Mail Stop 7010
July 18, 2005
via U.S. mail and Facsimile
Francis J. Petro
President and Chief Executive Officer
Haynes International, Inc.
1020 West Park Avenue
Kokomo, Indiana 46904-9013
Re: Haynes International, Inc.
Form S-1/A filed July 7, 2005
File No. 333-124977
Dear Mr. Petro:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form S-1/A filed July 7, 2005
Prospectus Cover Page
1. We note that the selling stockholders may sell their stock "at
prices they may determine at the time of sale" and your response
to
prior comment 36. Please specify the price or range of prices at
which the selling stockholders will offer the shares registered in
this offering. It is the Division`s position that when there is
no
existing market for the securities, stating that selling
stockholders
will sell at prevailing market prices, fixed prices, negotiated
prices, or at fixed prices that may be changed does not satisfy
the
requirements of Schedule A Item 16 and Item 501(b)(3) of
Regulation
S-K. Please note that you may include language specifying that
the
price range will apply until your shares begin trading on an
exchange
or market or you may file a post-effective amendment to switch to
a
market price when your shares begin trading on an exchange or
market.
Once you have established the price or range of prices for the
sale
of common stock by the selling stockholders, you should respond to
the third bullet of comment 36 in our letter dated June 10, 2005
accordingly.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 22
Liquidity and Capital Resources, page 34
2. We note your response to comment 15 in our letter dated June
10,
2005 along with your revised disclosures. Specifically, we note
that
you intend to fund the remaining approximately $7.4 million of
capital expenditures through cash generated by operations in some
part. We also note that you have not generated positive cash
flows
from operations in the past two years or during the most recent
six-
month period ended March 31, 2005. As such, it is unclear to us
how
you intend to fund the remainder of your capital expenditures in
some
part from cash flows from operations, especially in light of your
statement on page 45 that you experienced liquidity shortages that
resulted in your inability to make equipment upgrades. In
addition,
please expand your Future Sources and Uses of Liquidity section
beginning on page 35 to include a discussion and analysis of how
you
intend to fund working capital. Your discussion should provide
investors with sufficient information how your sources of cash
will
be sufficient to fund your capital expenditures and working
capital
needs for the next twelve months.
Critical Accounting Policies and Estimates, page 38
3. We note your response to the third bullet of comment 17 in our
letter dated June 10, 2005. Since you have never performed an
impairment test due to the timing of your annual impairment test
and
the date the goodwill balance was recorded, please make this fact
clear in your disclosure by revising your disclosure to state that
you will review goodwill for impairment as of August 31, 2005,
your
first annual impairment testing date, and that no events or
circumstances that would indicate the carrying amount of goodwill
may
be impaired occurred from the date goodwill was recorded, August
31,
2004, through the current period.
Selling Stockholders, page 72
4. We note your response to prior comment 24. Please revise your
disclosures in this section, and elsewhere as appropriate, to
state
how JANA Partners LLC acquired its shares given that it did not
acquire its shares directly as result of the reorganization and
pursuant to the registration rights agreement, but indirectly from
an
entity that was a party to the registration rights agreement.
Include a discussion of the exemption relied upon for the sale of
the
shares to JANA Partners LLC and the facts that support reliance
upon
the exemption.
Haynes International financial statements for the fiscal year
ended
September 30, 2004
Note 1 Background and Organization, page F-8
Fresh Start Reporting, page F-10
5. We note your response to comment 29 in our letter dated June
10,
2005 along with your revised disclosures. Please revise your
disclosures regarding the valuation to determine your
reorganization
value to state the period the valuation was performed. With
regards
to your valuation of your common stock in conjunction with the
stock
option grants on August 31, 2004, please revise your disclosure in
note 14 to state the significant changes in the financial
information
used to estimate the fair value of your common stock as of August
31,
2004 versus March 2004 when the reorganization value was
estimated.
Note 12 Environmental and Legal, page F-35
6. We note your response to comment 34 in our letter dated June
10,
2005. SAB Topic 5:Y indicates that product liabilities are
typically
of such significance that detailed disclosures regarding judgments
and assumptions underlying the recognition and measurement of
these
liabilities are necessary to prevent the financial statements from
omitting important information and to inform readers fully
regarding
the range of reasonably possible outcomes that could have a
material
effect on a registrant`s financial condition, results of
operations,
or liquidity, especially since one of your five lawsuits is a
class
action lawsuit. As such, please revise your disclosure in your
annual and interim financial statements to provide the following
information regarding your welding-related products contingent
liability, at a minimum:
* Clarify whether your insurance coverage limit of $25,000 is per
case or per claimant.
* State the number of total claimants for each of the outstanding
lawsuits, including the corresponding damages alleged.
* Confirm to us that you have recorded your probable and estimated
loss in accordance with SFAS 5 on a gross basis and recorded any
gain
contingency in accordance with SFAS 5 separately. Please tell us
the
amount of gross liability and receivable recorded. If material,
disclose the gross liability for these five lawsuits, including
the
timeframe over which the accrued or presently unrecognized amounts
may be paid out.
* State the amount or range of reasonably possible loss or state
that
such an estimate cannot be made, as required by paragraph 10 of
SFAS
5 and Question 2 of SAB Topic 5:Y.
* State the material components of the accruals and the
significant
assumptions underlying the estimates, including the circumstances
that may affect the reliability and precision of loss estimates.
* Disclose the nature and terms of your insurance coverage,
including
any uncertainties regarding the legal sufficiency of insurance
claims
or solvency of insurance carriers.
* Address the extent to which unasserted claims are reflected in
any
accrual or may affect the magnitude of the contingency.
Exhibit 5.1 - Legality Opinion
7. Please confirm to us that you concur with our understanding
that
your reference and limitation to "General Corporation Law of the
State of Delaware" includes the statutory provisions and also all
applicable provisions of the Delaware Constitution and reported
judicial decisions interpreting these laws.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Tracey Houser, Staff Accountant, at (202)
551-
3736 or, in her absence, Jeanne Baker, Assistant Chief Accountant,
at
(202) 551-3691 if you have questions regarding comments on the
financial statements and related matters. Please contact Tamara
Brightwell, Staff Attorney, at (202) 551-3751 or, in her absence,
me
at (202) 551-3767 with any other questions.
Sincerely,
Jennifer Hardy
Branch Chief
cc: Stephen J. Hackman, Esq.
Ice Miller
One American Square, Box 82001
Indianapolis, Indiana 46282-0002
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Francis J. Petro
Haynes International, Inc.
July 18, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE