HAYNES INTERNATIONAL INC [HAYN] Filings

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

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


☐	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, Kokomo, Indiana (Address of principal executive offices)		46904-9013 (Zip Code)

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


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.

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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

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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.

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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.

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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.

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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

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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.

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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.

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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.

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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