Hexcel Reports Strong 2013 First Quarter Results

  Hexcel Reports Strong 2013 First Quarter Results

                      Raises Full Year 2013 EPS Guidance

  *Sales of $416.5 million were 4.1% higher than last year (3.9% in constant
    currency) driven by Commercial Aerospace (up 10.8% in constant currency).
  *Net income up 10.1% to $43.6 million, $0.43 per diluted share, versus
    $39.6 million, $0.39 per diluted share last year.
  *FY 2013 adjusted diluted EPS guidance increased to a range of $1.73 to
    $1.83 (from $1.66 to $1.78).

Business Wire

STAMFORD, Conn. -- April 22, 2013

Regulatory News:

Hexcel Corporation (NYSE:HXL)(Paris:HXL):

                                                        
                                        Quarter Ended
                                                         
                                        March 31,
(In millions, except per share data)    2013    2012   % Change
                                                
Net Sales                               $ 416.5   $ 400.1   4.1%
Net sales change in constant currency                       3.9%
Operating Income                          63.0      60.6    4.0%
Net Income                                43.6      39.6    10.1%
Diluted net income per common share    $ 0.43   $ 0.39   10.3%

Hexcel Corporation (NYSE: HXL), today reported results for the first quarter
of 2013. Net sales during the quarter were $416.5 million, 4.1% higher than
the $400.1 million reported for the first quarter of 2012. Operating income
for the period was $63.0 million, compared to $60.6 million last year. Net
income for the first quarter of 2013 was $43.6 million, or $0.43 per diluted
share, compared to $39.6 million or $0.39 per diluted share in 2012.

Chief Executive Officer Comments

Mr. Berges commented, “This was another good start to the year for Hexcel, as
solid execution combined with continued strong aerospace sales delivered
excellent results. For the quarter, our adjusted diluted EPS of $0.43 was
10.3% higher than last year, on a 3.9% increase in constant currency sales.
Our commercial aerospace and space and defense sales were again up over 10%,
and helped offset the nearly 30% decline in industrial sales.”

Looking ahead, Mr. Berges said, “While we expect continued weakness in
industrial markets, our growth and operational performance in the rest of our
business, combined with an improved tax outlook, give us the confidence to
increase our 2013 adjusted diluted EPS guidance to $1.73 - $1.83 (from $1.66 -
$1.78). Our sales outlook in total remains at $1,640 million to $1,740
million.”

Markets

Commercial Aerospace

  *Commercial Aerospace sales of $268.9 million increased 11.0% (10.8% in
    constant currency) for the quarter as compared to the first quarter of
    2012. Revenues attributed to new aircraft programs (A380, A350, B787,
    B747-8) increased nearly 20% versus the same period last year. Our B787
    shipments continued to show strong growth in support of production rate
    increases. Airbus and Boeing legacy aircraft related sales for the quarter
    were up over 10% compared to 2012, as we experienced increasing demand
    related to line-rate increases.
  *Sales to “Other Commercial Aerospace,” which include regional and business
    aircraft customers, declined modestly for the first quarter compared to
    2012, as well as on a sequential basis.

Space & Defense

  *Space & Defense sales of $96.0 million were 13.1% higher (12.9% in
    constant currency) than the first quarter of 2012. Growth came from both
    rotorcraft and military fixed wing aircraft programs.

Industrial

  *Total Industrial sales of $51.6 million for the first quarter of 2013 were
    weak across the board at 29.2% lower (29.5% in constant currency) than the
    first quarter of 2012. As expected, wind sales were down over 30% from the
    record levels in the first half of 2012 and about 9% lower than the fourth
    quarter of 2012.

Operations

  *Sales volume and the continued improvement in operating performance
    resulted in gross margin of 26.9% of net sales for the quarter, as
    compared to 26.6% in the first quarter of 2012. Selling, general and
    administrative expenses were 3.8% higher than the first quarter of 2012
    primarily driven by the timing of stock-based compensation expense.
    Research and technology expenses in the first quarter of 2013 of $11.0
    million were $1.8 million higher than the comparable 2012 period.
  *Operating income in the 2013 first quarter was $63.0 million or 15.1% of
    sales as compared to $60.6 million or 15.1% of sales in 2012. Foreign
    exchange rates contributed a nominal benefit to the higher gross margin
    and operating income percentages in the first quarter of 2013 as compared
    to 2012.

Cash and other

  *Our effective tax rate for the quarter was 29.2% as compared to 31.9% in
    2012. This quarter benefitted from the extension of the 2012 and 2013 U.S.
    Research & Development tax credits that was enacted in January 2013. The
    full retroactive benefit from 2012 was taken in the current quarter and
    reduced the tax rate by one percentage point. Implementation of tax
    planning strategies and the mix of income by country accounted for the
    remaining improvement in the tax rate. We now expect our effective tax
    rate for the rest of the year to be about 30.5%.
  *Free cash flow for the first quarter of 2013 was a use of $15 million
    versus a use of $61 million in 2012, as seasonal effects typically cause
    cash usage in the first quarter. The lower usage as compared to last year
    was primarily due to lower capital expenditures, as cash used for capital
    expenditures of $48 million in the first quarter of 2013 were $35 million
    below the comparable period in 2012. Free cash flow is defined as cash
    provided from operating activities less cash paid for capital
    expenditures.
  *During the quarter, the Company invested $15 million and bought back
    530,730 shares under its authorized share repurchase program.
  *Total debt, net of cash as of March 31, 2013 was $255.6 million, an
    increase of $31.6 million from December 31, 2012. As of March 31, 2013 we
    had $190 million in available borrowing capacity and cash on hand.

2013 Outlook

Our 2013 outlook is:

  *Adjusted diluted earnings per share to be in the range of $1.73 to $1.83;
    previously it was $1.66 to $1.78.
  *We maintain our sales outlook of $1,640 million to $1,740 million with
    strong aerospace markets offsetting the weakness in the industrial market.

                                    *****

Hexcel will host a conference call at 10:00 A.M. ET, tomorrow, April 23, 2013
to discuss the first quarter results and respond to analyst questions. The
telephone number for the conference call is (719) 325-2494 and the
confirmation code is 1202908. The call will be simultaneously hosted on
Hexcel’s web site at www.hexcel.com/investors/index.html. Replays of the call
will be available on the web site for approximately three days.

                                    *****

Hexcel Corporation is a leading advanced composites company. It develops,
manufactures and markets lightweight, high-performance structural materials,
including carbon fibers, reinforcements, prepregs, honeycomb, matrix systems,
adhesives and composite structures, used in commercial aerospace, space and
defense and industrial applications such as wind turbine blades.

                                    *****

Disclaimer on Forward Looking Statements

This press release contains statements that are forward looking, including
statements relating to anticipated trends in constant currency for the markets
we serve (including changes in commercial aerospace revenues, the estimates
and expectations based on aircraft production rates provided or publicly
available by Airbus, Boeing and others, the revenues we may generate from an
aircraft model or program, the impact of delays in new aircraft programs, the
outlook for space & defense revenues and the trend in wind energy, recreation
and other industrial applications); our ability to maintain and improve
margins in light of the current economic environment; the success of
particular applications as well as the general overall economy; our ability to
manage cash from operating activities and capital spending in relation to
future sales levels such that the company funds its capital spending plans
from cash flows from operating activities, but, if necessary, maintains
adequate borrowings under its credit facilities to cover any shortfalls; and
the impact of the above factors on our expectations of financial results for
2013 and beyond. The loss of, or significant reduction in purchases by,
Boeing, EADS, Vestas, or any of our other significant customers could
materially impair our business, operating results, prospects and financial
condition. 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 changes in currency exchange rates, changing market conditions,
increased competition, inability to install, staff and qualify necessary
capacity or achievement of planned manufacturing improvements, conditions in
the financial markets, product mix, achieving expected pricing and
manufacturing costs, availability and cost of raw materials, supply chain
disruptions, work stoppages or other labor disruptions and changes in or
unexpected issues related to environmental regulations, legal matters,
interest expense and tax codes. Additional risk factors are described in our
filings with the SEC. We do not undertake an obligation to update our
forward-looking statements to reflect future events.

Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
                                                            Unaudited
                                                             Quarter Ended

                                                             March 31,
(In millions, except per share data)                         2013    2012
Net sales                                                    $ 416.5  $ 400.1
Cost of sales                                                304.5   293.7
                                                                         
Gross margin                                                   112.0     106.4
% Gross margin                                                 26.9%     26.6%
                                                                         
Selling, general and administrative expenses                   38.0      36.6
Research and technology expenses                             11.0    9.2
                                                                         
Operating income                                               63.0      60.6
                                                                         
Interest expense, net                                        1.7     3.0
                                                                         
Income before income taxes and equity in earnings from         61.3      57.6
affiliated companies
Provision for income taxes                                   17.9    18.4
                                                                         
Income before equity in earnings from affiliated companies     43.4      39.2
Equity in earnings from affiliated companies                 0.2     0.4
                                                                         
Net income                                                  $ 43.6   $ 39.6
                                                                         
                                                                         
                                                                         
Basic net income per common share:                           $ 0.43    $ 0.40
                                                                         
Diluted net income per common share:                         $ 0.43    $ 0.39
                                                                         
                                                                         
Weighted-average common shares:
                                                                         
Basic                                                          100.4     99.8
Diluted                                                      102.1   101.7

Hexcel Corporation and Subsidiaries

Condensed Consolidated Balance Sheets
                                      Unaudited
(In millions)                           March 31, 2013   December 31, 2012
Assets                                                  
Current assets:
Cash and cash equivalents               $ 18.3             $ 32.6
Accounts receivable, net                  269.1              229.0
Inventories, net                          245.9              232.8
Prepaid expenses and other current      65.8            81.3        
assets
Total current assets                      599.1              575.7
                                                             
Property, plant and equipment             1,480.0            1,459.2
Less accumulated depreciation           (549.1     )     (544.8      )
Property, plant and equipment, net        930.9              914.4
                                                             
Goodwill and other intangible assets,     57.2               57.8
net
Investments in affiliated companies       22.6               22.6
Deferred tax assets                       14.4               15.4
Other assets                            13.8            17.2        
Total assets                           $ 1,638.0        $ 1,603.1     
                                                             
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities    $ 15.4             $ 16.6
of capital lease obligations
Accounts payable                          125.2              115.7
Accrued liabilities                     106.7           103.0       
Total current liabilities                 247.3              235.3
                                                             
Long-term notes payable and capital       258.5              240.0
lease obligations
Other non-current liabilities           121.8           133.7       
Total liabilities                         627.6              609.0
                                                             
Stockholders' equity:
Common stock, $0.01 par value, 200.0
shares authorized, 103.5 shares           1.0                1.0
issued at March 31, 2013 and 102.4
shares issued at December 31, 2012
Additional paid-in capital                632.5              617.0
Retained earnings                         491.8              448.2
Accumulated other comprehensive loss    (52.5      )     (31.9       )
                                          1,072.8            1,034.3
Less – Treasury stock, at cost, 3.3
shares at March 31, 2013 and 2.5        (62.4      )     (40.2       )
shares at December 31, 2012.
Total stockholders' equity              1,010.4         994.1       
Total liabilities and stockholders'    $ 1,638.0        $ 1,603.1     
equity

Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
                                                        Unaudited
                                                         Year to Date Ended

                                                         March 31,
(In millions)                                           2013       2012
                                                                   
Cash flows from operating activities
Net income                                               $ 43.6      $ 39.6
                                                                       
Reconciliation to net cash provided by operating
activities:
Depreciation and amortization                              14.3        14.0
Amortization of debt discount and deferred financing       0.5         0.5
costs and call premium expense
Deferred income taxes                                      1.2         12.0
Equity in earnings from affiliated companies               (0.2  )     (0.4  )
Stock-based compensation expense                           8.7         7.5
Excess tax benefits on stock-based compensation            (3.7  )     (4.7  )
                                                                       
Changes in assets and liabilities:
(Increase) in accounts receivable                          (40.2 )     (48.3 )
(Increase) in inventories                                  (16.2 )     (13.5 )
Decrease in prepaid expenses and other current assets      2.7         2.6
Increase in accounts payable/accrued liabilities           20.8        17.7
Other – net                                              1.7      (4.8  )
Net cash provided by operating activities (a)            33.2     22.2  
                                                                       
Cash flows from investing activities
Capital expenditures and deposits for capital            (48.1 )   (82.9 )
purchases (b)
Net cash used in investing activities                    (48.1 )   (82.9 )
                                                                       
Cash flows from financing activities
Borrowings from senior secured credit facility             21.0        59.0
Repayments (borrowings) of capital lease obligations       (1.3  )     0.5
and other debt, net
Repayment of senior secured credit facility – term         (2.5  )     (1.2  )
loan
Stock repurchases                                          (15.0 )     —
Activity under stock plans                               (0.3  )   0.8   
Net cash used in financing activities                    1.9      59.1  
                                                                       
Effect of exchange rate changes on cash and cash         (1.3  )   0.8   
equivalents
Net (decrease) in cash and cash equivalents                (14.3 )     (0.8  )
Cash and cash equivalents at beginning of period         32.6     49.5  
Cash and cash equivalents at end of period              $ 18.3    $ 48.7  
                                                                       
Supplemental Data:
Free cash flow (a)+(b)                                   $ (14.9 )   $ (60.7 )
Accrual basis additions to property, plant and           $ 41.4      $ 44.7
equipment

Hexcel Corporation and Subsidiaries
Net Sales to Third-Party Customers by Market Segment
Quarters Ended March 31, 2013 and 2012           (Unaudited)  Table A
(In millions)      As Reported                  Constant Currency (a)
                                                    FX                 B/(W)
Market Segment      2013    2012   B/(W) %            2012  
                                                    Effect             %
                                                    (b)
Commercial         $ 268.9  $ 242.3  11.0     $ 0.4     $ 242.7  10.8
Aerospace
Space & Defense       96.0      84.9    13.1        0.1        85.0    12.9
Industrial          51.6    72.9   (29.2 )   0.3      73.2   (29.5 )
Consolidated       $ 416.5  $ 400.1  4.1     $ 0.8     $ 400.9  3.9   
Total
Consolidated % of   %       %                       %      
Net Sales
Commercial            64.6      60.6                           60.5
Aerospace
Space & Defense       23.0      21.2                           21.2
Industrial          12.4    18.2                    18.3   
Consolidated        100.0   100.0                   100.0  
Total

(a) To assist in the analysis of our net sales trend, total net sales and
sales by market for the quarter and year ended December 31, 2012 have been
estimated using the same U.S. dollar, British pound and Euro exchange rates as
applied for the respective period in 2013 and are referred to as “constant
currency” sales.

(b) FX effect is the estimated impact on “as reported” net sales due to
changes in foreign currency exchange rates.

Hexcel Corporation and Subsidiaries
Segment Information                                 (Unaudited)       Table B
(In millions)          Composite    Engineered   Corporate &   Total
                         Materials      Products       Other (a)
First Quarter 2013                                          
Net sales to          $ 324.8       $ 91.7        $ —            $ 416.5
external customers
Intersegment sales     16.7        0.6         (17.3   )     —     
Total sales              341.5          92.3           (17.3   )       416.5
Operating income         67.9           13.4           (18.3   )       63.0
(loss)
% Operating margin       19.9    %      14.5   %                       15.1  %
                                                                       
Depreciation and         13.1           1.2            —               14.3
amortization
Stock-based              2.0            0.5            6.2             8.7
compensation expense
Accrual based
additions to capital   38.4        3.0         —            41.4  
expenditures
First Quarter 2012                                             
Net sales to           $ 316.2        $ 83.9         $ —             $ 400.1
external customers
Intersegment sales     15.9        0.1         (16.0   )     —     
Total sales              332.1          84.0           (16.0   )       400.1
Operating income         65.8           11.8           (17.0   )       60.6
(loss)
% Operating margin       19.8    %      14.0   %                       15.1  %
                                                                       
Depreciation and         12.9           1.1            —               14.0
amortization
Stock-based              2.1            0.4            5.0             7.5
compensation expense
Accrual based
additions to capital   43.6        1.1         —            44.7  
expenditures

(a) We do not allocate corporate expenses to the operating segments.

Hexcel Corporation and Subsidiaries
Reconciliation of GAAP and Non-GAAP Measures       Table C
                                                Unaudited
                                                 Quarter Ended

                                                 March 31,
(In millions)                                  2013   2012
                                                      
GAAP operating income                          $ 63.0   $ 60.6
- Stock-based compensation expense               8.7      7.5
- Depreciation and amortization                14.3   14.0
Adjusted EBITDA                               $ 86.0  $ 82.1

Management believes that adjusted operating income, adjusted EBITDA, adjusted
net income and free cash flow (defined as cash provided by operating
activities less cash payments for capital expenditures), which are non-GAAP
measurements, are meaningful to investors because they provide a view of
Hexcel with respect to ongoing operating results excluding special items.
Special items represent significant charges or credits that are important to
an understanding of Hexcel’s overall operating results in the periods
presented. For the first quarters of 2013 and 2012 there were no special
items, so adjusted operating income and GAAP operating income are the same for
both periods. In addition, management believes that total debt, net of cash,
which is also a non-GAAP measure, is an important measure of Hexcel’s
liquidity. Such non-GAAP measurements are not recognized in accordance with
generally accepted accounting principles and should not be viewed as an
alternative to GAAP measures of performance.

Hexcel Corporation and Subsidiaries
Schedule of Total Debt, Net of Cash                             Table D
                                         Unaudited
                                          March 31,  December 31,  March 31,
(In millions)                            2013       2012          2012
                                                                       
Notes payable and current maturities of   $ 15.4      $  16.6        $ 14.5
capital lease obligations
Long-term notes payable and capital       258.5     240.0      294.8 
lease obligations
Total Debt                                  273.9        256.6         309.3
Less: Cash and cash equivalents           (18.3 )    (32.6  )    (48.7 )
Total debt, net of cash                  $ 255.6   $  224.0     $ 260.6 

Contact:

Hexcel Corporation
Michael Bacal, 203-352-6826
michael.bacal@hexcel.com
 
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