David Van Bibber – Controller and Chief Accounting Officer Mark Comerford – President, Chief Executive Officer and Director Dan Maudlin – Vice President and Chief Financial Officer.

Edward Marshall – Sidoti and Company Phil Gibbs – KeyBanc Capital Markets Davis Paddock – Invesco.

Greetings, and welcome to the Haynes International, Incorporated First Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow after the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. David Van Bibber, Controller and Chief Accounting Officer. Thank you, sir. You may begin..

Thank you very much for joining us today. With me today are Mark Comerford, President and CEO of Haynes International; and Dan Maudlin, Vice President and Chief Financial Officer. Before we get started, I’d like to read a brief cautionary note regarding forward-looking statements.

This conference call contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities and Exchange Act of 1934. The words believe, anticipate, plan and similar expressions are intended to identify forward-looking statements.

Although we believe our plans, intentions and expectations regarding or suggested by such forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties, and we can provide no assurance that such plans, intentions or expectations will be achieved.

Many of these risks are discussed in detail in the company’s filings with the Securities and Exchange Commission, in particular Form 10-K for the fiscal year ended September 30, 2014. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

With that, let me turn the call over to Mark..

Thank you, Dave. Good morning, everyone, and thanks for joining us today. Hopefully, you’ve all seen the press release and had a chance to review it and we’ll follow our standard agenda in today’s call, I’ll open with comments about the business and our end markets, and then Dan would give you greater detail on the financial results.

Net revenue in the first quarter was $110.7 million, up 18.1% from last year’s $93.7 million. Pounds shipped in the first quarter were $4.5 million, up roughly 4.7% from last year’s $4.3 million. Net income in the first quarter of fiscal 2015 was $6.4 million, up approximately $10 million from last year’s reported net loss of $3.5 million.

A couple of key factors have had positive impact on our business over this quarter, really as supposed I should say, over the past couple of quarters.

As we mentioned in the press release and over the past few calls, several special projects we’ve been working on over the past few years have been coming through as orders and have been shipping over the past 69 months. We still have several of these projects in the pipeline and we’re constantly working on new applications.

The timing of these projects is always difficult to predict, in many instances we’re counting on outside conversion sources, frequently customer schedules are often changing in variable, and even internally now the other processing sequences can impact the timing of the projects.

We were very pleased that we were able to move some of these projects through this past quarter and we still have some which are likely to ship in the current quarter. In addition, we’re also seeing better strength in our aerospace business as the aerospace destocking that occurred over the past two plus years has largely come to an end.

And I think we can describe the aerospace business is booming, but we feel we’re seeing a trend reining upwards in demand as the transition continues in 2015 and we expect from discussions with key house [ph] that 2016 will be stronger still.

Overall we expect 2015 to continue to strengthen, or deal with pockets of weakness, for example, at this point in time the global industrial economy appears to be trying to find its footing, after a precipitous drop in oil and subsequent postponements in capital spending by drillers and producers.

Oil appears to by trying to find a bottom, where Haynes does not have an extremely large position in the oil and gas industry, several of our competitors do. And so they may now have open capacity in some of their operations which may impact pricing and volumes through the industries as we look forward in 2015.

And I think that we’re pleased with the strength and quality of our backlog for keeping an eye on the economy as a whole.

One thing to remember and we mentioned it briefly last call, with nickel and general commodity price levels falling, we’re back in that mode where we were about a year ago for our customers are very reluctant to place large blanket orders. We expect that trend to continue until we see a broader economic rebound.

With that let me move into the markets and give a little more color on what we are seeing. Net revenue in the aerospace market for the first quarter of 2015 was $43.3 million, up 8.3% from the first quarter of 2014. Volume was 1.8 million pounds in the first quarter, up 11% from first quarter of 2014’s 1.6 million pounds.

Aerospace comprised 39.1% of our net revenue in the quarter. Our backlog in aerospace was flat during the quarter, up less than 1%, indicative of the falling nickel market and end of the year inventory management by our customers. We don’t expect any broad sustained downward correction occurring in the supply chain.

In fact, we expect aerospace business to continue to increase as 2015 progresses, although the increase will likely be somewhat uneven. I think you all know the story at the larger level.

At the macro level Boeing and Airbus now I have an aggregate backlog in excess of 12,000 aircraft, new platforms like the 737 Max, the A320 Neo and the engine programs associated with that continue to book heavily. The engine manufactures and the sub-tier fabricators that are associated with these platforms are expecting better activity.

As a result, we expect destocking we feel ended in 2014, will result the stronger demand as we move through 2015 and into 2016.

On the structural side, our tubular products facility in one of its best quarters since 2012, if you remember back in that timeframe we were shipping pretty heavily out of our tubular products division into a deep well oil and gas operation.

That business has obviously slowdown but what’s really been driving us over the last couple of quarters on the tubular side has been the aerospace tubing and the chemical process project that we’re talking about. Again, overall, we expect the aerospace market to remains strong as we progress through 2015.

In our chemical processing market, net revenue for the first quarter of 2015 was $30.8 million, up 33.3% from the first quarter of 2014’s $23.1 million. Volume in this market was up 5.4% first quarter of 2015 to 1.2 million pounds.

CPI accounted for 27.8% of our net revenues during the quarter, backlog fell 14.4% during the quarter, principally due to the high volume shift and the high value of that volume that we shift.

As we’ve discussed previously, several of the new applications we’ve been working on over the past three plus years, became orders in 2014 and we’ve been shipping these projects over the last six to nine months.

We still have several on the pipeline for 2015, it’s sometimes difficult just to - I’ll let everyone know it’s tough for the company to dedicate these resources sometimes to developing these projects when we’re in periods of lower demand and lower profitability as we were in late 2012 and into 2013.

But I think most of you realize that’s really when these projects were developed and the prototyping was done and the engineering work was done.

It’s important for me to acknowledge the work of our technical people, our production people and our field personnel that they commit themselves so heavily to these projects from time too far and then it’s - as you’ve all see they are very, very strong for hand when they hit the order book and turn into top line revenue.

Looking ahead, we continue to work on these new projects in this area and we’re confident, we’ll convert some of them into new applications, just as we’ve done over the past few quarters.

In the immediate future I mentioned last time that we still have concerns about booking up to second quarter, we do have some project work and transactional volume that is filling in the second quarter and we’re working with customers on those applications now.

Also, whereas we still have some excellent CPI projects in the pipeline, we did missed it, we didn’t express some concern about some of the higher volume low value products that typically shipped in this market area.

With the oil and gas pulling back, we could see available capacity being dedicated to attacking this market area on the higher volume materials.

We can’t say we’ve seen anything like this so far, we just have not seen any of that impact, but we’re vary of this possibility and as many of you know, this market area the chemical process area, especially large projects and high volume areas, either typically where we see lower price alternatives, and lower price competitors targeting our volume when we move into slow period.

On land-based gas turbine side, this market totaled $17.5 million in net revenue in the first quarter, down 3.4% from the first quarter of 2014, $18.1 million. Volume was 1.1 million pounds, down about 10% year earlier. This market accounted for 15.8% of our total revenue in the quarter and the backlogs increased 6.6%.

This market remains depressed at the OEM side of the business remains slows since roughly the end of 2013. We don’t push the picked up on the OEM side until we start to see energy demand from the industrial economy rebounding. MRO business was holding up. And as you know the demand on the MRO side is very difficult to predict.

We’ve been successful on developing our applications for our higher temperature capability materials, but until new platforms sales kick in on the OEM side, we don’t expect those application wins to result in significant short-term sales. Overall, we expect this market to remain soft and exhibit very low visibility through 2015.

Our new markets had net revenues of $14.1 million in first quarter of 2015 up 50% from the first quarter of last year. This area accounted for 12.7% of our revenue in the quarter and even in spite of this higher shipping level our backlog increased about 3% during the quarter.

Where as the tradition core of this market, we guess it’s authorization in North America has been hurt by alternative technologies and legislation, we are continuing to develop new applications for our materials, industrial heat treating, welding, brazing, even some areas in medical and consumer related applications have been hoping us to rebuild this segment of our business.

Finally, on our expansion investment projects in January, we closed on our acquisition of Leveltek Processing, LLC’s, asset booked in LaPorte, Indiana. We’ll be operating the company under the name LaPorte Custom Metal Processing as we seek to grow the toe end side of the business.

This acquisition grew out of the relationship with Leveltek over the past ten plus years and our need to develop capabilities to support our customers’ needs for higher quality products and faster higher quality service.

This acquisition gives us capabilities we need along with an existing business we would like to grow and an operation with people and equipment that has been proving capable of working with our most difficult value.

And by the ways, in addition to it being an existing business with an existing revenue stream and an existing profitability stream, the integration has gone smoothly and I think most let’s quote for very few startup headaches and heartburn so far. We are very excited about welcoming the LaPorte operations into the Haynes family.

Our IT platform is integration is ongoing, these are always difficult. As I’ve spoken to you previously, it’s very necessary at Haynes in managing our global business. We simply had two many discrete systems that didn’t connect to each other. We’re still facing in the North American sales and financial function.

And when we feel we have that area appropriately up in running we’ll move to our Kokomo operations. As I mentioned previously, our expansion of our tubular products capability is largely complete. And as I mentioned in the aerospace section, we saw a very nice quarter coming out of the people down in the tubular products division.

We’re still qualifying some of the product sizes, mainly on one of large cold working mill and we are writing the standing operating procedures, but the equipment has been turned over to production, in fact we had to do some very necessary maintenance on some of the legacy equipments in January and that went well.

And it was nice to have this new equipment up and running so that we can take some of that equipment down and perform some very, very necessary maintenance. We had a very solid quarter in tube and again, that’s largely due to the additional capacity being brought online.

Similar story on the flat roll expansion, we’re still writing SOPs and finalizing some of the temperature surveys on the last furnace, that’s a heat-treating furnace, but the rest of that equipment is up and operating.

It’s an area we used to have to count on substantial outside processing and pulling those capabilities in-house helps us and turning product around more quickly, as we saw in the past few quarters we’ll need a stronger market to fill up that capacity. I think we’ve been pretty open with you about that.

But where we see the markets going the expectations for growth in the engine side and some of these new applications we’re developing and CPI and once we start to see land-based gas turbine come back we expect that we’ll be able to get this equipment to rolled out. We are very excited about having all these capabilities in-house.

With that let me turn it over to Dan, for more detail on our financials..

Thank you, Mark. Our financial results in the first quarter was solid with the strengths in the project related shipments in both the chemical processing markets, as well as in our other markets category, driving a gross margin percentage of 18.3% this quarter compared to 15.8% in our last sequential quarter, Q4 and 5.6% in last year’s first quarter.

These were project shipments of high-value specialty and proprietary alloys that included high-value product forms. Our volume shipped in Q1 was lower in pounds, due to expected seasonality than the sequential quarter Q4, however, the pricing and profitability was better, which helped to drive a higher gross margin percentage.

Our gross margin dollars in Q1 was $20.3 million, which increased by $1.3 million, compared to Q4 and up $15 million compared to Q1 of last year. These results continue a solid progression of margin recovery.

We do expect next quarter sales to be higher in volume and dollars, so likely a lower gross margin percentage as the mix is expected to include less of these high-value project type shipments and more commodity type shipments.

As we continue to push margins back towards the normalized levels, certain headwinds and uncertainties persist, such as declining commodities, most notably the price of nickel. Looking at the 30-day average LME price at the end of the each quarter last year, we saw nickel price rise in Q1 at $6.31, Q2 at $7.10, Q3 Peak at $8.42 and Q4 at $8.20.

The LME for our Q1FY2015 was a $7.22 than more recently dropped into the $6.50 to $7 range. This lower level hit the persist could be a headwind to margins, as it may pushdown our average selling prices, as we sell off the higher cost inventory in our stock. And a second headwind maybe the continued strength of the U.S.

dollar and the impact that may have on our competitiveness in foreign markets and the translated value of sales made in foreign currencies. However, this risk is somewhat muted for us, as a majority of our sales deploying customers are in U.S. dollars. Mostly due to the U.S. dollar being the common currency of the aerospace market.

On the favorable side, we see some margin support, with price increases we have implemented, favorably impacting selling prices and margins, the Kokomo and Arcadia CapEx projects are substantially complete, we’re beginning to produce higher volumes especially at the tubular facility in Arcadia, as Mark mentioned.

And our continued focus on our cost structure, and production efficiencies and yield, through main manufacturing projects, as well as from the new capital investments recently completed.

SG&A cost combined with research in technical cost were $10.6 million which includes a favorable foreign currency translation gain of $1 million, however, this is offset by higher commissions and higher accruals from incentive compensation compared to last year.

SG&A as a the percentage of net revenues was 9.6% in the first quarter, compared to last year’s first quarter of a 11.6%, and the full 2014 fiscal year of 9.3%. Operating income was $9.6 million compared sequentially to Q4 of $8.8 million and last year’s first quarter of an operating loss of $5.6 million.

The effective tax rate this quarter was 33.9% but may slightly increase to approximately 34% to 35% as proportionally more taxable income is expected in the U.S. tax jurisdiction than in our lower rate foreign jurisdictions.

Outlook, we expect revenue in the second quarter of fiscal 2015 to be higher than the revenue of the first quarter of fiscal 2015.

However, we expect earnings to be similar to that over the first quarter of 2015, as the expected gross margin percentage maybe lower with a higher volume of commodity products expected to ship in the segment quarter as compared to the first quarter of 2015 as I previously mentioned.

Backlog, was $215.5 million at December 31, 2014, a decrease of $5.8 million or 2.6% from $221.3 million at September 30, 2014. Contributing to this decrease is a solid level of shipments in the first quarter of 2015. Our order entry levels have reduced as customers are showing caution, however this can be common at the end of the calendar year.

In addition, we implemented price increases, which are helping to improve the quality of our backlog that may slightly temper the order entry rates as we manage mix to better pricing levels. The January 31, 2015 backlog was roughly $205 million.

The forecast for capital investments in fiscal 2015 is approximately $22 million excluding the previously mentioned acquisition Leveltek LaPorte assets, which $14.6 million was paid in January 2015. The combined $36.6 million is our projected cash using investing activities for fiscal 2015.

And at the management team, we’re really excited to complete the acquisition of the LaPorte assets as this transaction is important to our long-term strategic plan.

This acquisition is expected to be mildly accretive to earnings and operating cash flow this year and the integration is expected to grow smoothly they have been a part of the production process for many years. Operating cash flow with a small use of cash of $0.8 million in the first quarter of fiscal 2015 driven by investments in inventory.

Probably operating cash flow is expected to move to a positive source of cash over the course of 2015. Controllable working capital was $285.7 million at December 31, 2014, an increase of $14.4 million during the first quarter of fiscal 2015 with inventory increasing $12 million due to positioning inventory for higher sales in Q2.

Our revolver balance remains at zero borrowing and our cash balances at December 31, 2014 was $38.4 million, a decrease of $7.5 million over the quarter. Our cash in expected to decline further over the next quarter primarily due to the acquisition of the LaPorte assets mentioned earlier.

In summary, we are seeing some concerning macroeconomic trends and uncertainty related to the impact of lower commodity pricing. As we proceed cautiously further into 2015, we continue to view fiscal 2015 as favorable to 2014.

Our focus will remain on growing our net revenues and regaining the price and margin levels that experience compression during the downturn. The long-term demands in our markets continues to look favorable and with the completion of our CapEx expansion projects we are well positioned for future earnings growth and improving shareholder value.

Mark, I will now turn the discussion back over to you..

Thanks Dan. We’re pleased with the start we have a fiscal 2015. We’ve seen excellent project activity in new applications in several market areas. Energy, specifically the oil and gas and enhance land-based gas turbine markets are expected to remain challenged in fiscal 2015.

However, in addition to our new applications we’re confident in our market position and we’re building on the added platforms we’ve worked no over the past few years. Specifically, the tubular products expansion and upgrade, the flat roll expansion and upgrade, and the acquisition of LaPorte Custom Metal Processing.

We feel all of these are already contributing and we expect to build on those contributions. We also just completed our third wave of black belt projects and green belt projects and we’re continuing to drive waste out of our operations. Our margin expansion is being possible without this focus on driving out ways for more operations.

We still have a lot of opportunities in this area as we look forward.

We feel confident, where Haynes is positioned in the market, we’ve seen pretty solid margin expansion as we started rebounding from 2013, will undoubtedly see some pressure as nickel has dropped and the oil and gas situation opens up capacities in the industry, but we’re also seeing some great opportunities.

And remember Haynes has to develop new application, it’s what we do and it’s what we do well. We can’t wait for the market securities upwards. Haynes has to be about improving base markets and driving new products and new applications. We will keep that push on, we’ll continue to offer higher value products and services to our customers.

With that let’s open up the call to your questions..

Thank you. [Operator Instructions] Our first question comes from Edward Marshall with Sidoti & Company. Please proceed with your question..

Hey guys, good morning..

Good morning, Ed..

So I want to look at if I could, talk about maybe the pricing element because it seems like a lot of the discussion points that we had going into fiscal 2014 are now starting to show themselves in fiscal 2015, meaning nickel is declining.

However, there are some significant differences around destocking, and maybe you are not juggling CapEx programs and things like that that might distract you. I'm just kind of going to ask to see if I can get a sense of what you think pricing might do over the next couple quarters.

And I know that you don't give guidance, but do you see it hitting the lows from fiscal 2014? Or is that exaggerated?.

Tough to say right now, Ed, I mean that be lot more, somebody asked the similar question if you remember last call, do we continue to see pricing moving upwards and my response at that time was we are standing in the phase of declining nickel market. I mean that’s always the wild card, it’s the dollar strength and nickel declines, blah, blah, blah.

You can have a lot of difficulty in continuing to move pricing upwards. This oil and gas situation too, the decline in oil over the last six months, just to let you know, this is really just a qualitative discussion. A lot of customers even though we are not heavily into oil and gas, are pretty spoofed by that.

And so it’s really made a lot of people nervous. Now in the last week or so, we’ve seen that seem to find a little better footing and we are hearing some more positive things.

But there is a lot of concern out in the marketplace about this dramatic drop in oil and the immediate cancellations we’ve seen in capital spending by the drillers and the production people.

I mean, I’ve never seen people respond so quickly to canceling capital projects, as we saw at Royal Dutch Shell and the layoff at Schlumberger [ph] and things, I mean it happened lightening fast. So a lot of people are nervous about that. The reason I get into that as we talk about pricing is that does then open up available capacity.

We haven’t seen the trickle down yet, and I don’t know if any of our peers in the industry had talked a lot about cancellations your push outs, but when you see cancellations and push outs, you see available capacity open up and all of us have to fight to fill our capacity.

The nice thing for someone like Haynes is a lot of our end user markets have not been directly impacted by those things. The tough thing for someone like Haynes is when those guys lose their big volume from oil and gas they tend to start moving into especially things like our base load volume on the chemical process side.

Those higher volume, lower price items that we frequently have coming to our chemical process area that are very, very attractive price level system of the competitive materials out there and even some of our competitors with similar materials there they have a capabilities to go to a lower price level and I have to fill up their equivalent.

I gave the kind of long answer, but I think the question asked is a very difficult one for where we are in visibility right now..

Right, maybe I can ask a different way. And maybe this is two-part.

But can you give us an update on where backlog is right now?.

Yes, backlog, backlog is really around 2.05%, and if you remember till about last three or four calls, we said we’re not going to be real, real concerned about, and expanding our growing backlog, for tow reasons.

One, we we’re working on the value of the backlog, are we bringing the right projects and making available capacities for higher-value products to go through the mill.

And the second thing being is, since we started seeing nickel declining, we knew we were going to back into that more transactional environment, where a set of people placing general leases at 4,000 pounds of pop, percent, you know what how many need 4,000 pounds this month and I’ll let you know next month.

So have a more transactional environment occurring..

Great, and the dollar value of that backlog coming in, is that easy for you to kind of discuss maybe as it relates to the $26.83 on average for Q1?.

I think you will see some decline in the price level. Two things, if you looking at the current backlog, we did see fewer high-value projects and more commodity business come in, I’ll say in the last three months to four months, as a percentage and we have the declining nickel situation, now starting to load itself into the backlog..

Yes, with the mix of products that we shipped this quarter, these were high-value type of items. So with those coming out of the backlog that’s going to lower the average selling price in the backlog, just from that and we mentioned the forecast for next quarter will probably not being quite that favorable of the mix..

Right. Okay, you talked about Arcadia in your prepared remarks, and the response you've had there. I'm wondering if you could kind of detail, maybe talk about some utilization rates. I think prior to the upgrade, you were at 100%-plus, if you could be more than 100%.

And then maybe you can talk about some of the efficiencies and how much more you can squeeze out of that from a margin perspective as you ramp up..

I think, we are still thinking of the plan, we pretty much said that this is going to give us 40% greater capacity down there, and what I’ve kind committed to you guys and everybody is, I think we can fill that up, as we move if we’re only get into a run rate out in 2017.

If you ask me right now, I told you we had a great quarter out of the tubular products area it was in my opinion about 10% higher than what we would standardly expect when we were running at that capacity. Even, I mean, in the old days, when I was talking about the capacity it was X number of dollars.

If you take 10% down to that normal quarterly amount, that’s where they finished this past quarter at about 10% above, what they had been doing previously per quarter.

Okay now, that’s dollars, and again there were some nice high-value projects that came out of the tubular products division in the past quarter, there’ll be some coming through this quarter as well..

And when we look at Leveltek, first, could I ask, was it a defensive transaction? I know you do some tolling in that.

Would you consider that somewhat defensive, vesting [ph] maybe?.

I think if you look at it as defensive if you wanted to. If I was outside the Company looking in might view it that way.

But we’ve talked for gosh probably the last three or four years about adding capabilities that will give us better controlled one over the turnaround time in getting product out; but, two, in the process efficiency, and it’s a critical component of the end processing, when you’re feeding into things like lasers or water jets that you have a stress-aligned uniform product that's not going to fold up like a potato chip after you cut the scalable structure out.

We now have control of that process. And that, to me, has always been - it’s been about getting a better product and a better service out to the customers. And we look at a number of outside processing capabilities and new equipment versus buying it.

And it all came back to look the reliability of this is excellent, we’ve been working with these guys for a years, it’s a great operation with great people. This makes the most sense to goal is..

And is there any margin enhancement that you can get from that, from in sourcing? I mean, is there any kind of knowledge of the capital that you put into the business or your existing business that you may be able to bring in that direction that would help your processes that you could actually even squeeze out even more margin than what they had?.

That certainly one we’re pushing towards absolutely, so with control of that process we’ll be able to look at yields a little bit differently and look that the product that goes across some of that equipment, a little differently. So that I think is going to help us.

In addition, they have a tolling business that is something that we’re excited to add to our portfolio. So that we feel will be in accretive earnings per share and operating cash flow this year, and certainly into the future..

Yes, you can imagine at any time you bring something like just to a board of directors, you better be able to talk about cycle time reduction or speedier service to customers. You better be able to talk about yield improvements, and you better be able to talk about margin enhancements.

So, yes, that’s all sitting there in a justification for getting this project done..

Great. Thanks guys..

Thank you..

[Operator Instructions] Our next question comes from Phil Gibbs, KeyBanc. Please proceed with your question..

Good morning..

Good morning Phil..

Good morning Phil..

I had a question on the other markets. That seemed to be driven by a lot of project business. And I apologize if I missed your comments on this earlier, Mark.

But what did you say that drove that outside of FGD? And then also what did you say on the backlog momentum there?.

Yes, I think we really touched on it in very broad terms. A lot of what we have in the other market area is covered by non-disclosures and call in general some of its competitive situations.

But just to give you a rough idea Phil on the FGD side, if you look back up as five, six years ago, actually probably more than that before I came to Haynes, that was probably a $30 million, $40 million maybe of a more million dollar a year business to Haynes. And I’d say 80% of that is now gone and maybe even as much as 90%.

That’s how much that is changed in North America in the past five, six years. So we’ve had to replace it, when we turn out and saw a lot of newer applications, lot of it using the new machines they knew, but we had the Wire Company in operation for ten years.

A lot of wire opportunities that we’ve come through fit into nich very, very well in the wire operation.

So its really been just grinding out and continuing to find people who need either better corrosion resistance or better wear resistance and finding applications from our products that fit into these applications and obviously to this always the high temperature and corrosion, so industrial heat treating, or industrial heat applications, embracing, welding, overlay applications.

There's just a myriad of new applications that we brought into the Company that Haynes didn't used to.

And by the way its just also new products, these products at Haynes wasn’t producing out of that, out of a series of our facilities that we kind of always had this parochial thought process of, if we didn’t invent it we’re going to make it, if we didn’t make it we are not going to sell it, and we broken those barriers down.

We will process other people's material and we’ll take it to market. And that has worked well for us on the other product side..

And I think it shows in that market segment too that, that’s where we can do some of the higher value, move up hour chain [ph]. The average selling price this quarter was $31.54 in other markets where last quarter was $24.65. So you can see some opportunity to kind of garner those higher average selling price type projects..

I'm sorry; did you talk about the movement of backlog as far as what that is doing now relative to some of the other businesses?.

Do you mean just in the other product areas?.

Yes..

Yes, we essentially say that the backlog was up - let me take a look and I think it was up of 3% or 4%, 3 % in the quarter in spite of shipping 50% more. So we have strong shipping quarter and we backfilled it with even more orders, so the other area has some pretty momentum right now..

Okay. And then, Mark, you mentioned that the tubular business was 10% stronger than you normally see it in the first quarter.

Does that include some of the new capacity as well? So with the new capacity it was 10% above? Or are you talking about the legacy business and then starting to think about phasing in some of the new capacity as we move forward?.

With the new capacity, if you kind of you look at the chart on my wall, we've committed to say we’re going to get 40% more out of the tubing business, once its capacity is up and running and our target we set in the - I think we said in the shareholders about two years ago. That we’ll be doing 40% more out the tubular products division by 2017.

So kind of my chart is sitting there and saying, boy, the guys have already stepped it up. We had a great quarter. Now that doesn’t mean we’re going to have a great quarter at year end, year out, but its time for them to okay, start showing me this.

Okay this is now the new standard, but it was up 10% over what I can say a standard quarter was last year, year before. And it’s because they’ve got the new equipment up and running.

And they are also - the flow of materials is a lot better than it was, they are doing some great things down there on the engineering side, as well as the new equipment side..

That's largely in the aerospace segment? Is that….

No, its everywhere, in fact right now Phil lot of these special projects that we’re shipping out at CPI, a lot of it is nickel-based alloys and we’ve had some really good quarters for these one of big projects that we finally nailed after working on the engineering for three or four years last six to nine months.

They come through a lot of them in plate and sheet, but quite a bit of tube and some of the other products that we would ship through the Arcadia facility..

So you are saying that some nickel tubing going into the CPI applications.

And is there any of the business there going into other markets, meaning some of what we were just talking about, the other piece?.

Yes..

Is that being served by Arcadia as well?.

Yes. Arcadia serves all of our markets. If you ask me just to talk top of my head Arcadia is largely aerospace products. Its probably second largest area is into the chemical process area. And third, would be in other markets, not a lot of it goes into the industrial gas turbine area..

Okay, terrific. Appreciate it. Thanks, guys..

Thanks, Phil..

Our next question comes from Davis Paddock with Invesco. Please proceed with your question..

Hi, good morning, guys. Thanks for taking my call.

Just a question on - now that the two capital projects are kind of nearing the end stages and starting to ramp up, can you give us a sense on how this might result in inventories coming down? They have been rising the last few years, and that’s part of services - how you are structured with your service centers around the globe.

They were elevated quite a bit the last few years.

Is there a possibility that we can return back to more historical, lower levels?.

Well, that certainly part of what we are trying to achieve with these new CapEx projects. Certainly the cycle times improvements that we hope to get from some of it and we call it inventory velocity. So the best of the inventory velocity to the plant, the better returns will be and yield improvements, and so on.

So we certainly expect or currents to improve, we also expect revenue to increase with the additional product that we’re pushing over the new equipment and the growth that we’re going to get over the years on that. And that will make inventory rise.

So the expectation is that inventory over the long-term will still rise, but we hope see inventory turns will improve to show better efficiency on our working capital management..

Do you have any sort of targets for that or timeframes for how that should play out over time?.

We look at inventory turns really based on pounds rather than in dollars. So you’ll probably calculate it based on dollars, but we look at in pounds. So we certainly have target that we’re trying to achieve, quite frankly pretty aggressive ones. So we’re trying very hard to unlock as much cash as we can from our inventory.

So that we can better unitize on cash for shareholder value, so that is certainly the goal..

I’ll give you one qualifier around it as well. Recently on the inventory side and as we’ve mentioned last couple of calls, we were kind to getting ready for some shutdowns that we have to take in maintenance that we built a little bit of inventory in the November, December timeframe.

Also we’re pushing as much as we possibly can through into the finished goods area, because quite frankly we are still behind on orders. So we’re still behind in a number of areas.

So in January we had a pretty good shipping month, as Dan indicated through the lower backlog we’re finally getting a lot of that material into finished goods and getting it out the door, finally. We have been disappointing some customers - quite a few of them, quite frankly.

The other qualifier, I’ll give you on the inventory side in which we’ve seen a lot of especially in 2014 are these fantastic special projects. Remember these aren’t items that are constantly coming through the plants, they are usually for new alloys, alloys that are not fitting in stock or made to stock, they’re typically made to order.

And the nice thing of these projects is when they come in they are usually a pretty big block or chunk of inventory we have to feed into the system because we don’t produce these alloys all the time. And then they typically when they go out they’ll go out in a block. And that’s what we’ve been seeing recently..

Okay.

Second question, assuming, if nickel prices were to stabilize here at current levels, how long does the nickel turn through take to turn through this system to where the nickel part would no longer be a headwind to gross margins? Is that a quarter away? Is it two or three or four quarters away? How should we think about that?.

We usually take the couple of quarters, I mean, we do have transactional business that, those kind of effects can be seen right away. Parts of our business have adjusters, escalators and de-escalators on a selling price based on nickel.

So some of the longer-term multi-ship type projects, it will take a couple quarters at least to get through, but with that transactional business you can start to seeing it, really within along the quarter..

And, what’s the next thing, transactional and I guess project business, typically?.

For transactional business, it’s usually around 33%, about a third of the business, close through kind of transactional type. We get the order we ship that within 60 days..

Okay, okay, thank you very much..

You’re welcome..

At this time, I’d like to turn the call back over to management for closing comments..

Thanks very much for your time today, and thank you for your interest and support of Haynes, we‘ll look forward to updating you next quarter..

Thank you. You may disconnect your lines at this time. This does conclude today’s teleconference. Thank you for your participation..