Good day, ladies and gentlemen, and thank you all for joining us for this Hayes International Inc. Third Quarter Fiscal 2019 Results Call. [Operator Instructions] And now to get us started with opening remarks and introductions, I’m pleased to turn the floor to Controller and Chief Accounting Officer, Mr. David Van Bibber. Welcome, David..

Thank you very much for joining us today. With me today are Michael Shor, President and CEO of Haynes International; and Dan Maudlin, Vice President and Chief Financial Officer. Before we get started, I would 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, 2018. 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 Mike..

first, we averaged about 15% gross margin as a percentage of net revenue in May and June and finished the quarter at 14.4%. Next, our 30 initiatives are beginning to show bottom line results. The best way to look at this is comparing our fiscal 2019 Q3 versus fiscal 2019 Q2.

The third quarter had slightly lower volumes and slightly lower average selling price per pound, leading to a Q3 with $1.5 million less revenue than Q2. However, Q3 had $3.5 million more gross margin dollars and an increase in net income of $2.3 million.

In addition, the $3.8 million in net income in our third quarter was the best level of net income this company has seen in 15 quarters. This is despite margin headwinds related to cobalt and related to high-cost product being sold now that was produced during the cold-finishing furnace outage startup.

These higher production costs compressed margins in the second and third quarters of fiscal 2019 and are expected to continue in the fourth quarter when a portion of this product sells through our service centers.

Also, as noted in the past, our improved performance is despite the significant reductions we’ve seen over the past few years in the industrial gas turbine market and the lack of any very large special project orders.

Again, as I’ve said before, in – if IGT bounces back or unique special projects materialize from the efforts we have underway in this area, it will be on top of our base planning. As for cash flow, we generated approximately $11 million in cash for the quarter driven by an improved P&L. Finally, communication and teamwork.

We’re communicating our focus areas and the need for engagement, accountability and results through our entire company. Progress has occurred via the hard work, teamwork and dedication of our employees. Now on to the details of the quarter.

Volume shift this quarter was 5.1 million pounds, again, exceeding our 5 million pound goal, therefore, alleviating the margin headwind associated with lower volumes. The volume in the quarter was 7.1% higher than the same period of fiscal 2018.

Net revenues were $126 million in the third quarter of fiscal year 2019, an increase of 11.4% from the $113.1 million in the same period of fiscal 2018. Average selling price in the quarter was $24.61 per pound, inclusive of our other revenue, up about 4.1% over last year’s $23.65 per pound.

Finally, our backlog dollars continued to grow, up 0.8% during the quarter driven by growth in our aerospace backlog. With that, let me move to our key markets. Sales to the aerospace market accounted for 53% of our revenue at $66.3 million in the third quarter of fiscal 2019.

This represents an increase of 11.2% from $59.6 million in the same period last year due to a 14.1% increase in average selling price per pound partially offset by a 2.5% decrease in volume. Earlier this year, we initiated price increases in the aerospace market for both transactional business and with renewed customer agreements.

These price increases are gaining traction and are improving our average selling prices. Aerospace volume in the third quarter of fiscal 2019 was slightly below the previous quarter and the same period of the prior year primarily due to the complexity of our mix and certain short-term testing and product flow issues in Q3.

Demand in the aerospace market remained solid, and fiscal year 2019 is on pace to beat last year’s record high volume for the company. As for the 737 MAX, we remain cautiously optimistic regarding Boeing’s temporary reduction in the production rates of the 737 MAX. We have not been notified of any reductions of orders by our customers.

However, if issues are prolonged or Boeing further reduces the 737 MAX production rate, this could potentially have an impact on our shipping schedules, but likely not until fiscal 2020. We saw our backlog dollars in aerospace increase sequentially from Q2 to Q3 by another 6.9% during the quarter. The last point on aerospace.

I was recently at the Paris aerospace show and had many conversations with our customers. I continue to be impressed with the quality of the relationships that we have built with these customers over many years. Sales to the chemical processing market accounted for 17% of our revenue at $21.2 million in the third quarter.

This represents a slight decrease of 0.8% from $21.4 million in the same period last year due to a 10.3% decrease in average selling price partially offset by a 10.6% increase in volume. Volume of a higher, however, the increase was in lower-valued products which reduced the average selling price.

The average selling price for sales into the chemical processing industry in the third quarter was $18.83 per pound compared to $20.99 per pound in the same period last year. This reduction is primarily due to sales of commodity alloys, which are highly competitive, with lower pricing and typically lower margins.

Our backlog dollars in CPI decreased sequentially from Q2 to Q3 by 5.8% during the quarter. Sales to the industrial gas turbine market accounted for 12% of our revenue at $15.9 million in the third quarter of fiscal 2019.

This represents an increase of 33.7% from $11.9 million in the same period last year due to an increase in volume of 43.6% partially offset by a mix-related decrease in average selling price per pound of 6.9%.

The increase in volume is primarily attributable to an increase in small and medium-frame engine builds, combined with a resupply of material into the supply chain. Demand for the larger-frame turbines in the energy market continues to be weak.

While volume has increased in comparison to the third quarter of last year, these volumes are well below the volumes shipped in previous years and there remains concern regarding a recovery in this market.

As I outlined in the last call, the demand for large-frame turbines has been impacted by many factors involving supply chain inventory reduction, a move to smaller turbines and growth in the use of renewable energy technology.

To potentially offset these weaker demand drivers going forward, we do see meaningful potential opportunities for market share growth for Haynes in the industrial gas turbine market in the future. Our backlog in IGT decreased sequentially from Q2 to Q3 by 14.6% during the quarter.

Finally, our other markets and other revenue accounted for 18% of revenue and $22.6 million in the third quarter of fiscal 2019.

This represents an increase of 11.9% from $20.0 in the same period of fiscal 2018 driven by an increase in other markets’ volume of 5% primarily from the oil and gas market, combined with a 29.8% decrease in other revenue driven by higher toll conversion.

Our backlog dollars in other markets decreased sequentially from Q2 to Q3 by 24.5% during the quarter. With that detail on the markets, now let me turn it over to Dan for more details on our financial results..

Thank you, Mike. Our focus on increasing volumes and improving profitability is gaining traction. For the first nine months of fiscal year 2019 compared to the same period of fiscal 2018, volume shipped is up 9.1%, net sales are up 15.2% and gross margin dollars are up 16.4% compared to last year. This represents solid growth rates.

In the third quarter of fiscal 2019, our gross margin dollars as a percentage of net sales were 14.4% and net income was $3.8 million. As Mike mentioned, this is the highest net income level in 15 quarters. This represents progress and traction in our efforts to improve volumes, increase prices compared to last year and reduce costs.

These efforts are continuous, and we plan to keep pushing our performance higher. Partially offsetting our improving profitability were headwinds to margin during the quarter, which included primarily the following three items.

First, the dramatic decline in the market price of cobalt caused a margin compression in the third quarter, which is expected to continue into the fourth quarter.

While our customer pricing agreements are structured to attempt to minimize our commodity price risk, when the decline is fast and steep, there can be a timing misalignment with our melt cost versus our customer pricing mechanisms, especially for products with longer production cycles or with transactional shipments out of our service center inventory.

Second, continued compression of margins from the sales of product produced during the cold-finish upgrade which had higher startup-type costs, including slower run times and scrap and yield impacts caused by the outage.

These higher production costs compressed margins in the second and third quarters of fiscal 2019 and are expected to continue in the fourth quarter when a portion of this product sell through our European service centers.

Third, special project revenue was $5.5 million in the third quarter of fiscal 2019, which is $1.5 million higher sequentially compared to Q2 of fiscal 2019, however, was $2.7 million lower than the third quarter of last year.

Of this quarter’s $5.5 million in special project sales, approximately 40% were shipments of a commodity-grade alloy, which had lower margins. This drove margin dollars from special projects lower by about $1.2 million in this year’s Q3 compared to last year’s Q3.

Overall, as we progress forward, we are projecting an increase in both gross margin dollars and gross margin percentage as we expect volumes to continue to improve, these headwinds to alleviate and additional strategic initiatives to favorably impact our P&L.

Moving down the P&L, SG&A, including research and technical costs, were $11.8 million in the third quarter of fiscal 2019. This is $2.9 million lower than the same period of last year.

Last year’s SG&A was higher than normal with two special items that took place related to the cost of an attempted strategic acquisition and the cost of a CEO transition, which combined impacted SG&A by $2.6 million. We expect full year of fiscal 2019 SG& A, including research and technical costs, to be approximately $47 million to $48 million.

Non-operating retirement benefit expense on the P& L was $856,000 compared to last year’s Q3 of $2.1 million driven by prior year favorable valuation at 09/30/2018. We are concerned as we look forward at the potential discount rates to be used at the valuation coming up at 09/30/2019, which determines our 2020 expense levels.

The current lower discount rates would increase next year’s expense, potentially getting back a portion of this year’s savings. On a favorable note, the pension plan paid less PBGC premiums by approximately $236,000 due to the higher funding percentage and actions we have taken, such as the annuitization of small-balance pensioners.

Our tax rate for the quarter was 28.1%, which is slightly higher than the last quarters due to lower foreign tax credits expected to be realized. The tax rate for the first nine months of fiscal 2019 is higher due to a Q1 discrete item related to vested stock options that were forfeited.

Last year, in the third quarter, we incurred a tax benefit related to adjustments stemming from the tax reform act. The impact of this tax benefit last year offset the higher SG&A cost noted above as special items, thus, netting to near zero impact on net income last year.

To see these results or these details, I refer you to the reconciliation of non-GAAP measures table in the back of the press release. And to finish off the P&L, net income for the quarter was $3.8 million or $0.30 per diluted share.

Backlog increased an additional $1.9 million in Q3 to $254.9 million at June 30, which is at the highest level since 2012. Outlook for next quarter. The company is expecting continued improving results in the fourth quarter of fiscal 2019 as our focus initiatives gain additional traction related to volume, pricing and cost improvements.

With a solid backlog to support higher business levels, the company expects revenue and earnings in the fourth quarter of fiscal 2019 to be slightly higher than the third quarter of fiscal 2019. Liquidity.

Cash was $22 million at June 30, 2019, representing a $12.2 million increase during the first nine months of the year, most of which was in the third quarter. Net cash provided by operating activities was $28.3 million in the first nine months of fiscal 2019.

This cash generation is driven by rising profitability combined with reducing inventory levels in a period of rising sales volumes and rising revenue would consume cash. Thus, I believe it is a notable point that we are generating cash this year. Also contributing to cash generation was controlling capital expenditures.

Capital spending was $7.3 million in the first nine months of fiscal 2019. The forecast for capital spending for the full year of fiscal 2019 is approximately $10 million, which we lowered from previously reported levels to better line up with the pace of our spending.

In conclusion, we are committed to continuing to push profitability higher as we focus on execution related to our strategic improvement initiatives. We continue to navigate the headwinds noted above as well as global trade uncertainty and the lack of future visibility in aerospace demand.

However, we focus on what we can control, and we are making notable progress with steady improvement in profitability as we move forward. Mike, I will now turn the discussion back over to you..

Thank you, Dan. It’s been a difficult few years for the profitability of Haynes, but based on the work of our employees, we’re beginning to show the initial results of our efforts, and we are very enthusiastic about what the future holds for our company. With that, Jim, let’s open the call to questions..

Just I guess the first question would be if you could potentially put some numbers around the cost of – higher production costs from the startup, and do you anticipate that would end in the fourth quarter? And the same question on the cobalt effects in Q3 and then maybe comment on Q4..

Okay. Let me talk about this in general. One of the things you heard from Dan is – and I’ll answer this in a broad way first, is that are special projects’ margin quarter-on-quarter, year-on-year is going to cost us about $1.3 million.

I would say that it is very difficult to give an exact number on the impact to cobalt and the impact to the cold-finish flat startup, but I would put them in the same type of range as $1.3 million. So plus or minus because we – I really – I don’t have an exact number in front, so I can’t give you that.

But I would say they’re all very large, and they’re all – they all have a significant impact. From everything we see, Ed, we believe that both the cobalt issue and the cold-finish flat issue it’s behind us for the most part by the end of Q4.

And if I can just keep going on that, what we have been focused on since I’ve been here is gross margin percent, and what we will continue to be focused on is gross margin percent. Now I don’t think there’s any – I think everyone is fully aware, the last two years, we have lagged our segment in gross margin percent. Our goal is pretty simple.

We want to move from worst of our segment there to best in our segment there. It is not going to happen overnight. It is not going to be step changes.

But we believe with the 30 initiatives I’ve now been talking about over a year that we have a lot in front of us as far us positives, continued pricing, continued cost, continued volume and getting out from under these headwind issues we’ve talked about for a while. Hopefully, I answered your question..

I think you did. And if I could sum up what I think you’re saying is this – the interim stuff around the gross margin due to kind of operational issues, although not ignored, are simply just kind of noise. The progress that you’re showing on a consistent basis is more important to you and you anticipate that, that will continue..

That’s correct. We’ve been able to, despite these headwinds, improve our gross margin percent throughout the fiscal year. We still will have headwinds in Q4, but we anticipate that continuing. .

Yes. We just keep pushing and pushing the margin up higher. And it’s a continuous process, but it’s going to be a gradual increase as we move throughout the year..

Now, Mike, I think some of the best organizations start to – when they adopt this new formula about returns, management teams will explain how they see the culture shift.

And I’m curious if you could kind of – maybe it’s early, maybe it’s still ongoing, but could you still talk about how they’ve – how the employee base has kind embraced the new culture? And is that part of the success that you’re seeing or do you think there’s more to come?.

I think – well, first we – I meet with – all employees are invited. I won’t tell you all employees show up, but all employees are invited. We meet with them on a quarterly basis.

And the amount of enthusiasm we’re getting for both setting a direction, setting some goals and then focusing everyone on do what you say you will do, when you say you’re going to do it, and in essence, that’s accountability for results, I think, has been very positive.

We’ve got a management team now around my table, and we meet on a regular basis that I believe – I don’t believe, I know, have fully bought in, and I feel very good about it. I get – I’ve probably mentioned this in the past, but I talk a lot about our 30 focus initiatives, Ed. I get details on each of those 30 and where we are.

Not just exception reports, but the details from everyone on the 10th day of every month that we go through that. And it not only comes to me, we’re continuing to ask that it be pushed through the organization. So I feel great about where we are, and I would say we’re just beginning to gain momentum..

Great. That’s good to hear. We look forward to seeing the progress. The Last question I have, if I could just sneak one in about backlog. Some good progress despite what’s going on in pricing. And I’m just – get a sense to maybe the plate volumes that might have been going.

I know that’s an initiative for you, so I just want to kind of get a sense as to the plate volumes, and how much of that might be in backlog today..

We are seeing growth in plate because we’re focused on it. Like everything else, it is – no one is going to roll over and play dead. So we continue to focus on what it’s going to take to do that.

A little bit of concern about the increase in tariffs in China and what that could mean to us as far as continuing – well, we’ll continue to grow, but how much we can continue to grow. So I would say we’re making slow but steady progress as far as incremental plate growth..

[Operator Instructions] We’ll take our next question from the line of Chris Olin with Longbow Research..

Mike, congratulations on the early success..

Thank you, Chris. Long way to go..

Yes. I got a question on your views about Haynes’ position within the global markets.

And I guess now that you’ve had some time to kind of study trends within the non-aerospace businesses, do you get the sense that Haynes was able to essentially hold its market share over the past two to three years? And I guess second to that, how does Haynes stay above the 5-million pound level on a consistent basis? I look at power gen, I don’t feel like there’s a whole lot of long-term upside there.

So any new customers, new end markets you could target?.

Okay. As far as share, I would say, obviously, we talk about this. Our power generation volume is down 50% from the peak periods, I’m doing this from memory, 2013, 2014, down also fairly significantly from 2016, 2017, but that is not a market share issue. That’s been well discussed between the large frames and renewable energy.

I feel real good about maintaining what we have, even though it’s at a much lower level than it’s been. And as I noted in my comments, there is business out there. Maintaining at a low level doesn’t feel good, so we do continue to go after share. Again, no one is going to just say, "Here, Haynes, take it." So it’s going to take some time.

But I feel good about where we are, and I feel good about what our sales team is doing as far as trying to get incremental business for us. As far as CPI is concerned, to me, it’s growing, but it’s growing at a slower pace. This year it’s at least off the bottom and it’s moving forward. We’re pretty much track it through tracking the CPI.

I would say for our CPI business to come back significantly, and I believe it will because I believe our special projects will increase next year, we’ve got to get more special projects under our belt. And quite frankly, it’s got to be special projects.

I like all of them, but I also like the ones that aren’t just on the commodity side, which is what we dealt with some this year. So I see those two moving. I feel very good. I’m not sure you asked about aerospace, but let me just talk about that for a second. I feel real good on the aerospace side with where we are.

When you look at our year-to-date numbers, revenue up about 15%, pounds up about 9% and still open capacity as we move forward in plate, in cold-finish flats and certainly in tubing going forward. I feel very good about all of those. So making progress. As far as other markets, I think there are bits and pieces for us.

We had a nice gain in oil and gas, but not a lot of flat products going in oil and gas. So we will continue to look for new applications. We’ve got an entire marketing application and marketing group that works on that, but nothing that’s going to move us beyond – move the needle greatly. As far as 5 million pounds, yes, I feel good about that.

I feel good about what’s happening in our effort to bring volume in. I feel good that we’ve already spent $120 million in capital, and now it’s time to fill the damn thing and take advantage of it..

And when we kind of set that 5 million goal, we hit it in September, which was our fourth quarter last year. In Q1of this, we had the Drever outage or the cold-finish outage, so we guided to be below the $5 million. But then in subsequent two quarters, we exceeded it pretty substantially with 5.165 million in our Q2 and 5.121 million in this quarter.

So we also gave guidance that we expect volumes to improve from here, so it’s good to get that low volume headwind out of the way..

And let me just sneak in one more comment in here because I’m very excited about it, and we’ve alluded to it, but I’m not sure we’ve given this detail in the past. As we look forward in the aerospace business, we talk about the core competencies of this business being alloy development and application development.

We now have proprietary – a proprietary alloy flying on the A220 neo, the Pratt & Whitney 1100 engine. We have a proprietary alloy flying on Pratt & Whitney 1500 engine, which is on the A220 the former Bombardier C Series. We have proprietary alloy on the Pratt & Whitney 1900 engine.

And now soon, serviced in late 2020, we’ll have two proprietary applications spec-ed into the GE9X. So we’ve got good things going on. It’s nice to talk about alloy development, I think it’s much better to talk about. Look, this is – we’re making progress with this stuff..

Okay. Good. Helpful answer there. I want to make sure I understand how you think about the risk of the – to the Boeing 737 issue. And I would’ve assumed if it was going to be any kind of disruption, Haynes would see it earlier because the issue would be squeeze in inventory and pushback from customers.

It sounds like you’re not seeing that at all, and I just want to make sure I understand that versus how you think about it in 2020 potentially hitting.

And then second, would it be the nickel business? Or does it hit that titanium tubing business when you think about it?.

Okay. We’ve seen nothing. We have – obviously, we spent a lot of time at the Paris Air Show, and through the efforts of Marty Losch and his team, I spend a lot of time with our customers talking about this. We’ve not seen any significant change in order backlogs at all. We continue not only to plan but to get orders at basically current levels.

We’re all reading the same releases, Chris. But at this point, even if something beyond the reductions that are out there would happen, we don’t see anything that would happen until 2020. We all obviously hope that would not happen.

Our exposure is obviously on airframe with titanium tubing, and what I can tell you is we have our customers literally beating their hands on the table, saying do not stop. They’re looking to make sure they can fill of supply chain and they have asked us – they’ve told us full steam ahead. So that’s a very good thing. And obviously, same on the nickel.

I would say same story. We’ve all listened the other calls in this segment and at basically in the same spot that everyone else has talked about..

And one number that Mike had in is prepared remarks was our backlog in aerospace. That improved over the quarter by 6.9%. So we’re certainly seeing some strength on the aerospace side of things..

Got you. And just finally circling back to that, the tubing business. I got the sense of doubt, those assets, was it Arcadia, was one of the areas you were going to focus on because you saw an opportunity on – in tubing margins or possibly efficiencies. I was wondering if you could just give any kind of color on what’s going on there..

Sure. Thanks for the question. I’m down in Arcadia a few times a year. We have full day – with Dan involved, we have full day sessions going over where they are. I’ll start by saying we’ve not reached our full potential, but I would also say we’re seeing significant positive progress down there. We had in the old days some good months, some bad months.

We are seeing consistent months of improvement in that facility. We continue to see year-on-year productivity increases since the investment, and we continue to push for more and more. I will tell you last year – as it should be. Because of the investment, we saw a record year for tubing production volume.

And we’ll exceed that in 2019, and we should exceed that again in 2020. Our backlog is very heavy, which should allow us to improve our full volume potential that we had committed to in the original capital request to the Board of Directors in about 2021. So feeling real good about where that’s going..

Okay. Good stuff.

And I don’t suppose you could frame up like the successes, how that translated in the gross margin number improvement at all?.

I’d have to say at this point, no, not prepared for that..

Correct. Yes, we typically don’t disclose or even track, in some cases, margins by segment. We’re one segment..

We’ll take our next question from Michael Leshock with KeyBanc Capital. Please go ahead. Your line is open sir..

Good morning. Just first question on aerospace sales were up – they were up pretty well, and then volumes were down slightly year-over-year. And you called out a temporary timing issues than a more complex alloy product mix. Just wondering if you could talk a little more in detail on that timing issue and whether or not that should recur..

We – the issues we faced surprised us a bit. We – in my comments, I talked about how I expect it to be higher, and I think the most important point is the orders were there. So we expect to continue to incrementally improve our aerospace, including in the cold-finish flat area, which should show growth as we move forward in this business..

Okay. And then you talked about price increases gaining traction there in aerospace.

Are there room for further increases in the near term?.

The majority of our contracts are January contracts, so we saw significant increase in our January contracts. So that should level out as we move into our Q4. But again, we continue to believe that we add value not only through the product and the quality of the product, but through our service center and how we get the product to our customer.

So we will continue to look for ways to do it. We needed to take advantage of that and the value we provide. We did that. Pretty much starting on 1/1 of this year, and we’ll continue look for ways to do that moving forward..

Got it, that’s it from me thanks..

[Operator Instructions] And next we will take a follow-up from Ed Marshall once again. Go ahead sir. Your line is open..

I just want a quick one. The – I understand your comments on the 737 MAX.

It’s small – and I think it’s a smaller piece overall of your aerospace volumes, but maybe you could kind of frame out what kind of precautionary planning measures you might have if production was to stop or materially change from the current measures? And then ultimately, I guess, how do you think for the supply chain, say, if we move forward, say, 12 months? Obviously, I think the growth rates might change just based on the amount of inventory that might be in the channel, but maybe you can just kind of talk through that program.

Thanks..

Sure, Ed. What I can tell you is that we – the best way to stay on top of this is to be very, very close with our customers. And as recently as last week, we had in-depth discussion with an engine manufacturer on this.

And what they’re talking to us about is, for example, if they’re manufacturing LEAP-1B engines is that – if in fact that would slow down further, could that capacity or capability of theirs be moved to other engines or to something like CFM56 pair. So that’s the type of thing we’re talking about there.

We – by the way, because of the proprietary alloys I talked about previously, we have more metal going into the A320 than we do into the 737, including the proprietary stuff. So that would help there.

On the airframe or titanium tubing side, we have so much pent-up demand for that product even outside of aerospace that we would just continue to look for alternatives as far as where titanium tubing could go..

So you don’t see it being a material risk one way or the other in the short to medium-term, I guess?.

That’s exactly right. Certainly not in the short term. Obviously, we’re looking. If something more drastic happens with the build rate, then it’s going to impact everyone and impact the supply chain. We do not see excess – based on the pulls we’re getting from the customers, we did not see excess inventory in the supply chain that we can see.

So that’s a very good thing for us right now. But we all have to wait to see what happens next with the 737 MAX..

And can you define what a drastic change in production would be? I mean is – are you referring to a complete halt or, say, a redesign?.

I’ll leave that one really up to Boeing as far as what happens there. But we have been – all of us have been able to whether the drop which has taken place in the manufacture of this, and we just have to watch it carefully as we go forward..

Great, thanks gentlemen..

Thank you. And next, we have another follow-up coming from Chris Olin..

Sorry, I forgot to ask one question.

I was just curious with commodity nickel significantly going above $6 and potentially positive momentum there, does that change the transactional activity or the order activity within your transactional business at all?.

Yes. We – what we’re watching for right now, Chris, is when nickel goes up – when you quote something and somebody is getting ready to order and nickel goes up, human nature says; "You know what? I’m going to hold off a little." So we’re watching very carefully what happens with where we are now as far order patterns. Not – it’s too early to tell.

But in my history, it says that people see nickel go up and they tend to hold off. So we’ll watch that carefully..

Yes. I think that is somewhat occurring now in the quarter. We got – in Q3, we do track transactional. And what we define that as is when we get an order and we can ship it within 60 days, so much shorter than a mill lead time that’s transactional out of our service center.

And that was 18.2% of our sales this quarter as compared to last quarter, it was 21.1%. So we did see a tick down. That does move around. 18% is not a number that’s too low. But we did see that tick down, and we’re attributing that to the rise in nickel. Obviously, a rise in nickel overall, however, is good for us.

We’ll have an expansion of margins if that continues, and we certainly hope it does..

And then just lastly, you announced price increases.

Was that just for aerospace products? Or was it across the board?.

No.

Chris, what we said or what we’ve done internally – we actually didn’t put out an official announcement, but what we did is we said where we believe our product is truly high value and differentiated, which is beyond aerospace, but our best guess is that’s about 50% of our mix, that’s where we’re going to aggressively – and are and have aggressively pursued price increases.

So I’d say it’s about half our product..

Okay. Thanks, again..

[Operator Instructions] And we have no signals from the group. I’ll turn it back to our leadership team for any additionally or closing remarks..

Thanks, Jim. Thank you, everyone, for your time today, and thank you for your interest and support of our company. We look forward to updating you again next quarter. Have a good weekend..

Ladies and gentlemen, this does conclude today’s meeting, and we do thank you all for your participation. You may now disconnect your lines, and we hope that you enjoy your day..