10-Q 1 hayn-20240331x10q.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, 2024

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 Select 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 May 6, 2024, the registrant had 12,782,892 shares of Common Stock, $0.001 par value per share, outstanding.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Page

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

2

Consolidated Balance Sheets (Unaudited) as of September 30, 2023 and March 31, 2024

2

Consolidated Statements of Operations (Unaudited) for the Three Months and Six Months Ended March 31, 2023 and 2024

3

Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended March 31, 2023 and 2024

4

Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Six Months Ended March 31, 2023 and 2024

5

Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended December 31, 2023 and 2024

6

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 5.

Other Information

30

Item 6.

Exhibits

30

Signatures

31

1

PART I FINANCIAL INFORMATION

Item 1.        Financial Statements

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

    

September 30, 

    

March 31, 

 

2023

2024

 

ASSETS

Current assets:

Cash and cash equivalents

$

10,723

$

11,529

Accounts receivable, less allowance for credit losses of $459 and $489 at September 30, 2023 and March 31, 2024, respectively

 

106,292

 

100,736

Inventories

 

414,077

 

407,103

Income taxes receivable

 

2,372

 

2,856

Other current assets

 

5,702

 

6,340

Total current assets

 

539,166

 

528,564

Property, plant and equipment, net

 

142,540

 

143,855

Deferred income taxes

 

3,608

 

3,787

Other assets

 

10,523

 

11,408

Goodwill

4,789

4,789

Other intangible assets, net

 

5,655

 

5,457

Total assets

$

706,281

$

697,860

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

52,812

$

44,888

Accrued expenses

 

18,201

 

18,812

Income taxes payable

 

336

 

172

Accrued pension and postretirement benefits

 

2,940

 

2,940

Deferred revenue - current portion

 

2,500

 

2,500

Total current liabilities

 

76,789

 

69,312

Revolving credit facilities - Long-term

 

114,843

 

103,213

Long-term debt

 

 

520

Long-term obligations (less current portion)

 

7,448

 

7,189

Deferred revenue (less current portion)

 

5,329

 

4,079

Deferred income taxes

3,686

3,757

Operating lease liabilities

362

1,417

Accrued pension benefits (less current portion)

 

14,019

 

11,631

Accrued postretirement benefits (less current portion)

49,481

50,362

Total liabilities

 

271,957

 

251,480

Commitments and contingencies

 

 

Stockholders’ equity:

Common stock, $0.001 par value (40,000,000 shares authorized; 13,124,401 and 13,208,307 shares issued and 12,731,661 and 12,782,892 shares outstanding at September 30, 2023 and March 31, 2024, respectively)

 

13

 

13

Preferred stock, $0.001 par value (20,000,000 shares authorized, none issued)

 

 

Additional paid-in capital

 

277,713

 

279,699

Accumulated earnings

 

165,825

 

176,446

Treasury stock, (392,740 and 425,415 shares at September 30, 2023 and March 31, 2024, respectively)

 

(15,600)

 

(17,141)

Accumulated other comprehensive income

 

6,373

 

7,363

Total stockholders’ equity

 

434,324

 

446,380

Total liabilities and stockholders’ equity

$

706,281

$

697,860

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, 

    

2023

    

2024

    

2023

    

2024

    

Net revenues

$

152,786

$

152,458

$

285,459

$

299,815

    

Cost of sales

 

121,908

125,444

231,543

248,093

Gross profit

 

30,878

 

27,014

 

53,916

51,722

Selling, general and administrative expense

 

12,702

13,361

23,654

25,832

Research and technical expense

 

1,047

1,098

2,020

2,200

Operating income

 

17,129

 

12,555

28,242

23,690

Nonoperating retirement benefit income

(365)

(498)

(731)

(996)

Interest income

 

(10)

(26)

(16)

(49)

Interest expense

 

1,865

2,008

3,366

4,247

Income before income taxes

 

15,639

 

11,071

 

25,623

20,488

Provision for income taxes

 

3,290

2,520

5,535

4,235

Net income

$

12,349

$

8,551

$

20,088

$

16,253

Net income per share:

Basic

$

0.98

$

0.67

$

1.59

$

1.28

Diluted

$

0.96

$

0.66

$

1.56

$

1.26

Weighted Average Common Shares Outstanding

Basic

12,544

12,658

12,522

12,650

Diluted

12,787

12,851

12,766

12,825

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

(Unaudited)

(in thousands)

    

    

Three Months Ended March 31, 

Six Months Ended March 31, 

    

2023

    

2024

    

2023

    

2024

    

Net income

$

12,349

$

8,551

$

20,088

$

16,253

Other comprehensive income, net of tax:

Pension and postretirement

 

(393)

 

(608)

(786)

(1,217)

Foreign currency translation adjustment

 

1,935

 

(1,892)

7,739

2,207

Other comprehensive income (loss)

1,542

(2,500)

6,953

990

Comprehensive income

$

13,891

$

6,051

$

27,041

$

17,243

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, 2023 and 2024

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Treasury

Comprehensive

Stockholders’

    

Shares

    

Par

    

Capital

    

Earnings

    

Stock

    

Income (Loss)

    

Equity

Balance December 31, 2022

 

12,597,607

$

13

$

270,340

$

139,976

$

(15,504)

$

(5,681)

$

389,144

Net income

12,349

 

12,349

Dividends paid and accrued ($0.22 per share)

(2,811)

 

(2,811)

Other comprehensive income

1,542

 

1,542

Exercise of stock options

 

130,889

4,851

 

4,851

Issue restricted stock (less forfeitures)

 

4,300

Purchase of treasury stock

 

(1,548)

(87)

 

(87)

Stock compensation

771

 

771

Balance March 31, 2023

 

12,731,248

$

13

$

275,962

$

149,514

$

(15,591)

$

(4,139)

$

405,759

Balance December 31, 2023

 

12,782,992

$

13

$

278,591

$

170,730

$

(17,141)

$

9,863

$

442,056

Net income

8,551

 

8,551

Dividends paid and accrued ($0.22 per share)

(2,835)

 

(2,835)

Other comprehensive income (loss)

(2,500)

 

(2,500)

Issue restricted stock (less forfeitures)

 

(100)

Stock compensation

1,108

 

1,108

Balance March 31, 2024

 

12,782,892

$

13

$

279,699

$

176,446

$

(17,141)

$

7,363

$

446,380

Six Months Ended March 31, 2023 and 2024

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Treasury

Comprehensive

Stockholders’

    

Shares

    

Par

    

Capital

    

Earnings

    

Stock

    

Income (Loss)

    

Equity

Balance September 30, 2022

 

12,479,741

$

13

$

266,193

$

135,040

$

(14,666)

$

(11,092)

$

375,488

Net income

20,088

 

20,088

Dividends paid and accrued ($0.44 per share)

(5,614)

 

(5,614)

Other comprehensive income

6,953

 

6,953

Exercise of stock options

 

218,576

8,228

 

8,228

Issue restricted stock (less forfeitures)

 

38,033

Vesting of restricted stock

12,429

Purchase of treasury stock

 

(17,531)

(925)

 

(925)

Stock compensation

1,541

 

1,541

Balance March 31, 2023

 

12,731,248

$

13

$

275,962

$

149,514

$

(15,591)

$

(4,139)

$

405,759

Balance September 30, 2023

 

12,731,661

$

13

$

277,713

$

165,825

$

(15,600)

$

6,373

$

434,324

Net income

16,253

 

16,253

Dividends paid and accrued ($0.44 per share)

(5,632)

 

(5,632)

Other comprehensive income

990

 

990

Issue restricted stock (less forfeitures)

 

44,150

Vesting of restricted stock

39,756

Purchase of treasury stock

 

(32,675)

(1,541)

 

(1,541)

Stock compensation

1,986

 

1,986

Balance March 31, 2024

 

12,782,892

$

13

$

279,699

$

176,446

$

(17,141)

$

7,363

$

446,380

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, 

    

2023

    

2024

    

Cash flows from operating activities:

Net income

$

20,088

$

16,253

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

Depreciation

 

8,932

 

8,507

Amortization

 

216

 

198

Pension and post-retirement expense

 

1,306

 

1,089

Change in long-term obligations

 

(41)

 

(28)

Stock compensation expense

 

1,541

 

1,986

Deferred revenue

 

(1,250)

 

(1,250)

Deferred income taxes

 

231

 

251

Loss on disposition of property

 

65

 

239

Change in assets and liabilities:

Accounts receivable

 

(1,134)

 

6,565

Inventories

 

(34,370)

 

8,801

Other assets

 

110

 

(432)

Accounts payable and accrued expenses

 

(8,888)

 

(7,327)

Income taxes

 

(2,346)

 

(639)

Accrued pension and postretirement benefits

 

(4,187)

 

(4,180)

Net cash provided by (used in) operating activities

 

(19,727)

 

30,033

Cash flows from investing activities:

Additions to property, plant and equipment

 

(7,292)

 

(10,896)

Net cash used in investing activities

 

(7,292)

 

(10,896)

Cash flows from financing activities:

Revolving credit facility borrowings

84,128

 

65,855

Revolving credit facility repayments

(50,849)

 

(77,485)

Long-term debt borrowings

 

520

Dividends paid

 

(5,603)

 

(5,714)

Proceeds from exercise of stock options

 

8,228

 

Payment for purchase of treasury stock

 

(925)

 

(1,541)

Payment for debt issuance cost

 

(245)

 

Payments on long-term obligations

(138)

(157)

Net cash provided by (used in) financing activities

 

34,596

 

(18,522)

Effect of exchange rates on cash

 

842

 

191

Increase in cash and cash equivalents:

 

8,419

 

806

Cash and cash equivalents:

Beginning of period

 

8,440

 

10,723

End of period

$

16,859

$

11,529

Supplemental disclosures of cash flow information:

Interest (net of capitalized interest)

$

2,951

$

3,937

Income taxes paid, net

$

7,568

$

4,462

Capital expenditures incurred but not yet paid

$

1,159

$

420

Dividends declared but not yet paid

$

210

$

116

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 Haynes International, Inc.’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 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 months and six months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2024 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 Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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 were effective immediately and may be applied prospectively to modifications made or relationships entered into or evaluated on or before December 31, 2022.  This standard did not have a material impact on the Company’s Consolidated Financial Statements.  

In December 2023, the FASB issued ASU2023-09, Income Taxes (Topic 740).  This new update provides for enhancements to income tax disclosures primarily related to the rate reconciliation and income taxes paid.  These enhanced disclosures will require a greater disaggregation of information in the rate reconciliation and income taxes paid by jurisdiction.  The amendments in this update are effective for annual periods beginning after December 15, 2024 and may be applied prospectively.  Interim disclosures are not impacted by this update.  The Company is currently evaluating the impact of these amendments on its annual disclosures.    

Note 3.  Revenues from Contracts with Customers

Contract Balances

As of September 30, 2023 and March 31, 2024, accounts receivable with customers were $106,751 and $101,225, respectively. Allowance for credit losses as of September 30, 2023 and March 31, 2024 were $459 and $489, respectively, and are presented within accounts receivable, less allowances for credit losses on the Consolidated Balance Sheets.

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, 2023 and March 31, 2024, contract liabilities of $7,829 and $6,579, respectively, for the Titanium Metals Corporation agreement, as described in Note 8 in these Notes to Condensed Consolidated Financial Statement have been recorded. Additionally, contract liabilities of $810 and $850, respectively, were recorded 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, 2023 and 2024.

Three Months Ended

Six Months Ended

March 31, 

March 31, 

    

2023

    

2024

    

2023

    

2024

Net revenues

Aerospace

$

66,612

$

77,140

$

131,130

$

150,486

Chemical processing

 

28,605

 

17,669

 

51,320

 

38,448

Industrial gas turbine

 

32,420

 

35,587

 

58,445

 

70,970

Other markets

 

17,550

 

13,687

 

32,272

 

25,194

Total product revenue

 

145,187

 

144,083

 

273,167

 

285,098

Other revenue

 

7,599

 

8,375

 

12,292

 

14,717

Net revenues

$

152,786

$

152,458

$

285,459

$

299,815

Note 4.  Inventories

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

September 30, 

March 31, 

 

    

2023

    

2024

    

 

Raw Materials

$

42,602

$

40,211

Work-in-process

 

229,120

 

205,191

Finished Goods

 

140,756

 

160,116

Other

 

1,599

 

1,585

$

414,077

$

407,103

Note 5.  Income Taxes

Income tax expense for the three and six months ended March 31, 2023 and 2024 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 in these periods.  The effective tax rate for the three months ended March 31, 2024 was 22.8% on $11,071 of income before income taxes compared to 21.0% on income before income taxes of $15,639 for the three months ended March 31, 2023.  The effective tax rate for the six months ended March 31, 2024 was 20.7% on $20,488 of income before income taxes compared to 21.6% on income before income taxes of $25,623 for the six months ended March 31, 2023.

Note 6.  Pension and Post-retirement Benefits

Components of net periodic pension and post-retirement benefit cost for the three and six months ended March 31, 2023 and 2024 were as follows:

Three Months Ended March 31, 

Six Months Ended March 31, 

Pension Benefits

Other Benefits

Pension Benefits

Other Benefits

    

2023

    

2024

    

2023

    

2024

    

2023

    

2024

    

2023

    

2024

 

Service cost

$

672

$

752

$

347

$

290

$

1,344

$

1,504

$

694

$

580

Interest cost

 

2,772

 

2,950

 

800

 

716

 

5,544

 

5,900

 

1,600

1,432

Expected return

 

(3,419)

 

(3,364)

 

 

 

(6,838)

 

(6,728)

 

Amortizations

 

51

 

51

 

(570)

 

(850)

 

102

 

102

 

(1,140)

(1,701)

Net periodic benefit cost

$

76

$