Haynes International, Inc. Reports Fourth Quarter and Fiscal 2013 Financial Results

Haynes International, Inc. Reports Fourth Quarter and Fiscal 2013 Financial
Results

  *Fourth quarter net revenues of $115.7 million and net income of $4.0
    million, or $0.32 per diluted share, for the three months ended September
    30, 2013, compared to net revenues of $150.3 million and net income of
    $12.9 million, or $1.04 per diluted share, for the same period of fiscal
    2012.
  *Net revenues of $482.7 million and net income of $21.6 million, or $1.74
    per diluted share, for fiscal 2013, compared to net revenues of $579.6
    million and net income of $50.2 million, or $4.07 per diluted share, for
    fiscal 2012.
  *Backlog was $166.6 million at September 30, 2013, a decrease of 12.1% from
    $189.6 million at June 30, 2013.
  *The Company spent approximately $7.9 million on capital projects in the
    fourth quarter of fiscal 2013, which brings year-to-date capital spending
    to approximately $41.6 million. The Company estimates spending
    approximately $57.0 million on capital projects in fiscal 2014.
  *Regular quarterly cash dividend of $0.22 per outstanding share of the
    Company's common stock declared.

KOKOMO, Ind., Nov. 21, 2013 (GLOBE NEWSWIRE) -- Haynes International, Inc.
(Nasdaq:HAYN) (the "Company"), a leading developer, manufacturer and marketer
of technologically advanced high-performance alloys, today reported financial
results for the fourth quarter and fiscal year ended September 30, 2013. In
addition, the Company announced that its Board of Directors has authorized a
quarterly cash dividend of $0.22 per outstanding share.

"Market conditions remain challenging as major customers reduce inventories,"
said Mark Comerford, President and Chief Executive Officer. "We are managing
through this difficult period by controlling costs, adjusting our production
schedules and reducing inventory. We continue to believe in the growth
potential of the aerospace, land-based gas turbine and chemical processing
markets, and we are continuing to implement our capital spending projects in
line with our plans to meet the long-term growth requirements of those target
markets. In the short term, we do not expect an increase in demand in the
first quarter of fiscal 2014, and we expect to take advantage of this period
of lower demand to perform maintenance at our manufacturing facilities over
the holidays. As a result, the first quarter of fiscal 2014's revenues are
expected to be below that of the fourth quarter of fiscal 2013."

Fiscal 2013 Results

Net Revenues. Net revenues were $482.7 million in fiscal 2013, a decrease of
16.7% from $579.6 million in fiscal 2012, due to a decrease in average selling
price per pound combined with lower volume. The total average selling price
was $22.94 per pound in fiscal 2013, a decrease of 7.4%, or $1.84, from $24.78
per pound in fiscal 2012. Volume was 21.0 million pounds in fiscal 2013, a
decrease of 10.0% from 23.4 million pounds in fiscal 2012. Volume declined
primarily due to destocking in the aerospace and land-based gas turbine
markets, a decline in activity in the project-oriented other markets,
uncertain economic conditions and declining raw material prices causing
customers to delay ordering. Average selling price decreased due to lower raw
material market prices, which represented approximately $1.01 per pound of the
decrease; lower volume of conversion sales, which represented approximately
$0.12 per pound of the decrease; a higher level of price competition and
reduced customer demand due to supply chain destocking, declining nickel
prices and uncertain economic conditions, which forced us to reduce prices in
order to be competitive, representing approximately $0.71 per pound of the
decrease.

Cost of Sales. Cost of sales was $409.1 million, or 84.7% of net revenues, in
fiscal 2013 compared to $458.7 million, or 79.1% of net revenues, in fiscal
2012. Cost of sales in fiscal 2013 decreased by $49.6 million as compared to
fiscal 2012 primarily due to lower volume. When volume decreases, the cost of
sales as percentage of net revenues increases due to reduced absorption of
manufacturing costs.

Gross Profit. As a result of the above factors, gross margin was $73.6 million
for fiscal 2013, a decrease of $47.2 million from $120.8 million in fiscal
2012. Gross margin as a percentage of net revenue decreased to 15.3% in fiscal
2013 as compared to 20.9% in fiscal 2012. Items impacting the gross margin
percentage compression include pricing competition, which we estimate impacted
gross profit margin percentage by 3.1 points. The remaining 2.5 percentage
point compression is the result of other factors, including higher-cost
inventory in cost of sales relative to lower raw material market prices that
drive the sales price and unfavorable absorption of fixed costs.

Selling, General and Administrative Expense. Selling, general and
administrative expense was $38.2 million for fiscal 2013, a decrease of $2.5
million, or 6.1%, from $40.7 million in fiscal 2012. Selling, general and
administrative expense reductions were primarily due to reduced costs for
incentive compensation programs. Selling, general and administrative expenses
as a percentage of net revenues increased to 7.9% for fiscal 2013, compared to
7.0% for fiscal 2012 due to decreased revenues.

Research and Technical Expense. Research and technical expense was $3.5
million, or 0.7% of revenue, for fiscal 2013, an increase of $0.2 million, or
6.7%, from $3.3 million, or 0.6% of net revenues, in fiscal 2012.

Operating Income. As a result of the above factors, operating income in fiscal
2013 was $32.0 million, compared to operating income of $77.0 million in
fiscal 2012.

Income Taxes. Income tax expense was $10.4 million in fiscal 2013, a decrease
of $16.4 million from an expense of $26.8 million in fiscal 2012, due
primarily to lower pretax income generated in fiscal 2013. The effective tax
rate for fiscal 2013 was 32.6%, compared to 34.8% in fiscal 2012. During
fiscal 2013, the Company's effective tax rate was lower, primarily due to
increased proportion of taxable earnings in foreign jurisdictions with a lower
tax rate and the reversal of certain tax reserves no longer required.

Net Income. As a result of the above factors, net income in fiscal 2013, was
$21.6 million, a decrease of $28.6 million from net income of $50.2 million in
fiscal 2012.

Volumes, Competition and Pricing

The Company continues to experience reduced demand, reduced selling price due
to nickel market prices and increased price competition in the marketplace
relative to fiscal 2012, particularly in commodity-type alloys in mill-direct
project business. The intense competitive environment continues to require the
Company to aggressively price orders across all markets, which has unfavorably
impacted the Company's gross profit margin and net income. In addition, sales
volumes below mill capacities in the industry have reduced mill-direct lead
times for our products. The decline in mill-direct lead times has, in turn,
resulted in downward pressure on prices for service center transactional
business, which typically commands a higher price due to faster product
availability.

In addition to the negative effects of price competition, volumes in fiscal
2013 are lower than those in fiscal 2012. Management believes the reduction in
volume in the aerospace and land-based gas turbine markets is attributable to
destocking in the supply chain as customers consume excess inventory. Volume
reductions in the chemical processing market are primarily attributable to
lower large project releases. The year-to-year reduction in volume in the
"other" markets is due to a large tubular oil and gas project produced and
shipped in fiscal 2012 that did not repeat in fiscal 2013. Management believes
the decline in the price of nickel and customer uncertainty regarding the
strength of the economy have also been contributors to the decline in overall
volumes.

Declining nickel prices can cause customers to delay orders for the Company's
products because the Company generally passes the cost of nickel on to
customers in the price of its products. As nickel prices decline, customers
may delay ordering in order to receive a lower price in the future. The
reduced volumes processed through the mill have resulted in reduced absorption
of fixed costs and additional margin compression. The Company has implemented
cost reduction measures and continues to carefully review discretionary
spending in order to mitigate the impact of these factors on gross margin.

The Company values inventory utilizing the first-in, first-out ("FIFO")
inventory costing methodology. Under the FIFO inventory costing method, the
cost of materials included in cost of sales may be different than the current
market price at the time of sale of finished product due to the length of time
from the acquisition of the raw material to the sale of the finished product.
In a period of decreasing raw material costs, the FIFO inventory valuation
normally results in higher costs of sales as compared to the last-in, first
out method. Conversely, in a period of rising raw material costs, the FIFO
inventory valuation normally results in lower costs of sales.

Gross Profit Margin Trend Performance

The gross profit margin percentage decreased during each quarter of fiscal
2013. The quarter-to-quarter compression is primarily due to lower average
selling prices resulting from price competition in the marketplace and the
impact of declining raw material prices on demand as well as higher-cost
inventory charged to cost of goods sold. Gross profit margin and gross profit
margin percentage for fiscal 2013 were also impacted by the effect of a fixed
pricing agreement with the Company's nickel supplier pursuant to which the
Company agreed to purchase a portion of its nickel supply at a fixed price
that has been and may continue to be greater than the market price of nickel.
The impact of the contract on the Company's gross profit margin percentage for
the fiscal year was 0.4 percentage points. While not material to the fiscal
year results, the contract had a greater impact as the market price of nickel
continued to drop through the second half of fiscal 2013. In the fourth
quarter, the Company entered into an amendment with the supplier that allowed
the Company to purchase lower volumes of the higher-priced nickel but extended
the duration of the purchase commitment through fiscal 2015 in order to
minimize the near term impact and provide a longer period in which the market
price of nickel could increase. If the market price of nickel remains low and
sales volumes do not increase, the impact on the Company's gross profit margin
percentage is expected to be unfavorable in future periods as a result of the
fixed price contract, which impact is estimated at approximately 1.0
percentage point, or higher, if the market price of nickel declines further.

Backlog

Backlog was $166.6 million at September 30, 2013, a decrease of approximately
$23.0 million, or 12.1%, from $189.6 million at June 30, 2013.

On a year-to-date basis, the backlog has declined by $56.3 million or 25.3%
primarily due to a 1.5 million pound reduction in backlog pounds. The
reduction in the backlog during the fiscal year resulted from reduced order
entry activity, as compared to sales, in each quarter of fiscal 2013. Backlog
for aerospace, land-based gas turbine and other markets declined in fiscal
2013. Backlog for the chemical processing market remained flat at a low level.

Capital Investment

Capital spending in fiscal 2013 was $41.6 million. The forecast for capital
spending in fiscal 2014 is approximately $57.0 million. The $57.0 million of
planned capital spending includes $19.0 million for the tubular capacity
expansion, $14.0 million for the processing and service center upgrades, $7.0
million for the Kokomo flat product project, $3.0 million for the information
systems upgrade project and the remaining $14.0 million for additional
enhancements and upgrades of the current facilities and equipment. The
processing and service center project capital spend are expected to carry over
into fiscal 2015 with approximately $10.0 million of spend in that year.

The actual and planned capital investments of approximately $124.0 million
over the three year-period of fiscal 2012 through 2014 are expected to allow
the Company to increase capacity, enhance product quality, reduce costs and
improve working capital management. These significant investments are
necessitated by expected intermediate and long-term increasing customer demand
for volume and quality improvements.

Liquidity

During fiscal 2013, the Company's primary sources of cash were cash on-hand
and cash from operations, as detailed below. At September 30, 2013, the
Company had cash and cash equivalents of $68.3 million compared to cash and
cash equivalents of $46.7 million at September 30, 2012.

Net cash provided by operating activities was $73.4 million in fiscal 2013
compared to $20.8 million in fiscal 2012. Net income of $21.6 million in
fiscal 2013 was $28.6 million lower than the $50.2 million reported in fiscal
2012. Cash generated from lower inventories was $31.5 million as compared to
fiscal 2012 cash used of $12.3 million, a change of $43.8 million.
Additionally, cash generated from lower accounts receivable was $18.6 million
compared to cash used by accounts receivable of $12.7 million in fiscal 2012,
a change of $31.3 million. Cash used in accounts payable and accrued expenses
of $12.2 million was $5.1 million lower than cash used in accounts payable and
accrued expenses in fiscal 2012. Net cash used in investing activities was
$41.6 million in fiscal 2013 compared to $25.9 million in fiscal 2012 as a
result of higher capital expenditures. Net cash used in financing activities
in fiscal 2013 of $10.4 million included $10.8 million of dividend payments
partially offset by proceeds and excess tax deductions from exercises of stock
options.

The Company's sources of liquidity for fiscal 2014 are expected to consist
primarily of cash generated from operations, cash on-hand and, if needed,
borrowings under the U.S. revolving credit facility. The U.S. revolving credit
facility provides for borrowings in a maximum amount of $120.0 million,
subject to a borrowing base formula and certain reserves. At September 30,
2013, the Company had cash of $68.3 million, an outstanding balance of zero on
the U.S. revolving credit facility and access to a total of approximately
$120.0 million under the U.S. revolving credit facility, subject to a
borrowing base formula and certain reserves. Management believes that the
resources described above will be sufficient to fund planned capital
expenditures and working capital requirements over the next twelve months.

The Company's primary uses of cash over the next twelve months are expected to
consist of expenditures related to:

  *Funding operations;
  *Capital spending; and
  *Dividends to stockholders.

Dividend Declared

On November 21, 2013, the Company announced that the Board of Directors
declared a regular quarterly cash dividend of $0.22 per outstanding share of
the Company's common stock. The dividend is payable December 16, 2013 to
stockholders of record at the close of business on December 2, 2013. The
aggregate cash payout based on current shares outstanding will be
approximately $2.7 million, or approximately $10.8 million on an annualized
basis.

Guidance

First quarter results are typically impacted by lower production days due to
holidays and planned maintenance outages. Planned outages related to the
capital expansion projects in both Kokomo and Arcadia as well as other
extended maintenance-related projects are expected to impact first quarter
results. In addition, the Company has continued to see order entry, pricing
and backlog decline with lower demand, which resulted in managing inventories
down. The Company remains committed to preparing for the anticipated long-term
growth opportunities in its core markets. However, in the short term,
management expects revenue for the first quarter of fiscal 2014 to be lower
than revenue for the fourth quarter of fiscal 2013 and, the Company expects to
incur a net loss in the first quarter of fiscal 2014.

Earnings Conference Call

The Company will host a conference call on Friday, November 22, 2012 to
discuss its results for the fiscal year ended September 30, 2013. Mark
Comerford, President and Chief Executive Officer, and Daniel Maudlin, 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: Friday, November 22,     Dial-In Numbers: 877-407-8033(Domestic)
      2013
Time: 9:00 a.m. Eastern Time                    201-689-8033(International)
     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 teleconference replay will be available
from Friday, November 22^nd at 11:00 a.m. ET, through 11:59 p.m. ET on Sunday,
December 22, 2013. To listen to the replay, please dial:

Domestic:       877-660-6853
International:   201-612-7415
Replay Access: Conference:13572925

A replay of the Webcast will also be available at www.haynesintl.com.

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.

Cautionary Note Regarding Forward-Looking Statements

This press 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 Exchange Act of 1934, each as amended. All statements other than
statements of historical fact, including statements regarding market and
industry prospects and future results of operations or financial position,
made in this press release are forward-looking. In many cases, you can
identify forward-looking statements by terminology, such as "may", "should",
"expects", "intends", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of such terms and other
comparable terminology. The forward-looking information may include, among
other information, statements concerning the Company's outlook for fiscal year
2014 and beyond, overall volume and pricing trends, cost reduction strategies
and their anticipated results, market and industry trends, capital
expenditures and dividends.There may also be other statements of
expectations, beliefs, future plans and strategies, anticipated events or
trends and similar expressions concerning matters that are not historical
facts.Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties,
including, without limitation, those risk factors set forth in Item 1A of the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended September 30, 2013.Actual results may
differ materially from those in the forward-looking statements as a result of
various factors, many of which are beyond the Company's control.

The Company has based these forward-looking statements on its current
expectations and projections about future events. Although the Company
believes that the assumptions on which the forward-looking statements
contained herein are based are reasonable, any of those assumptions could
prove to be inaccurate. As a result, the forward-looking statements based upon
those assumptions also could be incorrect. Risks and uncertainties may affect
the accuracy of forward-looking statements.

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.

                                                        
HAYNES INTERNATIONAL,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
                                                        
                                            Year Ended    Year Ended
                                           September30, September30,
                                            2012          2013
Net revenues                                $579,561      $482,746
Cost of sales                               458,721       409,120
Gross profit                                120,840       73,626
Selling, general and administrative expense 40,661        38,165
Research and technical expense              3,285         3,505
Operating income                            76,894        31,956
Interest income                             (188)         (114)
Interest expense                            87            72
Income before income taxes                  76,995        31,998
Provision for income taxes                  26,813        10,421
Net income                                  $50,182       $21,577
Net income per share:                                    
Basic                                       $4.09         $1.75
Diluted                                     $4.07         $1.74
Dividends declared per common share         $0.88         $0.88

                                      

                                                               
HAYNES INTERNATIONAL,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share data)
                                                               
                                                  September30, September30,
                                                   2012          2013
ASSETS                                                          
Current assets:                                                 
Cash and cash equivalents                          $46,740       $68,326
Accounts receivable, less allowance for doubtful   100,631       82,562
accounts of $1,249 and $1,199 respectively
Inventories                                        263,236       232,157
Income taxes receivable                            4,153         4,433
Deferred income taxes                              9,933         6,018
Other current assets                               1,532         2,408
Total current assets                               426,225       395,904
Property, plant and equipment, net                 124,652       152,764
Deferred income taxes—long term portion            68,255        41,301
Prepayments and deferred charges                   1,777         2,282
Other intangible assets, net                       6,017         5,601
Total assets                                       $626,926      $597,852
LIABILITIES AND STOCKHOLDERS' EQUITY                            
Current liabilities:                                            
Accounts payable                                   $37,471       $27,600
Accrued expenses                                   15,157        13,676
Revolving credit facility                          ––            ––
Accrued pension and postretirement benefits        21,065        4,918
Deferred revenue—current portion                   2,500         2,500
Total current liabilities                          76,193        48,694
Long-term obligations (less current portion)       980           767
Deferred revenue (less current portion)            32,829        30,329
Non-current income taxes payable                   339           ––
Accrued pension and postretirement benefits        215,487       162,259
Total liabilities                                  325,828       242,049
Commitments and contingencies                      ––            ––
Stockholders' equity:                                           
Common stock, $0.001 par value (40,000,000 shares
authorized, 12,287,790and 12,342,585 shares
issued and 12,287,790 and 12,332,592 outstanding   12            12
at September30, 2012 and September30,
2013,respectively)
Preferred stock, $0.001 par value (20,000,000
shares authorized, 0 shares issued and             ––            ––
outstanding)
Additional paid-in capital                         236,751       238,941
Accumulated earnings                               163,426       174,154
Treasury stock, 0 shares at September 30, 2012 and ––            (505)
9,993 shares at September 30, 2013
Accumulated other comprehensive loss               (99,091)      (56,799)
Total stockholders' equity                         301,098       355,803
Total liabilities and stockholders' equity         $626,926      $597,852

                                      

                                                               
HAYNES INTERNATIONAL,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
                                                               
                                                   Year Ended    Year Ended
                                                  September30, September30,
                                                   2012          2013
Cash flows from operating activities:                           
Net income                                         $50,182       $21,577
Adjustments to reconcile net income to net cash                 
provided by (used in) operating activities:
Depreciation                                       12,520        13,744
Amortization                                       423           416
Pension and post-retirement expense – U.S. and     15,590        16,173
U.K.
Change in long-term obligations                    (245)         (153)
Stock compensation expense                         2,079         1,254
Excess tax benefit from option exercises           (1,147)       (494)
Deferred revenue                                   (2,500)       (2,500)
Deferred income taxes                              5,658         6,171
Loss on disposition of property                    203           418
Change in assets and liabilities:                               
Accounts receivable                                (12,700)      18,630
Inventories                                        (12,326)      31,507
Other assets                                       1,309         (1,324)
Accounts payable and accrued expenses              (17,242)      (12,165)
Income taxes                                       (5)           341
Accrued pension and postretirement benefits        (21,018)      (20,191)
Net cash provided by operating activities          20,781        73,404
Cash flows from investing activities:                           
Additions to property, plant and equipment         (25,937)      (41,550)
Net cash used in investing activities              (25,937)      (41,550)
Cash flows from financing activities:                           
Dividends paid                                     (10,803)      (10,849)
Proceeds from exercise of stock options            1,635         598
Payment for purchase of treasury stock             ––            (505)
Excess tax benefit from option exercises           1,147         494
Payments on long-term obligations                  (123)         (100)
Net cash used in financing activities              (8,144)       (10,362)
Effect of exchange rates on cash                   (22)          94
Increase (decrease) in cash and cash equivalents:  (13,322)      21,586
Cash and cash equivalents:                                      
Beginning of period                                60,062        46,740
End of period                                      $46,740       $68,326

Quarterly Data

The unaudited quarterly results of operations of the Company for the years
ended September30, 2012 and 2013 are as follows:

                     2012
                     Quarter Ended
                     December31 March31 June30  September30
Net revenues          $128,851    $158,882 $141,574 $150,254
Gross profit          23,491      34,535   32,389   30,425
Net income            8,443       15,151   13,732   12,856
Net income per share:                            
Basic                 $0.69       $1.24    $1.12    $1.05
Diluted               $0.68       $1.23    $1.11    $1.04
                                                

                     2013
                     Quarter Ended
                     December31 March31 June30  September30
Net revenues          $114,300    $129,201 $123,587 $115,658
Gross profit          18,774      20,084   18,605   16,163
Net income            5,835       6,436    5,297    4,009
Net income per share:                            
Basic                 $0.47       $0.52    $0.43    $0.33
Diluted               $0.47       $0.52    $0.43    $0.32

CONTACT: Daniel Maudlin
         Vice President of Finance and Chief Financial Officer
         Haynes International, Inc.
         765-456-6102

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