HAYNES INTERNATIONAL, INC. 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 endedSeptember 30 , unless otherwise indicated. This Quarterly Report on Form 10-Q (this "Form 10-Q") 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, each as amended. All statements other than statements of historical fact, including statements regarding market and industry prospects and future results of operations or financial position, made in this Form 10-Q 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 2020 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 may affect the accuracy of forward-looking statements. Some, but not all, of these risks are described in Item 1A. of Part 1 of the Company's Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2019 .
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.
Business OverviewHaynes International, Inc. ("Haynes" or "the Company") is one of the world's largest producers of high-performance nickel and cobalt based alloys in sheet, coil and plate forms. The Company is focused on developing, manufacturing, marketing and distributing technologically advanced, high-performance alloys, which are sold primarily in the aerospace, chemical processing and industrial gas turbine industries. The Company's products consist of high-temperature resistant alloys, or HTA products, and corrosion-resistant alloys, or CRA products. HTA products are used by manufacturers of equipment that is subjected to extremely high temperatures, such as jet engines, gas turbine engines, and industrial heating and heat treatment equipment. CRA products are used in applications that require resistance to very corrosive media found in chemical processing, power plant emissions control and hazardous waste treatment. Management believes Haynes is one of the principal producers of high-performance alloy flat products in sheet, coil and plate forms, and sales of these forms, in the aggregate, represented approximately 58% of net product revenues in fiscal 2019. The Company also produces its products as seamless and welded tubulars, and in slab, bar, billet and wire forms. The Company has manufacturing facilities inKokomo, Indiana ;Arcadia, Louisiana ; and Mountain Home,North Carolina . TheKokomo facility specializes in flat products, theArcadia facility specializes in tubular products, and the Mountain Home facility specializes in wire products. The Company's products are sold primarily through its direct sales organization, which includes 12 service and/or sales centers inthe United States ,Europe andAsia . All of these centers are Company operated. Dividends Paid and Declared In the first quarter of fiscal 2020, the Company declared and paid a regular quarterly cash dividend of$0.22 per outstanding share of the Company's common stock. The dividend was paid onDecember 16, 2019 to stockholders of record at the close of business onDecember 2, 2019 . The dividend cash pay-out in the first quarter was approximately$2.8 million based on the number of shares outstanding and equal to approximately$11.0 million on an annualized basis. OnJanuary 30, 2020 , the Company announced that the Board of Directors declared a regular quarterly cash dividend of$0.22 per outstanding share of the Company's common stock. The dividend is payableMarch 16, 2020 to stockholders of record at the close of business onMarch 2, 2020 . Capital Spending
During the first three months of fiscal 2020, capital investment was
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Volumes, Competition and Pricing
Overall shipments during the first quarter of fiscal 2020 declined from the prior quarter and prior year's first quarter due to a number of factors. Volume shipped in the first quarter of fiscal 2020 was 4.2 million pounds, which was 1.2 million pounds lower sequentially than the fourth quarter of fiscal 2019 and 0.1 million pounds lower than last year's first quarter, which was impacted by a planned equipment outage. Volume shipped into the aerospace market in the first quarter of fiscal 2020 was 0.4 million pounds lower sequentially compared to the fourth quarter of fiscal 2019 but higher than last year's first quarter by 0.2 million pounds. Uncertainty is elevated in the aerospace market with the Boeing announcement that it has temporarily suspended production of the grounded 737 MAX and the corresponding impact in the aerospace supply chain. The Company has also seen adjustments in the ordering patterns for supply chains other than the Boeing 737 MAX. These headwinds are detrimental to current and near-term shipments into the aerospace market. The Company believes the demand drivers in the aerospace market are favorable long-term. Volume shipped into the chemical processing market in the first quarter of fiscal 2020 was lower sequentially by 0.5 million pounds compared to the fourth quarter of fiscal 2019 and lower than the first quarter of fiscal year 2019 by 0.1 million pounds driven by lower base-business volumes which the Company attributes to trade tariffs and global economic uncertainty. However, the lower base-business was slightly offset by higher specialty application projects. Pounds shipped in the first quarter of fiscal 2020 into the industrial gas turbine market were 0.1 million pounds lower sequentially compared to the fourth quarter of fiscal 2019 but slightly higher than last year's first quarter. The primary industrial gas turbine market activity was attributable to a slight improvement in demand for large-frame turbines, while small/medium frame engine builds have slowed down primarily due to the oil and gas market. Volume shipped into the other markets category in the first quarter of fiscal 2020 was lower sequentially by 0.1 million pounds compared to the fourth quarter of fiscal 2019 and lower by 0.2 million pounds compared to last year's first quarter, driven by a reduction in flue gas desulfurization shipments. The product average selling price per pound in the first quarter of fiscal 2020 was$23.97 , which is higher sequentially compared to the fourth quarter of fiscal 2019 and higher than last year's first quarter. The increase is primarily driven by favorable product mix and price increases. The Company continues to emphasize price increases in our high-value differentiated products
Set forth below are selected data relating to the Company's net revenues, gross profit, backlog, the 30-day average nickel price per pound as reported by the London Metals Exchange and a breakdown of net revenues, shipments and average selling prices to the markets served by the Company for the periods shown. The data should be read in conjunction with the consolidated financial statements and related notes thereto and the remainder of "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Form 10-Q.
Net Revenue and Gross Profit Margin Performance:
Quarter Ended
December 31, March 31, June 30, September 30, December 31,
(dollars in thousands) 2018 2019 2019 2019 2019
Net Revenues $ 107,069 $ 127,474 $ 126,032 $ 129,640 $ 108,453
Gross Profit Margin $ 11,335 $ 14,683 $ 18,175 $ 21,310 $ 18,743
Gross Profit Margin % 10.6 % 11.5 % 14.4 % 16.4 % 17.3 %
The gross profit margin percentage improved in the first quarter of fiscal 2020
to 17.3% as compared to 16.4% in the fourth quarter of fiscal 2019, even on
lower topline net revenues, and continued the sequential improvement in each
quarter since the beginning of fiscal 2019 with the progression being 10.6%,
11.5%, 14.4%, 16.4% and 17.3%. Continued traction of the Company's improvement
initiatives related to price increases and cost reductions continue to favorably
impact gross margins.
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Backlog
Quarter Ended
December 31, March 31, June 30, September 30, December 31,
2018 2019 2019 2019 2019
Backlog(1)
Dollars (in thousands) $ 237,802 $ 253,003 $ 254,947 $ 235,204 $ 237,620
Pounds (in thousands) 8,392 8,855 9,072 8,064 8,231
Average selling price per pound $ 28.34 $ 28.57 $ 28.10 $ 29.17 $ 28.87
Average nickel price per pound
London Metals Exchange(2) $ 4.92 $ 5.93 $ 5.43 $ 8.02 $ 6.26
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(1)The Company defines backlog to include firm commitments from customers for
delivery of product at established prices. There are orders in the backlog at
any given time which include prices that are subject to adjustment based on
changes in raw material costs, which can vary from approximately 30% - 50% of
the orders. Historically, approximately 75% of the backlog orders have shipped
within nine months and approximately 90% have shipped within 12 months. The
backlog figures do not reflect that portion of the business conducted at service
and sales centers on a spot or "just-in-time" basis.
(2)Represents the average price for a cash buyer as reported by the London Metals Exchange for the 30 days ending on the last day of the period presented.
Backlog was$237.6 million atDecember 31, 2019 , an increase of$2.4 million , or 1.0%, from$235.2 million atSeptember 30, 2019 . Backlog pounds atDecember 31, 2019 increased sequentially during the first quarter of fiscal 2020 by 2.1% as compared toSeptember 30, 2019 . The average selling price of products in the Company's backlog decreased to$28.87 per pound atDecember 31, 2019 from$29.17 per pound atSeptember 31, 2019 , reflecting a change in product mix and lower market prices for raw materials. Quarterly Market Information Quarter Ended December 31, March 31, June 30, September 30, December 31, 2018 2019 2019 2019 2019 Net revenues (in thousands) Aerospace$ 54,607 $ 68,858 $ 66,321 $ 68,318$ 58,843 Chemical processing 18,920 21,761 21,197 27,773 16,712 Industrial gas turbines 14,083 13,685 15,870 15,792 13,763 Other markets 14,285 16,958 15,666 11,037 11,875 Total product revenue 101,895 121,262 119,054 122,920 101,193 Other revenue 5,174 6,212 6,978 6,720 7,260 Net revenues$ 107,069 $ 127,474 $ 126,032 $ 129,640 $ 108,453 Shipments by markets (in thousands of pounds) Aerospace 2,112 2,857 2,579 2,731 2,303 Chemical processing 898 971 1,126 1,315 788 Industrial gas turbines 811 757 893 946 825 Other markets 509 580 523 432 306 Total shipments 4,330 5,165 5,121 5,424 4,222 Average selling price per pound Aerospace $ 25.86$ 24.10 $ 25.72 $ 25.02 $ 25.55 Chemical processing 21.07 22.41 18.83 21.12 21.21 Industrial gas turbines 17.36 18.08 17.77 16.69 16.68 Other markets 28.06 29.24 29.95 25.55 38.81 Total product (product only; excluding other revenue) 23.53 23.48 23.25 22.66 23.97 Total average selling price (including other revenue) $ 24.73$ 24.68 $ 24.61 $ 23.90 $ 25.69 22 Table of Contents
Results of Operations for the Three Months Ended
Three Months Ended December 31, Change
($ in thousands) 2018 2019 Amount %
Net revenues $ 107,069 100.0 % $ 108,453 100.0 % $ 1,384 1.3 %
Cost of sales 95,734 89.4 % 89,710 82.7 % (6,024) (6.3) %
Gross profit 11,335 10.6 % 18,743 17.3 % 7,408 65.4 %
Selling, general and
administrative expense 11,128 10.4 % 11,507 10.6 % 379 3.4 %
Research and technical expense 834 0.8 % 882 0.8 % 48 5.8 %
Operating income (loss) (627) (0.6) % 6,354 5.9 % 6,981 (1,113.4) %
Nonoperating retirement benefit
expense 856 0.8 % 1,700 1.6 % 844 98.6 %
Interest income (20) (0.0) % (14) (0.0) % 6 (30.0) %
Interest expense 241 0.2 % 251 0.2 % 10 4.1 %
Income (loss) before income taxes (1,704) (1.6) % 4,417 4.1 % 6,121 (359.2) %
Provision for (benefit from)
income taxes (101) (0.1) % 1,149 1.1 % 1,250 (1,237.6) %
Net income (loss) $ (1,603) (1.5) % $ 3,268 3.0 % $ 4,871 (303.9) %
The following table includes a breakdown of net revenues, shipments and average selling prices to the markets served by the Company for the periods shown.
Three Months Ended
December 31, Change
2018 2019 Amount %
Net revenues (dollars in thousands)
Aerospace $ 54,607 $ 58,843 $ 4,236 7.8 %
Chemical processing 18,920 16,712 (2,208) (11.7) %
Industrial gas turbine 14,083 13,763 (320) (2.3) %
Other markets 14,285 11,875 (2,410) (16.9) %
Total product revenue 101,895 101,193 (702) (0.7) %
Other revenue 5,174 7,260 2,086 40.3 %
Net revenues $ 107,069 $ 108,453 $ 1,384 1.3 %
Pounds by market (in thousands)
Aerospace 2,112 2,303 191 9.0 %
Chemical processing 898 788 (110) (12.2) %
Industrial gas turbine 811 825 14 1.7 %
Other markets 509 306 (203) (39.9) %
Total shipments 4,330 4,222 (108) (2.5) %
Average selling price per pound
Aerospace $ 25.86 $ 25.55 $ (0.31) (1.2) %
Chemical processing 21.07 21.21 0.14 0.7 %
Industrial gas turbine 17.36 16.68 (0.68) (3.9) %
Other markets 28.06 38.81 10.75 38.3 %
Total product (excluding other revenue) 23.53 23.97 0.44 1.9 %
Total average selling price (including
other revenue) $ 24.73 $ 25.69 $ 0.96 3.9 %
Net Revenues. Net revenues were $108.5 million in the first three months of
fiscal 2020, an increase of 1.3% from $107.1 million in the same period of
fiscal 2019. Volume was 4.2 million pounds in the first three months of fiscal
2020, a decrease of 2.5% from 4.3 million pounds in the same period of fiscal
2019. The decrease in volume was primarily due to declining chemical processing
sales (partly due to retaliatory tariffs in China ) as well as declining volume
in flue-gas desulfurization (included within other markets), partially offset by
an increase in aerospace volume. The product-sales average selling price was
$23.97 per pound in the first three months of fiscal 2020, an increase of 1.9%
from $23.53 per pound in the same period of fiscal 2019. The average selling
price increased as a result of improved pricing and a higher value mix within
the industrial gas turbine and other markets as compared to the same period of
fiscal 2019, in the amount of approximately $0.45 per pound, partially offset by
lower raw material market prices, which decreased average selling price per
pound by approximately $0.01 .
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Sales to the aerospace market were $58.8 million in the first three months of
fiscal 2020, an increase of 7.8% from $54.6 million in the same period of fiscal
2019, due to a 9.0%, or 0.2 million pound, increase in volume, partially offset
by a 1.2%, or $0.31 , decrease in average selling price per pound. The increase
in volume is due to the planned equipment that was undertaken in the first three
months of fiscal 2019. Partially offsetting this were lower shipments as the
supply chain began to be impacted by the grounding, production slow-down and
eventually temporary suspension of production of the Boeing 737 MAX. The average
selling price per pound decrease reflects a lower value product mix, which
decreased average selling price per pound by approximately $0.76 , partially
offset by improved pricing of $0.38 and an increase in raw material market
prices, which increased average selling price per pound by approximately $0.07 .
Sales to the chemical processing market were $16.7 million in the first three
months of fiscal 2020, a decrease of 11.7% from $18.9 million in the same period
of fiscal 2019, due to a 12.2% decrease in volume. Base-business volumes have
decreased in the first three months of fiscal 2020 from the same period of
fiscal 2019. However, partially offsetting base-business decline was an
increase in specialty application project revenue in the first three months of
fiscal 2020 compared to the same period last year. The average selling price
per pound reflects improved pricing and an increase in raw material market
prices, which increased average selling price per pound by approximately $0.48
and $0.39 , respectively, partially offset by a lower-value product mix, which
decreased average selling price per pound by approximately $0.73 .
Sales to the industrial gas turbine market were $13.8 million in the first three
months of fiscal 2020, a decrease of 2.3% from $14.1 million for the same period
of fiscal 2019, due to a decrease of 3.9%, or $0.68 , in average selling price
per pound, partially offset by a 1.7%, increase in volume. The increase in
volume is primarily attributable to a slight improvement in demand for
large-frame turbines, while small/medium frame engine builds have slowed down
primarily due to the oil and gas market. The decrease in average selling price
per pound primarily reflects declined pricing due to competition and other
factors, which decreased average selling price per pound by approximately $1.23 ,
partially offset by a higher-value product mix, which increased the average
selling price per pound by approximately $0.55 .
Sales to other markets were $11.9 million in the first three months of fiscal
2020, a decrease of 16.9% from $14.3 million in the same period of fiscal 2019,
due to a 39.9% decrease in volume, partially offset by a 38.3% increase in
average selling price per pound. The decrease in volume was primarily due to a
decline in sales to the flue-gas desulfurization market. The increase in average
selling price reflects a higher-value product mix and improved pricing, which
increased average selling price per pound by approximately $12.47 , partially
offset by lower raw material market prices, which decreased average selling
price per pound by approximately $1.72 .
Other Revenue. Other revenue was $7.3 million in the first three months of
fiscal 2020, an increase of 40.3% from $5.2 million in the same period of fiscal
2019. The increase was due primarily to increased toll conversion particularly
in titanium.
Cost of Sales. Cost of sales was $89.7 million , or 82.7% of net revenues, in
the first three months of fiscal 2020 compared to $95.7 million , or 89.4% of net
revenues, in the same period of fiscal 2019. This decrease was primarily due to
lower volumes sold combined with continued traction in the Company's cost
reduction initiatives and lower raw material prices.
Gross Profit. As a result of the above factors, gross profit was $18.7 million
for the first three months of fiscal 2020, an increase of $7.4 million from the
same period of fiscal 2019. Gross profit as a percentage of net revenue
increased to 17.3% in the first three months of fiscal 2020 as compared to 10.6%
in the same period of fiscal 2019. The improvement in gross profit was primarily
attributable to improved pricing and cost saving initiatives. Fiscal 2019 was
impacted by the temporary inefficiencies caused by the delayed start-up of
cold-finish operations after the planned equipment upgrade in the first three
months of fiscal 2019.
Selling, General and Administrative Expense. Selling, general and
administrative expense was $11.5 million for the first three months of fiscal
2020, an increase of $0.4 million from the same period of fiscal 2019. This
increase is primarily attributable to higher expense due to foreign exchange
losses. Selling, general and administrative expense as a percentage of net
revenues increased to 10.6% for the first three months of fiscal 2020 compared
to 10.4% for the same period of fiscal 2019.
Research and Technical Expense. Research and technical expense was
Operating Income/(Loss). As a result of the above factors, operating income in the first three months of fiscal 2020 was$6.4 million compared to an operating loss of$(0.6) million in the same period of fiscal 2019. Nonoperating retirement benefit expense. Nonoperating retirement benefit expense was$1.7 million compared to$0.9 million in the same period of fiscal 2019. The increase in expense was primarily driven by lower discount rates in theSeptember 30, 2019 valuation which resulted in higher retirement liabilities and ultimately higher expense for the first quarter of fiscal 2020. 24 Table of Contents Income Taxes. Income tax expense was$1.1 million in the first three months of fiscal 2020, an increase of$1.2 million from a benefit of$0.1 million in the same period of fiscal 2019. The effective tax rate (ETR) in the first quarter of fiscal 2020 of 26.0% was higher than the ETR during the same period of fiscal 2019 due to the prior year forfeiture of stock options which had an adverse impact of$0.3 million during the first quarter of fiscal 2019. This adverse impact lowered the ETR in a period which the Company had pre-tax losses. Net Income/(Loss). As a result of the above factors, net income for the first three months of fiscal 2020 was$3.3 million , a difference of$4.9 million from a net loss of$(1.6) million in the same period of fiscal 2019. Working Capital Controllable working capital, which includes accounts receivable, inventory, accounts payable and accrued expenses, was$290.2 million atDecember 31, 2019 , an increase of$7.8 million , or 2.8%, from$282.5 million atSeptember 30, 2019 . This increase resulted primarily from inventory increasing$23.2 million , partially offset by accounts receivable decreasing by$10.9 million during the first quarter of fiscal 2020 and accounts payable and accrued expenses increasing by$4.5 million during the first quarter of fiscal 2020.
Liquidity and Capital Resources
Comparative cash flow analysis
The Company had cash and cash equivalents of$33.6 million , inclusive of$9.9 million that was held by foreign subsidiaries in various currencies, compared to$31.0 million atSeptember 30, 2019 . Additionally, there were zero borrowings against the line of credit outstanding as ofDecember 31, 2019 . Net cash provided by operating activities in the first three months of fiscal 2020 was$7.0 million compared to net cash provided by operating activities of$7.1 million in the first three months of fiscal 2019, a decrease of$0.1 million . Cash flow from operating activities in the first three months of fiscal 2020 was adversely impacted by greater increases in inventory and lower income tax refunds as compared to the same period of fiscal 2019, partially offset by higher net income and greater decreases in accounts receivable in the first three months of fiscal 2020 as compared to the same period of fiscal 2019.
Net cash used in investing activities was
Net cash used in financing activities was$2.6 million in the first three months of fiscal 2020, which was lower than cash used in financing activities during the same period of fiscal 2018 of$2.9 million , primarily as a result of, among other factors, proceeds received from the exercise of stock options during the three months of fiscal 2020 as compared to the same period of fiscal 2019. Stock options were exercised by certain members of management just prior to their 10 year expiration dates. Future sources of liquidity The Company's sources of liquidity for fiscal 2020 are expected to consist primarily of cash generated from operations, cash on hand and, if needed, borrowings under theU.S. revolving credit facility. AtDecember 31, 2019 , the Company had cash of$33.6 million , an outstanding balance of zero on theU.S. revolving credit facility and access to a total of approximately$120.0 million under theU.S. revolving credit facility, subject to a borrowing base formula and certain reserves. Management believes that the resources described above will be sufficient to fund planned capital expenditures, regular quarterly dividends and working capital requirements over the next twelve months.
The Company andWells Fargo Capital Finance, LLC ("Wells Fargo") entered into a Third Amended and Restated Loan and Security Agreement (the "Amended Agreement") with certain other lenders with an effective date ofJuly 14, 2011 . OnJuly 7, 2016 , the Company amended the agreement to, among other things, extend the term throughJuly 7, 2021 and reduce unused line fees and certain administrative fees. The maximum revolving loan amount under the Amended Agreement is$120.0 million , subject to a borrowing base formula and certain reserves. The Amended Agreement permits an increase in the maximum revolving loan amount from$120.0 million up to an aggregate amount of$170.0 million at the request of the borrower. Borrowings under theU.S. revolving credit facility bear interest, at the Company's option, at either Wells Fargo's "prime rate", plus up to 0.75% per annum, or the adjusted Eurodollar rate used by the lender, plus up to 2.0% per annum. As ofDecember 31, 2019 , theU.S. revolving credit facility had a zero balance. 25 Table of Contents The Company must pay monthly, in arrears, a commitment fee of 0.20% per annum on the unused amount of theU.S. revolving credit facility total commitment. For letters of credit, the Company must pay 1.5% per annum on the daily outstanding balance of all issued letters of credit, plus customary fees for issuance, amendments and processing. The Company is subject to certain covenants as to fixed charge coverage ratios and other customary covenants, including covenants restricting the incurrence of indebtedness, the granting of liens and the sale of assets. The covenant pertaining to fixed charge coverage ratios is only effective in the event the amount of excess availability under the revolver is less than 10.0% of the maximum credit revolving loan amount. The Company is permitted to pay dividends and repurchase common stock if certain financial metrics are met (most of which do not apply in the case of regular quarterly dividends less than$20.0 million in the aggregate in a year and repurchases in connection with the vesting of shares of restricted stock). As ofDecember 31, 2019 , the most recent required measurement date under the Amended Agreement, management believes the Company was in compliance with all applicable financial covenants under the Amended Agreement. Borrowings under theU.S. revolving credit facility are collateralized by a pledge of substantially all of theU.S. assets of the Company, including the equity interests in itsU.S. subsidiaries, but excluding the four-high Steckel rolling mill and related assets, which are pledged toTitanium Metals Corporation ("TIMET") to secure the performance of the Company's obligations under a Conversion Services Agreement with TIMET (see discussion of TIMET at Note 8 in the Notes to Condensed Consolidated Financial Statements in this report). TheU.S. revolving credit facility is also secured by a pledge of a 65% equity interest in each of the Company's direct foreign subsidiaries. Future uses of liquidity
The Company's primary uses of cash over the next twelve months are expected to consist of expenditures related to:
?Funding operations; ?Capital spending;
?Dividends to stockholders; and
?Pension and postretirement plan contributions.
Capital investment in the first three months of fiscal 2020 was
Contractual Obligations
The following table sets forth the Company's contractual obligations for the
periods indicated, as of
Payments Due by Period
Less than More than
Contractual Obligations Total 1 year 1-3 Years 3-5 Years 5 years
(in thousands)
Credit facility fees(1) $ 440 $ 280 $ 160 $ - $ -
Operating lease obligations 4,474 2,486 1,454 534 -
Finance lease obligations 16,438 996 2,018 2,060 11,364
Raw material contracts (primarily
nickel) 24,671 24,671 - - -
Capital projects and other
commitments 1,987 1,987 - - -
Pension plan(2) 100,167 6,000 12,000 10,500 71,667
Non-qualified pension plans 695 95 190 190 220
Other postretirement benefits(3) 47,234 4,155 9,281 9,859 23,939
Environmental post-closure
monitoring 606 97 144 151 214
Total $ 196,712 $ 40,767 $ 25,247 $ 23,294 $ 107,404 -------------------------------------------------------------------------------- (1)As ofDecember 31, 2019 , the revolver balance was zero, therefore no interest is due. However, the Company is obligated to the Bank for unused line fees and quarterly management fees. (2)The Company has a funding obligation to contribute$100,167 to the domestic pension plan. These payments will be tax deductible. All benefit payments under the domestic pension plan are provided by the plan and not the Company. (3)Represents expected post-retirement benefits only based upon anticipated timing of payments. 26 Table of Contents New Accounting Pronouncements
See Note 2. New Accounting Pronouncements in the Notes to Consolidated Financial Statements.
Critical Accounting Policies and Estimates
The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Assumptions and estimates were based on the facts and circumstances known atDecember 31, 2019 . However, future events rarely develop exactly as forecasted and the best estimates routinely require adjustment. The accounting policies discussed in Item 7 of the Company's Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2019 are considered by management to be the most important to an understanding of the financial statements because their application places the most significant demands on management's judgment and estimates about the effect of matters that are inherently uncertain. These policies are also discussed in Note 2 of the consolidated financial statements included in Item 8 of that report. For the quarter endedDecember 31, 2019 included herein, there have been no material changes to the critical accounting policies and estimates.
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