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 June 30, 2000.
-------------
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
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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 August 14, 2000, the registrant had 100 shares of Common Stock, $.01 par
value, outstanding.
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HAYNES INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets as of
September 30, 1999 and June 30, 2000 3
Consolidated Condensed Statements of Operations
for the Three Months and Nine Months ended
June 30, 1999 and 2000 4
Consolidated Condensed Statements of
Comprehensive Income for the Three Months and
Nine Months ended June 30, 1999 and 2000 5
Consolidated Condensed Statements of Cash
Flows for the Nine Months ended
June 30, 1999 and 2000 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 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Index to Exhibits 16
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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, June 30,
1999 2000
------------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,576 $ 3,714
Accounts and notes receivable, less allowance for
doubtful accounts of $876 and $1,094, respectively 40,241 44,081
Inventories 91,012 105,772
-------- --------
Total current assets 134,829 153,567
-------- --------
Property, plant and equipment (at cost) 107,524 114,912
Accumulated depreciation (74,952) (76,825)
-------- --------
Net property, plant and equipment 32,572 38,087
Deferred income taxes 44,137 44,346
Prepayments and deferred charges, net 9,699 11,152
-------- --------
Total assets $221,237 $247,152
======== ========
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses $ 27,966 $ 37,801
Accrued postretirement benefits 4,200 4,200
Revolving credit 44,051 59,926
Note payable 208 1,517
Income taxes payable 263 1,400
Deferred income taxes 1,519 1,969
-------- --------
Total current liabilities 78,207 106,813
-------- --------
Long-term debt, net of unamortized discount 139,620 140,075
Accrued postretirement benefits 93,462 94,442
-------- --------
Total liabilities 311,289 341,330
-------- --------
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) (143,945)
Accumulated other comprehensive income (loss) 1,209 (1,508)
-------- --------
Total capital deficiency (90,052) (94,178)
-------- --------
Total liabilities and capital deficiency $221,237 $247,152
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
HAYNES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 52,146 $ 60,659 $ 156,613 $ 166,271
Cost of sales 40,731 47,284 119,952 131,429
Selling and administrative 6,567 6,043 18,045 17,575
Research and technical 997 875 2,907 2,693
--------- --------- --------- ---------
Operating income 3,851 6,457 15,709 14,574
Other costs, net 59 22 344 476
Terminated acquisition costs 359
Interest expense 5,127 5,813 15,292 16,747
Interest income (29) (24) (79) (120)
--------- --------- --------- ---------
Income (loss) before provision for
(benefit from) income taxes and
cumulative effect of a change in
accounting principle (1,306) 646 (207) (2,529)
Provision for (benefit from) income
taxes (384) 514 (4,440) (380)
--------- --------- --------- ---------
Income (loss) before cumulative
effect of a change in accounting
principle (922) 132 4,233 (2,149)
Cumulative effect of a change in
accounting principle, net of tax benefit 640
--------- --------- --------- ---------
Net income (loss) $ (922) $ 132 $ 4,233 $(1,509)
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
HAYNES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(dollars in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (loss) $ (922) $ 132 $ 4,233 $ (1,509)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment (977) (493) (2,953) (2,717)
--------- --------- --------- ---------
Other comprehensive loss (977) (493) (2,953) (2,717)
--------- --------- --------- ---------
Comprehensive income (loss) $ (1,899) $ (361) $ 1,280 $ (4,226)
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
5
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<TABLE>
<CAPTION>
HAYNES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Nine Months Ended
June 30,
-----------------
1999 2000
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,233 $ (1,509)
Depreciation 4,082 2,490
Amortization 955 843
Deferred income taxes (5,466) 411
Gain on property disposal (399)
Change in:
Inventories (6,313) (15,671)
Accounts receivable 6,621 (4,078)
Accounts payable and accruals 7,640 11,438
Other, net (2,188) (1,129)
--------- ---------
Net cash provided by (used in)
operating activities 9,564 (7,604)
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (7,387) (8,334)
Proceeds from property disposal 399
Other investing activities 343 330
--------- ---------
Net cash used in investing activities (7,044) (7,605)
--------- ---------
Cash flows from financing activities:
Net (decrease) increase in revolving
credit and long-term debt (2,865) 16,036
Capital contribution of proceeds from
exercise of stock options 100
--------- ---------
Net cash (used in) provided by financing
activities (2,865) 16,136
--------- ---------
Effect of exchange rates on cash (194) (789)
--------- ---------
Decrease in cash and cash equivalents (539) 138
Cash and cash equivalents, beginning of period $ 3,720 3,576
--------- ---------
Cash and cash equivalents, end of period $ 3,181 $ 3,714
========= =========
Supplemental disclosures of cash flow information:
Cash paid during period for: Interest $ 10,263 $ 11,359
========= =========
Income Taxes $ 1,978 $ 2
========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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HAYNES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
For the Nine Months Ended June 30, 2000
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 29,
1999. The results of operations for the nine months ended June 30, 2000, are not
necessarily indicative of the results to be expected for the full year or any
other interim period.
Note 2. Inventories
The following is a summary of the major classes of inventories:
September 30, 1999 June 30, 1999
------------------ -------------
(Unaudited)
Raw Materials $ 4,883 $ 5,487
Work-in-process 38,876 54,032
Finished Goods 41,243 37,150
Other, net 6,010 9,103
--------- ---------
Net inventories $ 91,012 $ 105,772
========= =========
Note 3. Income Taxes
The provision for income tax es for the nine months ended June 30, 2000,
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. During fiscal 1999, the company
reversed approximately $4.5 million of its deferred tax liability associated
with the undistributed earnings of two foreign affiliates. The Company concluded
that the cumulative earnings from these two affiliates, $12.2 million, will be
permanently invested overseas.
Note 4. Terminated Acquisition Costs
On March 3, 1998, the Company announced that Haynes Holdings, Inc.
("Holdings"), its parent corporation, and Blackstone Capital Partners II
Merchant Banking Fund L.P. and two of its affiliates ("Blackstone"), had
abandoned their attempt to acquire Inco Alloys International ("IAI"), a 100%
owned business unit of Inco Limited ("Inco"). Certain acquisition costs were
charged to operations in the nine months ended June 30, 1999.
Note 5. Cumulative Effect of Change in Accounting Principle
Effective January 1, 2000, the Company changed its method of amortizing
unrecognized actuarial gains and losses with respect to its pension benefits to
amortize them over the lesser of five years or the average remaining service
period of active participants. The method previously used was to amortize any
unrecognized gain or loss over the average remaining service period of active
participants (approximately 12 years). The $640,000 cumulative effect of the
change on prior years (after reduction for income taxes of $426,000) is included
in income of the nine month period ended June 30, 2000.
7
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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 29, 1999.
Results of Operations
---------------------
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Net Revenues. Net revenues increased approximately $8.6 million to
approximately $60.7 million in the third quarter of 2000 from approximately
$52.1 million in the third quarter of 1999. Volume increased approximately 20.0%
to 5.4 million pounds in the third quarter of fiscal 2000 compared to 4.5
million pounds in the third quarter of 1999. The increase in volume was
partially offset by a decline in the average selling price per pound to $11.09
for the third quarter of 2000 compared to $11.40 for the same period in 1999.
Sales to the aerospace industry in the third quarter of 2000 increased by
26.6% to approximately $24.3 million from $19.2 million for the same period a
year earlier. The increased revenue can be attributed to a 40.0% increase in
volume, partially offset by a 10.8% reduction in the average selling price per
pound. The increased volume can be attributed to significantly higher domestic
sales to airframe component fabricators and improved demand by domestic and
European gas turbine manufacturers as the industry responds to higher commercial
aircraft build schedules. The decrease in the average selling price per pound
was caused by a lower proportion of the higher priced specialty alloys and
tubulars relative to the lower priced nickel base alloys and product forms.
Sales to the chemical processing industry decreased by 1.6% from
approximately $19.2 million in the third quarter of 1999 to approximately $18.9
million for the same period in 2000. A 10.5% decrease in volume offset a 7.4%
increase in the average selling price per pound. The decline in volume can be
attributed to decreased worldwide project related activity.
Sales to the land-based gas turbine industry increased by 51.5% in the
third quarter of 2000 to approximately $10.3 million from $6.8 million for the
comparable period in 1999. The increased revenue can be attributed to a 57.1%
increase in volume, partially offset by a 12.0% decline in the average selling
price. The increase in volume is due to improved shipments of nickel- base and
specialty alloy flat products in all geographic sectors and export shipments of
proprietary alloy products. Increased billet shipments led to a decrease in the
average selling price per pound.
Sales to the flue gas desulfurization industry declined from approximately
$900,000 in the third quarter of 1999 to approximately $700,000 in the third
quarter of 2000, due to the absence of any significant project related business.
This market is generally characterized by large project requirements and very
modest continuing maintenance needs.
8
<PAGE>
Sales to the oil and gas industry in the third quarter of 2000 increased to
approximately $500,000 from approximately $400,000 in the third quarter of 1999.
Sales to this industry are typically linked to sour gas project requirements,
which vary significantly from quarter to quarter.
Sales to other industries increased by 17.0% to approximately $5.5 million
in the third quarter of 2000 from approximately $4.7 million in the third
quarter of 1999. The increased revenue was the result of an increase in volume
in the automotive and industrial heating and wear sectors, and a 9.8% increase
in the average selling price per pound.
Cost of Sales. Cost of sales as a percentage of net revenues remained
relatively flat in the third quarter of 2000 compared to the third quarter of
1999, at 78.0% and 78.1%, respectively. Higher raw material costs and inventory
adjustments in the third quarter of 2000 kept costs higher.
Selling and Administrative Expenses. Selling and administrative expenses
decreased approximately $600,000 to approximately $6.0 million in the third
quarter of 2000 from approximately $6.6 million in the same period a year ago,
primarily as a result of lower expenses related to the Company's compliance with
the Department of Justice's ("DOJ") investigation into the nickel alloy industry
that began in the third quarter of 1999.
Research and Technical Expenses. Research and technical expenses decreased
approximately $100,000 to approximately $900,000 in the third quarter of 2000
from approximately $1.0 million in the third quarter of 1999, primarily as a
result of decreased outside research donations.
Operating Income. As a result of the above factors, the Company recognized
operating income for the third quarter of 2000 of approximately $6.5 million,
approximately $1.4 million of which was contributed by the Company's foreign
subsidiaries. For the third quarter of 1999, operating income was approximately
$3.9 million, of which approximately $800,000 was contributed by the Company's
foreign subsidiaries.
Other. Other cost was relatively flat in the third quarter of 2000 compared
to the third quarter of 1999.
Interest Expense. Interest expense increased approximately $700,000 to
approximately $5.8 million for the third quarter of 2000 from approximately $5.1
million for the same period in 1999. Higher revolving credit balances and higher
interest rates during the third quarter of 2000 contributed to this increase.
Income Taxes. Income tax expense of approximately $500,000 was recorded for
the third quarter of 2000 compared to an income tax benefit of approximately
$400,000 in 1999.
Net Income (Loss). As a result of the above factors, the Company recognized
net income for the third quarter of 2000 of approximately $100,000, compared to
a net loss of approximately $900,000 for the third quarter of 1999.
[Remainder of page intentionally left blank.]
9
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Nine Months Ended June 30, 2000 Compared to Nine Months Ended June 30, 1999
Net Revenues. Net revenues increased approximately $9.7 million, or 6.2%,
to approximately $166.3 million in the first nine months of 2000 from
approximately $156.6 million in the first nine months of 1999, primarily as a
result of a 15.9% increase in shipments, to approximately 14.6 million pounds in
the first nine months of 2000, from approximately 12.6 million pounds in the
first nine months of 1999. Volume increases occurred in all markets except the
chemical processing industry. Average selling prices per pound decreased to
$11.22 from $12.16 for the first nine months of 2000, compared to the same
period in 1999.
Sales to the aerospace industry in the first nine months of 2000 increased
by 2.1% to approximately $67.2 million from approximately $65.8 million for the
same period a year earlier, primarily due to a 15.2% increase in volume,
partially offset by a 12.7% reduction in average selling price per pound. The
volume increase was the result of improved sales of nickel-base alloy flat and
billet products in the domestic market. A lower proportion of high priced
specialty alloys and titanium tubulars relative to lower priced nickel base
alloys and forms resulted in the decreased average selling price per pound for
the nine months in 2000.
Sales to the chemical processing industry declined by 14.3% from
approximately $55.3 million for the first nine months of 1999 to approximately
$47.4 million for the same period in 2000, due to a 13.5% reduction in volume,
while the average selling price per pound remained flat. The decline in volume
is primarily due to a decrease in sales to domestic distributors, partially
offset by strong export shipments in support of industry rebuilding.
Sales to the land-based gas turbine industry increased 67.3% for the first
nine months of 2000 compared to the same period in 1999. An 87.5% increase in
volume was slightly offset by a 12.5% decrease in the average selling price per
pound, caused largely by an increased proportion of sales of lower priced
product forms and alloys.
Sales to the flue gas desulfurization industry increased approximately $1.3
million, or 44.8%, to approximately $4.2 million for the first nine months of
2000 from approximately $2.9 million for the same period in 1999, due to
increased volume and higher average selling prices per pound in support of
stricter air quality standards in countries outside the United States.
Sales to the oil and gas industry in the first nine months of 2000
increased to approximately $3.7 million from approximately $1.1 million for the
same period a year ago, primarily attributable to a single seamless tubular
project shipped during the period. Volume requirements in this sector vary
substantially from quarter to quarter and year to year.
Sales to other industries increased by 30.8% to approximately $15.3 million
for the first nine months of 2000 from approximately $11.7 million for the first
nine months of 1999, on the strength of improved volume and average selling
price per pound in the automotive, electronics and industrial heating and wear
industries.
Cost of Sales. Cost of sales as a percentage of net revenues increased to
79.0% for the first nine months of 2000 compared to 76.6% in the same period
last year. The higher cost of sales percentage in 2000 resulted from higher raw
material costs and higher distribution costs for the first nine months of 2000
compared to 1999. In addition, lower volumes of higher value added coil, sheet,
and seamless product forms due to significant planned outages in sheet and coil
equipment in the first quarter of 2000, and inventory adjustments in the third
quarter of 2000 increased cost of sales for the first nine months of 2000.
Selling and Administrative Expenses. Selling and administrative expenses
decreased approximately $400,000 to approximately $17.6 million in the first
nine months of 2000 from approximately $18.0 million in the same period a year
ago. Higher administrative costs, marketing costs and data processing costs for
2000 offset the reduction of expenses related to the DOJ investigation and
change in executive management.
10
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Research and Technical. Research and technical expenses decreased
approximately $200,000 in the first nine months of 2000 compared to the first
nine months of 1999 due to reduced operating costs and outside research
donations.
Operating Income. As a result of the above factors, the Company recognized
operating income for the first nine months of 2000 of approximately $14.6
million, approximately $3.9 million of which was contributed by the Company's
foreign subsidiaries. For the first nine months of 1999, operating income was
approximately $15.7 million, of which approximately $3.3 million was contributed
by the Company's foreign subsidiaries.
Other. Other costs increased approximately $200,000 from approximately
$300,000 in the first nine months of 1999 to approximately $500,000 for the
first nine months of 2000, primarily due to higher contract service fees.
Terminated Acquisition Costs. Terminated acquisition costs of approximately
$400,000 were recorded in the first nine months of 1999 in connection with the
abandoned attempt to acquire IAI by Holdings.
Interest Expense. Interest expense increased approximately $1.4 million to
approximately $16.7 million for the first nine months of 2000 from approximately
$15.3 million for the same period in 1999. Higher revolving credit balances and
higher interest rates contributed to this increase.
Income Taxes. The benefit from income taxes of approximately $400,000 for
the first nine months of 2000 decreased by approximately $4.0 million from a tax
benefit of approximately $4.4 million for the first nine months of 1999 due
primarily to an adjustment of deferred income taxes in the nine month period for
1999 for certain foreign earnings that will not be remitted to the United
States.
Change in Accounting Principle. The cumulative effect of a change in
accounting principle represents a change in the Company's method of amortizing
unrecognized actuarial gains and losses with respect to its pension benefits.
The cumulative effect includes income of approximately $1.0 million, reduced by
approximately $400,000 for taxes.
Net Income. As a result of the above factors, the Company recognized a net
loss for the first nine months of 2000, of approximately $1.5 million, compared
to a net income of approximately $4.2 million for the first nine months 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 $8.3 million in the first nine months of 2000 ($1.0 million
related to foreign subsidiary capital expenditures), compared to capital
expenditures of approximately $7.4 million for the first nine months of 1999.
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"), and capital lease obligations. 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. On August 8, 2000, Fleet Capital Corporation
amended the Fleet Revolving Credit Facility which eliminated some of the foreign
account debtors from the collateral borrowing base. This amendment will
negatively impact the borrowing availability for the Company of approximately
nil by $2.0 million, depending on the level of foreign accounts receivable and
the collateral base.
11
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Net cash used in operating activities in the first nine months of 2000 was
approximately $7.6 million, as compared to net cash provided by operating
activities of approximately $9.6 million in the first nine months of 1999. The
negative cash flow from operations for 2000 was primarily the result of an
increase in inventories of approximately $15.7 million, an increase in accounts
receivable of approximately $4.1 million, and net loss of approximately $1.5
million. The negative cash flow was also affected by an increase in accounts
payable and accrued expenses of approximately $11.4 million, non-cash
depreciation and amortization expense of approximately $3.3 million, and other
net adjustments used in operating activities of approximately $1.0 million.
Net cash used in investing activities increased to approximately $7.6
million in the first nine months of 2000 from approximately $7.0 million in the
same period for 1999, primarily as a result of increased capital spending. Net
cash provided by financing activities for the first nine months of 2000 was
approximately $16.1 million, compared to net cash used in investing activities
of approximately $2.9 million for the first nine months of 1999, primarily as a
result of increased net borrowings by the Company in support of increased
working capital requirements.
Cash for the first nine months of 2000 increased approximately $100,000,
resulting in a June 30, 2000 cash balance of approximately $3.7 million. Cash in
the first nine months of 1999 decreased approximately $500,000, resulting in a
cash balance of approximately $3.2 million at June 30, 1999.
Total debt at June 30, 2000, was approximately $201.5 million compared to
approximately $172.2 million at June 30, 1999, reflecting increased borrowing
under the Facility and by the Company's French affiliate.
At June 30, 2000, approximately $59.9 million had been borrowed pursuant to
the Fleet Revolving Credit Facility compared to approximately $32.6 million at
June 30, 1999. In addition, as of June 30, 2000, approximately $500,000 in
Letter of Credit reimbursement obligations had been incurred by the Company. The
Fleet Revolving Credit Facility includes a reserve for accrued interest, payable
March 1 and September 1, in connection with the Senior Notes of approximately
$5.4 million at June 30, 2000. The Company had available additional borrowing
capacity of approximately $6.1 million on the Fleet Revolving Credit Facility at
June 30, 2000.
Grand Jury Investigation
A Federal Grand Jury, which had been investigating possible violations of
federal anti-trust laws in the nickel alloy industry since March of 1999, was
concluded in June, 2000, without any adverse actions being taken against any of
the companies involved, including Haynes. Certain costs incurred by the Company
in connection with the investigation have been accounted for as administrative
expenses and charged against income in the period. For the year ended September
30, 1999, and the nine month period ended June 30, 2000, these costs were
approximately $3.5 million and $1.0 million, respectively.
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 Costs
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 customers or suppliers regarding Year 2000. The Company is not aware of
any uncertainties, but in the event one should arise, the Company's Year 2000
Committee will remain active to respond to such an occurrence.
12
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
At June 30, 2000, 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 June 30, 2000.
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 June 30, 2000, the unrealized loss on these foreign currency exchange
contracts was approximately $2,000.
[Remainder of page intentionally left blank.]
13
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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.
14
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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
Vice President, Finance
Chief Financial Officer
Date: August 14, 2000
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INDEX TO EXHIBITS
Sequential
Number Numbering
Assigned In System Page
Regulation S-K Number of
Item 601 Description of Exhibit Exhibit
-------------- ---------------------- -------
<S> <C> <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.)
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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.)
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).
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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.)
10.17 Agreement by and between Galen Hodge and Haynes
International, 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 Sales, 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
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 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.
(Incorporated by reference to Exhibit 10.21 to Registrant's
Form 10-Q Report filed February 14, 2000, File No. 333-
5411.)
(11) No Exhibit.
(15) No Exhibit.
(18) 18.01 Preferability Letter dated May 15, 2000 by Deloitte & Touche
LLP. (Incorporated by reference to Exhibit 18.01 to
Registrant's Form 10-Q Report filed May 15, 2000, File No.
333-5411.)
(19) No Exhibit.
(22) No Exhibit.
(23) No Exhibit.
(24) No Exhibit.
(27) 27.01 Financial Data Schedule.
(99) No Exhibit.
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