Hexcel Comments On Business Outlook

Business Editors  
STAMFORD, Conn.--(BUSINESS WIRE)--Oct. 3, 2001--Hexcel Corporation 
(NYSE/PCX: HXL) today provided some comments on its business outlook 
in light of the tragic events that occurred on September 11, 2001 and 
the potential impact of those events on the markets it serves.  
The outlook is presented in relation to each of the company's 
major market segments.   
Commercial Aerospace  
Unlike many aerospace suppliers, Hexcel's sales to this segment 
are almost entirely driven by new aircraft build rates with no 
material aftermarket content. As a result, Hexcel's sales in the third 
quarter were not affected. While it will take some time before the 
changes in demand for new commercial aircraft become visible, Boeing 
and Airbus have published their initial revised guidance on aircraft 
deliveries. In 2001 Boeing has reduced its projected deliveries from 
538 to around 500 aircraft. Airbus is anticipated to deliver their 
previous forecast of about 330 aircraft. For 2002, Boeing has 
indicated they will deliver around 400 aircraft compared to their 
previous projection of 510 to 520 aircraft. Airbus has indicated that 
they anticipate deliveries at the same rate as 2001 rather than 
ramping up production as they had previously indicated. This guidance 
suggests that combined Boeing and Airbus commercial aircraft 
deliveries in 2002 will be about 16% lower than what had been 
projected for 2001 before the events of September 11. There is less 
information on anticipated deliveries of regional aircraft, but a 
similar decrease is expected.  
The impact of these changes on Hexcel will be influenced by two 
additional factors. First, the mix of aircraft produced. The dollar 
value of Hexcel's materials varies by aircraft type - twin aisle 
aircraft use more Hexcel materials and products than narrow body 
aircraft and newer designed aircraft use more than older generations. 
Secondly, the inventory supply chain effects of reduced aircraft 
production. Hexcel normally supplies its products on average six 
months before an aircraft is delivered and is already producing to its 
customer's previously anticipated 2002 delivery rates. The speed by 
which the aircraft manufacturers reduce their production to the new 
demand levels, and thereby their inventories, will impact their 
requirements for Hexcel's products. To date, customers have yet to 
identify details regarding the aircraft mix or the timing of 
production and inventory changes, however, the Company anticipates 
revenue reductions will begin in the fourth quarter of this year.  
Hexcel's commercial aerospace revenues for the twelve months ended 
June 30, 2001 were approximately $530 million. Based on the limited 
information available today, Hexcel's working assumption is that its 
commercial aerospace revenues will decline on the order of 20% in 
2002.  
Space & Defense  
Production of a new generation of military aircraft in the United 
States and Europe has been ramping up over the last two years. These 
aircraft utilize significantly greater amounts of Hexcel products than 
previous generations of military aircraft. During the summer, 
production rates and funding for such new programs as the V-22 and 
F-22 were confirmed. The company had sales of about $130 million for 
the twelve months ended June 30, 2001 in this segment and anticipates 
that its Space & Defense revenues will grow between 10% and 20% in 
2002.  
Electronics  
As previously reported, since March, the company has experienced 
an unprecedented reduction in demand for its electronic woven fabrics 
used in the manufacture of printed circuit boards. After allowing for 
the seasonal effects of the European summer vacation period, as 
expected, third quarter electronics revenues have remained at the same 
depressed levels seen in May and June. To date there is no evidence of 
an upturn in demand in the fourth quarter.  
As indicated in the company's second quarter earnings release, the 
company has continued to pursue cost reductions to offset some of the 
impact of these electronic market conditions. In addition to 
continuing to furlough employees, in July Hexcel initiated a headcount 
reduction of approximately 275 employees in its reinforcement products 
business and elsewhere in the company. The annualized savings from 
these actions will be about $6 million. The company will record a 
business consolidation expense of about $4 million in the third 
quarter in respect to these actions.  
Industrial  
The impact of recent events on Hexcel's Industrial segments ($237 
million of sales for the twelve months ended June 30, 2001) is likely 
to be mixed. The company anticipates that demand for renewable energy 
such as wind energy will continue to grow and has seen strong growth 
in demand for soft body armor. The company has continued to enjoy 
growth in its sales from automotive applications. This growth has been 
driven by new programs that use Hexcel honeycomb core to provide 
impact protection and lightweight structural products, rather than 
volume growth in the automotive market. Sales to recreational markets 
will probably track the trends in consumer spending and travel. Based 
on currently available information the company estimates that its 
industrial revenues will grow between 0% and 10% in 2002.  
Third Quarter Estimated Performance  
The company's performance in the third quarter has tracked with 
its expectations given the continuing depressed levels of electronic 
revenues and the seasonal impact of the European summer vacation 
period. While the company will not report actual results until later 
in the October, revenues for the quarter are estimated in the order of 
$240 million and EBITDA before business consolidation expense will be 
in the range of $25 - $28 million.  
Liquidity  
The company's total debt net of cash at the end of the second 
quarter was $704 million. With the benefit of some reductions in 
working capital, the company has made some moderate reductions in net 
debt during the third quarter. With the benefit of the $100 million in 
senior subordinated notes the company issued in June, the company's 
debt amortization requirements in 2001, 2002 and 2003 are moderate 
being respectively $8.0 million, $9.7 million and $57.6 million.  
Mr. David Berges, Hexcel's Chairman and Chief Executive Officer 
commented "Like many companies, we are working to understand the 
impact of events on our business and define appropriate strategies and 
actions to respond to a changed business environment. Prior to the 
events of September 11th, Hexcel had been focused on delivering growth 
from all business segments and responding to challenging market 
conditions in electronics. Our focus today is clearly on identifying 
where best we can reduce cost and generate cash." In response to the 
anticipated reduction in commercial aerospace sales, management is 
developing plans to aggressively reduce both direct and overhead costs 
company-wide. Hexcel expects to announce and commence the 
implementation of these plans in the fourth quarter, once the timing, 
mix, and value of reduced demand is known.  
Hexcel Corporation is the world's leading advanced structural 
materials company. It designs, manufactures and markets lightweight, 
high performance reinforcement products, composite materials and 
engineered products for use in commercial aerospace, space and 
defense, electronics, general industrial, and recreation applications.  
Disclaimer on Forward Looking Statements  
This press release contains statements that are forward looking, 
including statements relating to market conditions (including 
commercial and military aircraft build rates and demand for 
electronics and industrial products), sales volumes, sales 
growth/reductions by market segment, cost reductions, cash flow and 
total debt net of cash. These statements are not projections or 
assured results. Actual results may differ materially from the results 
anticipated in the forward looking statements due to a variety of 
factors, including but not limited to, changing market conditions, 
increased competition, product mix, inability to achieve planned 
manufacturing improvements and cost reductions, and changes in 
currency exchange rates. Additional risk factors are described in the 
Company's filings with the SEC. The Company does not undertake an 
obligation to update its forward-looking statements 
 
 
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