UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended December 31, 1999.
----------------------
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: 333-5411
-----------
HAYNES INTERNATIONAL, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1185400
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1020 West Park Avenue, Kokomo, Indiana 46904-9013
- ---------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
(765) 456-6000
-------------------------------------------
(Registrant's telephone number, including area code)
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 [X] No
As of February 14, 2000, the registrant had 100 shares of Common Stock, $.01 par
value, outstanding.
Page 1 of 16
<PAGE>
<TABLE>
<CAPTION>
HAYNES INTERNATIONAL, INC.
TABLE OF CONTENTS
<S> <C> <C>
PART I FINANCIAL INFORMATION Page
----
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets as of
September 30, 1999 and December 31, 1999 3
Consolidated Condensed Statements of Operations for the Three Months
ended December 31, 1998 and 1999 4
Consolidated Condensed Statements of Comprehensive Income for the
Three Months Ended December 31, 1998 and 1999 5
Consolidated Condensed Statements of Cash Flows for the Three Months
ended December 31, 1998 and 1999 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits 13
</TABLE>
Page 2 of 16
<PAGE>
PART I FINANCIAL INFORMATION
- ----------------------------
Item 1. Financial Statements
<TABLE>
<CAPTION>
HAYNES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands, except share amounts)
September 30, December 31,
1999 1999
------------- ------------
<S> <C> <C>
ASSETS ............................................................................... (Unaudited)
Current assets:
Cash and cash equivalents ....................................................... $ 3,576 $ 4,611
Accounts and notes receivable, less allowance for
doubtful accounts of $876 and $949, respectively ............................. 40,241 35,379
Inventories ..................................................................... 91,012 92,704
--------- ---------
Total current assets ........................................................ 134,829 132,694
--------- ---------
Property, plant and equipment (at cost) .............................................. 107,524 112,091
Accumulated depreciation ............................................................. (74,952) (75,583)
--------- ---------
Net property, plant and equipment ........................................... 32,572 36,508
Deferred income taxes ................................................................ 44,137 44,026
Prepayments and deferred charges, net ................................................ 9,699 11,373
--------- ---------
Total assets ........................................................... $ 221,237 $ 224,601
========= =========
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses ........................................... $ 27,966 $ 31,527
Accrued postretirement benefits ................................................. 4,200 4,200
Revolving credit ................................................................ 44,051 47,162
Note payable .................................................................... 208 601
Income taxes payable ............................................................ 263 576
Deferred income taxes ........................................................... 1,519 1,876
--------- ---------
Total current liabilities ................................................... 78,207 85,942
--------- ---------
Long-term debt, net of unamortized discount .......................................... 139,620 139,412
Accrued postretirement benefits ...................................................... 93,462 93,762
--------- ---------
Total liabilities ...................................................... 311,289 319,116
--------- ---------
Capital deficiency:
Common stock, $.01 par value (100 shares authorized,
issued and outstanding)
Additional paid-in capital ...................................................... 51,175 51,275
Accumulated deficit ............................................................. (142,436) (145,703)
Accumulated other comprehensive income (loss) ................................... 1,209 (87)
--------- ---------
Total capital deficiency .................................................... (90,052) (94,515)
--------- ---------
Total liabilities and capital deficiency ............................... $ 221,237 $ 224,601
========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
Page 3 of 16
<PAGE>
<TABLE>
<CAPTION>
HAYNES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands)
Three Months Ended
December 31,
------------
1998 1999
-------- --------
<S> <C> <C>
Net revenues ........................................... $ 49,211 $ 48,027
Cost of sales .......................................... 37,296 39,933
Selling and administrative ............................. 4,941 5,672
Research and technical ................................. 912 908
-------- --------
Operating income .................................. 6,062 1,514
Other cost, net ........................................ 230 238
Interest expense ....................................... 5,054 5,366
Interest income ........................................ (21) (31)
-------- --------
Income (loss) before provision for (benefit from)
income taxes ...................................... 799 (4,059)
Provision for (benefit from) income taxes .............. 619 (791)
-------- --------
Net income (loss) ................................. $ 180 $ (3,268)
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
Page 4 of 16
<PAGE>
<TABLE>
<CAPTION>
HAYNES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(dollars in thousands)
Three Months Ended
December 31,
------------
1998 1999
------- --------
<S> <C> <C>
Net Income (loss) .................................... $ 180 $(3,268)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment ......... (404) (1,296)
------- -------
Other comprehensive loss ............................. (404) (1,296)
------- -------
Comprehensive loss .............................. $ (224) $(4,564)
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
Page 5 of 16
<PAGE>
<TABLE>
<CAPTION>
HAYNES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Three Months Ended
December 31,
------------
1998 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................... $ 180 $(3,268)
Depreciation ........................................ 1,747 823
Amortization ........................................ 317 252
Deferred income taxes ............................... 217 563
Change in:
Inventories .................................... (6,966) (1,820)
Accounts receivable ............................ 7,968 4,494
Accounts payable and accruals .................. 4,625 4,012
Other, net ..................................... (636) (1,700)
------- -------
Net cash provided by operating activities ........... 7,452 3,356
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment .......... (2,100) (4,924)
Other investing activities .......................... 21 166
------- -------
Net cash used in investing activities ............... (2,079) (4,758)
------- -------
Cash flows from financing activities:
Net increase (decrease) in revolving credit and long-
term debt ...................................... (3,702) 2,762
Capital contribution from parent company of proceeds
from exercise of stock options ................. -- 100
------- -------
Net cash provided by (used in) financing activities . (3,702) 2,862
------- -------
Effect of exchange rates on cash .......................... (53) (425)
------- -------
Increase in cash and cash equivalents ..................... 1,618 1,035
Cash and cash equivalents, beginning of period ............ 3,720 3,576
------- -------
Cash and cash equivalents, end of period .................. $ 5,338 $ 4,611
======= =======
Supplemental disclosures of cash flow information:
Cash paid during period for: Interest ............... $ 664 $ 1,044
======= =======
Income taxes ........... $ 97 $ 49
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
Page 6 of 16
<PAGE>
HAYNES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
For the Three Months Ended December 31, 1999
Note 1. Basis of Presentation
The interim financial statements are unaudited and reflect all
adjustments (consisting solely of normal recurring adjustments) that, in the
opinion of management, are necessary for a fair statement of results for the
interim periods presented. This report includes information in a condensed form
and should be read in conjunction with the audited consolidated financial
statements included in Form 10-K for the fiscal year ended September 30, 1999,
filed by the Company with the Securities and Exchange Commission ("SEC") on
December 28, 1999. The results of operations for the three months ended December
31, 1999, are not necessarily indicative of the results to be expected for the
full year or any other interim period.
Note 2. Inventories
<TABLE>
<CAPTION>
The following is a summary of the major classes of inventories:
September 30, 1999 December 31, 1999
------------------ -----------------
(Unaudited)
<S> <C> <C>
Raw Materials .......................... $ 4,883 $ 3,576
Work-in-process ........................ 38,876 42,359
Finished Goods ......................... 41,243 38,038
Other, net ............................. 6,010 8,731
------- -------
Net inventories ........................ $91,012 $92,704
======= =======
</TABLE>
Note 3. Income Taxes
The provision for income taxes for the three months ended December 31,
1998 and 1999 differed from the U.S. federal statutory rate of 34% primarily due
to taxes on foreign earnings against which the Company was unable to utilize its
U.S. federal net operating loss carryforwards.
Page 7 of 16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
References to years or portions of years in Management's Discussion and Analysis
of Financial Condition and Results of Operations refer to the Company's fiscal
years ended September 30, unless otherwise indicated. This discussion contains
statements that constitute forward looking statements within the meaning of the
Securities Laws. Such statements may include statements regarding the intent,
belief or current expectations of the Company or its officers with respect to
(i) the Company's strategic plans, (ii) the policies of the Company regarding
capital expenditures, financing or other matters, and (iii) industry trends
affecting the Company's financial condition or results of operations. Readers of
this discussion are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties and that
actual results may differ materially from those in the forward looking
statements as a result of various factors. This report should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations included in Form 10-K for the fiscal year ended September
30, 1999 filed by the Company with the Securities and Exchange Commission on
December 28, 1999.
Results of Operations
Three Months Ended December 31, 1999 Compared to Three Months Ended December 31,
1998
Net Revenues. Net revenues decreased approximately $1.2 million to
approximately $48.0 million in the first quarter of 2000, from approximately
$49.2 million in the first quarter of 1999, primarily as a result of a 14.7%
decrease in the average selling price per pound, falling from $12.94 per pound
for fiscal 1999 to $11.04 per pound for fiscal 2000. The decline in the average
selling price was partially offset by a 16.2% increase in volume, from
approximately 3.7 million pounds in the first quarter of 1999 to approximately
4.3 million pounds in the first quarter of 2000.
Sales to the aerospace industry in the first quarter of fiscal year
2000 declined by 22.0% to approximately $18.1 million from approximately $23.2
million for the same period a year earlier, due to a decrease in the average
selling price per pound and a decline in volume. The decrease in average selling
prices was the result of a decrease in sales of higher value added tubular
products for commercial aircraft and a larger proportion of lower priced product
forms in the gas turbine sector. The volume decrease was caused by lower
domestic and European sales of nickel-base and cobalt-containing alloy flat
products to gas turbine manufacturers, as the industry continues to respond to
changes in the commercial aircraft build schedules.
Sales to the chemical processing industry declined by 23.1% from
approximately $16.9 million in the first quarter of 1999 to approximately $13.0
million in the first quarter of fiscal 2000, due to a decline in volume and a
reduction in the average selling price per pound. The decline in volume can be
attributed to decreased worldwide project related activity. The decline in
average selling price stems from heightened competition in a soft market.
Sales to the land-based gas turbine industry increased 109.1% in the
first three months of fiscal 2000 to approximately $6.9 million from
approximately $3.3 million for the same period a year earlier due primarily to
an increase in volume, partially offset by a decrease in the average selling
price per pound. The increase in volume was mainly due to improved domestic
shipments of nickel-base flat products to support the demand of manufacturers
build schedules and improved sales of ingots and billets used for further
processing. The decline in selling price can be attributed to a larger
proportion of a lower priced proprietary alloy for a major gas turbine
application.
Sales to the flue gas desulfurization industry increased 325.0% to
approximately $1.7 million from approximately $400,000 due to an increase in
both volume and average selling price per pound. The increases can be attributed
to a single project that shipped during the quarter. This market is generally
characterized by large project requirements and moderate continuing repair and
maintenance needs.
Page 8 of 16
<PAGE>
Sales to the oil and gas industry increased 400% to approximately $3.0
million for the first fiscal quarter of 2000 from approximately $600,000 for the
first quarter of 1999 due to an increase in volume, partially offset by a
decrease in the average selling price per pound. The increase in volume can be
attributed to a large sour gas project shipped during the quarter. This market
is entirely dependent upon large drilling projects, the timing of which are
difficult to predict.
Sales to other industries increased 29.4% to approximately $4.4 million
for the first three months of fiscal year 2000 from approximately $3.4 million
for the first three months of 1999 due to an increase in both volume and average
selling price per pound. The increase in average selling price can be attributed
to proportionately higher sales of higher cost, higher priced cobalt-base alloys
relative to sales of lower cost, lower priced nickel-base alloys.
Cost of Sales. Cost of sales as a percentage of net revenues increased
to 83.1% for the first quarter of fiscal 2000 compared to 75.8% in the same
period last year. The higher cost of sales percentage in fiscal 2000 resulted
from higher raw material costs, higher distribution costs associated with the
service centers, and lower volumes of higher value added coil, sheet, and
seamless product forms due to significant planned outages in sheet and coil
production equipment.
Selling and Administrative Expenses. Selling and administrative
expenses increased approximately $800,000 to approximately $5.7 million in the
first quarter of 2000 from approximately $4.9 million in the same period a year
ago, primarily as a result of expenses related to the Company's continuing
response to the Department of Justice's grand jury investigation into the nickel
alloy industry and a charge for management incentives.
Research and Technical Expenses. Research and technical expenses were
relatively flat in the first quarter of 2000 compared to the first quarter of
1999.
Operating Income. As a result of the above factors, the Company
recognized operating income for the first quarter of 2000 of approximately $1.5
million, approximately $1.0 million of which was contributed by the Company's
foreign subsidiaries. For the first quarter of 1999, operating income was
approximately $6.1 million, of which approximately $1.3 million was contributed
by the Company's foreign subsidiaries.
Other. Other cost was relatively flat in the first quarter 2000
compared to the first quarter of 1999.
Interest Expense. Interest expense increased approximately $300,000 to
approximately $5.4 million for the first quarter of 2000 from approximately $5.1
million for the same period in 1999. Higher revolving credit balances during the
first quarter of fiscal 2000, combined with higher interest rates, accounted for
the increase.
Income Taxes. An income tax benefit of approximately $791,000 was
recorded for the first quarter of 2000 compared to income tax expense of
approximately $619,000 in fiscal 1999 due to lower pretax earnings.
Net Income. As a result of the above factors, the Company recognized
net loss for the first quarter of 2000 of approximately $3.3 million, compared
to net income of approximately $180,000 for the first quarter of 1999.
Liquidity and Capital Resources
The Company's near-term future cash needs will be driven by working
capital requirements, and planned capital expenditures. Capital expenditures
were approximately $4.9 million in the first three months of fiscal 2000,
compared to capital expenditures of approximately $2.1 million for the first
three months of fiscal 1999. First quarter 2000 capital spending included
improvements to the Company's flat product production areas, including the
four-high mill and cold finishing areas, and completion of information
technology projects. The remainder of planned 2000 expenditures will be for
improvements in cost, quality, capacity and reliability of manufacturing
operations. The Company does not expect such capital expenditures to have a
material adverse effect on its long- term liquidity. The Company expects to fund
its working capital needs and capital expenditures with cash provided from
operations, supplemented by borrowings under its Revolving Credit Facility with
Fleet Capital Corporation ("Fleet Revolving Credit Facility"). The Company
believes these sources of capital will be sufficient to fund these capital
expenditures and working capital requirements over the next 12 months, although
there can be no assurance of this.
Page 9 of 16
<PAGE>
Net cash provided by operating activities in the first three months of
2000 was approximately $3.4 million, as compared to net cash provided by
operating activities of approximately $7.5 million the first three months of
1999. The positive cash flow from operations for 2000 was primarily the result
of a decrease in accounts receivable of approximately $4.5 million. The cash
flow was also affected by an increase in accounts payable and accrued expenses
of approximately $4.0 million, non-cash depreciation and amortization expense of
approximately $1.1 million, net loss of approximately $3.3 million, an increase
in inventories of approximately $1.8 million, and other net adjustments of
approximately $1.1 million.
Net cash used in investing activities increased to approximately $4.8
million in the first three months of 2000 from approximately $2.1 million in the
same period for 1999, primarily as a result of increased capital spending. Net
cash provided by financing activities for the first three months of 2000 was
approximately $2.9 million, compared to net cash used in financing activities of
approximately $3.7 million for the first three months of 1999, primarily as a
result of increased net borrowings by the Company.
Cash for the first three months of 2000 increased approximately $1.0
million resulting in a cash balance of approximately $4.6 million at December
31, 1999. Cash in the first three months of 1999 increased approximately $1.6
million, resulting in a cash balance of approximately $5.3 million at December
31, 1998.
Total debt at December 31, 1999, was approximately $187.2 million
compared to approximately $172.0 million at December 31, 1998, reflecting
increased borrowing under the Fleet Revolving Credit Facility.
At December 31, 1999, approximately $47.2 million had been borrowed
pursuant to the Fleet Revolving Credit Facility compared to approximately $31.6
million at December 31, 1998. In addition, as of December 31, 1999,
approximately $500,000 in letter of credit reimbursement obligations had been
incurred by the Company. The Company had available additional borrowing capacity
of approximately $12.5 million on the Fleet Revolving Credit Facility at
December 31, 1999.
Grand Jury Investigation
A Federal Grand Jury is investigating possible violations of federal
anti-trust laws in the nickel alloy industry. The Company, along with other
companies in this industry, is responding to the Government's request. The
Company has engaged outside legal counsel to represent its interest in the
investigation. Certain costs incurred by the Company in connection with the
investigation have been accounted for as selling and administrative and charged
against income in the period. For the year ended September 30, 1999, and the
three month period ended December 31, 1999, these costs were approximately $3.5
million and $250,000 respectively. While the outcome of the investigation cannot
be predicted with certainty, in the opinion of management, there will be no
liability incurred in this matter other than ongoing legal expenses in its
defense.
Accounting Pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", is effective for all fiscal quarters of fiscal years beginning
after July 1, 2000. This statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial condition and measure those instruments at fair value.
Management has not yet quantified the effect of the new standard on the
financial statements.
Year 2000
The Company did not realize any detrimental effect relating to Year
2000. All manufacturing and business systems are functioning in the manner they
were intended to operate. Furthermore, the Company has not experienced any
problems with its customer or suppliers regarding Year 2000. The Company is not
aware of any remaining uncertainties, but in the event one should arise, the
Company's Year 2000 Committee will remain active to respond to such an
occurrence.
Page 10 of 16
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
At December 31, 1999, the Company's primary market risk exposure was
foreign currency exchange rate risk with respect to forward contracts entered
into by the Company's foreign subsidiaries located in England and France. The
Company did not have any outstanding commodity contracts at December 31, 1999.
The foreign currency exchange risk exists primarily because the two
foreign subsidiaries need U.S. dollars in order to pay for their intercompany
purchases of high performance alloys from the Company's U.S. locations. The
foreign subsidiaries manage their own foreign currency exchange risk. Any U.S.
dollar exposure aggregating more than $500,000 requires approval from the
Company's Vice President of Finance. Most of the currency contracts to buy U.S.
dollars are with maturity dates of less than six months.
At December 31, 1999, the unrealized gain on these foreign currency
exchange contracts was approximately $30,000.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Index to Exhibits
--------
(b) Reports on Form 8-K. No report on Form 8-K was filed during
-------------------
the quarter for which this report is filed.
Page 11 of 16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAYNES INTERNATIONAL, INC.
/s/ Francis J. Petro
----------------------
Francis J. Petro
President and Chief Executive Officer
/s/ Joseph F. Barker
----------------------
J. F. Barker
Executive Vice President, Finance
Chief Financial Officer
Date: February 14, 2000
Page 12 of 16
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Sequential
Number Numbering
Assigned In System Page
Regulation S-K Number of
Item 601 Description of Exhibit Exhibit
-------------- ---------------------- -------
<S> <C> <C>
(2) 2.01 Stock Purchase Agreement, dated as of January 24, 1997, among
Blackstone Capital Partners II Merchant Banking Fund L.P.,
Blackstone Offshore Capital Partners II Merchant Banking Fund L.P.,
Blackstone Family Investment Partnership L.P., Haynes Holdings,
Inc. and Haynes International, Inc. (Incorporated by reference to
Exhibit 2.01 to Registrant's Form 8-K Report, filed February 13,
1997, File No. 333-5411.)
2.02 Stock Redemption Agreement, dated as of January 24, 1997,
among MLGA Fund II, L.P., MLGAL Partners, L.P. and Haynes
Holdings, Inc. (Incorporated by reference to Exhibit 2.02 to
Registrant's Form 8-K Report, filed February 13, 1997, File No.
333-5411.)
2.03 Exercise and Repurchase Agreement, dated as of January 24,
1997, among Haynes Holdings, Inc. and the holders as listed
therein. (Incorporated by reference to Exhibit 2.03 to Registrant's
Form 8-K Report, filed February 13, 1997, File No. 333-5411.)
2.04 Consent Solicitation and Offer to Redeem, dated January 30,
1997. (Incorporated by reference to Exhibit 2.04 to Registrant's Form
8-K Report, filed February 13, 1997, File No. 333-5411.)
2.05 Letter of Transmittal, dated January 30, 1997. (Incorporated by
reference to Exhibit 2.05 to Registrant's Form 8-K Report, filed
February 13, 1997, File No. 333-5411.)
(3) 3.01 Restated Certificate of Incorporation of Registrant. (Incorporated by
reference to Exhibit 3.01 to Registration Statement on Form S-1,
Registration No. 33-32617.)
3.02 By-laws of Registrant. (Incorporated by reference to Exhibit 3.02 to
Registration Statement on Form S-1, Registration No. 33-32617).
(4) 4.01 Indenture, dated as of August 23, 1996, between Haynes
International, Inc. and National City Bank, as Trustee, relating to the
11 5/8% Senior Notes Due 2004, table of contents and
cross-reference sheet. (Incorporated by reference to Exhibit 4.01 to
the Registrant's Form 10-K Report for the year ended
September 30, 1996, File No. 333-5411.)
4.02 Form of 11 5/8% Senior Note Due 2004. (Incorporated by
reference to Exhibit 4.02 to the Registrant's Form 10-K Report for the
year ended September 30, 1996, File No. 333-5411.)
(10) 10.01 Form of Severance Agreements, dated as of March 10, 1989,
between Haynes International, Inc. and the employees of Haynes
International, Inc. named in the schedule to the Exhibit.
(Incorporated by reference to Exhibit 10.03 to Registration
Statement on Form S-1, Registration No. 33-32617.)
10.02 Amended Stockholders' Agreement, dated as of January 29,
1997, among Haynes Holdings, Inc. and the investors listed
therein. (Incorporated by reference to Exhibit 4.01 to Registrant's
Form 8-K Report, filed February 13, 1997, File No. 333-5411.)
10.03 First Amendment to the Amended Stockholders'
Agreement, dated March 31, 1997. (Incorporated
by reference to Exhibit 10.10 to Registrant's
Form 10-Q Report, filed May 15, 1997, File No.
333-5411.)
10.04 Executive Employment Agreement, dated as of September 1,
1993, by and among Haynes International, Inc., Haynes Holdings,
Inc. and Michael D. Austin. (Incorporated by reference to
Exhibit 10.26 to the Registration Statement on Form S-4,
Registration No. 33-66346.)
Page 13 of 16
<PAGE>
10.05 Amendment to Employment Agreement, dated as of July 15, 1996 by
and among Haynes International, Inc., Haynes Holdings, Inc. and
Michael D. Austin (Incorporated by reference to Exhibit 10.15 to
Registration Statement on S-1, Registration No. 333-05411).
10.06 Haynes Holdings, Inc. Employee Stock Option Plan.
(Incorporated by reference to Exhibit 10.08 to Registration Statement
on Form S-1, Registration No. 33-32617.)
10.07 First Amendment to the Haynes Holdings, Inc. Employee Stock
Option Plan, dated March 31, 1997. (Incorporated by reference to
Exhibit 10.18 to Registrant's Form 10-Q Report, filed May 15, 1997,
File No. 333-5411.)
10.08 Form of "New Option" Agreements between Haynes Holdings, Inc.
and the executive officers of Haynes International, Inc. named in the
schedule to the Exhibit. (Incorporated by reference to Exhibit 10.09
to Registration Statement on Form S-1, Registration No. 33-32617.)
10.09 Form of "September Option" Agreements between Haynes
Holdings, Inc. and the executive officers of Haynes International, Inc.
named in the schedule to the Exhibit. (Incorporated by reference to
Exhibit 10.10 to Registration Statement on Form S-1, Registration
No. 33-32617.)
10.10 Form of "January 1992 Option" Agreements between Haynes
Holdings, Inc. and the executive officers of Haynes International, Inc.
named in the schedule to the Exhibit. (Incorporated by reference to
Exhibit 10.08 to Registration Statement on Form S-4, Registration
No. 33-66346.)
10.11 Form of "Amendment to Holdings Option Agreements" between
Haynes Holdings, Inc. and the executive officers of Haynes
International, Inc. named in the schedule to the Exhibit.
(Incorporated by reference to Exhibit 10.09 to Registration
Statement on Form S-4, Registration No. 33-66346.)
10.12 Form of March 1997 Amendment to Holdings Option Agreements.
(Incorporated by reference to Exhibit 10.23 to Registrant's Form 10-Q
Report, filed May 15, 1997, File No. 333-5411.)
10.13 March 1997 Amendment to Amended and Restated Holdings
Option Agreement, dated March 31, 1997. (Incorporated by
reference to Exhibit 10.24 to Registrant's Form 10-Q Report, filed
May 15, 1997, File No. 333-5411.)
10.14 Amended and Restated Loan and Security Agreement by and
among CoreStates Bank, N.A. and Congress Financial
Corporation (Central), as Lenders, Congress Financial
Corporation (Central), as Agent for Lenders, and Haynes
International, Inc., as Borrower. (Incorporated by reference to
Exhibit 10.19 to the Registrant's Form 10-K Report for the year ended
September 30, 1996, File No. 333-5411).
10.15 Amendment No. 1 to Amended and Restated Loan and Security
Agreement by and among CoreStates Bank, N.A. and Congress
Financial Corporation (Central), as Lenders, Congress Financial
Corporation (Central) as Agent for Lenders, and Haynes
International, Inc., as Borrower. (Incorporated by reference to Exhibit
10.01 to Registrant's Form 8-K Report, filed January 22, 1997, File
No. 333-5411.)
10.16 Amendment No. 2 to Amended and Restated Loan and Security
Agreement, dated January 29, 1997, among CoreStates Bank, N.A.
and Congress Financial Corporation (Central), as Lenders, Congress
Financial Corporation (Central), as agent for Lenders, and Haynes
International, Inc. (Incorporated by reference to Exhibit 10.01 to
Registrant's Form 8-K Report, filed February 13, 1997, File No. 333-
5411.)
Page 14 of 16
<PAGE>
10.17 Agreement by and between Galen Hodge and Haynes International,
Inc. dated January 13, 1998 (Incorporated by reference to
Exhibit 10.17 to Registrant's Form 10-Q Report filed February 13,
1998, File No. 333-5411).
10.18 Facility Management Agreement by and between Republic
Engineered Steels, Inc. and Haynes International, Inc., dated
April 15, 1999. (Incorporated by reference to Exhibit 10.18 to
Registrant's Form 10-Q Report filed May 14, 1999,
File No. 333-5411)
10.19 Amendment No. 3 to Amended and Restated Loan and Security
Agreement, dated August 23, 1999, by and among CoreStates Bank,
N.A. and Congress Financial Corporation (Central), as Lenders,
Congress Financial Corporation (Central) as Agent for Lenders, and
Haynes International, Inc., as Borrower. (Incorporated by reference
to Exhibit 10.29 to Registrant's Form 10-K Report filed December 28,
1999, File No. 333-5411.)
10.20 Credit Agreement by and among Institutions from time to time party
hereto, as Lenders, Fleet Capital Corporation, as Agent for Lenders,
and Haynes International, Inc., as Borrower. (Incorporated by
reference to Exhibit 10.30 to Registrant's Form 10-K Report filed
December 28, 1999, File No. 333-5411.)
10.21 Amendment No. 1 to Credit Agreement, dated December 30, 1999,
by and among Institutions from time to time party hereto, as Lenders,
Fleet Capital Corporation, as Agent for Lenders, and Haynes
International, Inc., as Borrower.
(11) No Exhibit.
(15) No Exhibit.
(18) No Exhibit.
(19) No Exhibit.
(22) No Exhibit.
(23) No Exhibit.
(24) No Exhibit.
(27) 27.01 Financial Data Schedule.
(99) No Exhibit.
</TABLE>
Page 15 of 16
AMENDMENT NO. 1
TO
CREDIT AGREEMENT
AMENDMENT NO. 1 (the "Amendment") TO "CREDIT AGREEMENT" (as defined
below), dated as of December 30, 1999, among Haynes International, Inc., a
Delaware corporation (the "Borrower"), the financial institutions party to the
Credit Agreement (the "Lenders"), and Fleet Capital Corporation, in its capacity
as administrative agent for itself as a Lender and the other Lenders (the
"Administrative Agent") under that certain Credit Agreement, dated as of
November 22, 1999, by and among the Borrower, the Lenders and the Administrative
Agent (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"). Defined terms used herein and not
otherwise defined herein shall have the meaning given to them in the Credit
Agreement.
WHEREAS, the Borrower, the Lenders and the Administrative Agent have
entered into the Credit Agreement; and
WHEREAS, the Borrower, the Lenders and the Administrative Agent have
agreed to amend the Credit Agreement on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises set forth above, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrower, the Lenders and the Administrative Agent
agree as follows:
1. Amendment to the Credit Agreement. Effective as of the date first
above written, unless otherwise specified herein, and subject to the execution
of this Amendment by the parties hereto and the satisfaction of the conditions
precedent set forth in Section 2 below, the Credit Agreement shall be and hereby
is amended as follows:
a. Section 2.13(d)(ii) is hereby amended to delete therefrom
the phrase "it shall be assumed for purposes of determining the
Applicable Floating Margin and Applicable Eurodollar Margin that the
Interest Coverage Ratio was less than 1.5 to 1.0" and to substitute
therefor the phrase "it shall be assumed for purposes of determining
the Applicable Floating Margin and Applicable Eurodollar Margin that
the Interest Coverage Ratio was less than 1.25 to 1.0."
b. Section 7.3(A) of the Credit Agreement is hereby amended to
delete therefrom clauses (x) and (xi) and to substitute therefor the
following clauses(x) and (xi):
"(x) Indebtedness of a Subsidiary payable to the Borrower or
any other Subsidiary; provided, however, that the aggregate of
such Indebtedness shall not exceed $5,000,000;"
"(xi) Indebtedness of the Borrower payable to any Subsidiary;"
-1-
<PAGE>
c. Section 7.3(C) of the Credit Agreement is hereby amended to
delete therefrom clause (ii) and to substitute therefor the following:
"(ii) Permitted Existing Liens and any Liens on or against any
real property owned by any of the Borrower's Subsidiaries that
are organized under the laws of a jurisdiction other than the
United States;"
d. Section 7.3(F)(ii) of the Credit Agreement is hereby
amended in its entirety as follows:
"(ii) the Borrower, prior to any such Acquisition, shall have
delivered to the Administrative Agent and the Lenders pro
forma projections, based on information reasonably acceptable
to the Administrative Agent and the Lenders, demonstrating
that after giving effect to such Acquisition, the Borrower
would be in compliance with the terms of this Agreement for
the period beginning on the date such Acquisition is
consummated and ending on the first anniversary thereof;
provided, however, that the Borrower need not deliver any pro
forma projections for any Acquisition the purchase price of
which is less than $7,500,000"
e. Section 9.3(vi) of the Credit Agreement is hereby amended
in its entirety as follows:
"(vi) Release a material portion of the Collateral or release
any guarantor that has guaranteed the Obligations from its
guaranty of such Obligations."
f. Section 9.3(vii) of the Credit Agreement is hereby amended
in its entirety as follows;
"(vii) Amend any percentage in the Borrowing Base or decrease
the amount of the Availability Reserve or otherwise materially
modify the manner in which the Borrowing Base is determined."
g. Section 9.3 of the Credit Agreement is hereby amended to
insert immediately after clause (viii) the following clause (ix):
(ix) Take any action or enforce any rights or remedies against
any real property of the Borrower that is subject to a Lien in
favor of the Administrative Agent on behalf of the Lenders."
h. Exhibit A to the Credit Agreement is hereby deleted
therefrom and the attached Exhibit A is hereby substituted therefor.
-2-
<PAGE>
2. Conditions Precedent. This Amendment shall become effective as of
the date above written, if, and only if, the Administrative Agent has received
an executed copy of this Amendment from the Borrower, the Lenders and the
Administrative Agent.
3. Representations and Warranties of the Borrower. The Borrower hereby
represents and warrants as follows:
a. This Amendment and the Credit Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Borrower and are
enforceable against the Borrower in accordance with their terms.
b. Upon the effectiveness of this Amendment, the Borrower
hereby reaffirms all representations and warranties made in the Credit
Agreement, and to the extent the same are not amended hereby, agrees
that all such representations and warranties shall be deemed to have
been remade as of the date of delivery of this Amendment, unless and to
the extent that any such representation and warranty is stated to
relate solely to an earlier date, in which case such representation and
warranty shall be true and correct as of such earlier date.
4. Reference to and Effect on the Credit Agreement.
a. Upon the effectiveness of Section 1 hereof, on and after
the date hereof, each reference in the Credit Agreement to "this Credit
Agreement," "hereunder," "hereof," "herein" or words of like import
shall mean and be a reference to the Credit Agreement as amended
hereby.
b. The Credit Agreement, as amended hereby, and all other
documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are
hereby ratified and confirmed.
c. Except as expressly provided herein, the execution,
delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of the Administrative Agent or the
Lenders, nor constitute a waiver of any provision of the Credit
Agreement or any other documents, instruments and agreements executed
and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws (including Section 735 ILCS 105/5-1 et seq. but
otherwise without regard to conflict of law provisions) of the State of
Illinois.
6. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
-3-
<PAGE>
7. Counterparts. This Amendment may be executed by one or more of the
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
The remainder of this page is intentionally blank.
-4-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
on the date first above written.
HAYNES INTERNATIONAL, INC.
By: ----------------------------------
Name: ----------------------------------
Title: ----------------------------------
FLEET CAPITAL CORPORATION,
individually and as Administrative Agent
By: ----------------------------------
Name: ----------------------------------
Title: ----------------------------------
NATIONAL CITY COMMERCIAL FINANCE,
INC.
By: ----------------------------------
Name: ----------------------------------
Title: ----------------------------------
-5-
<PAGE>
SCHEDULE 1
TO
AMENDMENT NO. 1
TO
CREDIT AGREEMENT
EXHIBIT A
TO
CREDIT AGREEMENT
Commitments
REVOLVING LOAN COMMITMENTS
Lender Amount of Revolving % of Revolving Loan
Loan Commitment Commitment
FLEET CAPITAL
CORPORATION $57,000,000 79.166667%
NATIONAL CITY
COMMERCIAL FINANCE $15,000,000 20.833333%
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated condensed financial statements of Haynes International, Inc.
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000858655
<NAME> HAYNES INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-2000
<PERIOD-END> SEP-30-1999 DEC-31-1999
<CASH> $3,576 $4,611
<SECURITIES> 0 0
<RECEIVABLES> 41,117 36,328
<ALLOWANCES> (876) (949)
<INVENTORY> 91,012 92,704
<CURRENT-ASSETS> 134,829 132,694
<PP&E> 107,524 112,091
<DEPRECIATION> (74,952) (75,583)
<TOTAL-ASSETS> 221,237 224,601
<CURRENT-LIABILITIES> 78,207 85,942
<BONDS> 139,620 139,412
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (90,052) (94,515)
<TOTAL-LIABILITY-AND-EQUITY> 221,237 224,601
<SALES> 208,986 48,027
<TOTAL-REVENUES> 208,986 48,027
<CGS> 164,349 39,933
<TOTAL-COSTS> 193,433 46,513
<OTHER-EXPENSES> 707 238
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 20,213 5,335
<INCOME-PRETAX> (5,755) (4,059)
<INCOME-TAX> (6,319) (791)
<INCOME-CONTINUING> 564 (3,268)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 564 (3,268)
<EPS-BASIC> 5,640 (32,680)
<EPS-DILUTED> 5,640 (32,680)
</TABLE>
