KOKOMO, Ind., Nov. 24, 2008 (GLOBE NEWSWIRE) -- Haynes International, Inc. (Nasdaq:HAYN) today reported net revenues of $160.8 million and net income of $16.3 million, or $1.35 per diluted share for the three months ended September 30, 2008, compared to net revenues of $161.0 million and net income of $17.8 million, or $1.50 per diluted share, for the same period of fiscal 2007. Revenues for the full fiscal year ended September 30, 2008 were $637.0 million and net income was $62.8 million, or $5.22 per diluted share, compared to net revenues of $559.8 million and net income of $66.1 million, or $5.89 per diluted share, for fiscal 2007.
"The Company's performance over the past year was solid, in spite of the increasing challenges of a slowing economic environment. Revenue and pounds shipped for fiscal 2008 represent a record year. Net income was relatively flat compared to fiscal 2007 as a result of the challenging commercial environment," said Mark Comerford, Haynes' President and Chief Executive Officer.
"On behalf of the Board, we're very pleased that Mark has joined the Company," stated John Corey, the Company's Chairman. "We believe that his leadership and experience qualify him to guide the Company through this challenging period, and to position the business for the next upturn."
Fiscal 2008 Results
Net Revenues. Net revenues increased by $77.2 million, or 13.8%, to $637.0 million in fiscal 2008 from $559.8 million in fiscal 2007. Volume for all products increased by 2.5% to 23.3 million pounds in fiscal 2008 from 22.7 million pounds in fiscal 2007. Volume of high-performance alloys increased by 11.2% to 22.8 million pounds in fiscal 2008 as compared to 20.5 million pounds in fiscal 2007. Volume of stainless steel wire decreased by 77.3% to 0.5 million pounds in fiscal 2008 as compared to 2.2 million pounds in fiscal 2007 as a result of the Company's strategy to reduce production of stainless steel wire and increase production of high-performance alloy wire due to higher average selling price available on high-performance alloy wire. The aggregate average selling price per pound for all products increased by 11.0% to $27.37 per pound in fiscal 2008 from $24.65 per pound in fiscal 2007 because of changes in product mix (including market, form and alloy), an increased level of service center value-added business, and changes in raw material prices.
Cost of Sales. Cost of sales increased to $492.3 million, or 77.3% of net revenues in fiscal 2008 compared to $408.7 million, or 73.0% of net revenues in fiscal 2007. Cost of sales increased as a result of a combination of the following factors: (i) increased volumes, (ii) increased manufacturing costs due to planned and unplanned equipment outages, (iii) changes in product mix due to an increase in the production and sale of higher-cost alloy and forms, (iv) increased energy costs, and (v) increased raw material costs of molybdenum, cobalt and chromium partially offset by the lower nickel costs. In fiscal 2007, cost of sales included a one-time bonus accrual to union employees upon ratification of the collective bargaining agreement of $2.2 million (or 0.4% of net revenue), which did not repeat in fiscal 2008. This difference was partially offset by higher wage rates for union employees and increased fringe benefit costs in fiscal 2008. Cost of sales in fiscal 2008 was also decreased by a $3.7 million (0.6% of net revenue) pension curtailment gain, which was recorded due to an amendment to freeze future pension benefit accruals for non-union employees in the U.S. While the price of nickel was lower for fiscal 2008 than in fiscal 2007, the lower price of nickel was offset by increased prices for other raw materials that are significant in the manufacture of the Company's products, such as molybdenum, cobalt and chromium. As reported by the London Metals Exchange, the average price per pound for 30-day cash buyers of nickel at September 30, 2008 was $8.07 compared to $13.40 at September 30, 2007, and the average price over the course of fiscal 2008 was higher than the 30-day cash average at September 30, 2008.
Selling, General and Administrative Expense. Selling, general and administrative expense increased by $2.8 million to $42.3 million in fiscal 2008 from $39.4 million in fiscal 2007 due to: (i) higher business activity causing commissions and sales expenses to increase by $3.9 million, and (ii) an increase of $0.4 million in allowance for doubtful accounts in fiscal 2008 compared to fiscal 2007 as a result of a reduction in that category in fiscal 2007 to reflect the write-off history. These increases were partially offset by a decrease in stock compensation expense of $1.5 million. Selling, general and administrative expenses as a percentage of net revenues decreased to 6.6% for fiscal 2008 compared to 7.0% for fiscal 2007 due primarily to increased revenues.
Research and Technical Expense. Research and technical expense slightly increased by $0.3 million to $3.4 million, or 0.5% of net revenues, in fiscal 2008 compared to $3.1 million, or 0.6% of net revenues, in fiscal 2007 due to normal inflationary increases and increased staff levels earlier in fiscal 2008 required to support the transition of retiring employees.
Operating Income. As a result of the above factors, operating income in fiscal 2008 was $98.9 million compared to $108.5 million in fiscal 2007.
Interest Expense. Interest expense decreased by $3.0 million to $1.2 million in fiscal 2008 from $4.2 million for fiscal 2007. The decrease is due to a lower average balance outstanding resulting from: (i) the Company's application of proceeds from the equity offering that occurred near the end of the second quarter of fiscal 2007, (ii) cash generated from operations, and (iii) proceeds from the exercise of stock options which were used to reduce the outstanding debt balance.
Income Taxes. Income tax expense decreased to $35.1 million in fiscal 2008 from $38.5 million in fiscal 2007 due to lower pretax income. The effective tax rate for fiscal 2008 was 35.9% compared to 36.8% in fiscal 2007. The decrease in effective tax rate is primarily attributable to (i) lower blended state tax rate in the U.S. due to an apportionment factor change and (ii) a higher manufacturers deduction for U.S. based facilities.
Net Income. As a result of the above factors, net income decreased by $3.3 million, or 5.1%, to $62.8 million in fiscal 2008 compared to $66.1 million in fiscal 2007.
Subsequent Event
The Company renewed its revolving credit facility with Wachovia Capital Finance Corporation (Central), entering into a Second Amended and Restated Loan and Security Agreement effective November 18, 2008.
"We are very pleased to have completed this renewal at favorable terms and with the ongoing support of our key relationship bank, particularly under the climate of uncertainty in the credit markets today," said Marcel Martin, the Company's Chief Financial Officer.
Among other items, the amended agreement extends the maturity date of the revolving credit facility to September 30, 2011, increases the margin over LIBOR included in the interest rate from 1.5% per annum to 2.5% per annum, permits the Company to pay dividends and repurchase common stock if certain financial metrics are met, and eliminates the EBITDA covenant. The maximum revolving loan amount under the amended agreement continues to be $120.0 million.
Liquidity
At September 30, 2008, the Company had cash and cash equivalents of approximately $7.1 million compared to cash and cash equivalents of approximately $5.7 million at September 30, 2007, and has access to additional cash of approximately $108.2 million under its U.S. revolving credit facility subject to borrowing base and certain reserves.
Net cash provided by operating activities was $41.3 million in fiscal 2008, as compared to cash provided by operating activities of $4.6 million in fiscal 2007. At September 30, 2008, inventory balances (net of foreign currency adjustments) were approximately $21.6 million higher than at September 30, 2007, as a result of the continued increase in costs of raw materials, a higher level of inventory required to be maintained to support the increased level of sales and a level of safety stock in order to continue production and shipments through the planned outages related to the Company's capital upgrade program. In addition, the pension and postretirement benefits balance decreased by $12.5 million due to the payments to the plans and plan amendments. Net cash used in investing activities was $21.6 million in fiscal 2008, as a result of the continuing capital expenditure program and the Asian distribution expansion and acquisition. As a result of the above, borrowings on the revolving credit facility decreased by $23.7 million. Also included in cash from financing activities is $3.2 million for the excess tax benefit from the exercise of 177,386 stock options in fiscal 2008.
The Company's sources of cash for fiscal 2009 are expected to consist primarily of cash generated from operations, cash on hand, and borrowings under the U.S. revolving credit facility. The U.S. revolving credit facility provides borrowings in a maximum amount of $120.0 million, subject to a borrowing base formula and certain reserves.
The Company's primary uses of cash over the next twelve months are expected to consist of expenditures related to income tax payments; capital spending to improve reliability and performance of the equipment; reduction of debt; pension plan funding; and interest payments on outstanding indebtedness. In the first quarter of fiscal 2009, federal taxes of $15.0 million were paid related to the twenty year agreement to provide conversion services to Titanium Metals Corporation.
Outlook
Although revenue and volumes from quarter-to-quarter through both fiscal 2007 and 2008 tended to show growth, in the latter half of fiscal 2008 the backlog began to exhibit signs of the weakening economic environment to varying degrees in specific market categories. Revenue dollars and volumes in the backlog were essentially flat between September 30, 2007 and September 30, 2008, while the average selling price declined approximately 5%, in part as a result of a 40% decline in the cost of nickel between periods. However, the backlog at the end of fiscal 2008 declined from the end of the third quarter of fiscal 2008 by approximately 9% in both revenue dollars and pounds, while the average selling price remained essentially flat. Revenue dollars and volume in the backlog at October 31, 2008 declined by an additional 4% from September 30, 2008, while average selling price again remained essentially flat. The trend in backlog movement would appear to be consistent with historical performance; however, management does not believe that the backlog will increase in the second and third quarters of fiscal 2009 to the same extent as in past comparable periods. Although uncertain as to the extent of any additional reduction in revenue dollars and pounds will occur in the backlog, management anticipates that backlog revenue dollars and pounds will decline further and ultimately be reflected in a commensurate reduction in revenue and sales pounds.
Planned fiscal 2009 capital spending is targeted at approximately $15.1 million, most of which is maintenance spending. Depending upon economic conditions, the Company may make further equipment upgrades in fiscal 2009; however, capital projects in fiscal 2009 will be focused on improving and maintaining the equipment reliability. At this time, management does not anticipate any prolonged planned equipment outages as a result of equipment upgrades in fiscal 2009.
Worldwide economic conditions have recently deteriorated significantly and may remain depressed, or could worsen, in the foreseeable future. These conditions may have a material adverse effect on demand for our customers' products and, in turn, on demand for our products. If these conditions persist or worsen, our results of operations and financial condition could be materially adversely affected.
Commenting on the outlook for fiscal 2009 and forward, Mr. Comerford said, "In the short-term, we expect a significant slow-down and, while we believe the Company can maintain acceptable levels of profitability, our results are likely to be below those seen in recent years. Certainly, we expect accelerating weakness in order entry and pounds shipped over the next several quarters. Even with strong demand, the ability of our customers to obtain credit is likely to be negatively impacted in this environment, which could also negatively impact sales. However, it still appears that long-term demand for our high-performance alloys should be positively driven by favorable long-term trends in the aerospace market, chemical processing facility construction and maintenance markets and the land-based gas turbine market. These favorable long-term trends also reflect the anticipated growth in the emergent economies of Asia."
"We also believe that our value-added services will help us to compete with added competition as a result of extra capacity in the stainless market in early fiscal 2009. As a result of the strategies implemented over the last five years, the Company is well-positioned to deal with the challenges of the down turn. The equipment upgrades and the focus on the service centers value-added capabilities give the Company an advantage it hasn't had in past economic down turns."
Earnings Conference Call
The Company will host a conference call on Tuesday, November 25, 2008, to discuss its results for the fiscal year ended September 30, 2008. Mark Comerford, President and Chief Executive Officer, and Marcel Martin, Chief Financial Officer and Vice President of Finance, will host the call and be available to answer questions.
To participate, please dial the teleconferencing number shown below five minutes prior to the scheduled conference time.
Date: Tuesday, November 25, 2008 Dial-In Numbers: 877-407-0778
(Domestic)
201-689-8565
(International)
Time: 9:00 a.m. Eastern Time
8:00 a.m. Central Time
7:00 a.m. Mountain Time
6:00 a.m. Pacific Time
A live Webcast of the conference call will be available at www.haynesintl.com.
For those unable to participate a replay will be available from Tuesday, November 25th at 11:00 a.m. ET, through 11:59 p.m. ET on Tuesday, December 2, 2008. To listen to the replay, please dial:
Domestic: 877-660-6853 International: 201-612-7415 Replay Access: Account: 286 Conference: 303137
A replay of the Webcast will also be available at www.haynesintl.com until December 24, 2008.
About Haynes International
Haynes International, Inc. is a leading developer, manufacturer and marketer of technologically advanced, high performance alloys, primarily for use in the aerospace, land-based gas turbine and chemical processing industries.
The Haynes International, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4319
Cautionary Note Regarding Forward-Looking Statements
This news release contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934, particularly under the "Outlook" section above. When used in this news release, the words "believes," "anticipates," "expects," "plans" and similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, such forward-looking statements are subject to a number of risks and uncertainties, and the Company can provide no assurances that such plans, intentions or expectations will be achieved. Many of these risks are discussed in detail in the Company's filings with the Securities and Exchange Commission, in particular in its Form 10-K for the fiscal year ended September 30, 2008. You should carefully read these risk factors.
All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only to the respective dates on which such statements are made and the Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
It is not possible to anticipate and list all risks and uncertainties that may affect the future operations or financial performance of the company; however, they include, but are not limited to, the following:
* Any significant decrease in customer demand for our products or in
demand for our customers' products;
* Economic and market risks associated with foreign operations and
U.S. and world economic and political conditions;
* Rapid increases in the cost of nickel, energy and other raw
materials;
* Our dependence on production levels at our Kokomo facility and our
ability to make capital improvements at that facility;
* Our ability to continue to develop new commercially viable
applications and products;
* Our ability to recruit and retain key employees;
* Our ability to comply, and the costs of compliance, with applicable
environmental laws and regulations; and
* Commercialization of new production capacity.
Schedule 1
HAYNES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Year Ended Year Ended
September 30, September 30,
2007 2008
------------ -----------
Net revenues $ 559,836 $ 637,006
Cost of sales 408,752 492,349
------------ -----------
Gross profit 151,084 144,657
Selling, general and administrative
expense 39,441 42,277
Research and technical expense 3,116 3,441
------------ -----------
Operating income 108,527 98,939
Interest income (227) (188)
Interest expense 4,166 1,213
------------ -----------
Income before income taxes 104,588 97,914
Provision for income taxes 38,468 35,136
------------ -----------
Net income $ 66,120 $ 62,778
============ ===========
Net income per share:
Basic $ 6.07 $ 5.27
Diluted $ 5.89 $ 5.22
Weighted average shares outstanding:
Basic 10,896,067 11,903,289
Diluted 11,230,101 12,026,440
Schedule 2
HAYNES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share data)
September 30, September 30,
2007 2008
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,717 $ 7,058
Restricted cash--current portion 110 110
Accounts receivable, less allowance
for doubtful accounts of $1,339
and $1,354 respectively 106,414 99,295
Inventories 286,302 304,915
Income taxes receivable 1,760 --
Deferred income taxes 10,801 9,399
Other current assets 1,457 2,573
---------- ----------
Total current assets 412,561 423,350
---------- ----------
Property, plant and equipment, net 97,860 107,302
Deferred income taxes--long term
portion 22,738 32,310
Prepayments and deferred charges 3,702 2,741
Restricted cash--long term portion 330 220
Goodwill 41,252 43,737
Other intangible assets, net 8,526 7,907
---------- ----------
Total assets $586,969 $617,567
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,254 $ 41,939
Accrued expenses 12,189 12,729
Income taxes payable -- 7,482
Accrued pension and postretirement
benefits 14,647 15,016
Revolving credit facilities 35,549 11,812
Deferred revenue - current portion 2,500 2,500
Current maturities of long-term
obligations 110 1,515
---------- ----------
Total current liabilities 113,249 92,993
---------- ----------
Long-term obligations (less current
portion) 3,074 1,582
Deferred revenue (less current
portion) 45,329 42,830
Non-current income taxes payable -- 276
Accrued pension and postretirement
benefits 108,940 100,343
---------- ----------
Total liabilities 270,592 238,024
---------- ----------
Commitments and contingencies
(Notes 9 and 10) -- --
Stockholders' equity:
Common stock, $0.001 par value
(40,000,000 shares authorized,
11,807,237 and 11,984,623 shares issued
and outstanding at September 30, 2007
and September 30, 2008, respectively) 12 12
Preferred stock, $0.001 par value
(20,000,000 shares authorized,
0 shares issued and outstanding) -- --
Additional paid-in capital 218,504 225,821
Accumulated earnings 93,880 155,831
Accumulated other comprehensive income
(loss) 3,981 (2,121)
---------- ----------
Total stockholders' equity 316,377 379,543
---------- ----------
Total liabilities and stockholders'
equity $586,969 $617,567
========== ==========
Schedule 3
HAYNES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Year Ended Year Ended
September 30, September 30,
Cash flows from operating 2007 2008
activities: ------------ ------------
Net income $ 66,120 $ 62,778
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 7,501 8,934
Amortization 1,146 1,119
Stock compensation expense 3,136 1,650
Excess tax benefit from option
exercises (10,869) (3,187)
Deferred revenue 50,000 --
Deferred revenue - portion
recognized (2,171) (2,499)
Deferred income taxes 3,928 (7,511)
Pension curtailment gain -- (3,659)
Loss on disposition of property 134 321
Change in assets and liabilities,
net of effect from acquisition:
Accounts receivable (26,308) 5,121
Inventories (103,100) (21,569)
Other assets (2,573) 28
Accounts payable and accrued
expenses 12,558 (4,021)
Income taxes 8,754 12,604
Accrued pension and postretirement
benefits (3,680) (8,826)
----------- ----------
Net cash provided by operating
activities 4,576 41,283
Cash flows from investing activities:
Additions to property, plant and
equipment (16,226) (18,685)
Asian distribution expansion and
acquisition -- (3,000)
Change in restricted cash 110 110
----------- ----------
Net cash used in investing
activities (16,116) (21,575)
Cash flows from financing activities:
Net increase (decrease) in
revolving credit facility (81,287) (23,737)
Proceeds from equity offering, net 72,752 --
Proceeds from exercise of stock
options 8,478 2,480
Excess tax benefit from option
exercises 10,869 3,187
Changes in long-term obligations (119) (135)
----------- ----------
Net cash provided by (used in)
financing activities 10,693 (18,205)
Effect of exchange rates on cash 382 (162)
----------- ----------
Increase (decrease) in cash and cash
equivalents (465) 1,341
Cash and cash equivalents:
Beginning of period 6,182 5,717
----------- ----------
End of period $ 5,717 $ 7,058
=========== ==========
Supplemental disclosures of cash
flow information:
Cash paid during period for:
Interest (net of capitalized
interest) $ 3,794 $ 1,115
=========== ==========
Income Taxes $ 26,072 $ 32,410
=========== ==========
Schedule 4
Quarterly Data
The unaudited quarterly results of operations of the Company
for the years ended September 30, 2008 and 2007 are as follows:
2008
---------------------------------------------
Quarter Ended
---------------------------------------------
(in thousands, except December 31 March 31 June 30 September 30
per share data) ----------- -------- -------- ------------
Net revenues $146,077 $163,771 $166,340 $160,818
Gross profit 34,205 35,920 40,117 34,415
Net income 13,843 15,063 17,564 16,308
Net income per share:
Basic $ 1.17 $ 1.27 $ 1.47 $ 1.36
Diluted $ 1.16 $ 1.25 $ 1.46 $ 1.35
2007
---------------------------------------------
Quarter Ended
---------------------------------------------
December 31 March 31 June 30 September 30
----------- -------- -------- ------------
Net revenues $120,463 $137,336 $141,087 $ 160,950
Gross profit 33,621 40,333 36,939 40,191
Net income 13,184 17,404 17,741 17,791
Net income per share:
Basic $ 1.32 $ 1.70 $ 1.52 $ 1.53
Diluted $ 1.27 $ 1.63 $ 1.49 $ 1.50