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Company History

The Company was founded in 1912 as Haynes Stellite Works by American inventor and entrepreneur Elwood Haynes in Kokomo, Indiana. Since its founding, the Company has continuously conducted its main operations in Kokomo, Indiana. The Company was owned for much of its history by corporate parents, including Union Carbide and Cabot Corporation, until purchased in 1989 and then again in 1997 by private equity firms. The debt incurred in the last leveraged buy‑out ultimately forced the Company into bankruptcy in March 2004, from which it emerged five months later in August 2004.

The Company began operations in its tubular facility in Arcadia, Louisiana over 30 years ago. This facility and the Company’s tubular product business have grown with additional investment over time. The Company operates service centers in the U.S. many of which include value-added operations with laser, water-jet and plasma cutting.  The Company also acquired a stainless steel and high‑temperature alloy wire company located in Mountain Home, North Carolina in 2005. The Company primarily produces high‑performance alloy wire at that facility.  Most recently, in January 2015, the Company acquired assets in LaPorte, Indiana enabling coil stretching, leveling, slitting and cut-to-length operations.  The Laporte operation also includes a toll processing business.  The Company expanded the Laporte facility and moved operations from Lebanon, Indiana to that facility.  In addition, the Company has expanded globally with service center locations in the United Kingdom, Switzerland and China and other sales offices in France, Japan, Singapore and Italy.

In March 2007, the Company completed a public equity offering, and simultaneously the Company listed its common stock on the NASDAQ Global Market. The Company began paying a dividend in fiscal 2010 and raised the dividend at the beginning of fiscal 2012.

Products

The global specialty alloy market consists of three primary sectors:includes stainless steel, titanium alloys, general-purpose nickel alloys and high‑performance nickel‑high-performance nickel- and cobalt‑basedcobalt-based alloys. The Company believes that the high‑performancehigh-performance alloy sector represents less than 10% of the total alloy market. The Company competes primarily in the high‑performance nickel‑high-performance nickel- and cobalt‑basedcobalt-based alloy sectors, which includes HTA products and CRA products. In each year of fiscal 2017, 20182019, 2020 and 2019,2021, HTA products accounted for approximately 81%80%, 81% and 80%75% of the Company’s net revenues, and sales of the Company’s CRA products accounted for approximately 19%20%, 19% and 20%25% of the Company’s net revenues.  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.

High‑temperatureHigh-temperature Resistant Alloys.  HTA products are used primarily in manufacturing components for the hot sections of gas turbine engines. Stringent safety and performance standards in the aerospace industry result in development lead times typically as long as eight to ten years in the introduction of new aerospace‑relatedaerospace-related market applications for HTA products. However, once a particular new alloy is shown to possess the properties required for a specific application in the aerospace market, it tends to remain in use for extended periods. HTA products are also used in gas turbine engines produced for use in applications such as naval and commercial vessels, electric power generation, power sources for offshore drilling platforms, gas pipeline booster stations and emergency standby power generators. The following table

In the chemical processing industry, customers have found extensive applications for HASTELLOY^®  G‑35 G-35^® alloy, particularly in wet phosphoric acid production. Management expects demand for this alloy will continue to grow. Commercialization is also ongoing for HASTELLOY^® HYBRID‑BC1 HYBRID-BC1^® alloy. HYBRID‑BC1HYBRID-BC1^® alloy is a CRA product with potential applications in the chemical processing industryand petrochemical industries that has demonstrated resistance to hydrochloric and sulfuric acid.acid as well as several organic acids.

In the oil and gas industry, HASTELLOY^®  C‑22HS C-22HS^® alloy has already found increasingmultiple applications. Commercialization of this alloy continues as is the testing, evaluation and promotion of this alloy with special emphasis on applications for this industry.

In addition to the successful commercialization of the above alloys, the Company continues to develop applications for four new alloys which are still being scaled up at the mill and not yet ready to beginare in the early stages of the commercialization process. HAYNES® HR‑235® alloy has excellent resistance to metal dusting in carbonaceous high temperature environments. Potential uses include applications in petrochemical production and syngas plants. HAYNES® HR-224®HAYNES® NS-163® alloy is a nitride dispersion strengthened material that represents an entirely new metallurgical approach to achieving very high creep resistance at high temperatures. Technical process developments are still under investigation. HAYNES® HR-224® alloy is an HTA product with superior resistance to oxidation and excellent fabricability, and could be usedis being assessed in certain current and emerging technology applications. AnotherHAYNES® HR-235® alloy has excellent resistance to metal dusting in high temperature carbonaceous environments. Good progress in developing new alloy, HAYNES® NS-163® alloy, is a nitride dispersion strengthenedapplications for the alloy for certain potential high temperature applications.petrochemical and syngas production applications has been made this past fiscal year. Most recently, HAYNES®HAYNES® 233^TM alloy was introduced. This alloy offersintroduced to provide excellent oxidation resistance coupled with superior creep strength at temperatures to 2100°F or higher coupled with superior creep strength, ahigher. This combination of properties is believed not to have been achieved previously in a readily fabricatedfabricable alloy. This alloy is also being introduced to key customers.Significant progress has been made over the past year in developing applications for this new alloy.

Patents or other proprietary rights are an important element of the Company’s business. The Company’s strategy is to file patent applications in the U.S. and any other country that represents an important potential commercial market to the Company. In addition, the Company seeks to protect technology that is important to the development of the Company’s business. The Company also relies upon trade secret rights to protect its technologies and its development of new processes, applications and alloys. The Company protects its trade secrets in part through confidentiality and proprietary information agreements with its customers.customers and employees. Trademarks on the names of many of the Company’s alloys have also been applied for or granted in the U.S. and certain foreign countries.

While the Company believes its patents are important to its competitive position, significant barriers to entry may exist beyond the expiration of any patent period. These barriers to entry include the unique equipment required to produce these materials and the exacting processes required to achieve the desired metallurgical properties. These processing requirements include optimal melting and thermo-mechanical processing parameters for each alloy. Management believes that the current alloy development programs and these barriers to entry reduce the impact of patent expirations on the Company.

Raw Materials

Raw materials represented an estimated 34% of cost of sales in fiscal 2021. Nickel, a major component of many of the Company’s products, accounted for approximately 45% of raw material costs, or approximately 15% of total cost of sales in fiscal 2021.  Other raw materials include cobalt, chromium, molybdenum and tungsten. Melt materials consist of virgin raw material, purchased scrap and internally produced scrap.

The average nickel price per pound for cash buyers for the 30-day period ended on September 30, 2019, 2020 and 2021, as reported by the London Metals Exchange, was $8.02 $6.74 and $8.80 respectively. Prices for certain other raw materials which are significant in the manufacture of the Company’s products, such as cobalt, chromium and molybdenum were higher in fiscal 2021 compared to fiscal 2020.

The Company’s business model includes mill manufacturing and global distribution facilities, which create a long working capital cycle and contribute to a long position as it relates to commodity price risk, especially for product sold out of distribution facility inventory at spot prices.  In addition, the type of high-performance products the Company produces require multiple production steps to create the final yielded product that is sold to the customer.  These refining steps

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generate high revert scrap pounds that are recycled back through the melt at metal value.  This scrap cycle also contributes to a long position as it relates to commodity price risk.

Although alternative sources of supply are available, the Company currently purchases nickel through an exclusive arrangement with a single supplier to ensure consistent quality and supply. The Company purchases raw materials through various arrangements including fixed-term contracts and spot purchases, which involve a variety of pricing mechanisms. In cases where the Company prices its products at the time of order placement, the Company attempts to establish selling prices with reference to known costs of materials, thereby reducing the risk associated with changes in the cost of raw materials. However, to the extent that the price of nickel fluctuates rapidly, there may be a favorable or unfavorable effect on the Company’s gross profit margins. The Company periodically purchases material forward with certain suppliers in connection with fixed price agreements with customers. In the event a customer fails to meet the expected volume levels or the consumption schedule deviates from the expected schedule, a rapid or prolonged decrease in the price of raw materials could adversely affect the Company’s operating results.

The Company values inventory utilizing the first-in, first-out (“FIFO”) inventory costing methodology. Under the FIFO inventory costing method, the cost of materials included in cost of sales may be different from the current market price at the time of sale of finished product due to the length of time from the acquisition of the raw material to the sale of the finished product. In a period of decreasing raw material costs, the FIFO inventory valuation method normally results in higher costs of sales as compared to last-in, first out method. Conversely, in a period of rising raw material costs, the FIFO inventory valuation method normally results in lower costs of sales.

End Markets

The global specialty alloy market consists ofincludes stainless steels, titanium alloys, general purpose nickel alloys and high‑performance nickel‑high-performance nickel- and cobalt‑basedcobalt-based alloys. Of this total market, the Company primarily competes in the high‑performance nickel‑high-performance nickel- and cobalt‑basedcobalt-based alloy sector, which demands diverse specialty alloys suitable for use in precision manufacturing. Given the technologically advanced nature of the products, strict requirements of the end users and higher‑growthhigher-growth end markets, in general the Company believes the high‑performancehigh-performance alloy sector provides greater growth potential, the opportunity for higher profit margins and greater opportunities for service, product and price differentiation as compared to the stainless steels and general-purpose nickel alloys markets. While stainless steel and general-purpose nickel alloys are generally sold in bulk through third‑partythird-party distributors, the Company’s products are sold in smaller‑sizedsmaller-sized orders which are customized and typically handled on a direct‑to‑customerdirect-to-customer basis.

The Company believes it is an industry leader in developing new alloys to meet its customers’ specialized and demanding requirements. The Company continues to work closely with customers and end users of its products to identify opportunities to develop and manufacture new high-performance alloys. The Company’s technical programs have yielded many new proprietary alloys with multiple applications, an accomplishment that the Company believes distinguishes it from its competitors.

Developing new applications for its new and existing alloys is also a key strength and strategy of the Company. The Company leverages its technical expertise to develop unique applications for its products, especially proprietary and specialty alloys that can yield higher margins. These new applications, including use in unique special projects and new programs, are an important part of the Company’s growth and profitability strategy.

Aerospace.  The Company has manufactured HTA products for the aerospace market since the late 1930s and has developed numerous proprietary alloys for this market. Customers in the aerospace market tend to be the most demanding with respect to meeting specification requirements, precise tolerances and achieving new product performance standards. Stringent safety standards and continuous efforts to reduce equipment weight, reduce emissions, and develop more fuel-efficient designs require close coordination between the Company, the aero-engine OEM’s, and its customers in the selection and development of HTA products. As a result, sales to aerospace customers tend to be made through the Company’s direct sales force. Demand for the Company’s products in the aerospace market is based on the new and

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subjected to substantial wear and tear and require periodic maintenance, repair and overhaul. The Company views the maintenance, repair and overhaul (MRO) business as an area of continuing long‑term growth.long-term growth post-pandemic.

Chemical Processing.  The chemical processing market represents a large base of customers with diverse CRA and HTA applications driven by demand for key end-use markets such as automobiles, housing, health care, biopharmaceuticals, agriculture and metals production. Both CRA and HTA supplied by the Company have been used in the chemical processing market since the early 1930s. Demand for the Company’s products in this market is driven by the level of MRO and expansion requirements of existing chemical processing facilities, as well as the construction of new facilities. The expansion of manufacturing of chemicals from natural gas liquids in North America is expected to be a driver of demand in this market. In addition, the Company believes the extensive worldwide network of Company‑ownedCompany-owned service and sales centers, as well as its network of independent distributors and sales agents who supplement the Company’s direct sales efforts outside of the U.S., provide a competitive advantage in marketing its CRA and HTA products in the chemical processing market.

Industrial gas turbine.Gas Turbine.  Demand for the Company’s products in the industrial gas turbine market is driven primarily by utility-scale electricity generation, both for base load as well as for backup generation during times of peak power demand.  The benefit of these turbines are their relatively low cost, high efficiency, rapid response and reliability, especially as weather-controlled renewables have become major sources of electricity. An additional demand consideration is the drive to lower emissions from coal-fired generating facilities, since natural gas has gained acceptance as a cleaner, low costlower-cost alternative to coal.  Industrial gas turbines are also used for power and propulsion in certain classes of ships and ferries, most commonly as derivatives of popular aero turbine engines. Demand is also generated by mechanical drive units used for oil and gas production and pipeline transportation and for back-up sources of power generation for hospitals and shopping malls. The companyCompany also has a strong presence in microturbinemicro turbine applications, which provide decentralized power and thermal heating for many key markets.  The Company’s products have allowed turbines to operate with higher temperatures and efficiencies for much longer service intervals.

Other Markets.  Other markets in which the Company sells its HTA products and CRA products include flue‑gasflue-gas desulfurization (FGD), oil and gas, waste incineration, industrial heat treating, automotive, thermocouples, sensors and instrumentation, biopharmaceuticals, solar and nuclear fuel. The FGD market has been driven by both legislated and self-imposed standards for lowering emissions from fossil fuel fired electric generating facilities. This market has softened and is expected to continue to soften in the U.S. if the trend to switch from coal to natural gas for power plants continues, but has continued potential in other regions of the world.  The Company also sells its products for use in the oil and gas market, primarily in connection with sour gas production. In addition, incineration of municipal, biological, industrial and hazardous waste products typically produces very corrosive conditions that demand high performance alloys. The Company continues to look for opportunities to introduce and expand the use of its alloys in emerging technologies such as solar, fuel cells, ultra-supercritical steam and supercritical-CO2 power plants, and nuclear fuel applications. Markets capable of providing growth are being driven by increasing performance, reliability and service life requirements for products used in these markets, which could provide further applications for the Company’s products.

Through development of new alloys and new applications, the Company continues to seek to participate in additional markets with new revenue streams beyond the core markets of aerospace, chemical processing and industrial gas turbine industries. The Company believes that medical/pharmaceutical, consumer electronics, petrochemical and emerging technologies such as renewable and clean energy, hydrogen production, next-generation nuclear power generation and additive manufacturing all present possible significant growth opportunities for its products.

Sales and Marketing and Distribution

The Company sells its products primarily through its direct sales organization, which operates from 1514 total locations in the U.S., Europe and Asia, 12 of11of which are service and/or sales centers. All of the Company’s service and/or sales centers are operated either directly by the Company or through its directly or indirectly wholly‑ownedwholly-owned subsidiaries. Approximately 75%78% of the Company’s net revenue in fiscal 20192021 was generated by the Company’s direct sales organization. The remaining 25%22% of the Company’s fiscal 20192021 net revenues was generated by a network of independent distributors and sales agents who supplement the Company’s direct sales in the U.S., Europe and Asia.  Going forward, the Company expects its direct sales force to generate approximately 75% of its total net revenues.

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Providing technical assistance to customers is an important part of the Company’s marketing strategy. The Company provides performance analyses of its products and those of its competitors for its customers. These analyses enable the Company to evaluate the performance of its products enabling the products to be included as part of the technical

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intermediate shape and size depending upon the intended final product form. Intermediate shapes destined for flat products are then sent through a series of hot and cold rolling, annealing, pickling, leveling and shearing operations before being cut to final size.

The Company has a four‑highfour-high Steckel rolling mill for use in hot rolling high‑performancehigh-performance alloys, created specifically for that purpose. The four‑highfour-high Steckel rolling mill was installed in 1982 and is one of the most powerful four‑highfour-high Steckel rolling mills in the world. The mill is capable of generating approximatelyover 12.0 million pounds of separating force and rolling a plate up to 72 inches wide. The mill includes integrated computer controls (with automatic gap control and programmed rolling schedules), two coiling Steckel furnaces and seven heating furnaces. Computer‑controlledComputer-controlled rolling schedules for each of the hundreds of combinations of product shapes and sizes the Company produces allow the mill to roll numerous widths and gauges to exact specifications without stoppages or changeovers.

The Company also operates a three‑highthree-high hot rolling mill and a two‑hightwo-high hot rolling mill, each of which is capable of custom processing much smaller quantities of material than the four‑highfour-high Steckel rolling mill. These mills provide the Company with significant flexibility in running smaller batches of varied products in response to customer requirements. The Company believes the flexibility provided by the three‑highthree-high and two‑hightwo-high mills provides the Company with an advantage over its major competitors in obtaining smaller specialty orders.

The coil and sheet operation includes the ability to cold roll to tight tolerances, bright anneal, oxidize anneal and pickle, along with finishing processes that slit and cut to size.  The Company recently madeIn recent years, the capital investment to redesign, rebuild, and operate a cold mill that had been shuttered for a decade, resulting in a significant increase in capacity in that area.  The Company has also invested installed, and begun to operate a new processing line for moresuccessfully brought on-line additional cold rolling capability, as well as annealing capacity to support the added rolling capacity. This added annealing capacity gives the Company the ability to offer either bright annealed finish or anneal and pickled finish that will be determined by specifications, application or type of alloy.

The Company also produces bar and billet product through a series of bar mills and a forge press operation that is located at the Kokomo, Indiana facility. 

The Arcadia, Louisiana facility uses feedstock produced at the Kokomo facility as well as outside suppliers to fabricatemanufacture welded and seamless alloy pipe and tubing and purchases extruded tube hollows to produce seamless titanium tubing. The manufacturing processes at Arcadia require cold pilger mills, weld mills, draw benches, annealing furnaces, pickling facilities, and pickling facilities.various finishing lines.  The Company recently completed a capital investment project that added capacitycompany has also invested in the above‑mentioned processes.specialized ultrasonic testing, eddy current testing, including its own specimen testing laboratory.

The Mountain Home, North Carolina facility primarily manufactures finished high‑performancehigh-performance alloy wire.wire and small diameter bar products. Finished wire, productsbar, and powder products are also warehoused at this facility.facility for quick delivery.  The facility has recently made investments in various pieces of equipment to expand their portfolio to include bar products.

Backlog

The Company defines backlog to include firm commitments from customers for delivery of product at established prices.  There areAt any given time, approximately 50% of the orders in the backlog at any given time which include prices that are subject to adjustment based on changes in raw material costs, that can vary from approximately 30%-50% of the orders.costs.  Historically, approximately 75%70% of the Company’s backlog orders have shipped within six months and approximately 90% have shipped within 12 months. The backlog figures do not typically reflect that portion of the Company’s business conducted at its service and sales centers on a spot or “just‑in‑time”“just-in-time” basis. For additional discussion of backlog, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Annual Report on Form 10‑K.

10-K.

Consolidated Backlog at Fiscal Quarter End

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Raw Materials

Raw materials represented an estimated 45% of cost of sales in fiscal 2019. Nickel, a major component of many of the Company’s products, accounted for approximately 30% of raw material costs, or approximately 14% of total cost of sales in fiscal 2019.  Other raw materials include cobalt, chromium, molybdenum and tungsten. Melt materials consist of virgin raw material, purchased scrap and internally produced scrap.

The average nickel price per pound for cash buyers for the 30‑day period ended on September 30, 2017, 2018 and 2019, as reported by the London Metals Exchange, was $5.10, $5.68 and $8.02 respectively. Prices for certain other raw materials which are significant in the manufacture of the Company’s products, such as cobalt and chrome were lower in fiscal 2019 compared to fiscal 2018, while the price of molybdenum was higher in fiscal 2019 compared to fiscal 2018.

To the extent that the Company is unable to adjust to rapid fluctuations in the price of nickel, cobalt and other raw materials that it uses in large quantities, there may be a negative effect on gross profit margins. The Company enters into several different types of sales contracts with customers, some of which allow it to pass on increases in nickel or other raw material prices to customers. In other cases, the Company fixes the nickel or other raw materials component of its prices for a period of time through the life of a long‑term contract. In yet other cases, the Company prices its products at the time of order, which allows it to establish prices with reference to known costs of raw material inventory, but which does not allow the Company to offset an unexpected rise in the price of raw materials.

The Company’s business model includes mill manufacturing and global distribution facilities, which create a long working capital cycle and contribute to a long position as it relates to commodity price risk, especially for product sold out of distribution facility inventory at spot prices.  In addition, the type of high-performance products the Company produces require multiple production steps to create the final yielded product that is sold to the customer.  These refining steps generate high revert scrap pounds that are recycled back through the melt at metal value.  This scrap cycle also contributes to a long position as it relates to commodity price risk.

Although alternative sources of supply are available, the Company currently purchases nickel through an exclusive arrangement with a single supplier to ensure consistent quality and supply. The Company purchases raw materials through various arrangements including fixed‑term contracts and spot purchases, which involve a variety of pricing mechanisms. In cases where the Company prices its products at the time of order placement, the Company attempts to establish selling prices with reference to known costs of materials, thereby reducing the risk associated with changes in the cost of raw materials. However, to the extent that the price of nickel fluctuates rapidly, there may be a favorable or unfavorable effect on the Company’s gross profit margins. The Company periodically purchases material forward with certain suppliers in connection with fixed price agreements with customers. In the event a customer fails to meet the expected volume levels or the consumption schedule deviates from the expected schedule, a rapid or prolonged decrease in the price of raw materials could adversely affect the Company’s operating results.

The Company values inventory utilizing the first‑in, first‑out (“FIFO”) inventory costing methodology. Under the FIFO inventory costing method, the cost of materials included in cost of sales may be different from the current market price at the time of sale of finished product due to the length of time from the acquisition of the raw material to the sale of the finished product. In a period of decreasing raw material costs, the FIFO inventory valuation method normally results in higher costs of sales as compared to last‑in, first out method. Conversely, in a period of rising raw material costs, the FIFO inventory valuation method normally results in lower costs of sales.

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Succession and Recruitment

The Company has an organizational development and succession planning process in place for human capital strategic planning.  The strategic development process is continually updated and often consists of multi-year succession and development plans for individuals. Such succession plans have been utilized throughout the Company to prepare employees for future roles and leadership opportunities.  

In response to the COVID-19 pandemic and other market forces that have altered, and are expected to continue to alter, the workforce and the manner in which it functions, the Company is redefining how many roles within the Company may be performed.  For example, through experience with the COVID-19 pandemic, the Company has learned that many non-production employees are able to perform all or substantially all of their job functions outside of the office.  In addition, virtual meetings have been used to substantially reduce travel as well as in-person contact.  The Company is evaluating the effects of these and other changes on its current and future workforce, including their potential to provide the Company access to a broader recruiting pool for potential new employees, including workers in specialized areas such as metallurgy and others with specialties relating to the Company’s products, flexible role descriptions and/or working arrangements and other matters.

The Company attempts to hire from within when opportunities occur, given employee growth and progression.  The Company also utilizes outside recruiters due to the challenging and competitive hiring environment.  In order to encourage development of a future workforce for the Company, the Company continues to sponsor a Ph.D candidate and Senior Metallurgical Engineers Research Project from Purdue University, as well as providing internships in various departments and locations throughout the Company.

COVID-19 – Pandemic

Economic conditions have limited hiring and succession planning implementation in some areas.  In fiscal 2020 and 2021, the Company predominantly hired new personnel in order to backfill crucial positions.  Hiring for succession planning or bench strength has subsided during the economic downturn in business related to the COVID-19 pandemic and other factors.  

The onset of COVID-19 in the United States in fiscal 2020 and the ongoing economic downturn created additional risk related to key person retention and succession planning.  In response to the economic conditions created by the COVID-19 pandemic, previously implemented voluntary retirement incentives, reductions-in-force, and compensation reductions, created additional challenges to developing and retaining staff.  This creates higher risk of turnover of key employees.  In addition, other industries did not experience the same downturn as the Company did, and alternative opportunities are available for current employees and potential candidates.

Strong competition and limited workforce issues challenge the Company’s acquisition and retention of employees with specific skill sets.  Limited dedicated resources and commitment for developmental positions may also impact the success and rate of succession and development efforts.  Nonetheless, the Company has established formal and informal development activities to promote employee retention and position the Company for success in the long term.

Retirement and Exit Programs

The Company has established a phased retirement program to sustain the Company’s access to institutional knowledge of employees with specialized skill sets who would like to phase into retirement.  At the same time, the program is designed to facilitate a smooth transition for their successors.  This program has been limited in its use but strategically beneficial.  

The Company also utilizes exit interviews and on-boarding interviews to provide feedback regarding turnover and employee desires for growth and development.  Both have recently been strengthened and expanded.  These interviews are also utilized to identify drivers of voluntary turnover and departures from the Company.  Employee turnover rate and reasons, including voluntary and involuntary departures, are monitored annually.  The global turnover rate in fiscal 2021 was 14%, compared to 22% in fiscal 2020 and an average of 14% in the previous two fiscal years.  Both voluntary and

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involuntary terminations, including retirements, are used to calculate the turnover rate.  The reduction-in-force resulting from the COVID-19 pandemic accounted for most of the increased turnover rate in fiscal 2020, however turnover was more normalized in fiscal 2021.  

Compensation Equity

The Company conducts inflation-adjusted compensation analysis to promote competitive compensation.  This analysis takes into account ranges for the geographical area, education level and job title under consideration.  The Company’s Human Resources Department develops offers for new salaried employees and also develops and administers promotions to maintain the internal integrity of the compensation levels for comparable positions.  The Company works with managers to ensure that high potential employees and those individuals with unique talents are appropriately developed and compensated.  For example, the Board of Directors authorized a pool of restricted stock that can be used to compensate high potential employees and for retention purposes.  Further, bonus programs have been implemented at the LaPorte and Mountain Home facilities, as well as those in Europe and Asia, for retention and recognition purposes, and all salaried employees who are not eligible to participate in the Management Incentive Plan were given bonuses in fiscal 2021.  The Compensation Committee, with the recommendation of the full Board in the case of incentive compensation, determines annual salaries and other elements of compensation of the Company’s executive management team, taking into account similarly situated executives employed by a peer group of companies while also considering input of the Compensation Committee’s independent compensation consultant.  

Diversity and Inclusion

The Corporate Governance and Nominating Committee of the Board (the “Governance Committee”) considers diversity as a criteria evaluated as a part of the attributes and qualifications a Board candidate possesses.  The Governance Committee construes the notion of diversity broadly, considering differences in viewpoint, professional experience, education, skills and other individual qualities, in addition to race, gender, age, ethnicity and cultural backgrounds as elements that contribute to a diverse Board.  In keeping with this diversity commitment, the two most recent directors appointed to the Board, each of whom brings substantial experience in the form of executive leadership in the specialty metals industry and the U.S. Air Force, respectively, further the Board’s goal of enhancing diversity.    

Management also considers similar broad concepts of diversity in its hiring practices as well as its selection of vendors, contractors and other service providers.  As a federal government subcontractor, the Company follows federal rules and regulations relating to diversity and other matters, including reporting requirements.  

Company Culture

The Company has controls in place relating to compliance with the Company’s Code of Business Conduct and Ethics, including a requirement for annual employee certification of that code as well as an established whistleblower hotline and related procedures.  In addition, human capital management, and more specifically employee hiring and retention, are included within the Company’s Enterprise Risk Management program, which is subject to Board oversight through regular reporting.  

Community Involvement

The Company has used internships and partnerships with universities to enrich recruiting efforts, particularly for technical roles such as research, alloy development and engineering.  The Company has also utilized outreach and partnerships with local community resources at all major locations such as community and technical colleges, workforce development agencies, industry groups and other entities to strengthen the Company’s hiring process and expand the future workforce candidate pool.

Employee Engagement and Wellness

The Company has a long-standing tuition reimbursement program to assist employees with the continuation of their education.  In addition, employee assistance programs offer counseling for emotional, financial and family issues.  

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Continuing financial planning education is provided by the Company’s 401(k) plan administrator to assist employees in financial and retirement planning.  For many years, the Company’s investment in human capital has involved commitments to worker training, apprenticeship programs and funding college scholarships.

Management and Board Oversight

Management is engaged in the Company’s efforts regarding management of human capital resources at all levels through regular informational meetings, the Company’s Enterprise Risk Management program and organized succession planning.  The Board oversees these activities through regular reports by senior management regarding new or altered programs and as part of the Enterprise Risk Management process.  In addition, the Corporate Governance and Nominating Committee of the Board is actively engaged in monitoring and encouraging diversity at the Board level while the Compensation Committee also focuses on achieving and maintaining internal and external pay equity for the executive team and the Board members while overseeing incentive compensation more broadly throughout the organization.  In promoting external pay equity, the Board and the Compensation Committee make use of peer comparisons and benchmarking measures.

Employee Statistics

As of September 30, 2019,2021, the Company employed 1,179 full‑time1,073 full-time employees and 37 part-time employees worldwide. All eligible hourly employees at the Kokomo, Indiana and Arcadia, Louisiana plants (597(539 in the aggregate) are covered by two collective bargaining agreements.

On July 1, 2018, the Company entered into a new five-year collective bargaining agreement with the United Steelworkers of America Local 2958, which covers eligible hourly employees at the Kokomo, Indiana plant. This agreement will expire in June 2023.

On December 21, 2015,2020, the Company entered into a new collective bargaining agreement with the United Steelworkers of America Local 1505, which covers eligible hourly employees at the Company’s Arcadia, Louisiana plant. This agreement will expire in December 2020.2025.  

Management believes that current relations with the union are satisfactory.satisfactory.

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fiscal 20192021 and are currently expected to be approximately $3.2$3.0 million for fiscal 2020.2022.  

The Company’s facilities are subject to periodic inspection by various regulatory authorities, who from time to time have issued findings of violations of governing laws, regulations and permits. In the past five years, the Company has paid administrative fines, none of which have had a material effect on the Company’s financial condition, for alleged violations relating to environmental matters, requirements relating to its Title V Air Permit and alleged violations of record keeping and notification requirements relating to industrial waste water discharge. Capital expenditures of approximately $0.9$1.3 million were made for pollution control improvements during fiscal 2019,2021, with additional expenditures of approximately $1.6$2.8 million for similar improvements planned for fiscal 2020.2022.

The Company has received permits from the Indiana Department of Environmental Management and the North Carolina Department of Environment and Natural Resources to close and provide post‑closurepost-closure environmental monitoring and care for certain areas of its Kokomo and Mountain Home, North Carolina facilities, respectively.  

The Company is required among other things to monitor groundwater and to continue post‑closurepost-closure maintenance of the former disposal areas at each site. As a result, the Company is aware of elevated levels of certain contaminants in the groundwater andon the Company’s property.  These levels are stable or decreasing, but additional testing and corrective action by the Company could be required.  The Company is unable to estimate the costs of any further corrective action at these sites, if required. Accordingly, the Company cannot assure that the costs of any future corrective action at these or any other current or former sites would not have a material effect on the Company’s financial condition, results of operations or liquidity.

The Company may also incur liability for alleged environmental damages associated with the off‑siteoff-site transportation and disposal of hazardous substances.  Generators of hazardous substances which are transported to disposal sites where environmental problems are alleged to exist are subject to claims under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, and state counterparts. CERCLA imposes strict, joint and several liabilities for investigatory and cleanup costs upon hazardous substance generators, site owners and operators and other potentially responsible parties. The Company is currently named as a potentially responsible party at one site. There can be no assurance that the Company will not be named as a potentially responsible party at other sites in the future or that the costs associated with those sites would not have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

Legal Compliance

In addition to environmental laws and regulations, the Company must comply with a wide variety of other laws and regulations, including, without limitation, federal and state securities laws, Delaware corporate law and safety laws and regulations.  The Company continues to engage in collaboration with key stakeholders, such as customers and regulators, to adapt to changing regulatory expectations.  Compliance with law and government regulations is not expected to have any material effect upon capital expenditures, earnings or the competitive position of the Company.  

Environmental, Social and Governance Matters

In addition to the information set forth below, further information regarding the Company’s environmental, social and governance activities can be found under the Sustainability tab on the Company’s website at www.haynesintl.com/company-information/sustainability.

Governance and Social Matters

On February 11, 2016,The Company is committed to a culture of openness, trust and integrity in all aspects of its business. It is critical that all employees, vendors and customers understand and accept that, in everything it does, the Company voluntarily reported towill conduct itself from the Louisiana Departmentperspective of Environmental Quality a leak that it discovered in one of its chemical cleaning operations“doing the right thing for the right reason” at its Arcadia, Louisiana facility.  As a result of the discovery, the Company is working with that department to determine the extent of the issue and appropriate remediation.

Business Conduct and Ethicsall times.

The Company has a number of policies in place governing social and ethical conduct,issues, including, without limitation, a Code of Business Conduct and Ethics, a Human Trafficking Policy (which includes a forced labor policy), an Anti-Corruption Policy, an Anti-Nepotism Policy, an Anti-Harassment Policy (which includes a discrimination policy), a Gift Policy and an Insider Trading and Tipping Policy.  Employeeslimitation:

All Company employees must certify compliance with ourthe Code of Business Conduct and Ethics annually, and regular training is provided to employees regarding these and other policies. The Company also has a Supplier Code of Conduct.  In addition, the Company maintains a whistleblower hotline with access available on an anonymous basis online or by telephone. 

Environmental Matters

The Company alsois in the process of installing a 1MW solar fixed ground mount array system to reduce the dependence on nonrenewable energy sources at its wire facility located in Mountain Home, North Carolina.  This solar system should provide over 50% of the electricity needs for the facility. In addition, since fiscal year 2010, the Company has invested more than $2.0 million in energy conservation programs, and as a conflict mineralsresult, the Company now saves approximately $1.1 million in energy costs per year. The Company has specific targets in place for reducing electricity and natural gas consumption in its energy conservation programs.

The Company has an enterprise level environmental policy, which focuses on fostering a safe workplace, while protecting the environment and reports annuallycomplying with laws and health and safety management systems. The Company maintains an environmental management system certified to the resultsISO 14001:2015 standard, and Kokomo operations are ISO 50001:2018 certified. The Company’s facilities are subject to periodic inspection by various regulatory authorities. The Company utilizes available resources to improve quality, environmental and health and safety management systems, as well as set objectives and targets for each. This policy is communicated to contractors and vendors who provide services on site, and the Company periodically audits selected suppliers from an environmental compliance perspective.

The Company is conscious of its conflict minerals programenvironmental impact and is actively working to lighten its carbon footprint including projects to measure greenhouse gas emissions and develop goals of reduction.  The ever-increasing demand for clean energy generation has led to the development of several emerging technologies that require high-temperature alloys for demanding operating conditions.

Since the invention of HASTELLOY^® X alloy in 1954, the Company’s alloys have made it possible for aerospace engines to run at high temperatures for long periods of time.  This has been further enhanced with alloys used in new generation engines such as HAYNES 282^®.  Engines being placed in service today reportedly consume 15% less fuel,

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produce 50% less pollutants and reduce the noise footprint near airports compared to the previous generation of airplane engines.  The environmental related improvements stem in part from the increased use of alloys, such as HASTELLOY^® X, HAYNES^® 188, 230^®, 282^®, 242^®, 244^® and other Haynes invented alloys.  

In addition to the Company’s alloys for energy production and powering modern aircraft in a more environmentally friendly manner, the Company’s alloys are used in chemical plants that produce ecologically safe agrichemicals which help to feed the world’s growing population.  Company-invented HASTELLOY^® G-35^®, HYBRID-BC1^® and C-276 alloys are commonly used in these applications. In addition, HASTELLOY^® C-22^®, C-2000^® and B-3^® alloys are used by the pharmaceutical companies for production of chemicals.

Renewable power generation offers the promise of producing power from nature’s resources, such as wind, sun, rivers and oceans, with minimal depletion to the Earth’s resources and damage to the environment.  Many renewable energy technologies require the capture of energy at very high temperatures in extreme environments for which the Company’s alloys are well suited.  For example, the Company’s materials withstand intense heat in concentrated solar power plants to facilitate storable thermal power to generate electricity after the sun sets.

Safety Matters

Safety is the Company’s top priority.  Listed below are certain improvement efforts the Company has implemented in order to reduce occurrences of injuries, occupational diseases and work-related fatalities.

The Company extends its health and safety policies to suppliers, visitors and contractors. When suppliers, visitors and contractors come on Form SD. site, they receive safety training. The training includes a review of relevant policies, required personal protection equipment, emergency procedures and specific hazards that may be encountered.

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Executive Officers of the Company

The following table sets forth certain information concerning the persons who served as executive officers of the Company as of September 30, 2019.2021. Except as indicated in the following paragraphs, the principal occupations of these persons have not changed during the past five years.

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Mr. Shor was elected President and Chief Executive Officer of the Company in September 2018.  Prior to that, he served as interim President and Chief Executive Officer of the Company from May 2018 through September 2018 and Chairman of the Board of the Company from February 2017 through September 2018. Mr. Shor has been a director since 2012.

Mr. Maudlin has served as the Vice President‑FinancePresident-Finance, Treasurer and Chief Financial Officer of the Company since December 2012.

Ms. Gunst has served as Vice President—General Counsel and Corporate Secretary of the Company since August 2011.

Dr. Ishwar has served as Vice President—Marketing & Technology of the Company since January 2010.

Mr. Losch has served as Vice President—Sales & Distribution of the Company since January 2010.

Ms. Neel has served as Vice President—Corporate Affairs of the Company since April 2000.

Mr. Pinkham has served as Vice President—Tube and Wire Products of the Company since September 2018.  Prior to that, he served as Vice President—Manufacturing of the Company since March 2008.

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Item 1A.  Risk Factors

The following risk factors should be considered carefully in addition to the other information contained in this filing.  

The risks and uncertainties described below are not the only ones we face and represent risks that our management believes are material to investors regarding an investment in our Company and our business.  Additional risks and uncertainties not presently known to us or that we currently deem not material may also harm our business.  If any of the following risks actually occur, our business, financial condition or results of operations could be harmed.  

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Risks Related to the COVID-19 Pandemic

Our results of operations, financial condition and cash flows have been and may continue to be adversely affected by pandemics, epidemics or other public health emergencies, such as COVID-19.  

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Our business, results of operations, financial condition, cash flows and stock price have been, and may continue to be, adversely affected by pandemics, epidemics or other public health emergencies, such as the global outbreak of COVID-19.  In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The outbreak resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

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The outbreak of COVID-19 and preventive or protective actions taken by governmental authorities may continue to have a material adverse effect on our operations, supply chain, customers and transportation networks, including business shutdowns or disruptions. We have already experienced many effects of COVID-19, including partial shutdowns, quarantine of certain employees, temporary and permanent layoffs, pay cuts and mandatory unpaid furloughs, decreased demand for our products, increased pricing pressures and changes to our business strategies and management attention.  More recently, we have experienced additional effects of the COVID-19 pandemic, including raw material shortages, unavailability of transportation and logistics resources, unusual inflation, shortages of hydrogen or other natural gases necessary in the operation of our business, hiring and retention challenges and limited availability of outside conversion resources. Further, the U.S. government and certain of its agencies have issued orders requiring specific steps to be taken with respect to COVID-19 by certain employers and contractors.  The costs relating to these programs are currently unknown.  These events and others have caused, and may continue to cause, lower revenue and lower volumes, leading to unfavorable fixed cost absorption.  The extent to which COVID-19 may continue to adversely impact our business depends on future developments, which are highly uncertain and, in many cases, beyond our control including the severity and duration of the outbreak and the effectiveness of actions taken globally to contain or mitigate its effects. Over the preceding 18 months, the fluctuation in levels of the virus’s effects on different portions of the global economy have continued to affect our business as well as other businesses.  Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry and workforce.  Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not able to estimate the effects of the pandemic on our results of operations, financial condition or liquidity in a particular future quarter or year.  

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The aerospace market, our largest market, has been hit particularly hard by the addition of COVID-19 issues to the safety concerns with the Boeing 737 MAX, which remains grounded in China, and we cannot determine what further effect that exacerbating factor will have on the aerospace market.  Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression. Additionally, concerns over the economic impact of COVID-19 have caused extreme volatility in financial and other capital markets which has and may continue to adversely impact our stock price and our ability to access capital markets. Our indebtedness may also increase due to our need to increase borrowing to fund operations during a period of reduced revenue.  To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described herein.

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Risks Related to Our BusinessMarkets

Our revenues may fluctuate widely based upon changes in demand for our customers’ products.

Demand for our products is dependent upon and derived from the level of demand for the machinery, parts and equipment produced by our customers, which are principally manufacturers and fabricators of machinery, parts and equipment for highly specialized applications. Historically, certain of the markets in which we compete have experienced unpredictable, wide demand fluctuations.fluctuations, such as the current conditions in the aerospace industry and in the broader global economy as a result of the COVID-19 pandemic. Because of the comparatively high level of fixed costs associated with our manufacturing processes, significant declines in thoseour markets have had, and may continue to have, a disproportionately adverse impact on our operating results.

Since we became an independent company, weWe have, in several instances, experienced substantial year‑to‑yearyear-to-year declines in net revenues, primarily as a result of decreases in demand in the industries to which our products are sold. In fiscal 2002, 2003, 2009, 2010, 2013, 2016, 2020 and 2016,2021, our net revenues, when compared to the immediately preceding year, declined by approximately 10.3%, 21.2%, 31.1%, 13.0%, 16.7%, 16.6%, 22.4% and 16.6%11.3%, 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‑yearyear-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 business.  Currently, the COVID-19 pandemic has significantly decreased demand for our products across all of our markets, but particularly in the aerospace industry, which also continues to be affected by issues relating to the Boeing 737 MAX (which remains grounded in China).  Passenger airline travel has decreased significantly since the beginning of the pandemic and remains volatile.  As a result, volatility in the aerospace market has continued and may continue for an unknown period of time.

Profitability in the high‑performancehigh-performance alloy industry is highly sensitive to changes in sales volumes.

The high‑performancehigh-performance alloy industry is characterized by high capital investment and high fixed costs. The cost of raw materials is the primary variable cost in the manufacture of our high‑performancehigh-performance alloys and, in fiscal 2019,2021, represented approximately 45%34% of our total cost of sales.  Other manufacturing costs, such as labor, energy, maintenance and supplies, often thought of as variable, have a significant fixed element. Profitability is, therefore, very sensitive to changes in volume, and relatively small changes in volume can result in significant variations in earnings. Our ability to effectively utilize our manufacturing assets depends greatly upon continuing demand in our end markets, successfully increasing our market share in IGT and other areas and continued acceptance of our new products into the marketplace.  Any failureThe COVID-19 pandemic has significantly decreased demand, and therefore, sales volume of our products.  Failure to effectively utilize our manufacturing assets, including as a result of the COVID-19 pandemic, may continue to negatively impact our business.

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The military aerospace cycle is highly dependent on U.S. and foreign government funding which is driven by, among other factors, the effects of terrorism, a changing global political environment, U.S. foreign policy, the retirement of older aircraft and technological improvements to new engines that increase reliability. Accordingly, the timing, duration and magnitude of cyclical upturns and downturns cannot be forecasted with certainty. Downturns or reductions in demand for our products sold into the aerospace market could have a material adverse effect on our business.

The industrial gas turbine market is also cyclical in nature. Demand for power generation products is global and is affected by the state of the U.S. and world economies, the availability of financing to power generation project sponsors, the increase in renewable energy and the political environments of numerous countries. The availability of fuels and related prices also have a large impact on demand. DemandDecreased demand for our products in the industrial gas turbine industry may not return to peak demand levels, which has materially affected and may continue to have a material adverse effect on our business.  

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product specifications, U.S. and world economic conditions, changes in the regulatory environment and labor relations between the aircraft manufacturers and their work forces. A significant interruption or slowdownforces, most of which have been and continue to be adversely affected by the economic effects of the COVID-19 pandemic.  Significant interruptions and slowdowns in the number of new aircraft built by the aircraft manufacturers couldhas and may continue to have a material adverse effect on our business.  As noted above, future actions relating to the worldwide grounding ofsafety issues with the Boeing 737 MAX passenger airliner, by The Boeing Company couldas well as the ongoing effects of the COVID-19 pandemic, have had and may continue to have a material adverse effect on our business.  

During periods of lower demand in other alloy markets, some of our competitors may use their available capacity to produce higher volumes of high-performance alloys, which leads to increased competition in the high-performance alloy market.

We have experienced increased competition from competitors who produce both stainless steel and high-performance alloys. As a result of the competition in our markets, we have made price concessions to our customers from time to time, and we expect customer pressure for further price concessions to continue, particularly given the effects of the COVID-19 pandemic. Maintenance of our market share will depend, in part, on our ability to sustain a cost structure that enables us to be cost-competitive. If we are unable to adjust our costs relative to our pricing, our profitability will suffer. Our effectiveness in managing our cost structure through changing circumstances will be a key determinant of future profitability and competitiveness.

Periods of reduced demand and excess supply as well as the availability of substitute lower-cost materials can adversely affect our ability to price and sell our products at the profitability levels we require to be successful.

Additional worldwide capacity and reduced demand for our products could significantly impact future worldwide pricing, which would adversely impact our business.  In recent years, several of our competitors have added capacity that represents direct competition with the Company’s business.  In addition, continued availability of substitute materials may also cause significant fluctuations in future results as our customers opt for a lower-cost alternative.  The impacts of the COVID-19 pandemic have also reduced demand for our products globally and have significantly increased customer requests to reduce pricing or delay delivery.

We change prices on our products as we deem necessary. In addition to the above general competitive impact, other market conditions and various economic factors beyond our control can adversely affect the timing of our pricing actions. The effects of any pricing actions may be delayed due to long manufacturing lead times or the terms of existing contracts. There is no guarantee that the pricing actions we implement will be effective in maintaining our profit margin levels.

Risks Related to Raw Materials

Rapid fluctuations in the prices of nickel, cobalt and other raw materials may materially adversely affect our business.

To the extent that we are unable to adjust to rapid fluctuations in the price of nickel, cobalt and other raw materials that we use in large quantities, there may be a negative effect on our gross profit margins. In fiscal 2021, nickel, a major component of many of our products, accounted for approximately 45% of our raw material costs, or approximately 15% of our total cost of sales. We enter into several different types of sales contracts with our customers, some of which allow us to pass on increases in nickel or other raw material prices to our customers. In other cases, we fix the nickel or other raw materials component of our prices for a period of time through the life of a long-term contract. In yet other cases, we price our products at the time of order, which allows us to establish prices with reference to known costs of our raw material inventory, but which does not allow us to offset an unexpected rise in the price of raw materials. The COVID-19 pandemic has affected raw material pricing by increasing the unpredictability of our profitability, and its future effects are unknown.   We may not be able to successfully offset rapid changes in the price of nickel, cobalt or other raw materials in the future. In the event that raw material price increases occur that we are unable to pass on to our customers, our cash flows or results of operations could be materially adversely affected.

Our business cycle is long, involving multiple steps.  These refining steps generate high revert scrap pounds that are recycled back through the melt at metal value.  This scrap cycle also contributes to a long position as it relates to commodity price risk.

Our results of operations may also be negatively impacted if both customer demand and raw material prices rapidly fall at the same time. Because we value our inventory utilizing the first-in, first-out inventory costing methodology, a rapid decrease in raw material costs has a negative effect on our operating results. In those circumstances, we recognize higher material cost in cost of sales relative to lower raw material market prices that drive the sales price.

In addition, we periodically enter into forward purchase agreements for our raw material supply. If we enter into a forward purchase agreement which is not matched to one or more customer contracts with fixed raw material prices, a rapid or prolonged decrease in the price of significant raw materials could adversely impact our business.

Our business is dependent on a number of raw materials that may not be available.

We use a number of raw materials in our products which are found in only a few parts of the world and are available from a limited number of suppliers. The availability of these materials may be influenced by private or government cartels, changes in world politics, additional regulation, labor relations between the materials producers and their work force, unstable governments in exporting nations, inflation, general economic conditions and export quotas imposed by governments in nations with rare earth element supplies.  The ability of key material suppliers to meet quality and delivery requirements or to provide materials on terms acceptable to us is beyond our control and can also impact our ability to meet commitments to customers. The COVID-19 pandemic has adversely affected the availability of certain raw materials through its effects on the labor market, availability of transportation for materials and other factors.  Future shortages or price fluctuations in raw materials could result in decreased sales as well as margins, or otherwise adversely affect our business. The enactment of new or increased import duties on raw materials imported by us could also decrease availability, thereby adversely affect our business.

If suppliers are unable to meet our demands, we may not have alternative sources of supply. In some cases, we have entered into exclusive supply agreements with respect to raw materials, which could adversely affect our business if the exclusive supplier cannot meet quality and delivery requirements to provide materials on terms acceptable to us.

The manufacturing of the majority of our products is a complex process and requires long lead times. We may experience delays or shortages in the supply of raw materials. If we are unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products. This could cause us to lose sales, incur additional costs, delay new product introductions or suffer harm to our reputation.

Risks Related to Our Production and Operations

Our operations are dependent on production levels at our Kokomo facility.

Our principal assets are located at our primary integrated production facility in Kokomo, Indiana and at our production facilities in Arcadia, Louisiana and in Mountain Home, North Carolina. The Arcadia and Mountain Home plants, as well as all of the domestic and foreign service centers, rely to a significant extent upon feedstock produced at the Kokomo facility. During fiscal 2020, we endured a temporary shut-down of most of the Company’s production operations due to the effects of the COVID-19 pandemic which impacted our operations and financial results.  We have also been affected by shortages of labor, transportation and other services and raw materials in our Kokomo and other production facilities as a result of the COVID-19 pandemic.  Any further production failures, shutdowns (including those associated with COVID-19) or other significant problems at the Kokomo facility could have a material adverse effect on our financial condition and results of operations. We maintain property damage insurance to provide for reconstruction of damaged equipment, as well as business interruption insurance to mitigate losses resulting from any production shutdown caused by an insured loss. Although we believe that our insurance is adequate to cover any such losses, that may not be the case. Additionally, our insurance policies include deductibles that would require us to incur losses that could have an adverse effect on our financial results in the event a significant interruption occurs.  One or more significant uninsured losses at our Kokomo facility may have a material adverse effect on our business.

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In addition, from time to time we schedule planned outages on the equipment at our Kokomo facility for maintenance and upgrades. These projects are subject to a variety of risks and uncertainties, including a variety of market, operational and labor-related factors, many of which may be beyond our control. The COVID-19 pandemic made it necessary for us to shut down portions of our operations in fiscal 2020.  The pandemic, and its effect on our markets and our business, has also required us to temporarily or permanently lay off certain personnel.  Certain portions of our operations continue to be affected by personnel shortages.  Should a planned or unplanned shut down on a significant piece of equipment, or a significant decrease in personnel or lack of necessary new personnel, last substantially longer than originally planned, there could be a material adverse effect on our business.

Our production may be interrupted due to equipment failures, energy or personnel shortages, lack of critical spares, or other events affecting our factories.

Our manufacturing processes depend on certain sophisticated and high‑valuehigh-value equipment, some of which has been in operation for a long period of time for which there may be only limited or no production alternatives. Failures of this equipment, or the lack of critical spares or skilled personnel to timely repair this equipment, could result in production delays, revenue loss and significant repair costs. In addition, our factories rely on the availability of electrical power and natural gas, transportation for raw materials and finished products and employee access to our workplace that are subject to interruption in the event of severe weather conditions or other natural or manmade events.events (including the COVID-19 pandemic). We have recently experienced a significant decrease in the availability of certain industrial gas resources that may impact our operations.  While we maintain backup resources to the extent practicable, a severe or prolonged equipment outage, failure or other interruptive event affecting areas where we have significant manufacturing operations may result in loss of manufacturing or shipping days, which could have a material adverse effect on our business. Natural or manmade events (including the COVID-19 pandemic) that interrupt significant manufacturing operations of our customers also have had, and could continue to have a material adverse effect on our business.

Issues related to our agreements with Titanium Metals Corporation could require us to make significant payments and could disrupt our operations and materially affect our financial results.

We entered into a Conversion Services Agreement and an Access and Security Agreement with Titanium Metals Corporation (TIMET) in November 2006 that provide for the performance of certain titanium conversion services through November 2026. In 2012, TIMET was acquired by Precision Castparts Corp. which owns Special Metals Corporation, a direct competitor of ours. Events of default under the Conversion Services Agreement include (a) a change in control in which the successor does not assume the agreement, (b) a violation by us of certain non‑competenon-compete obligations relating to the manufacture and conversion of titanium and (c) failure to meet agreed‑uponagreed-upon delivery and quality requirements. If an event of default under the Conversion Services Agreement occurs, TIMET could require us to repay the unearned portion of the $50.0 million fee paid to us by TIMET when the agreement was signed, plus liquidated damages of $25.0 million. Our obligations to pay these amounts to TIMET are secured by a security interest in our four‑highfour-high Steckel rolling mill, through which we process a substantial amount of our products. In addition, the Access and Security Agreement with TIMET includes, among other terms, an access right that would allow TIMET to use certain of our operating assets, including the four‑highfour-high mill, to perform titanium conversion services in the event of our bankruptcy or the acceleration of our indebtedness. Exercise by TIMET of its rights under its security interest following a default and non‑paymentnon-payment of the amounts provided in the Conversion Services Agreement or exercise of the access rights under the Access and Security Agreement could cause significant disruption in our Kokomo operations, which would have a material adverse effect on our business.

high revert scrap pounds that are recycled back through the melt at metal value.  This scrap cycle also contributes to a long position as it relates to commodity price risk.

Our results of operations may also be negatively impacted if both customer demand and raw material prices rapidly fall at the same time. Because we value our inventory utilizing the first‑in, first‑out inventory costing methodology, a rapid decrease in raw material costs has a negative effect on our operating results. In those circumstances, we recognize higher material cost in cost of sales relative to lower raw material market prices that drive the sales price.

In addition, we periodically enter into forward purchase agreements for our raw material supply. If we enter into a forward purchase agreement which is not matched to one or more customer contracts with fixed raw  material prices, a rapid or prolonged decrease in the price of significant raw materials could adversely impact our business.

Our business is dependent on a number of raw materials that are subject to volatility in price and availability.

We use a number of raw materials in our products which are found in only a few parts of the world and are available from a limited number of suppliers. The availability and costs of these materials may be influenced by private or government cartels, changes in world politics, additional regulation, labor relations between the materials producers and their work force, unstable governments in exporting nations, inflation, general economic conditions and export quotas imposed by governments in nations with rare earth element supplies. The ability of key material suppliers to meet quality and delivery requirements or to provide materials on price and other terms acceptable to us is beyond our control and can also impact our ability to meet commitments to customers. Future shortages or price fluctuations in raw materials could result in decreased sales as well as margins,injury to our workers or otherwisethird parties.

Our manufacturing operations could result in harm to our workers or third parties in our facilities.  Our manufacturing processes involve the use of heavy equipment, vehicles and chemicals, among other matters, that could lead to harm, injury, death or illness.  In addition to harm to individuals, any such occurrences could result in reputational harm, adverse effects on employee morale, litigation and other costs, any of which could materially and adversely affect our business.  

Although collective bargaining agreements are in place for certain employees, union or labor disputes could still disrupt the manufacturing process.

Our operations rely heavily on our skilled employees. Any labor shortage, disruption or stoppage caused by any deterioration in employee relations or difficulties in the renegotiation of labor contracts could reduce our operating margins and income. Approximately 55% of our U.S. employees are affiliated with unions or covered by collective bargaining agreements. The enactment of new or increased import duties on raw materials imported by us could also increase the costs to us of obtaining the raw materials and might adversely affect our business.

If suppliers increase the price of critical raw materials or are unable to meet our demands, we may not have alternative sources of supply. In some cases, we haveCompany entered into exclusive supplytwo collective bargaining agreements with respectthe United Steel Workers of America which cover eligible hourly employees at the Company’s Arcadia, Louisiana and Kokomo, Indiana facilities. Failure to raw materials,negotiate new labor agreements when required could result in a work stoppage at one or more of our facilities. In addition, other Company facilities could be subject to union organizing activity. Although we believe that our labor relations have generally been satisfactory, it is possible that we could become subject to additional work rules imposed by agreements with labor unions, or that work stoppages or other labor disturbances could occur in the future, any of which could reduce our operating margins and income and place us at a disadvantage relative to non-union competitors.  

Product liability and product warranty risks could adversely affect our business if the exclusive supplier cannot meet qualityoperating results.

We produce many critical products for commercial and delivery requirementsmilitary aircraft, industrial gas turbines, chemical processing plants and pharmaceutical production facilities.  Failure of our products could give rise to provide materials on pricesubstantial product liability and other damage claims as well as reputational harm. We maintain insurance addressing this risk, but our insurance coverage may not be adequate or insurance may not continue to be available on terms acceptable to us. In addition,

Additionally, we manufacture our products to strict contractually-established specifications using complex manufacturing processes. If we fail to meet the extent that we have quoted prices to customers and accepted customer orderscontractual requirements for products prior to purchasing necessary raw materials, or have existing fixed‑price contracts,a product, we may be unablesubject to raisewarranty costs to repair or replace the price of products to cover all or part of the increased cost of the raw materials.

The manufacturing of the majority of our products is a complex processproduct itself and requires long lead times. We may experience delays or shortages in the supply of raw materials. If we are unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products. This could cause us to lose sales, incur additional costs delay new product introductionsrelated to customers’ damages or suffer harmthe investigation and inspection of non-complying products. These costs are generally not insured.

Risks Related to our reputation.Research and Technology Activities

We value our inventory using the FIFO method, which could put pressure on our margins.

The cost of our inventories is determined using the first-in, first-out (FIFO) method. Under the FIFO inventory costing method, the cost of materials included in cost of sales may be different than the current market price at the time of sale of finished product due to the length of time from the acquisition of raw material to the sale of the finished product.  In a period of decreasing raw material costs, the FIFO inventory valuation normally results in higher costs of sales as compared to the last-in, first-out method.  This could result in compression of the gross margin on our product sales. 

Changes in tax rules and regulations, or interpretations thereof, may adversely affect our effective tax rates.

We are a U.S. based company with customers and suppliers in foreign countries. We import various raw materials used in our production processes, and we export goods to our foreign customers. The United States, the European Commission, countries in the EU, including the United Kingdom, and other countries where we do business may change relevant tax, border tax, accounting and other laws, regulations and interpretations, that may unfavorably impact our effective tax rate or result in other costs to us.  In addition, the Company has deferred tax assets on its balance sheet which could be subjected to unfavorable impacts if tax rates are reduced, such as those that occurred at the end of calendar 2017. 

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In addition, laws in some non-U.S. countries affecting intellectual property are uncertain in their application, which can affect the scope or enforceability of our intellectual property rights. Any of these events or factors could diminish or cause us to lose the competitive advantages associated with our intellectual property, which could have a material adverse effect on our business.

Risks Related to Our Cybersecurity Activities

We are subject to risks relating to our cybersecurity measures and to misappropriation of information generally.

We have put in place a number of systems, processes and practices designed to protect against intentional or unintentional misappropriation or corruption of our systems and information or disruption of our operations. These include, for example,operations including unauthorized access to our networks, servers and data, encryption of network access.access and the introduction of malware. Despite suchour cybersecurity efforts, we arecould be subject to breaches of security systems which may result in unauthorized access, misappropriation, corruption or disruption of the information we are trying to protect, in which case we could suffer material harm. AccessFor example, access to our proprietary information regarding new alloy formulations would allow our competitors to use that information in the development of competing products. Current employees have, and former employees may have, access to a significant amount of information regarding our operationsCompany which could be disclosed to our competitors or otherwise used to harm us. Any misappropriation or corruption of our systems and information or disruption of our operations could have a material adverse effect on our business.

Our information technology systems could be subject to attack.  

Our information technology systems could be subject to sabotage by employees or third parties, including attacks in which the systems could be shut down with a demand for payment of “ransom”, which could slow or stop production or otherwise adversely affect our business. Any such attack could disrupt our operations and could have a material adverse effect on our business.

An interruption in energy services may cause manufacturing curtailments or shutdowns.

We rely upon third parties fordepend on our supply of energy resources consumed ininformation technology infrastructure to support the manufacturecurrent and future information requirements of our products. operations which exposes us to risk.

Management relies on our information technology infrastructure, including hardware, network, software, people and processes, to provide useful information to support assessments and conclusions about operating performance. Our inability to produce relevant or reliable measures of operating performance in an efficient, cost-effective and well-controlled fashion may have significant negative impacts on our business.

Risks Related to Our Finance Activities

We value our inventory using the FIFO method, which could put pressure on our margins.

The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Disruptions in the supply of energy resources could temporarily impair our ability to manufacture products for customers. Further, increases in energy costs, which are outsidecost of our control,inventories is determined using the first-in, first-out (FIFO) method. Under the FIFO inventory costing method, the cost of materials included in cost of sales may be different than the current market price at the time of sale of finished product due to the length of time from the acquisition of raw material to the sale of the finished product.  In a period of decreasing raw material costs, the FIFO inventory valuation normally results in higher costs of sales as compared to the last-in, first-out method.  This could result in compression of the gross margin on our product sales.  

Changes in tax rules and regulations, or changes in costs relative to energy costs paid by competitors, has andinterpretations thereof, may continue to adversely affect our business. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our business. 

Our operations could result in injury to our workers or third parties.

Our manufacturing operations could result in harm to our workers or third parties in our facilities.  Our manufacturing processes involve the use of heavy equipment, vehicles and chemicals, among other matters, that could lead to harm, injury, death or illness.  In addition to harm to individuals, any such occurrences could result in reputational harm, adverse effects on employee morale, litigation and other costs, any of which could materially and adversely affect our business. 

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We could be required to make additional contributions to our defined benefit pension plans or recognize higher related expense in our statement of operations as a result of adverse changes in interest rates and the capital markets.

Our estimates of liabilities and expenses for pension benefits incorporate significant assumptions, including the rate used to discount the future estimated liability, the long‑termlong-term rate of return on plan assets and several assumptions relating to the employee workforce (salary increases, retirement age and mortality). We currently expect that we will be required to make future minimum contributions to our defined benefit pension plans. Many domestic and international competitors do not provide defined benefit plans and/or retiree health plans (which we do provide), and those competitors may have a resulting cost advantage.  A decline in the value of plan investments in the future, an increase in costs or liabilities, including those caused by the lowering of the rate used to discount future payouts, or unfavorable changes in laws or regulations that govern pension plan funding could materially change the timing and amount of required pension funding or the amount of related expense recognized in our statement of operations. A requirement to fund any deficit created in the future could have a material adverse effect on our business.

The carrying value of goodwill and other intangible assets may not be recoverable.

Goodwill and other intangible assets are recorded at fair value on the date of acquisition. We review these assets at least annually for impairment. Impairment may result from, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations and a variety of other factors. A sustained downturn resulting from the COVID-19 pandemic or otherwise may result in the carrying value of our goodwill or other intangible assets exceeding their fair value, which may require us to recognize impairment to those assets.  Any future impairment of goodwill or other intangible assets could have a material adverse effect on our business.  

We may not be able to obtain financing on terms that are acceptable to us.

The global capital markets have been adversely affected, and may continue to be adversely affected, by the economic effects of the COVID-19 pandemic.  Terms for borrowers have become significantly less favorable.  As a result of this and other issues, we may not be able to obtain needed financing on terms that are acceptable to us.

Our working capital requirements may negatively affect our liquidity and capital resources.

Our working capital requirements can vary significantly, depending in part on the timing of our delivery obligations under various customer contracts and the payment terms with our customers and suppliers. If our working capital needs exceed our cash flows from operations, we would look to our cash balances and availability for borrowings under our existing credit facility to satisfy those needs, as well as potential sources of additional capital, which may not be available on satisfactory terms and in adequate amounts, if at all.

Risks Related to Our Global Operations

We are unablesubject to recruit, hirerisks associated with global trade matters

We are subject to macroeconomic downturns in the United States and retain skilledabroad that may affect the general economic climate, our performance and experienced personnel,the demand of our customers.  Previous turmoil in the global economy has had, and future turmoil may have, an adverse impact on our business and our financial condition.  In addition to the impact that the global financial crisis previously had, we may face significant challenges if conditions in the global economy worsen.  Economic turmoil has resulted and may continue to result from the COVID-19 pandemic, which has adversely impacted and may continue to adversely impact our business.  Transportation and logistics resources, including shipping and transportation services, have been in short supply, which has had, and may continue to have, and adverse effect on our business.  Further, any global trade wars or similar economic turmoil, including new or existing tariffs, could adversely affect our business.  For example, the U.S. and China have imposed tariffs on large amounts of products imported into each of the countries from one another.  Moreover, these new tariffs, or other changes in trade policy, have resulted in, and may continue to trigger, retaliatory actions on the part of these countries and potentially other countries in the future.  Talks between the two countries are ongoing, but the outcome is highly uncertain and could affect our ability to effectively managebuy raw materials from China and expandsell products into the Chinese market.  A “trade war” or other governmental action related to tariffs or

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international trade agreements or policies has the potential to adversely impact demand for our business will be harmed.

Our success largely depends onproducts, our costs, customers, suppliers and/or the skills, experienceU.S. economy or certain sections thereof, and, efforts of our officers and other key employees who may terminate their employment at any time. The loss of any of our senior management team could harmthus, adversely affect our business.  The announcementOur competitors outside of the lossUnited States may not be subject to these tariffs or other measures, and therefore, could have a significant competitive advantage over us in that respect.  In addition, the long-term effect of onethe exit of our key employeesthe United Kingdom from the European Union is currently unknown and could negativelyadversely affect our stock price. Our ability to retain our skilled workforce and our successbusiness.

A global recession or disruption in attracting and hiring new skilled employees will be a critical factor in determiningglobal financial markets could adversely affect us.