KOKOMO, Ind., May 5, 2011 (GLOBE NEWSWIRE) -- Haynes International, Inc. (Nasdaq:HAYN) a leading developer, manufacturer and marketer of technologically advanced high-performance alloys, today reported financial results for the second quarter of fiscal 2011. The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.20 per outstanding share payable June 15, 2011 to stockholders of record as of June 1, 2011.
"We experienced strong revenue performance during the quarter and indicators for our key markets are improving. Margins should increase over the balance of the year as pricing strengthens and mix improves to higher-value products," said Mark Comerford, President and Chief Executive Officer. "Order entry in the quarter continued to strengthen enabling the backlog to expand to approximately $241.0 million from $167.0 million at December 31, 2010."
Quarterly Results
Net Revenues. Net revenues were $139.1 million in the second quarter of fiscal 2011, an increase of 47.0% from $94.6 million in the same period of fiscal 2010. Volume was 6.4 million pounds in the second quarter of fiscal 2011, an increase of 44.7% from 4.4 million pounds in the same period of fiscal 2010. The aggregate average selling price was $21.83 per pound in the second quarter of fiscal 2011, an increase of 1.6% from $21.48 per pound in the same period of fiscal 2010.
Cost of Sales. Cost of sales was $118.5 million, or 85.2% of net revenues, in the second quarter of fiscal 2011 compared to $84.4 million, or 89.2% of net revenues, in the same period of fiscal 2010. Cost of sales in the second quarter of fiscal 2011 increased by $34.1 million as compared to the same period of fiscal 2010 due to higher volume, higher raw material costs and increased production staffing to meet increased product demand. This increase was partially offset by increased absorption of fixed manufacturing costs as a result of higher production volumes, particularly of sheet product.
Selling, General and Administrative Expense. Selling, general and administrative expense was $10.2 million for the second quarter of fiscal 2011, an increase of $2.2 million, or 27.3%, from $8.0 million in the same period of fiscal 2010. A portion of the increases were due to higher personnel costs as a result of headcount additions, salary increases, recruiting and relocation costs. Also increasing were sales, marketing and additional administrative expenses. Selling, general and administrative expenses as a percentage of net revenues decreased to 7.3% for the second quarter of fiscal 2011 compared to 8.4% for the same period of fiscal 2010 due primarily to increased revenues.
Research and Technical Expense. Research and technical expense was $0.9 million, or 0.6% of revenue, for the second quarter of fiscal 2011, an increase of $0.2 million from $0.7 million, or 0.8% of net revenues, in the same period of fiscal 2010.
Operating Income. As a result of the above factors, operating income in the second quarter of fiscal 2011 was $9.6 million compared to operating income of $1.5 million in the same period of fiscal 2010.
Income Taxes. Income taxes were an expense of $3.3 million in the second quarter of fiscal 2011, an increase of $2.8 million from $0.6 million in the same period of fiscal 2010, due to higher pretax income generated in fiscal 2011. The effective tax rate for the second quarter of fiscal 2011 was 35.0%, compared to 37.6% in the same period of fiscal 2010 primarily due to lower state tax rates and higher manufacturing deduction.
Net Income. As a result of the above factors, net income in the second quarter of fiscal 2011 was $6.2 million, an increase of $5.2 million from $1.0 million in the same period of fiscal 2010.
Results for the six months ended March 31, 2011
Net Revenues. Net revenues were $245.5 million in the first six months of fiscal 2011, an increase of 39.8% from $175.6 million in the same period of fiscal 2010 due to increases in volume and average selling price per pound. Volume was 10.8 million pounds in the first six months of fiscal 2011, an increase of 29.4% from 8.3 million pounds in the same period of fiscal 2010. The aggregate average selling price was $22.76 per pound in the first six months of fiscal 2011, an increase of 8.0% from $21.08 per pound in the same period of fiscal 2010.
Cost of Sales. Cost of sales was $207.0 million, or 84.3% of net revenues, in the first six months of fiscal 2011 compared to $158.6 million, or 90.3% of net revenues, in the same period of fiscal 2010. Cost of sales in the first six months of fiscal 2011 increased by $48.4 million as compared to the same period of fiscal 2010 due to higher volume, higher raw material costs and increased production staffing to meet increased demand. This increase was partially offset by increased absorption of fixed manufacturing costs as a result of higher production volumes, particularly of sheet product. Cost of sales as a percentage of net revenues decreased in the first six months of fiscal 2011 as compared to the same period of fiscal 2010 due to improving customer demand.
Selling, General and Administrative Expense. Selling, general and administrative expense was $19.3 million for the first six months of fiscal 2011, an increase of $3.1 million, or 19.3%, from $16.2 million in the same period of fiscal 2010. A portion of the increases were due to higher personnel costs as a result of headcount additions, salary increases, recruiting and relocation costs. Also increasing were sales, marketing and additional administrative expenses. Selling, general and administrative expenses as a percentage of net revenues decreased to 7.9% for the first six months of fiscal 2011 compared to 9.2% for the same period of fiscal 2010 due to increased revenues.
Research and Technical Expense. Research and technical expense was $1.6 million, or 0.7% of revenue, for the first six months of fiscal 2011, an increase of $0.2 million from $1.4 million, or 0.8% of net revenues, in the same period of fiscal 2010.
Operating Income (Loss). As a result of the above factors, operating income in the first six months of fiscal 2011 was $17.6 million compared to an operating loss of $(0.5) million in the same period of fiscal 2010.
Income Taxes. Income taxes were an expense of $6.1 million in the first six months of fiscal 2011, an increase of $6.3 million from a benefit of $0.1 million in the same period of fiscal 2010, due to pretax income generated in fiscal 2011. The effective tax rate for the first six months of fiscal 2011 was 34.9%, compared to 28.6% in the same period of fiscal 2010, due primarily to the prior year impact of permanent items on near breakeven pretax income.
Net Income (Loss). As a result of the above factors, net income in the first six months of fiscal 2011 was $11.5 million, an increase of $11.8 million from a net loss of $(0.3) million in the same period of fiscal 2010.
Gross Profit Margin Performance
Gross profit margins and gross profit margin percentages have improved in the first half of fiscal 2011 compared to the first half of fiscal 2010 due to a combination of rising volume, improved product mix, improved cost structure and an improving market environment. Service center transactional business volumes and prices have also improved, particularly in the aerospace market, due to the end of inventory destocking by the Company's customers and an increase in the commercial aircraft build rate.
When comparing the trend of gross profit margin and gross profit margin percentages from the first quarter of fiscal 2011 to the second quarter, the gross profit margin increased by $2.7 million, however, the gross profit margin percentage was 2.0% lower in the second quarter due to the increased number of large projects invoiced in the second quarter as compared to the first quarter. Gross profit margin percentages are expected to improve in subsequent quarters with the expected decline in project business offset by projected increases in higher margin transactional business.
Backlog
Backlog dollars were $241.7 million at March 31, 2011, an increase of approximately 44.7% from $167.0 million at December 31, 2010 due to strong order entry activity during the second quarter. This increase is the result of a 39.6% increase in backlog pounds and a 3.7% increase in backlog average selling price.
The backlog dollars improved in the second quarter due to both a substantial increase in the aerospace and chemical processing market backlogs and because of an improvement in the product mix reflective of higher value alloys and forms.
Capital Spending
Capital spending for the quarter was $3.0 million with spending for fiscal 2011 targeted at $15.0 million of which $6.0 million is for upgrades of the four-high Steckel rolling mill and supporting equipment. In addition to the $15.0 million planned for fiscal 2011, the Company also plans to spend approximately $10.0 million over the course of fiscal 2011 and 2012 to improve the customer service capabilities of the Company's service centers.
Liquidity
During the first six months of fiscal 2011, the Company's primary sources of cash were cash on-hand and cash from operations. At March 31, 2011, the Company had cash and cash equivalents of $47.3 million compared to cash and cash equivalents of $64.0 million at September 30, 2010.
Net cash used in operating activities was $6.3 million in the first six months of fiscal 2011 compared to $1.3 million in the same period of fiscal 2010. Items contributing to the difference include cash used by higher accounts receivable of $20.5 million which was $13.0 million higher than cash used from accounts receivable in the same period of fiscal 2010. Cash used from increased inventory balances (net of foreign currency fluctuation) of $7.0 million was $16.4 million lower than cash used from inventory balances in the same period of fiscal 2010. Inventory has increased to support the Company's increased order entry, higher backlog levels and higher raw material costs. Cash generated from operations was favorably impacted by net income of $11.5 million, compared to a net loss of $0.3 million in the same period of fiscal 2010. Net cash used in investing activities was $6.3 million in the first six months of fiscal 2011 compared to $6.9 million in the first six months of fiscal 2010 as a result of lower capital expenditures. Net cash used in financing activities in the first six months of fiscal 2011 included $4.9 million in dividend payments.
The Company's sources of cash for fiscal 2011 are expected to consist primarily of cash generated from operations, cash on-hand, and, if needed, borrowings under the U.S. revolving credit facility. The U.S. revolving credit facility provides borrowings in a maximum amount of $120.0 million, subject to a borrowing base formula and certain reserves. At March 31, 2011, the Company had cash of $47.3 million, an outstanding balance of zero on the U.S. revolving credit facility and access to a total of approximately $120.0 million under the U.S. revolving credit facility, subject to borrowing base and certain reserves. Management believes that the resources described above will be sufficient to fund operations, planned capital expenditures, pension plan funding, dividends to stockholders and working capital requirements over the next twelve months.
Dividend Declared
Today the Company also announced that the Board of Directors declared a regular quarterly cash dividend of $0.20 per outstanding share of the Company's common stock. The dividend is payable June 15, 2011 to stockholders of record at the close of business on June 1, 2011. The dividend cash payout will approximate $2.4 million for the quarter based on shares outstanding, and equal to approximately $9.8 million on an annualized basis.
Outlook
Management expects that net revenues for the third and fourth quarters of fiscal 2011 will approximate the levels of the second quarter, while volume in each of those quarters is expected to be slightly lower than the volume in the second quarter. However, management anticipates sequential improvement in net income for each of the third and fourth quarters of fiscal 2011 due to fewer large project orders compared to second quarter, a corresponding increase in the amount of transactional business as compared to the second quarter, and the impact of price increases instituted in the second quarter, which should begin to impact the Company's net income in the third quarter and to an increasing extent in the fourth quarter.
In summary Mark Comerford, President and Chief Executive Officer, commented, "The inventory we put in place over the past nine months, along with the added production and maintenance personnel, and our new application initiatives have positioned us well to take advantage of the strengthening industrial economy. We're increasing output to meet demand, increasing price levels, and seeing a strengthening of our mix. We expect to see better profitability per pound as the year progresses. Our customers continue to report strengthening in their end-markets, and we're committed to meeting their requirements."
Earnings Conference Call
The Company will host a conference call on Friday, May 6, 2011 to discuss its results for the second quarter of fiscal 2011 for the period ended March 31, 2011. Mark Comerford, President and Chief Executive Officer, and Marcel Martin, Chief Financial Officer and Vice President of Finance, will host the call and be available to answer questions.
To participate, please dial the teleconferencing number shown below five minutes prior to the scheduled conference time.
A live Webcast of the conference call will be available at .
For those unable to participate, a replay will be available from Friday, May 6th at 11:00 a.m. ET, through 11:59 p.m. ET on Friday, May 20, 2011. To listen to the replay, please dial:
A replay of the Webcast will also be available at until May 6, 2012.
About Haynes International
Haynes International, Inc. is a leading developer, manufacturer and marketer of technologically advanced, high performance alloys, primarily for use in the aerospace, land-based gas turbine and chemical processing industries.
The Haynes International, Inc. logo is available at
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. All statements other than statements of historical fact, including statements regarding 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 2011 and beyond, overall volume and pricing trends, cost reduction strategies and their anticipated results, 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. 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, some of which are discussed in Item 1A. of Part 1 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2010, 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.
CONTACT: Marcel Martin Chief Financial Officer and Vice President of Finance Haynes International, Inc. 765-456-6129
