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TheStreet Open House

Haynes International, Inc. Reports Third Quarter Fiscal 2010 Financial Results

  • Net Revenues of $101.3 Million For The Third Quarter Of Fiscal 2010, an Increase of $2.9 Million Compared to the Third Quarter of Fiscal 2009
  • Net income of $3.7 million, or $0.31 per diluted share, for the Third Quarter of Fiscal 2010, Compared to Net Loss of $(10.9) Million, or $(0.91) Per Diluted Share, for the Third Quarter of Fiscal 2009
  • Regular Quarterly Cash Dividend of $0.20 Per Outstanding Share of the Company's Common Stock Declared       

KOKOMO, Ind., Aug. 5, 2010 (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 third quarter of fiscal 2010 and nine months ended June 30, 2010. The Company also announced that its Board of Directors declared a regular quarterly cash dividend of $0.20 per outstanding share payable September 15, 2010 to stockholders of record as of September 1, 2010.

"Sales activity and overall business conditions in the end markets we serve have continued to improve. We finally saw some commitments for longer term buys from some key accounts in the quarter, however, most customers continue to make conservative buys on an as-needed basis. Destocking appears to be essentially complete and inventories are more in line with build rates and end-use demand," said Mark Comerford, president and Chief Executive Officer. "Longer term, we're very encouraged by our increased revenue levels coupled with our expanded backlog. We've redeployed some of our working capital into inventory to support the increased order book and engaged our supermarket system for faster deliveries on higher-volume alloys."

Quarterly Results

Net Revenues. Net revenues were $101.3 million in the third quarter of fiscal 2010, an increase of $2.9 million  from $98.3 million in the same period of fiscal 2009, due to an increase in volume partially offset by a decrease in the average selling price per pound.   Volume was 4.7 million pounds in the third quarter of fiscal 2010, an increase of 7.9% from 4.4 million pounds in the same period of fiscal 2009. The aggregate average selling price was $21.44 per pound in the third quarter of fiscal 2010, a decrease of 4.5% from $22.45 per pound in the same period of fiscal 2009.      

Cost of Sales. Cost of sales was $84.4 million, or 83.4% of net revenues, in the third quarter of fiscal 2010 compared to $106.5 million, or 108.3% of net revenues, in the same period of fiscal 2009. Cost of sales in the third quarter of fiscal 2010 decreased by $22.1 million as compared to the same period of fiscal 2009 due to lower raw material costs, reduced manufacturing expense, workforce reductions and a modest amount of improved absorption due to improved sheet volume. Offsetting the decrease in cost of sales as a percentage of net revenue in the third quarter of fiscal 2010 compared to the same period of fiscal 2009 was increased price competition, which negatively impacted net revenue. 

Selling, General and Administrative Expense. Selling, general and administrative expense was $9.5 million for the third quarter of fiscal 2010, an increase of $0.6 million, or 7.3%, from $8.8 million in the same period of fiscal 2009 due primarily to the increased business activity causing commissions and sales expenses to increase. Selling, general and administrative expenses as a percentage of net revenues increased to 9.4% for the third quarter of fiscal 2010 compared to 9.0% for the same period of fiscal 2009.

Research and Technical Expense. Research and technical expense was $0.6 million, or 0.6% of revenue, for the third quarter of fiscal 2010, a decrease of $0.1 million from $0.8 million, or 0.8% of net revenues, in the same period of fiscal 2009, due to the reductions in workforce during the second and fourth quarters of fiscal 2009.

Operating Income (Loss). As a result of the above factors, operating income in the third quarter of fiscal 2010 was $6.7 million compared to an operating loss of $(17.8) million in the same period of fiscal 2009.

Income Taxes. Income taxes were an expense of $3.0 million in the third quarter of fiscal 2010, an increase of $9.9 million from a benefit of $6.9 million in the same period of fiscal 2009, primarily due to pretax income. The effective tax rate for the third quarter of fiscal 2010 was 44.4%, compared to 38.5% in the same period of fiscal 2009 primarily due to a change in the state apportionment factor, which lowered the blended state tax rate resulting in an unfavorable reduction of our deferred tax asset.

Net Income (Loss). As a result of the above factors, net income in the third quarter of fiscal 2010 was $3.7 million, an increase of $14.7 million from a net loss of $(10.9) million in the same period of fiscal 2009. 

Results for the nine months ended June 30, 2010

Net Revenues. Net revenues were $276.9 million in the first nine months of fiscal 2010, a decrease of 21.6% from $353.0 million in the same period of fiscal 2009, due to decreases in volume and average selling price per pound.   Volume was 13.1 million pounds in the first nine months of fiscal 2010, a decrease of 10.3% from 14.5 million pounds in the same period of fiscal 2009. The aggregate average selling price was $21.21 per pound in the first nine months of fiscal 2010, a decrease of 12.6% from $24.27 per pound in the same period of fiscal 2009. 

Cost of Sales. Cost of sales was $243.0 million, or 87.8% of net revenues, in the first nine months of fiscal 2010 compared to $335.5 million, or 95.0% of net revenues, in the same period of fiscal 2009. Cost of sales in the first nine months of fiscal 2010 decreased by $92.5 million as compared to the same period of fiscal 2009 due to lower volume, lower raw material costs, reduced manufacturing expense and workforce reductions. This decrease was partially offset by reduced absorption of fixed manufacturing costs caused by lower production volumes, particularly that of sheet product. 

Selling, General and Administrative Expense. Selling, general and administrative expense was $25.6 million for the first nine months of fiscal 2010, a decrease of $2.1 million, or 7.5%, from $27.7 million in the same period of fiscal 2009 due primarily to lower business activity causing commissions and sales expenses to decline and significant workforce reductions in the second and fourth quarters of fiscal 2009. Selling, general and administrative expenses as a percentage of net revenues increased to 9.3% for the first nine months of fiscal 2010 compared to 7.9% for the same period of fiscal 2009 due primarily to reduced revenues.

Research and Technical Expense. Research and technical expense was $2.0 million, or 0.7% of revenue, for the first nine months of fiscal 2010, a decrease of $0.4 million from $2.4 million, or 0.7% of net revenues, in the same period of fiscal 2009, due to the reductions in workforce during the second and fourth quarters of fiscal 2009.

Impairment of Goodwill. An impairment charge of $43.7 million was recorded in the second quarter of fiscal 2009 due to weakening of the U.S. economy and the global credit crisis resulting in a reduction of the Company's market capitalization below its total stockholders' equity value for a sustained period of time. Please see Note 8 in the Notes to Consolidated Financial Statements for additional information.

Operating Income (Loss). As a result of the above factors, operating income in the first nine months of fiscal 2010 was $6.2 million compared to operating loss of $(56.3) million in the same period of fiscal 2009.

Income Taxes. Income taxes was an expense of $2.9 million in the first nine months of fiscal 2010, from a benefit of $(7.5) million in the same period of fiscal 2009, due to the Company generating pretax income rather than pretax loss. The effective tax rate for the first nine months of fiscal 2010 was 45.6%, compared to 13.1% in the same period of fiscal 2009. The change in the effective tax rate is primarily attributable to a change in the state apportionment factor, which lowered the blended state tax rate resulting in an unfavorable reduction of our deferred tax asset. In addition, the non-deductible goodwill impairment charge lowered the effective tax rate in the first nine months of fiscal 2009.

Net Income (Loss). As a result of the above factors, net income in the first nine months of fiscal 2010 was $3.4 million, an increase of $52.7 million from a net loss of $(49.3) million in the same period of fiscal 2009.

Backlog

Increasing order entry activity contributed to improvement in backlog at June 30, 2010 as compared to March 31, 2010.  Backlog dollars were $130.9 million at June 30, 2010, an increase of approximately 5.1% from $124.6 million at March 31, 2010.  This increase is the result of a 7.5% increase in backlog average selling price, which was partially offset by a 2.2% decline in backlog pounds.  Management expects the backlog dollars and pounds to increase modestly through the next two fiscal quarters.

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