Haynes International, Inc.

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Haynes International, Inc.

1020 West Park Avenue
P.O. Box 9013
Kokomo, Indiana 46904-9013
U.S.A.
Telephone: (765) 456-6000
Toll Free: (800) 354-0806
Fax: (765) 456-6905
Web site: http://www.haynesintl.com

Public Company
Incorporated: 1915 as Haynes Stellite Company
Employees: 1,072
Sales: $434.41 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: HAYN
NAIC: 331491 Nonferrous Metal (Except Copper and Aluminum) Rolling, Drawing, and Extruding; 331492 Secondary Smelting, Refining, and Alloying of Nonferrous Metal (Except Copper and Aluminum); 421510 Metals Service Centers and Offices

Haynes International, Inc., is a leading American producer of nickel- and cobalt-based alloys, a technology the companys founder, Elwood Haynes, pioneered in the early part of the 20th century. The companys high temperature resistant metals have applications in the aerospace industry, which accounts for most of revenues, while corrosion-resistant alloys make up a significant business with the chemical processing industry. Haynes has manufacturing facilities in Kokomo, Indiana; Arcadia, Louisiana; and Mountain Home, North Carolina, as well as metals service centers located in the United States, Europe, and Asia. The company offers products in a variety of forms, including sheet, bar, wire, and tubing, as well as fittings and flanges.

ORIGINS

The story of Haynes International began early in the 20th century with scientist and engineer Elwood Haynes. A native of Indiana, Haynes graduated from a polytechnic institute and did some graduate work in chemistry at Johns Hopkins before returning home to take a job with a natural gas and oil concern. Haynes was perhaps best known during his day as the inventor of one of the first gasoline-powered automobiles, called the Pioneer, which he introduced in 1894. His Haynes-Apperson Automobile Company manufactured cars until 1924. Hayness other passion, however, was metallurgical experimentation. He developed a lightweight yet durable metal during this time that he called stellite (from the Latin word stella (star), receiving patents for it in 1912, and incorporated the Haynes Stellite Company in Kokomo, Indiana, in 1915. Stellite was a tungsten and cobalt-chromium alloy, referred to later as an early form of stainless steel, with applications in the manufacture of machine parts, particularly lathe or cutting tools, and metal utensils, including dental instruments.

Bolstered too by the demand for the metal during World War I, Haynes Stellite was highly successful from the onset, with sales surpassing $3 million by 1918. Among Hayness customers was Union Carbide and Carbon Corporation, which purchased stellite for its cutting tools. In 1920, Haynes accepted an offer from Union Carbide to purchase his company, and he withdrew from his leadership role. Haynes died in 1925 at the age of 68.

Haynes Stellite carried on, and, under the parentage of Union Carbide, continued to develop new alloys. New cobalt-based products were soon followed by nickel-based alloys, which resisted corrosion. Hastelloy B, a nickel-based alloy that would be used for decades, was among the more successful, and eventually was found in high temperature applications such as rocket nozzles for the Viking Mars landing vehicles. A subsequent product called Hastelloy C made it into the Apollo program, while Hastelloy X, introduced in 1953, was featured in numerous jet aircraft. Stellite too gained new ground and flourished, especially during World War II when the company became the top producer of stellite blades or buckets used in the superchargers for airplane engines. Stellite and Hastelloy both figured in production of the Navys search light reflectors.

After the war, Haynes continued to develop new alloys and the products found new applications, particularly in aircraft engines. products In 1967 the company introduced an alloy called Haynes 188 that provided even more heat resistance. This incorporated lanthanum, chromium, and tungsten in a nickel base. It was used in the massive Pratt & Whitney F100 engines that powered the F-15, which set many speed and altitude records and served as the Wests best interceptor aircraft for decades. Haynes 230, an alloy of nickel, chromium, tungsten, and molybdenum, eventually supplanted Haynes 188. A similar formulation was found in Hastelloy C-22.

OWNERSHIP CHANGES

In 1970 Union Carbide sold Haynes to Cabot Corporation of Waltham, Massachusetts, and it become a division of the global chemicals giant. According to Cabots annual report at the time, Haynes Stellite profoundly changed the nature of the Company by launching Cabot in a new directionhigh performance materialsby providing major diversification strength, and by broadening our technological base in a way that is complementary to the technical skills we have in the performance chemical field.

Research and development efforts continued apace, with the introduction of a new generation of Hastelloy alloys. Moreover, the company began extending its reach abroad, opening several service centers in Europe.

Recognizing the need to keep pace with technology to stay competitive, Haynes installed a $60 million Steckel rolling mill at its Kokomo facility in 1982. While the companys technology evolved, so did its marketing, in response to market conditions. A trend in the 1980s toward lower inventories and more outsourcing of assemblies to subcontractors caused the company to focus more on small orders. Around the same time, Haynes licensed production of its alloys to Japans Mitsubishi Metal Corporation. By the end of the 1980s, the company had four service centers in the United States and another three in Europe.

In 1987, Cabot spun Haynes off as an independent company, incorporated in Delaware under the name Haynes International, Inc. Struggling financially after overextending its reach its efforts to diversify, Cabot sold an estimated 40 percent of the company to Prudential Insurance Company of America, with management acquiring another 5 to 10 percent. Dr. Paul Troiano became Haynes CEO in 1986. Michael D. Austin, former head of British Steels Tuscaloosa steel mini-mill, replaced him in 1993 and served for six years in that capacity.

COMPANY PERSPECTIVES

Haynes International, Inc., headquartered in Kokomo, Indiana, USA, is a world leader as the inventor, developer, and producer of quality high performance nickel- and cobalt-based alloys. Haynes International, Inc., is a technology and service oriented company devoted to the development and manufacture of highperformance nickel- and cobalt-based alloys for service in severe corrosion and high-temperature applications. Superior customer service and technical support are provided worldwide by well-trained professionals within the company. Haynes service centers and affiliates have available in-stock sheet, plate, bar, wire, tubing, forging stock, fittings, and flanges.

In 1989 a new holding company formed by Haynes management and Morgan Lewis Githens & Ahn Inc., a private investment firm based in New York, bought Cabots 53 percent share of Haynes for $76 million. Prudential also sold its holdings, though it retained an indirect interest through its participation in Morgan Lewiss investment fund, allowing Morgan Lewis to amass a 90 percent holding. Cabot had sold most of its other metals businesses as well.

Haynes began the 1990s with annual revenues in excess of $200 million; however, sales dropped considerably as a global recession hit its aviation industry customers hard in the early part of the decade. Officials considered selling the company in 1995 due to lagging earnings. The markets, particularly aerospace, soon rebounded, however. Nevertheless, the company had another change of ownership within a couple of years. Another investment firm, the Blackstone Group, acquired control of Haynes in 1997.

Francis J. Petro became president and CEO of Haynes in 1999. He had previously led the Inco Alloys unit of The International Nickel Company of Canada. Blackstone had proposed buying Inco Alloys for $410 million and combining it with Haynes in 1998, but the Justice Department blocked the deal on antitrust grounds.

With Blackstones plans to grow the business by merger thwarted, the company looked to international markets for growth. By the end of the 1990s, Haynes International was a global business. It had 1,000 employees, most of them based at the home facility of Kokomo, Indiana. This plant supplied feedstock for a couple of other plants making bars, plate, and wires. There were several service centers extending distribution to Europe and Asia. China and India were emerging as important international markets.

BANKRUPTCY REORGANIZATION AND GOING PUBLIC

Haynes had not had any major labor disputes since the 1960s, but contract renewal negotiations with United Steelworkers stalled in 2002 as the unions contract came up for renewal. A lockout ensued. A couple of years later, Haynes would emerge from bankruptcy proceedings with labor concessions such as increased flexibility in scheduling.

Haynes experienced a difficult year in 2003 as both the chemicals and aerospace industries suffered in a global recession. At the same time, power companies put off installing new land-based turbines due to the slow economy and fallout from the Enron scandal. After earning just under a million dollars in the previous fiscal year, Haynes suffered a loss of $72 million in fiscal 2003 as revenues slipped from $226 million to $178 million. Its debts totaled $140 million as it and its U.S. subsidiaries and affiliates filed for bankruptcy protection on March 29, 2004.

Haynes emerged from bankruptcy on August 31, 2004, with a new structure, merging former parent company, Haynes Holdings, Inc., with Haynes International, Inc., the surviving entity. The Blackstone Group, which held 72 percent of Haynes equity before the restructuring, saw its holding reduced to less than 4 percent.

The company was soon in growth mode again. In November 2004, Haynes acquired The Branford Wire and Manufacturing Company of Mountain Home, North Carolina, for about $8 million in cash. Branford made wire of stainless and nickel alloy.

Revenues rose by a third in the fiscal year ended September 30, 2006, reaching a record $434 million (figures after 2004 reflect fresh start reporting). After losing $4 million in the previous year, the company was in the black again, posting a net gain of $35.5 million. The upturn was attributed to better market conditions, increased efficiency due to upgraded mill equipment, and success of the companys new 282 alloy.

Aerospace continued to be the companys largest segment, generally accounting for 40 percent of revenues. Sales to the chemical processing industry made up 20 to 30 percent of the total, with land-based turbines accounting for a little less than that.

KEY DATES

1912:
Elwood Haynes patents a new metal alloy he calls stellite.
1915:
Haynes Stellite Company is formed in Kokomo, Indiana.
1920:
Union Carbide and Carbon acquires Haynes.
1972:
Haynes is acquired by Cabot Corporation.
1987:
Haynes is incorporated in Delaware.
1989:
Private investment firm Morgan Lewis Githens & Ahn Inc. buys Haynes.
1997:
Blackstone Group acquires Haynes.
2004:
Haynes files Chapter 11 but emerges from bankruptcy within a few months.
2007:
Haynes goes public on the NASDAQ.

After the reorganization, some of the companys shares had been traded over-the-counter on the pink sheets. By the end of 2006, its share price had risen from $9.90 to $54. The company went public on the NASDAQ General Market System in March 2007. The offering was priced at $65 a share; proceeds went toward paying off debt. The initial public offering helped extend the shares beyond a few hedge funds, increasing liquidity and value.

Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

Haynes International, Ltd. (United Kingdom); Haynes International S.A.R.L. (France); Haynes Pacific Pte Ltd. (Singapore); Haynes Wire Company; Nickel-Contor AG (Switzerland).

PRINCIPAL OPERATING UNITS

Arcadia, Louisiana; Chennai, India; Houston, Texas; Kokomo, Indiana; La Mirada, California; Lebanon, Indiana; Lenzburg, Switzerland; Milan, Italy; Mountain Home, North Carolina; Openshaw, England; Paris, France; Shanghai, China; Winsor, Connecticut; Singapore; Zürich, Switzerland.

PRINCIPAL COMPETITORS

Allegheny Technologies, Inc.; Krupp VDM GmbH; Special Metals Corporation.

FURTHER READING

Biswas, Soma, Haynes Eyes Coming Out Party, Daily Deal, August 18, 2004.

Brennan, Terry, Haynes Gets Approval for $100M DIP, Daily Deal, April 23, 2004.

Dempsey, John, Haynes Reports Its Best Year Ever, Kokomo Tribune, December 6, 2006.

_____, Haynes Seeking OK to Go Public, Kokomo Tribune, January 25, 2007.

_____, Haynes Stock Surges 11% on Nasdaq, Kokomo Tribune, March 27, 2007.

Francis Petro, President and CEO, Haynes International Inc. (Interview), Safety & Health, February 2007, p. 35.

Gray, Ralph D., Stellite: The History of the Haynes Stellite Company, 19121972, Stellite Division, Cabot Corp., 112 p.

Guzzo, Maria, Haynes Plans Stock Offering to Repay Debt, American Metal Market, January 30, 2007, p. 6.

Haflich, Frank, Timet, Haynes Sign 20-Year Agreement for Flat Products, American Metal Market, November 21, 2006, p. 6.

Hastelloy, Materials World, May 2005, p. 21.

Haynes Buys Automation System, American Metal Market, December 2, 1998, p. 3.

Haynes Holdings Inc., Going Public: The IPO Reporter, July 8, 1996, p. 17.

Haynes International, Inc., Haynes Heritage80 Years Plus of Innovative Metallurgy, http://www.haynesintl.com/Heritage.htm.

Hornaday, Bill W., Kokomo, Ind., Metals-Alloy Maker Files for Bankruptcy Protection, Indianapolis Star, March 30, 2004.

Kelly, Nancy E., Alloys Deal: What Watchdogs Watch, American Metal Market, June 19, 1997, p. 2.

Key, Peter, Indiana Metals Firm Haynes International Inc. Files for IPO, Knight-Ridder/Tribune Business News, June 6, 1996.

Murray, Shanon D., Haynes International Files Ch. 11, Daily Deal, March 30, 2004.

Robertson, Scott, Haynes No Longer Up for Sale, American Metal Market, February 16, 1996, p. 3.

Sacco, John E., Haynes Acquires Branford Assets to Expand Its Superalloys Portfolio, American Metal Market, November 9, 2004, p. 5.

_____, Haynes Austin Retires, American Metal Market, January 20, 1999, p. 4.

_____, Haynes International Seeks Ch. 11 Creditor Protection, American Metal Market, March 30, 2004, p. 1.

_____, Haynes Rolls On, Barred Workers Wait and Wonder, American Metal Market, June 27, 2002, p. 1.

_____, Merger of Haynes, Inco Alloys Unit Off, American Metal Market, March 5, 1998, p. 1.

Scolieri, Peter, At Least 3 Metals Firms Are Seen As Suitors for Haynes International, American Metal Market, May 23, 1989, p. 1.

_____, Cabot Seeks Buyer of Haynes Interest, American Metal Market, February 8, 1989, p. 1.

_____, N.Y. Holding Firm Acquires Haynes, American Metal Market, July 12, 1989, p. 1.

Selland, Kerri J., For Haynes, Red Gets Deeper, American Metal Market, March 4, 1993, pp. 5f.

Smith, Sandy, Safety Is Top Priority at Haynes, Occupational Hazards, September 2003, p. 83.

Sponaugle, Charlie, History of Haynes International Inc. Pittsburgh Engineer, Winter 2005.

Trickett, Alex, High Performance Metals, Metal Bulletin Monthly, March 1, 2000.

Tunney, John, Haynes Changes Focus of Hi-Temp Alloy Sales to Small-Order Buyers, American Metal Market, August 31, 1988, pp. 1f.