Company Quick10K Filing
Haynes
Price35.63 EPS1
Shares13 P/E46
MCap446 P/FCF10
Net Debt-31 EBIT13
TEV415 TEV/EBIT31
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-12-31 Filed 2021-01-28
10-K 2020-09-30 Filed 2020-11-19
10-Q 2020-06-30 Filed 2020-07-31
10-Q 2020-03-31 Filed 2020-04-30
10-Q 2019-12-31 Filed 2020-01-30
10-K 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-02
10-Q 2018-12-31 Filed 2019-01-31
10-K 2018-09-30 Filed 2018-11-15
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-03
10-Q 2017-12-31 Filed 2018-02-01
10-K 2017-09-30 Filed 2017-11-16
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-04
10-Q 2016-12-31 Filed 2017-02-02
10-K 2016-09-30 Filed 2016-11-17
10-Q 2016-06-30 Filed 2016-08-04
10-Q 2016-03-31 Filed 2016-05-05
10-Q 2015-12-31 Filed 2016-02-04
10-K 2015-09-30 Filed 2015-11-19
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-07
10-Q 2014-12-31 Filed 2015-02-05
10-K 2014-09-30 Filed 2014-11-20
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-08
10-Q 2013-12-31 Filed 2014-02-06
10-K 2013-09-30 Filed 2013-11-21
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-02
10-Q 2012-12-31 Filed 2013-01-31
10-K 2012-09-30 Filed 2012-11-15
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-03
10-Q 2011-12-31 Filed 2012-02-02
10-K 2011-09-30 Filed 2011-11-17
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-05
10-Q 2010-12-31 Filed 2011-02-03
10-K 2010-09-30 Filed 2010-11-18
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-05-06
10-Q 2009-12-31 Filed 2010-02-08
8-K 2021-01-28 Earnings, Regulation FD, Exhibits
8-K 2020-12-18 Regulation FD
8-K 2020-11-24
8-K 2020-11-19
8-K 2020-10-19
8-K 2020-07-30
8-K 2020-05-01
8-K 2020-04-30
8-K 2020-04-07
8-K 2020-03-12
8-K 2020-02-25
8-K 2020-01-29
8-K 2019-12-23
8-K 2019-11-19
8-K 2019-11-14
8-K 2019-08-01
8-K 2019-05-02
8-K 2019-02-27
8-K 2019-01-30
8-K 2018-11-18
8-K 2018-11-15
8-K 2018-09-01
8-K 2018-08-02
8-K 2018-07-06
8-K 2018-07-01
8-K 2018-05-29
8-K 2018-05-01
8-K 2018-02-28
8-K 2018-02-01
8-K 2018-01-19

HAYN 10Q Quarterly Report

Part 1 Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
Note 2. Recently Issued Accounting Standards
Note 3. Revenues From Contracts with Customers
Note 4. Inventories
Note 5. Income Taxes
Note 6. Pension and Post - Retirement Benefits
Note 7. Legal, Environmental and Other Contingencies
Note 8. Deferred Revenue
Note 9. Goodwill and Other Intangible Assets, Net
Note 10. Net Income (Loss) per Share
Note 11. Stock - Based Compensation
Note 12. Dividend
Note 13. Fair Value Measurements
Note 14. Changes in Accumulated Other Comprehensive Income (Loss) By Component
Note 15. Long - Term Obligations
Note 16. Foreign Currency Forward Contracts
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits
EX-31.1 hayn-20201231xex31d1.htm
EX-31.2 hayn-20201231xex31d2.htm
EX-32.1 hayn-20201231xex32d1.htm

Haynes Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
65052039026013002012201420172020
Assets, Equity
14010774418-252012201420172020
Rev, G Profit, Net Income
4028164-8-202012201420172020
Ops, Inv, Fin

UNITED STATES
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Table of Contents

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 December 31, 2020

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 $.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 January 28, 2021, the registrant had 12,682,147 shares of Common Stock, $.001 par value, outstanding.

Table of Contents

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

3

Consolidated Balance Sheets (Unaudited) as of September 30, 2020 and December 31, 2020

3

Consolidated Statements of Operations (Unaudited) for the Three Months Ended December 31, 2019 and 2020

4

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three Months Ended December 31, 2019 and 2020

5

Consolidated Statement of Stockholders’ Equity (Unaudited) for the Three Months Ended December 31, 2019 and 2020

6

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended December 31, 2019 and 2020

7

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II

OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 6.

Exhibits

27

Index to Exhibits

27

Signatures

28

2

Table of Contents

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, 

    

December 31, 

 

2020

2020

 

ASSETS

Current assets:

Cash and cash equivalents

$

47,238

$

61,263

Accounts receivable, less allowance for doubtful accounts of $545 and $576 at September 30, 2020 and December 31, 2020, respectively

 

51,118

 

40,380

Inventories

 

246,124

 

236,313

Income taxes receivable

 

3,770

 

4,221

Other current assets

 

3,285

 

3,946

Total current assets

 

351,535

 

346,123

Property, plant and equipment, net

 

159,819

 

156,942

Deferred income taxes

 

30,551

 

32,096

Other assets

 

8,974

 

8,531

Goodwill

4,789

4,789

Other intangible assets, net

 

5,056

 

5,920

Total assets

$

560,724

$

554,401

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

17,555

$

18,063

Accrued expenses

 

14,757

 

14,134

Income taxes payable

 

 

277

Accrued pension and postretirement benefits

 

3,403

 

3,403

Deferred revenue—current portion

 

2,500

 

2,500

Total current liabilities

 

38,215

 

38,377

Long-term obligations (less current portion)

 

8,509

 

8,436

Deferred revenue (less current portion)

 

12,829

 

12,204

Deferred income taxes

2,131

2,222

Operating lease liabilities

1,719

1,622

Accrued pension benefits (less current portion)

 

105,788

 

103,467

Accrued postretirement benefits (less current portion)

90,032

90,182

Total liabilities

 

259,223

 

256,510

Commitments and contingencies

 

 

Stockholders’ equity:

Common stock, $0.001 par value (40,000,000 shares authorized, 12,681,280 and 12,751,495 shares issued and 12,622,371 and 12,682,147 shares outstanding at September 30, 2020 and December 31, 2020, respectively)

 

13

 

13

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

 

 

Additional paid-in capital

 

257,583

 

258,642

Accumulated earnings

 

120,943

 

110,134

Treasury stock, 58,909 shares at September 30, 2020 and 69,348 shares at December 31, 2020

 

(2,437)

 

(2,675)

Accumulated other comprehensive loss

 

(74,601)

 

(68,223)

Total stockholders’ equity

 

301,501

 

297,891

Total liabilities and stockholders’ equity

$

560,724

$

554,401

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

3

Table of Contents

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

    

Three Months Ended December 31, 

    

2019

    

2020

    

Net revenues

$

108,453

$

72,177

    

Cost of sales

89,710

71,190

Gross profit

 

18,743

987

Selling, general and administrative expense

11,507

9,733

Research and technical expense

882

787

Operating income (loss)

6,354

(9,533)

Nonoperating retirement benefit expense

1,700

359

Interest income

(14)

(4)

Interest expense

251

304

Income (loss) before income taxes

 

4,417

(10,192)

Provision for (benefit from) income taxes

1,149

(2,165)

Net income (loss)

$

3,268

$

(8,027)

Net income (loss) per share:

Basic

$

0.26

$

(0.65)

Diluted

$

0.26

$

(0.65)

Weighted Average Common Shares Outstanding

Basic

12,460

12,493

Diluted

12,502

12,493

Dividends declared per common share

$

0.22

$

0.22

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

4

Table of Contents

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)

    

Three Months Ended December 31, 

    

2019

    

2020

    

Net income (loss)

$

3,268

$

(8,027)

Other comprehensive income (loss), net of tax:

Pension and postretirement

1,719

1,528

Foreign currency translation adjustment

4,243

4,850

Other comprehensive income (loss)

5,962

6,378

Comprehensive income (loss)

$

9,230

$

(1,649)

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

5

Table of Contents

HAYNES INTERNATIONAL, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share data)

Three Months Ended December 31, 2019

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Treasury

Comprehensive

Stockholders’

    

Shares

    

Par

    

Capital

    

Earnings

    

Stock

    

Income (Loss)

    

Equity

Balance September 30, 2019

 

12,513,500

$

13

$

253,843

$

125,296

$

(2,239)

$

(80,638)

$

296,275

Net income (loss)

3,268

 

3,268

Dividends paid and accrued ($0.22 per share)

(2,837)

 

(2,837)

Other comprehensive income (loss)

5,962

 

5,962

Exercise of stock options

 

12,400

422

 

422

Reclass due to adoption of ASU 2018-02

13,283

(13,283)

Issue restricted stock (less forfeitures)

 

35,795

Purchase of treasury stock

 

(5,440)

(198)

 

(198)

Stock compensation

734

 

734

Balance December 31, 2019

 

12,556,255

$

13

$

254,999

$

139,010

$

(2,437)

$

(87,959)

$

303,626

Three Months Ended December 31, 2020

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)

(8,027)

 

(8,027)

Dividends paid and accrued ($0.22 per share)

(2,782)

 

(2,782)

Other comprehensive income (loss)

6,378

 

6,378

Issue restricted stock (less forfeitures)

 

55,718

Vesting of restricted stock

14,497

Purchase of treasury stock

 

(10,439)

(238)

 

(238)

Stock compensation

1,059

 

1,059

Balance December 31, 2020

 

12,682,147

$

13

$

258,642

$

110,134

$

(2,675)

$

(68,223)

$

297,891

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)

    

Three Months Ended December 31, 

    

2019

    

2020

    

Cash flows from operating activities:

Net income (loss)

$

3,268

$

(8,027)

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

Depreciation

 

4,752

 

4,807

Amortization

 

51

 

116

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

 

3,437

 

2,040

Change in long-term obligations

 

(12)

 

7

Stock compensation expense

 

734

 

1,059

Deferred revenue

 

(625)

 

(625)

Deferred income taxes

 

(84)

 

(1,983)

Change in assets and liabilities:

Accounts receivable

 

11,941

 

11,684

Inventories

 

(19,983)

 

13,289

Other assets

 

(206)

 

(270)

Accounts payable and accrued expenses

 

4,207

 

(1,246)

Income taxes

 

1,761

 

(178)

Accrued pension and postretirement benefits

 

(2,213)

 

(2,220)

Net cash provided by (used in) operating activities

 

7,028

 

18,453

Cash flows from investing activities:

Additions to property, plant and equipment

 

(2,296)

 

(1,127)

Net cash provided by (used in) investing activities

 

(2,296)

 

(1,127)

Cash flows from financing activities:

Dividends paid

 

(2,760)

 

(2,795)

Proceeds from exercise of stock options

 

422

 

Payment for purchase of treasury stock

 

(198)

 

(238)

Payment for debt issuance cost

 

 

(980)

Payments on long-term obligation

(40)

(67)

Net cash provided by (used in) financing activities

 

(2,576)

 

(4,080)

Effect of exchange rates on cash

 

425

 

779

Increase (decrease) in cash and cash equivalents:

 

2,581

 

14,025

Cash and cash equivalents:

Beginning of period

 

31,038

 

47,238

End of period

$

33,619

$

61,263

Supplemental disclosures of cash flow information:

Interest (net of capitalized interest)

$

236

$

223

Income taxes paid (refunded), net

$

(526)

$

(13)

Capital expenditures incurred, but not yet paid

$

106

$

487

Dividends declared but not yet paid

$

117

$

126

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, 2020 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 ended December 31, 2020 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2021 or any 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.

COVID-19 Pandemic

In March 2020, the World Health Organization characterized the COVID-19 virus as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.  The rapid spread of the virus, and the continuously evolving responses to combat it, have had a significant negative impact on the global economy and the Company’s business.  

COVID-19 related disruptions negatively impacted the Company’s financial and operating results in the second half of fiscal 2020 and first quarter of fiscal 2021 and could continue to materially affect the Company’s financial condition and results of operations for an extended period of time.  In particular, the pandemic negatively impacted the aerospace supply chain which is currently absorbing significant downward adjustments to its forecasted demand. The Company has accepted, with select aerospace customers, requests to delay the shipment of orders and in some cases cancellations.  Markets other than aerospace have also been depressed with uncertainty and tight cash management impacting customer ordering patterns. The Company has taken significant actions to position itself to manage through the current market disruption caused by COVID-19.  

Note 2.  Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820).  This new guidance removes and modifies disclosure requirements on fair value statements.  This update is effective for fiscal years beginning after December 15, 2019.  The Company adopted this guidance on October 1, 2020.  This guidance did not have a material impact on the disclosures in the Notes to Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.  The new current expected credit loss (CECL) methodology does not have a minimum threshold for recognition of impairment losses, and entities will need to measure expected credit losses on assets that have a low risk of loss.  This update is effective for fiscal years beginning after December 15, 2019.  The Company adopted this standard on October 1, 2020.  This standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.    

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

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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, 2020 and December 31, 2020, accounts receivable with customers were $51,663 and $40,956, respectively. Allowance for doubtful accounts as of September 30, 2020 and December 31, 2020 were $545 and $576, 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, 2020 and December 31 30, 2020, no contract liabilities have been recorded except for $15,329 and $14,704, respectively, for the Titanium Metals Corporation agreement, as described in Note 8 to the Condensed Consolidated Financial Statements and $1,200 and $900 for accrued product returns respectively.

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 months ended December 31, 2019 and 2020.

Three Months Ended

December 31, 

    

2019

    

2020

Net revenues (dollars in thousands)

Aerospace

$

58,843

$

24,555

Chemical processing

 

16,712

 

15,256

Industrial gas turbine

 

13,763

 

13,967

Other markets

 

11,875

 

12,779

Total product revenue

 

101,193

 

66,557

Other revenue

 

7,260

 

5,620

Net revenues

$

108,453

$

72,177

Note 4.  Inventories

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

September 30, 

December 31, 

 

    

2020

    

2020

    

 

Raw Materials

$

22,163

$

23,142

Work-in-process

 

110,717

 

101,136

Finished Goods

 

111,744

 

110,484

Other

 

1,500

 

1,551

$

246,124

$

236,313

Note 5.  Income Taxes

Income tax expense (benefit) for the three months ended December 31, 2019 and 2020 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 December 31, 2020 was 21.2% on $(10,192) of loss before income taxes compared to 26.0% on income before income taxes of $4,417 for the three months ended December 31, 2019.  Income tax expense in the three months ended December 31, 2020 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.  

 

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Note 6.  Pension and Post-retirement Benefits

Components of net periodic pension and post-retirement benefit cost for the three months ended December 31, 2019 and 2020 were as follows:

Three Months Ended December 31, 

Pension Benefits

Other Benefits

    

2019

    

2020

    

2019

    

2020

    

Service cost

$

1,386

$

1,407

$

354

$

274

Interest cost

 

2,148

 

1,808

 

873

 

573

Expected return

 

(3,645)

 

(3,978)

 

 

Amortizations

 

1,859

 

1,956

 

462

 

Net periodic benefit cost

$

1,748

$

1,193

$

1,689

$

847

The Company contributed $1,500 to Company-sponsored U.S. pension plans and $696 to its other post-retirement benefit plans for the three months ended December 31, 2020. The Company expects to make contributions of $4,500 to its U.S. pension plan and $2,611 to its other post-retirement benefit plan for the remainder of fiscal 2021.

Note 7.  Legal, Environmental and Other Contingencies

Legal

The Company is regularly involved in litigation, both as a plaintiff and as a defendant, relating to its business and operations, including environmental, commercial, asbestos, employment and federal and/or state Equal Employment Opportunity Commission administrative actions. Future expenditures for environmental, employment, intellectual property and other legal matters cannot be determined with any degree of certainty.

In January 2017, a customer based in the United Kingdom wrote to the Company making a claim in relation to certain product sold to that customer by the Company.  This writing was followed up by claim correspondence in 2018, 2019 and January of 2020.  The Company has engaged its legal advisors in the United Kingdom to respond to the claim.  However, no further interaction has occurred since January 2020.  The Company intends to pursue insurance coverage as and if necessary while vigorously defending against the customer claim.  Based on the facts presently known, management does not believe that the claim will have a material effect on the Company’s financial position, results of operations or cash flows.

Environmental

The Company has received permits from the Indiana Department of Environmental Management and the North Carolina Department of Environment and Natural Resources to close and provide post-closure environmental monitoring and care for certain areas of its Kokomo, Indiana and Mountain Home, North Carolina facilities, respectively.  

The Company is required to, among other things, monitor groundwater and to continue post-closure maintenance of the former disposal areas at each site. As a result, the Company is aware of elevated levels of certain contaminants in the groundwater, and additional testing and corrective action by the Company could be required.  The Company is unable to estimate the costs of any further corrective action at these sites, if required. Accordingly, the Company cannot assure that the costs of any future corrective action at these or any other current or former sites would not have a material effect on the Company’s financial condition, results of operations or liquidity.

As of September 30, 2020 and December 31, 2020, the Company has accrued $602 for post-closure monitoring and maintenance activities, of which $525 is included in long-term obligations as it is not due within one year.  Accruals for these costs are calculated by estimating the cost to monitor and maintain each post-closure site and multiplying that amount by the number of years remaining in the post-closure monitoring.

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Expected maturities of post-closure monitoring and maintenance activities (discounted) included in long-term obligations are as follows at December 31, 2020.  

Expected maturities of post-closure monitoring and maintenance activities (discounted)

    

 

Year Ended September 30,

2022

$

67

2023

 

65

2024

 

87

2025

65

2026 and thereafter

 

241

$

525

On February 11, 2016, the Company voluntarily reported to the Louisiana Department of Environmental Quality a leak that it discovered in one of its chemical cleaning operations at its Arcadia, Louisiana facility.  As a result of the discovery, the Company worked with that department to determine the extent of the issue and appropriate remediation.  Management has completed the required remediation and is expecting a “No Further Action” notice from the department upon completion of related administrative action.  Management does not currently expect that the remediation costs related to this matter will have a material adverse effect on the Company’s results of operations.

Note 8.  Deferred Revenue

On November 17, 2006, the Company entered into a twenty-year agreement to provide conversion services to Titanium Metals Corporation (TIMET) for up to ten million pounds of titanium metal annually. TIMET paid the Company a $50,000 up-front fee and will also pay the Company for its processing services during the term of the agreement (20 years) at prices established by the terms of the agreement. TIMET may exercise an option to have ten million additional pounds of titanium converted annually, provided that it offers to loan up to $12,000 to the Company for certain capital expenditures which may be required to expand capacity. In addition to the volume commitment, the Company has granted TIMET a first priority security interest in its four-high Steckel rolling mill, along with rights of access if the Company enters into bankruptcy or defaults on any financing arrangements. The Company has agreed not to manufacture titanium products (other than cold reduced titanium tubing). The Company has also agreed not to provide titanium hot-rolling conversion services to any entity other than TIMET for the term of the Conversion Services Agreement. The agreement contains certain default provisions which could result in contract termination and damages, including liquidated damages of $25,000 and the Company being required to return the unearned portion of the up-front fee. The Company considered each provision and the likelihood of the occurrence of a default that would result in liquidated damages. Based on the nature of the events that could trigger the liquidated damages clause, and the availability of the cure periods set forth in the agreement, the Company determined and continues to believe that none of these circumstances are reasonably likely to occur. Therefore, events resulting in liquidated damages have not been factored in as a reduction to the amount of revenue recognized over the life of the contract. The cash received of $50,000 is recognized in income on a straight-line basis over the 20-year term of the agreement. If an event of default occurred and was not cured within any applicable grace period, the Company would recognize the impact of the liquidated damages in the period of default and re-evaluate revenue recognition under the contract for future periods. The portion of the up-front fee not recognized in income is shown as deferred revenue on the consolidated balance sheet.

Note 9.  Goodwill and Other Intangible Assets, Net

The Company has goodwill, trademarks, customer relationships and other intangibles.  As the customer relationships have a definite life, they are amortized over a life of fifteen years.  The Company reviews customer relationships for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the assets is measured by a comparison of the carrying amount of the asset to the undiscounted cash flows expected to be generated by the asset.   If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset.  

Goodwill and trademarks (indefinite lived) are tested for impairment at least annually as of January 31 for goodwill and August 31 for trademarks (the annual impairment testing dates), or more frequently if impairment indicators exist.  If the carrying value of a trademark exceeds its fair value (determined using an income approach, based upon a discounted cash flow of an assumed royalty rate), impairment of the trademark may exist resulting in a charge to earnings to the extent of the impairment.  The impairment test for goodwill is performed by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment loss in the event that the carrying amount is greater than the fair value.  Any goodwill impairment loss recognized would not exceed the total carrying amount of goodwill allocated to that reporting unit.  No impairment has been recognized as of December 31, 2020.  

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During the first three months of fiscal 2021, there were no changes in the carrying amount of goodwill.  

Amortization of customer relationships and other intangibles was $51 and $116 for the three-month periods ended December 31, 2019 and 2020, respectively.  The following represents a summary of intangible assets at September 30, 2020 and December 31, 2020.

    

Gross

    

Accumulated

    

Carrying

 

September 30, 2020

Amount

Amortization

Amount

 

Trademarks

$

3,800

$

$

3,800

Customer relationships

2,100

(858)

1,242

Other

 

291

(277)

14

$

6,191

$

(1,135)

$

5,056

    

Gross

    

Accumulated

    

Carrying

 

December 31, 2020

Amount

Amortization

Amount

 

Trademarks

$

3,800

$

$

3,800

Customer relationships

2,100

(894)

1,206

Other

 

980

(66)

914

$

6,880

$

(960)

$

5,920

Estimated future Aggregate Amortization Expense:

    

 

Year Ended September 30, 

2021

$

351

2022

 

466

2023

 

461

2024

 

126

2025

 

123

Thereafter

 

593

Note 10.  Net Income (Loss) Per Share

The Company accounts for earnings per share using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to participation rights in undistributed earnings. Non-vested restricted stock awards that include non-forfeitable rights to dividends are considered participating securities.  Basic earnings per share is computed by dividing net income available to common stockholders for the period by the weighted average number of common shares outstanding for the period. The computation of diluted earnings per share is similar to basic earnings per share, except the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

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The following table sets forth the computation of basic and diluted earnings (losses) per share for the periods indicated:

Three Months Ended

December 31, 

(in thousands, except share and per share data)

    

2019

    

2020

 

Numerator: Basic and Diluted

Net income (loss)

 

$

3,268

 

$

(8,027)

Dividends paid and accrued

 

(2,837)

 

(2,782)

Undistributed income (loss)

 

431

 

(10,809)

Percentage allocated to common shares (a)

 

99.3

%

 

100.0

%

Undistributed income (loss) allocated to common shares

428

(10,809)

Dividends paid on common shares outstanding

 

2,818

 

2,744

Net income (loss) available to common shares

 

3,246

 

(8,065)

Denominator: Basic and Diluted

Weighted average common shares outstanding

 

12,459,930

 

12,492,985

Adjustment for dilutive potential common shares

 

41,582

 

Weighted average shares outstanding - Diluted

 

12,501,512

 

12,492,985

Basic net income (loss) per share

 

$

0.26

 

$

(0.65)

Diluted net income (loss) per share

 

$

0.26

 

$

(0.65)

Number of stock option shares excluded as their effect would be anti-dilutive

 

502,301

 

358,346

Number of restricted stock shares excluded as their effect would be anti-dilutive

 

 

173,769

Number of deferred restricted stock shares excluded as their effect would be anti-dilutive

35,616

Number of performance share awards excluded as their effect would be anti-dilutive