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Haynes International Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: November 17, 2011 10:02PM
Haynes International Inc. (HAYN) filed Annual Report for the period ended 2011-09-30. Haynes International Inc. has a market cap of $651 million; its shares were traded at around $53.34 with a P/E ratio of 24.9 and P/S ratio of 1.7. The dividend yield of Haynes International Inc. stocks is 1.5%.
Highlight of Business Operations:The global specialty alloy market consists of three primary sectors: stainless steel, general purpose nickel alloys and high-performance nickel- and cobalt-based alloys. The Company believes that the high-performance alloy sector represents less than 10% of the total alloy market. The Company competes primarily in the high-performance nickel- and cobalt-based alloy sectors, which includes HTA products and CRA products. In fiscal 2009, 2010 and 2011, HTA products accounted for approximately 74%, 75% and 76% of the Company's net revenues, respectively; and sales of the Company's CRA products accounted for approximately 26%, 25% and 24% of the Company's net revenues, respectively. These percentages are based on data which include revenue associated with sales by the Company to its foreign subsidiaries, but exclude revenue associated with sales by foreign subsidiaries to their customers. Management believes, however, that the effect of including revenue data associated with sales by its foreign subsidiaries would not materially change the percentages presented in this section.
Since we became an independent company in 1987, we have, in several instances, experienced substantial year-to-year declines in net revenues, primarily as a result of decreases in demand in the industries to which our products are sold. In 1992, 1999, 2002, 2003, 2009 and 2010, our net revenues, when compared to the immediately preceding year, declined by approximately 24.9%, 15.4%, 10.3%, 21.2%, 31.1% and 13.0%, respectively. We may experience similar fluctuations in our net revenues in the future. Additionally, demand is likely to continue to be subject to substantial year-to-year fluctuations as a consequence of industry cyclicality, as well as other factors such as global economic uncertainty, and such fluctuations may have a material adverse effect on our financial condition or results of operations.
Income Taxes. Income tax expense was $18.3 million in fiscal 2011, an increase of $11.6 million from an expense of $6.7 million in fiscal 2010, due primarily to higher pretax income generated in fiscal 2011. The effective tax rate for fiscal 2011 was 37.0%, compared to 43.1% in fiscal 2010. During the third quarter of fiscal 2011, Indiana enacted a corporate income tax rate decrease from 8.5% to 6.5% to be phased in over a period of four years. Additional income tax expense of $0.7 million was recorded in the quarter reflecting our estimate of the decrease in the deferred tax asset, due to the lower state income tax rate. The prior year effective tax rate of 43.1% was primarily due to the impact of fixed permanent items on lower pretax earnings.
Net cash provided by operating activities was $19.6 million in fiscal 2011, as compared to cash used in operating activities of $19.0 million in fiscal 2010. Net income of $31.1 million in fiscal year 2011 was $22.2 million higher as compared to $8.9 million in fiscal 2010. At September 30, 2011, inventory balances (net of foreign currency adjustments) were approximately $17.9 million higher than at September 30, 2010. This increase in inventory was a result of higher manufacturing volumes in the fourth quarter of fiscal 2011 compared to the fourth quarter of fiscal 2010. Cash used from an increase of accounts receivable was $24.8 million in fiscal 2011, as compared to $15.8 million for fiscal 2010, as a result of higher fourth quarter sales. Pension and postretirement benefits was a use of cash of $6.5 million in fiscal 2011. Cash of $18.0 million was generated from increased accounts payable due to higher purchases of raw materials. Net cash used in investing activities was $14.3 million in fiscal 2011, as a result of capital expenditure spending. Net cash used in financing activities was $9.3 million primarily due to the payment of $9.8 million in dividends to shareholders. As a result of the above, the cash balance decreased to $60.1 million at September 30, 2011 even though sales volumes have grown considerably.
Net cash used in operating activities was $19.0 million in fiscal 2010, as compared to cash provided by operating activities of $120.0 million in fiscal 2009. At September 30, 2010, inventory balances (net of foreign currency adjustments) were approximately $49.5 million higher than at September 30, 2009. This increase in inventory was a result of higher sales in the fourth quarter of fiscal 2010 compared to the fourth quarter of fiscal 2009, initiation of pull inventory and higher raw material costs. Cash used from an increase of accounts receivable was $15.8 million in fiscal 2010, as compared to cash generated of $50.9 million for fiscal 2009, as a result of higher fourth quarter sales. Pension and postretirement benefits was a use of cash of $8.4 million in fiscal 2010. The above factors were partially offset by cash generated
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