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 2021 and beyond, overall volume and pricing trends, cost reduction strategies and their anticipated results, capital expenditures, dividends and the impact of COVID-19 on the economy, demand for our products and our operations, including the measures taken by governmental authorities to address it, which may precipitate or exacerbate other risks and/or uncertainties. 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, including our expectations of the impact of the COVID-19 pandemic. 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, 2020 .
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 56% of net product revenues in fiscal 2020. The Company also produces its products as seamless and welded tubulars, and in slab, bar, billet and wire forms. 17 Table of Contents 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. COVID-19 Pandemic InMarch 2020 , theWorld Health Organization characterized the COVID-19 virus as a pandemic, and the President ofthe United States declared the COVID-19 outbreak a national emergency. The rapid spread of the pandemic, and the continuously evolving responses to combat it, have had a significant negative impact on the global economy and the Company's business. COVID-19 related disruptions negatively impacted the Company's financial and operating results in the second half of fiscal 2020 and the first quarter of fiscal 2021. In particular, the pandemic negatively impacted the aerospace supply chain which is absorbing significant downward adjustments to its forecasted demand. The Company has accepted, with select aerospace customers, order push-outs and in some cases cancellations. Markets other than aerospace have also been depressed, with uncertainty and tight cash management impacting customer ordering patterns. The Company has taken significant actions to reduce costs and position itself to manage through the current market disruption caused by COVID-19. While these actions are expected to continue to generate cost savings and cash benefits, additional actions may be required, although we believe that our volumes shipped in the first quarter of fiscal 2021 of 2.8 million pounds represent the bottom of this unprecedented economic and business downturn. Dividends Paid and Declared In the first quarter of fiscal 2021, the Company declared and paid a regular quarterly cash dividend of$0.22 per outstanding share of the Company's common stock. The first quarter dividend was paid onDecember 15, 2020 to stockholders of record at the close of business onDecember 1, 2020 . The dividend cash pay-outs in the first quarter was approximately$2.8 million based on the number of shares outstanding. OnJanuary 28, 2021 , 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 15, 2021 to stockholders of record at the close of business onMarch 1, 2021 . Any future dividends will be at the discretion of the Board of Directors. Capital Spending
During the first three months of fiscal 2021, capital investment was
Volumes, Competition and Pricing
Significantly lower produced and shipped volume continued to be the primary issue impacting the Company's financial results in the first quarter of fiscal 2021. Demand for the Company's products has been negatively impacted across all of the Company's major end markets due to the widespread impact of the COVID-19 global pandemic. Many of the Company's customers are in a cash preservation mode which has also resulted in conservative order entry trends. Elevated inventory throughout the supply chain, particularly in aerospace, contributed to lower order entry. In addition, the first quarter of any fiscal year is typically impacted by lower volumes due to the holidays, maintenance schedules and customers managing their calendar year-end balance sheets. Volume shipped in the first quarter of fiscal 2021 was 2.8 million pounds, a reduction of 1.4 million pounds, or 33.9%, from the same period last year and a 5.2% reduction sequentially from the fourth quarter of fiscal 2020. The aerospace market was the most impacted market with a 1.4 million, or 60.7%, volume decrease from the same period last year and a 20.8% decrease sequentially from the fourth quarter of fiscal 2020. Volume shipped into the chemical processing market decreased 0.2 million pounds, or 23.7%, due to COVID-19 impacts noted above, but was offset by increased volume of 0.2 million pounds shipped into other markets for flue-gas desulphurization applications. Shipments in the industrial gas turbine market were relatively flat compared to the same period last year. The industrial gas turbine market was impacted by COVID-19, however this impact was mitigated by increases in market share. Due to abnormally low levels of production during the first quarter, the Company directly expensed a portion of fixed overhead costs of$5.9 million to cost
of sales.
The product average selling price per pound in the first quarter of fiscal 2021
was
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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:
Comparison by Quarter of Net Revenues, Gross Profit Margin and
Gross Profit Margin Percentage for Fiscal 2020 and 2021
Quarter Ended
December 31, March 31, June 30, September 30, December 31,
(dollars in thousands) 2019 2020 2020 2020 2020
Net Revenues $ 108,453 $ 111,563 $ 80,576 $ 79,938 $ 72,177
Gross Profit Margin $ 18,743 $ 19,296 $ 2,639 $ 3,954 $ 987
Gross Profit Margin % 17.3 % 17.3 % 3.3 % 4.9 % 1.4 %
The significant drop in volumes resulting from the COVID-19 pandemic compressed
margins significantly in the first quarter of fiscal 2021 to 1.4%. The Company
continues to face the industry-wide challenge of reducing spending commensurate
with reductions in production volume in the current environment. In the first
quarter, the Company charged $5.9 million directly to cost of sales for excess
fixed overhead cost per pound incurred due to abnormally low production levels
that could not be capitalized into inventory. This direct charge of $5.9 million
compares to $0.0 million in the first quarter of fiscal 2020 and $4.0 million
sequentially in the fourth quarter of fiscal 2020. Additional inventory reserves
and scrap-outs of $0.7 million compared to last year's first quarter were
charged to cost of sales primarily due to decreasing sales levels of certain
inventory items.
Backlog
Quarter Ended
December 31, March 31, June 30, September 30, December 31,
2019 2020 2020 2020 2020
Backlog(1)
Dollars (in thousands) $ 237,620 $ 204,709 $ 174,639 $ 153,266 $ 145,143
Pounds (in thousands) 8,231 6,930 5,643 5,485 5,607Average selling price per pound $ 28.87$ 29.54 $ 30.95 $ 27.94 $ 25.89 Average nickel price per pound London Metals Exchange(2) $ 6.26$ 5.39 $ 5.76 $ 6.74 $ 7.62
Approximately 50% of the orders in the backlog include prices that are
subject to adjustment based on changes in raw material costs. Historically,
approximately 70% of the backlog orders have shipped within six months and (1) approximately 90% have shipped within 12 months, however, in the current
economic environment, shipments may be delayed or cancelled in certain
circumstances due to customer request. 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.
Represents the average price for a cash buyer as reported by the
presented.
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The Company has continued to experience low order entry levels attributable primarily to the global COVID-19 pandemic and its unprecedented impact on the economy, significant supply chain inventory reductions, the significant drop in the oil prices, along with the disruption in the aerospace supply chain caused by the year-long grounding of the Boeing 737 MAX. Backlog was$145.1 million atDecember 31, 2020 , a decrease of$8.1 million , or 5.3%, from$153.3 million atSeptember 30, 2020 . Backlog pounds atDecember 31, 2020 increased sequentially during the first quarter of fiscal 2021 by 2.2% as compared toSeptember 30, 2020 . The average selling price of products in the Company's backlog decreased to$25.89 per pound atDecember 31, 2020 from$27.94 per pound atSeptember 30, 2020 , reflecting a change in product mix to lower value products. Visibility continues to be limited due to the uncertainty surrounding the impact of COVID-19 and the various mitigation measures undertaken within the various
supply chains.
Quarterly Market Information
Quarter Ended
December 31, March 31, June 30, September 30, December 31,
2019 2020 2020 2020 2020
Net revenues (in thousands)
Aerospace $ 58,843 $ 59,172 $ 40,375 $ 33,590 $ 24,555
Chemical processing 16,712 15,832 12,143 18,483 15,256
Industrial gas turbines 13,763 16,701 13,673 12,439 13,967
Other markets 11,875 12,762 11,203 9,259 12,779
Total product revenue 101,193 104,467 77,394 73,771 66,557
Other revenue 7,260 7,096 3,182 6,167 5,620
Net revenues $ 108,453 $ 111,563 $ 80,576 $ 79,938 $ 72,177
Shipments by markets (in thousands of
pounds)
Aerospace 2,303 2,261 1,523 1,142 904
Chemical processing 788 689 578 789 601
Industrial gas turbines 825 990 768 752 798
Other markets 306 386 302 264 489
Total shipments 4,222 4,326 3,171 2,947 2,792
Average selling price per pound
Aerospace $ 25.55 $ 26.17 $ 26.51 $ 29.41 $ 27.16
Chemical processing 21.21 22.98 21.01 23.43 25.38
Industrial gas turbines 16.68 16.87 17.80 16.54 17.50
Other markets 38.81 33.06 37.10 35.07 26.13
Total product (product only;
excluding other revenue) 23.97 24.15 24.41 25.03 23.84
Total average selling price
(including other revenue) $ 25.69 $ 25.79 $
25.41 $ 27.13 $ 25.85
Results of Operations for the Three Months Ended
Three Months Ended December 31, Change
2019 2020 Amount %
Net revenues $ 108,453 100.0 % $ 72,177 100.0 % $ (36,276) (33.4) %
Cost of sales 89,710 82.7 % 71,190 98.6 % (18,520) (20.6) %
Gross profit 18,743 17.3 % 987 1.4 % (17,756) (94.7) %
Selling, general and
administrative expense 11,507 10.6 % 9,733 13.5 % (1,774) (15.4) %
Research and technical expense 882 0.8 % 787 1.1 % (95) (10.8) %
Operating income (loss) 6,354 5.9 % (9,533) (13.2) % (15,887) (250.0) %
Nonoperating retirement benefit
expense 1,700 1.6 % 359 0.5 % (1,341) (78.9) %
Interest income (14) (0.0) % (4) (0.0) % 10 (71.4) %
Interest expense 251 0.2 % 304 0.4 % 53 21.1 %
Income (loss) before income
taxes 4,417 4.1 % (10,192) (14.1) % (14,609) (330.7) %
Provision for (benefit from)
income taxes 1,149 1.1 % (2,165) (3.0) % (3,314) (288.4) %
Net income (loss) $ 3,268 3.0 % $ (8,027) (11.1) % $ (11,295) (345.6) %
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The following table sets forth certain financial information as a percentage of
net revenues for the periods indicated and compares such information between
periods.
Three Months Ended
December 31, Change
By market 2019 2020 Amount %
Net revenues (dollars in thousands)
Aerospace $ 58,843 $ 24,555 $ (34,288) (58.3) %
Chemical processing 16,712 15,256 (1,456) (8.7) %
Industrial gas turbine 13,763 13,967 204 1.5 %
Other markets 11,875 12,779 904 7.6 %
Total product revenue 101,193 66,557 (34,636) (34.2) %
Other revenue 7,260 5,620 (1,640) (22.6) %
Net revenues $ 108,453 $ 72,177 $ (36,276) (33.4) %
Pounds by market (in thousands)
Aerospace 2,303 904 (1,399) (60.7) %
Chemical processing 788 601 (187) (23.7) %
Industrial gas turbine 825 798 (27) (3.3) %
Other markets 306 489 183 59.8 %
Total shipments 4,222 2,792 (1,430) (33.9) %
Average selling price per pound
Aerospace $ 25.55 $ 27.16 $ 1.61 6.3 %
Chemical processing 21.21 25.38 4.17 19.7 %
Industrial gas turbine 16.68 17.50 0.82 4.9 %
Other markets 38.81 26.13 (12.68) (32.7) %Total product (excluding other revenue) 23.97 23.84 (0.13) (0.5) % Total average selling price (including other revenue)$ 25.69 $ 25.85 $ 0.16 0.6 %
Net Revenues. Net revenues were
Volume was 2.8 million pounds in the first quarter of fiscal 2021, a decrease of 33.9% from 4.2 million pounds in the same period of fiscal 2020. The decrease in volume is primarily attributable to a significant slowdown in demand caused by the COVID-19 pandemic and the impact on the aerospace supply chain caused by the grounding of the Boeing 737 MAX. The product average selling price was$23.84 per pound in the first quarter of fiscal 2021, a decrease of 0.5% from$23.97 per pound in the same period of fiscal 2020. The decrease in average selling price per pound largely reflects a lower-value product mix and other pricing considerations, which decreased the average selling price per pound by approximately$0.14 , partially offset by higher market prices of raw materials which increased average selling price per pound by approximately$0.01 . Sales to the aerospace market were$24.6 million in the first quarter of fiscal 2021, a decrease of 58.3% from$58.8 million in the same period of fiscal 2020, due to a 60.7% decrease in volume, partially offset by a 6.3% increase in average selling price per pound. Demand in the aerospace market declined primarily due to the COVID-19 pandemic which has decreased demand for air travel resulting in decreased demand for maintenance parts and new planes. Demand has also been impacted by the elevated amount of inventory throughout the aerospace supply chain, the significant number of undelivered new planes already built (primarily the Boeing 737 MAX), and the significant number of planes taken out of service. The increase in average selling price per pound largely reflects a higher value product mix, combined with higher market prices of raw materials, which increased average selling price per pound by approximately$2.09 , partially offset by other pricing factors, which decreased average selling price per pound by approximately$0.48 . Sales to the chemical processing market were$15.3 million in the first quarter of fiscal 2021, a decrease of 8.7% from$16.7 million in the same period of fiscal 2020, due to a 23.7% decrease in volume, partially offset by a 19.7% increase in average selling price per pound. Volume was lower primarily due to decreased demand caused by COVID-19 and low oil prices which caused customers in the chemical industry to delay capital expenditure decisions. The increase in average selling price per pound reflects a higher value product mix and higher market prices of raw materials, which increased average selling price per pound by approximately$4.84 , partially offset by pricing competition and other factors, which decreased average selling price per pound by approximately$0.67 . Sales to the industrial gas turbine market were$14.0 million in the first quarter of fiscal 2021, an increase of 1.5% from$13.8 million for the same period of fiscal 2020, due to an increase in average selling price per pound of 4.9%, partially offset by a decrease in volume of 3.3%. The decrease in volume is primarily attributable to the impact of COVID-19, combined with small/medium frame engine builds slowing down due to lower demand in the oil industry.
Nearly mitigating these volume decreases was increased shipments to a new customer which represents increased market share. The increase in average selling price per pound reflects a higher value
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product mix and higher market prices of raw materials, which increased average selling price per pound by approximately$0.55 , combined with pricing increases and other factors which increased average selling price per pound by approximately$0.27 . Sales to other markets were$12.8 million in the first quarter of fiscal 2021, an increase of 7.6% from$11.9 million in the same period of fiscal 2020, due to an increase in volume of 59.8%, partially offset by a 32.7% decrease in average selling price per pound. The increase in volume was primarily related to an increase in flue-gas desulphurization. The average selling price per pound decrease reflects a lower-value product mix and other pricing factors, which decreased average selling price per pound by approximately$12.61 , combined with lower market prices of raw materials, which decreased average selling price per pound by approximately$0.07 . Other Revenue. Other revenue was$5.6 million in the first quarter of fiscal 2021, a decrease of 22.6% from$7.3 million in the same period of fiscal 2020. The decrease was due primarily to decreased toll conversion which related to the COVID-19 pandemic including toll conversion customers with exposure to the aerospace industry. Cost of Sales. Cost of sales was$71.2 million , or 98.6% of net revenues, in the first quarter of fiscal 2021 compared to$89.7 million , or 82.7% of net revenues, in the same period of fiscal 2020. The decrease was primarily due to lower volumes combined with the Company's actions taken to lower costs in response to COVID-19. However, despite these cost reduction measures, fixed costs have not declined in line with current production volumes, which required directly expensing a portion of these fixed costs in the amount of approximately$5.9 million during the first quarter of fiscal 2021. The Company also recorded a$0.7 million increase in inventory reserves and scrap-outs to cost of sales during the first quarter of fiscal 2021 as compared to the first quarter of 2020. Gross Profit. As a result of the above factors, gross profit was$1.0 million for the first quarter of fiscal 2021, a decrease of$17.8 million from the same period of fiscal 2020. Gross margin as a percentage of net revenue decreased to 1.4% in the first quarter of fiscal 2021 as compared to 17.3% in the same period of fiscal 2020.
Selling, General and Administrative Expense. Selling, general and
administrative expense was
Selling, general and administrative expense as a percentage of net revenues increased to 13.5% for the first quarter of fiscal 2021 compared to 10.6% for the same period of fiscal 2020. Significant cost saving measures continued in the quarter including headcount reductions, furloughs, reduced executive salaries, reduced board fees and reduced travel and entertainment expenses.
Lower exchange rate loss also contributed to the lower expenses in the first quarter of fiscal 2021 as compared to the same period of fiscal 2020.
Research and Technical Expense. Research and technical expense was
The
reduction in spend as compared to the first quarter of fiscal 2020 is primarily attributable to lower salaries and wages as a result of lower hours worked
and reduced headcount. Operating Income/(Loss). As a result of the above factors, operating loss in the first quarter of fiscal 2021 was($9.5) million compared to operating income of$6.4 million in the same period of fiscal 2020.
Nonoperating retirement benefit expense. Nonoperating retirement benefit
expense was
Income Taxes. Income tax benefit was$2.2 million in the first quarter of fiscal 2021, a difference of$3.3 million from income tax expense of$1.1 million in the first quarter of fiscal 2020, driven primarily by a difference in income (loss) before income taxes of$14.6 million . Additionally, income tax benefit is being adversely impacted by discrete items related to stock compensation in
the first quarter of fiscal 2021.
Net Income/(Loss). As a result of the above factors, net loss in the first
quarter of fiscal 2021 was
Working Capital Controllable working capital, which includes accounts receivable, inventory, accounts payable and accrued expenses, was$244.5 million atDecember 31, 2020 , a decrease of$20.4 million , or 7.7%, from$264.9 million atSeptember 30, 2020 . The decrease resulted primarily from accounts receivable and inventory decreasing$10.7 million and$9.8 million , respectively, during the first three months of fiscal 2021. 22 Table of Contents
Liquidity and Capital Resources
Comparative cash flow analysis
The Company had cash and cash equivalents of$61.3 million atDecember 31, 2020 , inclusive of$14.6 million that was held by foreign subsidiaries in various currencies, compared to$47.2 million atSeptember 30, 2020 . Additionally, there were zero borrowings against the line of credit outstanding as ofDecember 31, 2020 . Net cash provided by operating activities in the first three months of fiscal 2021 was$18.5 million compared to net cash provided by operating activities of$7.0 million in the first three months of fiscal 2020, an increase of$11.4 million . Cash flow from operating activities in the first three months of fiscal 2021 was favorably impacted by a decrease in inventory of$13.3 million during the first three months of fiscal 2021 as compared to an increase in inventory of$20.0 million during the same period of fiscal 2020, partially offset by a net loss of($8.0) million during the first three months of fiscal 2021 as compared to net income of$3.3 million during the same period of fiscal 2020. Net cash used in investing activities was$1.1 million in the first three months of fiscal 2021 which was lower than cash used in investing activities of$2.3 million during the same period of fiscal 2020 due to lower additions to property, plant and equipment. Net cash used in financing activities was$4.1 million in the first three months of fiscal 2021, which was higher than net cash used in financing activities of$2.6 million during the same period of fiscal 2020, primarily as a result of, among other factors, cash paid for debt issuance costs resulting from the newU.S. revolving credit facility (described below). Dividends paid of$2.8 million during the first three months of fiscal 2021 were comparable to the
same period of fiscal 2020.
OnOctober 19, 2020 , the Company andJPMorgan Chase Bank, N.A . entered into a Credit Agreement (the "Credit Agreement") and related Pledge and Security Agreement with certain other lenders (the "Security Agreement", and, together with the Credit Agreement, the "Credit Documents"). The Credit Documents, which have a three-year term expiring inOctober 2023 , replaced the Third Amended and Restated Loan and Security Agreement and related agreements, dated as ofJuly 14, 2011 , as amended, previously entered into between the Company,Wells Fargo Capital Finance, LLC and certain other lenders (the "Previous Facility"). The Credit Agreement provides for revolving loans in the maximum amount of$100.0 million , subject to a borrowing base and certain reserves. The Credit Agreement permits an increase in the maximum revolving loan amount from$100.0 million up to an aggregate amount of$170.0 million at the request of the borrower if certain conditions are met. Borrowings under the Credit Agreement bear interest, at the Company's option, at either JPMorgan's "prime rate", plus 1.25% - 1.75% per annum, or the adjusted Eurodollar rate used by the lender, plus 2.25% - 2.75% per annum (with a LIBOR floor of 0.5%). The Company must pay monthly, in arrears, a commitment fee of 0.425% per annum on the unused amount of theU.S. revolving credit facility total commitment. For letters of credit, the Company must pay a fronting fee of 0.125% per annum as well as 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 the greater of (i) 12.5% of the maximum credit revolving loan amount and (ii)$12.5 million . The Company is permitted to pay dividends and repurchase common stock if certain financial metrics are met. The Company may pay quarterly cash dividends up to$3.5 million per fiscal quarter so long as the Company is not in default under the Credit Documents. As ofDecember 31, 2020 , 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. The Company currently believes it is not at material risk of not meeting its financial covenants over the next twelve months. Borrowings under the Credit Agreement 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 Company's Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q). Borrowings under the Credit Documents are also secured by a pledge of a 100% equity interest in each of the Company's direct foreign subsidiaries. 23 Table of Contents Future uses of liquidity
The Company's sources of liquidity for the next twelve months are expected to consist primarily of cash generated from operations (including reduction of inventory), cash on-hand and, if needed, borrowings under our newU.S. revolving credit facility. AtDecember 31, 2020 , the Company had cash of$61.3 million , an outstanding balance of zero on the newU.S. revolving credit facility (described below) and access to a total of approximately$100.0 million , subject to a borrowing base formula and certain reserves. Management believes that the resources described above will be sufficient to fund planned capital expenditures, any regular quarterly dividends declared and working capital requirements over the next twelve months.
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 2021 was$1.1 million , and the forecast for capital spending in fiscal 2021 is$10.0 million to allow for maintaining reliability within operations. 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) $ 1,207 $ 431 $ 776 $ - $ -
Operating lease obligations 3,461 1,861 1,153 447 -
Finance lease obligations 15,442 1,003 2,042 2,072 10,325
Raw material contracts (primarily
nickel) 8,789 8,789 - - -
Capital projects and other
commitments 1,151 998 153 - -
Pension plan(2) 103,467 6,000 12,000 10,500 74,967
Non-qualified pension plans 657 95 190 190 182
Other postretirement benefits(3) 90,182 3,307 7,339 7,396 72,140
Environmental post-closure
monitoring 601 77 134 156 234
Total $ 224,957 $ 22,561 $ 23,787 $ 20,761 $ 157,848 (1) As of
consists of unused line fees.
The Company has a funding obligation to contribute
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.
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, 2020 . 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, 2020 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 24
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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, 2020 , there were no material changes to the critical accounting policies and estimates.
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