Haynes International, Inc. Reports First Quarter Fiscal 2014 Financial Results

Haynes International, Inc. Reports First Quarter Fiscal 2014 Financial Results

  *First quarter net revenues of $93.7 million and net loss of $(3.5)
    million, or $(0.29) per diluted share, for the three months ended December
    31, 2013, compared to net revenues of $114.3 million and net income of
    $5.8 million, or $0.47 per diluted share, for the same period of fiscal
    2012.
  *Backlog was $180.2 million at December 31, 2013, an increase of 8.1% from
    $166.6 million at September 30, 2013.
  *The Company spent approximately $9.3 million on capital projects in the
    first quarter of fiscal 2014. 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., Feb. 6, 2014 (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 first quarter ended December 31, 2013. In addition, the
Company announced that its Board of Directors has authorized a regular
quarterly cash dividend of $0.22 per outstanding share.

"Business conditions in the first quarter of fiscal 2014 were challenging and
our financial results were negatively impacted by reduced shipments and lower
average selling prices," said Mark Comerford, President and Chief Executive
Officer. "Customers continued to reduce their inventories as destocking in the
supply chain for aerospace engine and land-based gas turbines persisted. Short
industry lead times for mill direct products and falling market price of
nickel have contributed to sluggish demand. As we look further into fiscal
2014, we expect conditions to improve. Our backlog increased over 8% during
the quarter, and feedback from our customers is pointing towards improving
market conditions over the fiscal year. We are continuing to make meaningful
progress on our capital expansion projects and we expect to be well positioned
for future growth."

Quarter Results

Net Revenues. Net revenues were $93.7 million in the first quarter of fiscal
2014, a decrease of 18.0% from $114.3 million in the same period of fiscal
2013. Volume was 4.3 million pounds in the first quarter of fiscal 2014, a
decrease of 7.8% from 4.7 million pounds in the same period of fiscal 2013.
The decline in volume is primarily due to the destocking in the aerospace and
land-based gas turbine markets. The aggregate average selling price was $21.69
per pound in the first quarter of fiscal 2014, a decrease of 11.1% from $24.40
per pound in the same period of fiscal 2013. Average selling price decreased
due to increased price competition, representing approximately $1.58 of the
decrease, lower raw material market prices, which represented approximately
$0.92 per pound of the decrease; and change in mix, representing approximately
$0.35 of the decrease; offset by an increase in other revenue, which
represented an approximately $0.14 increase.

Cost of Sales. Cost of sales was $88.5 million, or 94.4% of net revenues, in
the first quarter of fiscal 2014 compared to $95.5 million, or 83.6% of net
revenues, in the same period of fiscal 2013. Cost of sales in the first
quarter of fiscal 2014 decreased by $7.1 million as compared to the same
period of fiscal 2013 primarily due to lower volumes, partially offset by
reduced absorption of manufacturing costs, higher-cost inventory charged to
cost of sales, and the impact of our fixed price nickel contracts.

Gross Profit. As a result of the above factors, gross profit was $5.3 million
for the first quarter of fiscal 2014, a decrease of $13.5 million from the
same period of fiscal 2013. Gross margin as a percentage of net revenue
decreased to 5.6% in the first quarter of fiscal 2014 as compared to 16.4% in
the same period of fiscal 2013. Increased price competition is estimated to
account for $6.8 million of the decrease. Approximately $3.7 million of the
decrease is attributable to reduced volumes and the related unfavorable
variances arising from lower volumes as well as changes in product mix. An
estimated $2.1 million is attributable to higher-cost inventory charged to
cost of sales with falling raw materials. The impact of a fixed price nickel
agreement, pursuant to which the Company agreed to purchase a portion of its
nickel supply at a fixed price that has been greater than the market price of
nickel is estimated to be attributable to the remaining $0.9 million.

Selling, General and Administrative Expense. Selling, general and
administrative expense was $10.0 million for the first quarter of fiscal 2014,
an increase of $0.1 million from the same period of fiscal 2013. Prior year
stock compensation expense was $0.2 million lower due to prior year
forfeitures of restricted stock. Selling, general and administrative expense
as a percentage of net revenues increased to 10.6% for the first quarter of
fiscal 2014 compared to 8.6% for the same period of fiscal 2013 primarily due
to decreased revenues.

Research and Technical Expense. Research and technical expense was $0.9
million, or 0.9% of revenue, for the first quarter of fiscal 2014, compared to
$0.9 million, or 0.8% of revenue, in the same period of fiscal 2013.

Operating Income/(Loss). As a result of the above factors, operating loss in
the first quarter of fiscal 2014 was $5.6 million compared to operating income
of $8.1 million in the same period of fiscal 2013.

Income Taxes. Income taxes were a benefit of $2.1 million in the first quarter
of fiscal 2014, a decrease of $4.3 million from an expense of $2.3 million in
the same period of fiscal 2013. The effective tax rate for the first quarter
of fiscal 2014 was 37.1%, compared to 28.1% in the same period of fiscal 2013.
The increase in the effective tax rate was due to a discrete tax item in the
first quarter of fiscal 2014 which decreased tax benefit by $0.2 million, in
addition to a change in the California tax law that took effect in the first
quarter of fiscal 2013, which lowered prior year tax expense for the first
quarter of fiscal 2013 by $0.6 million.

Net Income/(Loss). As a result of the above factors, net loss in the first
quarter of fiscal 2014 was $3.5 million, a decrease of $9.3 million from net
income of $5.8 million in the same period of fiscal 2013.

Volumes, Competition and Pricing

Business conditions continue to be challenging as the Company continues to
experience reduced demand, reduced selling price due to nickel market prices
and increased price competition in the marketplace, particularly in
commodity-type alloys.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.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 the first
quarter of fiscal 2014 were lower than volumes in the first quarter of fiscal
2013.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. 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 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 margin in the first quarter of fiscal 2014 was $5.3 million, a
reduction of $13.5 million from the $18.8 million in the first quarter of
fiscal 2013. Increased price competition is estimated to account for
approximately $6.8 million of the decrease.Approximately $3.7 million of the
decrease is attributable to reduced volumes and the related unfavorable
variances arising from lower volumes as well as changes in product mix. An
estimated $2.1 million of the decrease is attributable to higher cost
inventory charged to cost of sales with falling raw material prices.The
impact of a fixed priced nickel agreement, pursuant to which the Company
agreed to purchase a portion of its nickel supply at a fixed price that has
been greater than the market price of nickel, is estimated to account for the
remaining $0.9 million

In the first quarter of each fiscal year, the Company's gross profit margin
percentage is typically lower than the preceding quarter due to lower
absorption of fixed manufacturing costs that do not decrease in proportion
with decreased production levels. Production levels decrease in the first
quarter due to the Company's observance of seasonal holidays and planned
equipment downtime for capital upgrades and maintenance projects.

Backlog

Backlog was $180.2 million at December 31, 2013, an increase of approximately
$13.6 million, or 8.1%, from $166.6 million at September 30, 2013.The backlog
dollars increased during the first quarter of fiscal 2014 due to a 9.4%
increase in backlog pounds, slightly offset by a small decrease in the average
selling price per pound for the quarter.The increase in the backlog during
the first quarter resulted from increased order entry primarily in the
chemical processing market.However, the level of transactional business
declined in the first quarter of fiscal 2014 from the last quarter of fiscal
2013.

Capital Investment

A key element of the Company's business strategy is to capitalize on strategic
equipment investments. Although the markets in which the Company participates
are currently experiencing a period of lower demand, management continues to
believe in the long-term growth potential of the aerospace, land-based gas
turbine and chemical processing markets. Therefore, the Company is continuing
to implement the previously announced capital spending projects in line with
plans to meet the expected long-term growth requirements of those target
markets.Capital spending in the first quarter of fiscal 2014 was
approximately $9.3 million, and the forecast for capital spending in fiscal
2014 is approximately $57.0 million. The capital spending planned for fiscal
2014 includes $18.8 million for the Arcadia tubular project, $8.9 million for
the Kokomo flat product project, $14.0 million for the processing and service
center upgrades, $2.5 million for the information systems upgrade project and
the remaining $12.8 million for additional enhancements and upgrades of
current facilities and equipment.

The actual and planned capital investments of approximately $124.5 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 the first quarter of fiscal 2014, the Company's primary sources of
liquidity were cash on-hand and cash from operations, as detailed below.At
December 31, 2013, the Company had cash and cash equivalents of $81.1 million
compared to cash and cash equivalents of $68.3 million at September 30, 2013.

Net cash provided by operating activities was $24.2 million in the first
quarter of fiscal 2014 compared to net cash provided by operating activities
of $29.5 million in the same period of fiscal 2013.Items contributing to the
difference include a $9.3 million difference between a net loss of $3.5
million compared to net income of $5.8 million in the same period of fiscal
2013 and a $7.9 million decrease in cash provided by lower accounts receivable
compared to the same period of fiscal 2013. These reductions were offset by a
$15.6 million increase in cash provided by inventory balances (net of foreign
currency fluctuation) compared to the same period of fiscal 2013.Net cash
used in investing activities was $9.3 million in the first quarter of fiscal
2014 compared to $9.0 million in the first quarter of fiscal 2013 as a result
of higher capital expenditures.Net cash used in financing activities in the
first quarter of fiscal 2013 included a $2.7 million dividend payment,
consistent with the first quarter of fiscal 2013.Additionally, $0.3 million
was used as payment for purchase of treasury stock in order to satisfy payroll
taxes related to the vesting of employees' restricted stock.

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.At December 31, 2013, the
Company had cash of $81.0 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 February 6, 2014, 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 March 17, 2014 to
stockholders of record at the close of business on March 3, 2014. The
aggregate cash payout based on current shares outstanding will be
approximately $2.7 million, or approximately $10.9 million on an annualized
basis.

Guidance

Revenue and earnings for the second quarter of fiscal 2014 are expected to
improve from those of the first quarter of fiscal 2014, but the Company may
still experience a net loss for the second quarter. Given the increase in
backlog and feedback from customers, the Company currently expects financial
results to improve over the course of fiscal 2014.

Earnings Conference Call

The Company will host a conference call on Friday, February 7, 2014 to discuss
its results for the first quarter of fiscal 2014.Mark Comerford, President
and Chief Executive Officer, and Daniel Maudlin, Vice President of Finance and
Chief Financial Officer, 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, February 7,2014 Dial-In Numbers: 877-407-8033(Domestic)
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, February 7^th at 11:00 a.m. ET, through 11:59 p.m. ET on Friday,
March 7, 2014. To listen to the replay, please dial:

Domestic:       877-660-6853
International:   201-612-7415
Replay Access: Conference:13575144

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.

                                                    Schedule 1
                                                    
HAYNES INTERNATIONAL,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
                                                    
                                            
                                            Three Months Ended
                                             December 31,
                                            2012     2013
                                                    
Net revenues                                $114,300 $93,700
Cost of sales                               95,526   88,450
Gross profit                                18,774   5,250
Selling, general and administrative expense 9,811    9,956
Research and technical expense              858      878
Operating income (loss)                    8,105    (5,584)
Interest income                             (29)     (46)
Interest expense                            17       18
Income (loss) before income taxes           8,117    (5,556)
Provision for (benefit from) income taxes   2,282    (2,064)
Net income (loss)                          $5,835   ($3,492)
Net income (loss) per share:                         
Basic                                      $0.47    ($0.29)
Diluted                                    $0.47    ($0.29)
                                                    
Dividend declared per common share          $0.22    $0.22
                                                    

                                                                
                                                                Schedule 2
                                                                
HAYNES INTERNATIONAL,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share data)
                                                                
                                                                
                                              September30, 2013 December 31,
                                                                  2013
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                     $68,326            $81,023
Accounts receivable, less allowance for
doubtful accounts of $1,199 and $1,194,        82,562             62,749
respectively
Inventories                                   232,157            229,473
Income taxes receivable                       4,433              3,165
Deferred income taxes                         6,018              6,321
Other current assets                          2,408              3,737
Total current assets                          395,904            386,468
Property, plant and equipment, net            152,764            159,612
Deferred income taxes—long term portion       41,301             44,641
Prepayments and deferred charges              2,282              1,986
Other intangible assets, net                  5,601              5,497
Total assets                                  $597,852           $598,204
LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities:                                             
Accounts payable                              $27,600            $33,656
Accrued expenses                              13,676             12,989
Revolving credit facility                     ––                 ––
Accrued postretirement benefits               4,918              4,918
Deferred revenue—current portion              2,500              2,500
Total current liabilities                     48,694             54,063
Long-term obligations (less current portion)  767                767
Deferred revenue (less current portion)       30,329             29,704
Accrued pension and postretirement benefits   162,259            161,134
Total liabilities                             242,049            245,668
Commitments and contingencies                 ––                 ––
Stockholders' equity:                                            
Common stock, $0.001 par value (40,000,000
shares authorized, 12,342,585 and 12,401,728
shares issued, 12,332,592 and 12,385,451       12                 12
shares outstanding at September30, 2013 and
December 31, 2013,respectively)
Preferred stock, $0.001 par value (20,000,000
shares authorized, 0 shares issued and         ––                 ––
outstanding)
Additional paid-in capital                    238,941            240,220
Accumulated earnings                          174,154            167,942
Treasury stock, 9,993 shares at September 30,  (505)              (840)
2013 and 16,277 shares at December 31, 2013
Accumulated other comprehensive loss          (56,799)           (54,798)
Total stockholders' equity                    355,803            352,536
Total liabilities and stockholders' equity    $597,852           $598,204

                                                                  
                                                                  Schedule 3
HAYNES INTERNATIONAL,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
                                                          
                                                          Three Months Ended
                                                           December 31,
                                                          2012     2013
Cash flows from operating activities:                              
Net income (loss)                                         $5,835   ($3,492)
Adjustments to reconcile net income (loss) to net cash             
provided by (used in) operating activities:
Depreciation                                             3,131    3,606
Amortization                                             105      104
Pension and post-retirement expense – U.S. and U.K.       4,023    2,611
Stock compensation expense                               218      437
Excess tax benefit from option exercises and restricted    (195)    (253)
stock vesting
Deferred revenue                                         (625)    (625)
Deferred income taxes                                    (147)    (4,668)
Loss on disposition of property                          3        17
Change in assets and liabilities:                                 
Accounts receivable                                      28,342   20,462
Inventories                                              (12,095) 3,541
Other assets                                             (1,087)  (1,010)
Accounts payable and accrued expenses                    5,038    3,822
Income taxes                                             2,127    2,119
Accrued pension and postretirement benefits              (5,145)  (2,606)
Net cash provided by operating activities                 29,528   24,065
                                                                  
Cash flows from investing activities:                              
Additions to property, plant and equipment               (8,982)  (9,313)
Net cash used in investing activities                    (8,982)  (9,313)
                                                                  
Cash flows from financing activities:                              
Dividends paid                                            (2,710)  (2,720)
Proceeds from exercise of stock options                   598      589
Payment for purchase of treasury stock                     ––       (335)
Excess tax benefit from option exercises and restricted    195      253
stock vesting
Net cash used in financing activities                     (1,917)  (2,213)
                                                                  
Effect of exchange rates on cash                          94       158
Increase in cash and cash equivalents                     18,723   12,697
                                                                  
Cash and cash equivalents, beginning of period            46,740   68,326
Cash and cash equivalents, end of period                  $65,463  $81,023
                                                                  

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

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