprehensive income (loss)

1,259

(1,430)

7,637

(861)

Comprehensive income (loss)

$

(2,373)

$

7,054

$

(4,022)

$

12,282

The accompanying notes are an integral part of these financial statements.

4

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share data)

Three Months Ended March 31, 2021 and 2022

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Treasury

Comprehensive

Stockholders’

    

Shares

    

Par

    

Capital

    

Earnings

    

Stock

    

Income (Loss)

    

Equity

Balance December 31, 2020

 

12,682,147

$

13

258,642

$

110,134

$

(2,675)

$

(68,223)

$

297,891

Net income (loss)

(3,632)

 

(3,632)

Dividends paid and accrued ($0.22 per share)

(2,781)

 

(2,781)

Other comprehensive income (loss)

1,259

 

1,259

Issue restricted stock (less forfeitures)

 

(200)

Vesting of restricted stock

6,783

Stock compensation

1,154

 

1,154

Balance March 31, 2021

 

12,688,730

$

13

$

259,796

$

103,721

$

(2,675)

$

(66,964)

$

293,891

Balance December 31, 2021

 

12,455,839

$

13

$

263,126

$

102,865

$

(14,023)

$

(11,772)

$

340,209

Net income (loss)

8,484

 

8,484

Dividends paid and accrued ($0.22 per share)

(2,730)

 

(2,730)

Other comprehensive income (loss)

(1,430)

 

(1,430)

Exercise of stock options

 

2,883

109

 

109

Issue restricted stock (less forfeitures)

 

(6,522)

Vesting of restricted stock

11,993

Purchase of treasury stock

 

(5,240)

(195)

 

(195)

Stock compensation

863

 

863

Balance March 31, 2022

 

12,458,953

$

13

$

264,098

$

108,619

$

(14,218)

$

(13,202)

$

345,310

Six Months Ended March 31, 2021 and 2022

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Treasury

Comprehensive

Stockholders’

    

Shares

    

Par

    

Capital

    

Earnings

    

Stock

    

Income (Loss)

    

Equity

Balance September 30, 2020

 

12,622,371

$

13

$

257,583

$

120,943

$

(2,437)

$

(74,601)

$

301,501

Net income (loss)

(11,659)

 

(11,659)

Dividends paid and accrued ($0.44 per share)

(5,563)

 

(5,563)

Other comprehensive income (loss)

7,637

 

7,637

Issue restricted stock (less forfeitures)

 

55,518

Vesting of restricted stock

21,280

Purchase of treasury stock

 

(10,439)

(238)

 

(238)

Stock compensation

2,213

 

2,213

Balance March 31, 2021

 

12,688,730

$

13

$

259,796

$

103,721

$

(2,675)

$

(66,964)

$

293,891

Balance September 30, 2021

 

12,562,140

$

13

$

262,057

$

101,015

$

(7,423)

$

(12,341)

$

343,321

Net income (loss)

13,143

 

13,143

Dividends paid and accrued ($0.44 per share)

(5,539)

 

(5,539)

Other comprehensive income (loss)

(861)

 

(861)

Exercise of stock options

 

6,533

224

 

224

Issue restricted stock (less forfeitures)

 

25,182

Vesting of restricted stock

32,904

Purchase of treasury stock

 

(167,806)

(6,795)

 

(6,795)

Stock compensation

1,817

 

1,817

Balance March 31, 2022

 

12,458,953

$

13

$

264,098

$

108,619

$

(14,218)

$

(13,202)

$

345,310

The accompanying notes are an integral part of these financial statements

5

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

    

Six Months Ended March 31, 

    

2021

    

2022

    

Cash flows from operating activities:

Net income (loss)

$

(11,659)

$

13,143

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

Depreciation

 

9,588

 

9,252

Amortization

 

231

 

322

Pension and post-retirement expense - U.S. and U.K.

 

4,080

 

1,100

Change in long-term obligations

 

(15)

 

(16)

Stock compensation expense

 

2,213

 

1,817

Deferred revenue

 

(1,250)

 

(1,250)

Deferred income taxes

 

(3,941)

 

4,009

Loss on disposition of property

 

23

 

Change in assets and liabilities:

Accounts receivable

 

5,927

 

(17,830)

Inventories

 

22,210

 

(44,124)

Other assets

 

(624)

 

1,282

Accounts payable and accrued expenses

 

7,496

 

598

Income taxes

 

897

 

(701)

Accrued pension and postretirement benefits

 

(4,051)

 

(4,411)

Net cash provided by (used in) operating activities

 

31,125

 

(36,809)

Cash flows from investing activities:

Additions to property, plant and equipment

 

(2,103)

 

(7,729)

Net cash used in investing activities

 

(2,103)

 

(7,729)

Cash flows from financing activities:

Revolving credit facility borrowings

 

35,000

Revolving credit facility repayments

 

(13,500)

Dividends paid

 

(5,604)

 

(5,587)

Proceeds from exercise of stock options

 

 

224

Payment for purchase of treasury stock

 

(238)

 

(6,795)

Payment for debt issuance cost

 

(987)

 

Payments on long-term obligations

(106)

(120)

Net cash used in financing activities

 

(6,935)

 

9,222

Effect of exchange rates on cash

 

495

 

(208)

Increase (decrease) in cash and cash equivalents:

 

22,582

 

(35,524)

Cash and cash equivalents:

Beginning of period

 

47,238

 

47,726

End of period

$

69,820

$

12,202

Supplemental disclosures of cash flow information:

Interest (net of capitalized interest)

$

439

$

559

Income taxes paid (refunded), net

$

61

$

998

Capital expenditures incurred but not yet paid

$

233

$

632

Dividends declared but not yet paid

$

98

$

161

The accompanying notes are an integral part of these financial statements.

6

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except share and per share data)

Note 1.  Basis of Presentation

Interim Financial Statements

The accompanying unaudited condensed interim consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and such principles are applied on a basis consistent with information reflected in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 filed with the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations promulgated by the SEC related to interim financial statements. In the opinion of management, the interim financial information includes all adjustments and accruals which are necessary for a fair presentation of results for the respective interim periods. The results of operations for the three and six months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2022 or any other interim period.

Principles of Consolidation

The consolidated financial statements include the accounts of Haynes International, Inc. and directly or indirectly wholly-owned subsidiaries (collectively, the “Company”).  All intercompany transactions and balances are eliminated.

Note 2.  Recently Issued Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848).  This new update provides optional expedients to ease the potential burden of accounting for the effects of reference rate reform as it pertains to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued.  These amendments are effective immediately and may be applied prospectively to modifications made or relationships entered into or evaluated on or before December 31, 2022.  The Company is in the process of evaluating the impact of the pronouncement.  

Note 3.  Revenues from Contracts with Customers

Contract Balances

As of September 30, 2021 and March 31, 2022, accounts receivable with customers were $58,517 and $75,969, respectively. Allowance for doubtful accounts as of September 30, 2021 and March 31, 2022 were $553 and $618, respectively, and are presented within accounts receivable, less allowance for doubtful accounts on the Consolidated Balance Sheet.

Contract liabilities are recognized when the Company has received consideration from a customer to transfer goods or services at a future point in time when the Company performs under the purchase order or contract.  As of September 30, 2021 and March 31, 2022, no contract liabilities have been recorded except for $12,829 and $11,579, respectively, for the Titanium Metals Corporation agreement, as described in Note 8 to the Condensed Consolidated Financial Statements and $1,060 and $610, respectively, for accrued product returns.

7

Disaggregation of Revenue

Revenue is disaggregated by end-use markets.  The following table includes a breakdown of net revenues to the markets served by the Company for the three and six months ended March 31, 2021 and 2022.

Three Months Ended

Six Months Ended

March 31, 

March 31, 

    

2021

    

2022

    

2021

    

2022

Net revenues

Aerospace

$

30,601

$

52,918

$

55,156

$

101,373

Chemical processing

 

15,068

 

22,850

 

30,324

 

40,300

Industrial gas turbine

 

16,436

 

24,788

 

30,403

 

39,386

Other markets

 

15,546

 

9,755

 

28,325

 

24,242

Total product revenue

 

77,651

 

110,311

 

144,208

 

205,301

Other revenue

 

4,412

 

6,745

 

10,032

 

11,185

Net revenues

$

82,063

$

117,056

$

154,240

$

216,486

Note 4.  Inventories

The following is a summary of the major classes of inventories:

September 30, 

March 31, 

 

    

2021

    

2022

    

 

Raw Materials

$

22,711

$

23,017

Work-in-process

 

138,609

 

185,059

Finished Goods

 

85,797

 

82,566

Other

 

1,378

 

1,455

$

248,495

$

292,097

Note 5.  Income Taxes

Income tax (benefit) expense for the three and six months ended March 31, 2021 and 2022 differed from the U.S. federal statutory rate of 21.0%, primarily due to state income taxes, differing tax rates on foreign earnings and discrete tax items that impacted income tax expense (benefit) in these periods.  The effective tax rate for the three months ended March 31, 2022 was 24.7% on $11,267 of income before income taxes compared to 17.3% on loss before income taxes of $(4,392) for the three months ended March 31, 2021.  The effective tax rate for the six months ended March 31, 2022 was 25.2% on $17,573 of income before income taxes compared to 20.1% on loss before income taxes of $(14,584) for the six months ended March 31, 2021.  Income tax expense in the first six months of fiscal 2021 was unfavorably impacted by the lower stock price at the time of vesting of restricted stock as compared to the price when the stock was granted, which resulted in the Company not being able to fully utilize the deferred tax assets attributable to those shares.  The unfavorable tax expense resulted in a lower effective tax in a period in which the Company incurred a loss before income taxes.

 

8

Note 6.  Pension and Post-retirement Benefits

Components of net periodic pension and post-retirement benefit cost for the six months ended March 31, 2021 and 2022 were as follows:

Three Months Ended March 31, 

Six Months Ended March 31, 

Pension Benefits

Other Benefits

Pension Benefits

Other Benefits

    

2021

    

2022

    

2021

    

2022

    

2021

    

2022

    

2021

    

2022

 

Service cost

$

1,407

$

1,182

$

274

$

456

$

2,814

$

2,364

$

548

$

912

Interest cost

 

1,808

 

1,923

 

573

 

559

 

3,616

 

3,846

 

1,146

1,118

Expected return

 

(3,978)

 

(3,561)

 

 

 

(7,956)

 

(7,122)

 

Amortizations

 

1,956

 

51

 

 

(60)

 

3,912

 

102

 

(120)

Net periodic benefit cost

$

1,193

$

(405)

$

847

$

955

$

2,386

$

(810)

$

1,694

$

1,910

The Company contributed $3,000 to Company-sponsored U.S. pension plans and $1,362 to its other post-retirement benefit plans for the six months ended March 31, 2022. The Company expects to make contributions of $3,000 to its U.S. pension plan and $2,097