- Q1 2021 GAAP basic EPS of ($0.17) and adjusted basic EPS of
($0.10), compared to Q1 2020 GAAP diluted EPS of $0.50 and adjusted
diluted EPS of $0.64.
- Q1 2021 Sales were $310 million, compared to $541 million in
the first quarter of 2020.
- Strong liquidity at March 31, 2021 included cash of $82
million and revolver borrowing availability of $536
million.
See table C for reconciliation of GAAP and non-GAAP operating
(loss) income, net (loss) income and earnings (loss) per share and
operating cash flow to free cash flow. Free cash flow is cash from
operations less capital expenditures.
Hexcel Corporation (NYSE: HXL):
Summary of Results from
Operations
Quarters Ended
March 31,
(In millions, except per share data)
2021
2020
% Change
Net Sales
$
310.3
$
541.0
(42.6
)%
Net sales change in constant currency
(43.5
)%
Operating (loss) income
(10.2
)
65.7
(115.5
)%
Net (loss) income
(14.0
)
42.4
(133.0
)%
Diluted net (loss) income per common
share
$
(0.17
)
$
0.50
(133.4
)%
Non-GAAP measures for year-over-year
comparison (Table C)
Adjusted Operating income
$
1.9
$
80.4
(97.6
)%
As a % of sales
0.6
%
14.9
%
Adjusted Net (loss) income (Table C)
(8.4
)
53.8
(115.6
)%
Adjusted diluted net income per share
$
(0.10
)
$
0.64
(115.6
)%
Hexcel Corporation (NYSE: HXL) today reported first quarter 2021
results including net sales of $310 million and adjusted diluted
EPS of $(0.10) per share.
Chairman, CEO and President Nick Stanage said, “First quarter
results were in line with our expectations and reflect a strong
focus on cost controls in light of the pandemic-related economic
headwinds we face, including the impact of continued supply chain
destocking. This first quarter, along with Q3 and Q4 2020, are
projected to be the low point of the current pandemic-driven demand
cycle, and we now expect destocking to wind down as we move through
the second quarter and to be mostly behind us as we enter the
second half of the year. At that point, Commercial Aerospace sales
should start to grow steadily, more closely reflecting OEM aircraft
build rates. We expect a gradual step up in sales each quarter as
2021 progresses, followed by an extended period of growth starting
in 2022.”
Mr. Stanage continued, “We believe a steady yet slow recovery is
developing as the world emerges from the pandemic and regains its
confidence in traveling once again. As it does, Hexcel is well
positioned to support the sizable OEM aircraft backlog with our
innovative, lightweight advanced composites technology that drives
fuel efficiency, reduces emissions, and improves performance. We
also previously communicated our target to reduce overhead costs on
an annual basis by $150 million by mid-2021 and I’m pleased to
report a significant portion of those savings have been achieved
and are reflected in our first quarter results. Hexcel has never
been more focused on its Customers, on Operational Excellence, and
on Innovation. We expect to emerge from these challenges as a
leaner and stronger company, even better positioned to deliver
strong growth and increasing shareholder returns.”
Markets
Sales in the first quarter of 2021 were $310.3 million compared
to $541.0 million in the first quarter of 2020.
Commercial Aerospace
- Commercial Aerospace sales of $147.6 million decreased 59.3%
(59.7% in constant currency) for the quarter compared to the first
quarter of 2020. Sales were down significantly across all major
platforms reflecting pandemic-induced build rate reductions by the
aircraft OEMs and continued supply chain destocking. Boeing 737 MAX
sales continue at a low level.
- Sales to “Other Commercial Aerospace,” which include regional
and business aircraft, decreased 48.0% in the first quarter of 2021
as compared to 2020, as the global pandemic negatively impacted
demand across this market sector, particularly business jets.
Space & Defense
- Space & Defense sales of $111.7 million were unchanged
compared to the first quarter of 2020 (decrease of 1.0% in constant
currency). Strength in rotorcraft, including the CH-53K, as well as
the F-35 joint strike fighter was offset by the collective impact
of a softer quarter for a number of smaller U.S. defense and space
programs.
Industrial
- Total Industrial sales of $51.0 million in the first quarter
were down 23.3% (27.1% in constant currency) compared to the first
quarter of 2020. Lower wind energy sales drove the decrease,
partially offset by stronger automotive sales.
- Wind energy sales (the largest submarket in Industrial)
experienced a decline of 42.5% in constant currency compared to the
first quarter of 2020. The decrease was due to general lower demand
and the cessation of sales in North America following a previously
reported customer demand shift.
Consolidated Operations
Gross margin for the first quarter was 17.1% compared to 26.0%
in the prior year period. Similar to the second half of fiscal year
2020, lower volumes continue to be a headwind leading to the under
absorption of fixed overhead magnified by the continued temporary
idling of select production assets and facilities. Sales mix did,
however, improve in the first quarter of 2021 compared to the
fourth quarter of 2020. Selling, general and administrative and
R&T expenses for the first quarter of 2021 decreased $9.3
million or 15.4% compared to the prior year due to global
realignment actions and headcount reductions to lower the cost
structure. Other operating expenses were restructuring charges
primarily related to labor actions outside the U.S. Adjusted
operating income in the first quarter of 2021 was $1.9 million, or
0.6% of sales, compared to adjusted operating income of $80.4
million, or 14.9% of sales in 2020. The impact of exchange rates on
operating income as a percent of sales was negative by
approximately 10 basis points in the first quarter of 2021 compared
to 2020.
Cash, 2021 Guidance Update and
other
- The effective tax rate for the first quarter of 2021 was a
36.8% benefit compared to a 21.9% charge in the first quarter of
2020. The quarter ended March 31, 2021 includes a discrete tax
benefit of $3.2 million from the revaluation of deferred tax
liabilities related to a favorable U.S. state tax law change. The
prior period benefited from deductions associated with share-based
compensation payments. The effects of the COVID-19 pandemic will
continue to have an impact on the Company’s overall effective tax
rate throughout 2021.
- Net cash from operating activities in the first quarter of 2021
was a use of $1.2 million compared to a source of $8.6 million in
the first quarter of 2020. Capital expenditures on a cash basis
were $4.9 million during the first quarter of 2021 compared to
$27.2 million during the first quarter of 2020. Free cash flow was
($6.1) million for the first quarter of 2021 compared to ($18.6)
million in the first quarter of 2020. Working capital was a cash
use of $26.2 million in the first quarter of 2021, principally
related to an increase in receivables, compared to a cash use of
$94.8 million in the first quarter of 2020. Free cash flow is
defined as cash generated from operating activities less cash paid
for capital expenditures.
- The share repurchase program remains temporarily suspended and
no shares were repurchased during the first quarter of 2021.
Further, share repurchases are also restricted per the second
amendment to the Revolver facility that was executed in January
2021. The remaining authorization under the share repurchase
program at March 31, 2021 was $217 million. The quarterly dividend
remains temporarily suspended. The Board of Directors will continue
to evaluate capital allocation strategies on at least a quarterly
basis.
- The Company continues to withhold financial guidance due to the
market uncertainties arising from the global pandemic.
Hexcel will host a conference call at 10:00 a.m. ET, on April
20, 2021 to discuss first quarter 2021 results. The event will be
webcast via the Investor Relations webpage at www.Hexcel.com. The
event can also be accessed by dialing +1 (647) 689-5685. The
conference ID is 4194215. Replays of the call will be available on
the website.
Hexcel Corporation is a leading advanced composites company. It
develops, manufactures and markets lightweight, high-performance
structural materials, including carbon fibers, specialty
reinforcements, prepregs and other fiber-reinforced matrix
materials, honeycomb, adhesives, engineered core and composite
structures, used in commercial aerospace, space and defense and
industrial applications. Learn more at www.Hexcel.com.
Disclaimer on Forward Looking Statements
This news release contains statements that are forward looking
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements relating to the estimates and
expectations based on aircraft production rates provided by Airbus,
Boeing and others; the revenues we may generate from an aircraft
model or program; the impact of the possible push-out in deliveries
of the Airbus and Boeing backlog and the impact of delays in the
startup or ramp-up of new aircraft programs or the final Hexcel
composite material content once the design and material selection
have been completed; expectations with regard to the build rate of
the Boeing 737 MAX following its return to service and the related
impact on our revenues; expectations with regard to the timing of
inventory destocking resulting from the pandemic-related decrease
in customer demand; expectations of composite content on new
commercial aircraft programs and our share of those requirements;
expectations regarding revenues from space and defense
applications, including whether certain programs might be curtailed
or discontinued; expectations regarding sales for wind energy,
recreation, automotive and other industrial applications;
expectations regarding working capital trends and expenditures and
inventory levels; expectations as to the level of capital
expenditures and completion of capacity expansions and
qualification of new products; expectations regarding our ability
to maintain and improve margins in view of the pandemic-induced
economic environment; projections regarding our tax rate;
expectations with regard to the continued impact of the COVID-19
pandemic on worldwide air travel and aircraft programs, as well as
on our customers and suppliers and, in turn, on our operations and
financial results; and the anticipated impact of the above factors
and various market risks on our expectations of financial results
for 2021 and beyond. 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 the impact of the
COVID-19 pandemic, including continued disruption in global
financial markets, ongoing restrictions on movement and travel,
employee absenteeism and reduced demand for air travel, on the
operations, business and financial condition of Hexcel and its
customers and suppliers; reductions in sales to any significant
customers, particularly Airbus or Boeing, including reduction in
revenue related to the timing of ramp-up of production of the
Boeing 737 MAX, as well as due to the impact of the COVID-19
pandemic; inability to effectively adjust production and inventory
levels to align with customer demand; inability to effectively
motivate, retain and hire the necessary workforce; inability to
successfully implement or realize our business strategies, plans
and objectives of management, including any restructuring or
alignment activities in which we may engage; timing of inventory
destocking caused by the COVID-19 pandemic; changes in sales mix;
changes in current pricing and cost levels; changes in aerospace
delivery rates; changes in government defense procurement budgets;
changes in military aerospace program technology; timely new
product development or introduction; industry capacity; increased
competition; availability and cost of raw materials; supply chain
disruptions; inability to install, staff and qualify necessary
capacity or complete capacity expansions to meet customer demand;
cybersecurity breaches or intrusions; currency exchange rate
fluctuations; changes in political, social and economic conditions,
including, but not limited to, the effect of change in global trade
policies and the impact of the exit of the U.K. from the European
Union; work stoppages or other labor disruptions; unexpected
outcome of legal matters or impact of changes in laws or
regulations. Additional risk factors are described in our filings
with the Securities and Exchange Commission. We do not undertake an
obligation to update our forward-looking statements to reflect
future events.
Hexcel Corporation and
Subsidiaries
Consolidated Statements of
Operations
Unaudited
Quarters Ended
March 31,
(In millions, except per share data)
2021
2020
Net sales
$
310.3
$
541.0
Cost of sales
257.2
400.1
Gross margin
53.1
140.9
% Gross Margin
17.1
%
26.0
%
Selling, general and administrative
expenses
39.6
46.5
Research and technology expenses
11.6
14.0
Other operating expense
12.1
14.7
Operating (loss) income
(10.2
)
65.7
Interest expense, net
10.3
12.0
(Loss) income before income taxes, and
equity in earnings of affiliated companies
(20.5
)
53.7
Income tax (benefit) expense
(7.5
)
11.8
(Loss) income before equity in earnings of
affiliated companies
(13.0
)
41.9
Equity in (losses) earnings from
affiliated companies
(1.0
)
0.5
Net (loss) income
$
(14.0
)
$
42.4
Basic net (loss) income per common
share:
$
(0.17
)
$
0.51
Diluted net (loss) income per common
share:
$
(0.17
)
$
0.50
Weighted-average common shares:
Basic
84.0
83.7
Diluted
84.0
84.3
Hexcel Corporation and
Subsidiaries
Consolidated Balance Sheets
Unaudited
March 31,
December 31,
(In millions)
2021
2020
Assets
Cash and cash equivalents
$
82.0
$
103.3
Accounts receivable, net
164.4
125.4
Inventories, net
217.4
213.5
Contract assets
42.3
43.1
Prepaid expenses and other current
assets
50.7
38.0
Assets held for sale
12.6
12.6
Total current assets
569.4
535.9
Property, plant and equipment
3,109.8
3,139.7
Less accumulated depreciation
(1,281.4
)
(1,265.5
)
Net property, plant and equipment
1,828.4
1,874.2
Goodwill and other intangible assets,
net
274.4
277.8
Investments in affiliated companies
44.4
44.7
Other assets
176.9
185.2
Total assets
$
2,893.5
$
2,917.8
Liabilities and Stockholders'
Equity
Liabilities:
Short-term borrowings
$
0.3
$
0.9
Accounts payable
88.5
70.0
Accrued compensation and benefits
56.1
43.2
Accrued liabilities
75.0
69.0
Total current liabilities
219.9
183.1
Long-term debt
912.0
925.5
Retirement obligations
52.2
53.9
Other non-current liabilities
222.5
245.1
Total liabilities
$
1,406.6
$
1,407.6
Stockholders' equity:
Common stock, $0.01 par value, 200.0
shares authorized,
109.9 shares issued at March 31, 2021 and
109.7 shares
issued at December 31, 2020
$
1.1
$
1.1
Additional paid-in capital
861.5
849.7
Retained earnings
1,982.4
1,996.4
Accumulated other comprehensive loss
(78.7
)
(59.6
)
2,766.3
2,787.6
Less – Treasury stock, at cost, 26.1
shares at both March 31, 2021 and December 31, 2020
(1,279.4
)
(1,277.4
)
Total stockholders' equity
1,486.9
1,510.2
Total liabilities and stockholders'
equity
$
2,893.5
$
2,917.8
Hexcel Corporation and
Subsidiaries
Consolidated Statements of Cash
Flows
Unaudited
Quarters Ended
March 31,
(In millions)
2021
2020
Cash flows from operating
activities
Net (loss) income
$
(14.0
)
$
42.4
Reconciliation to net cash provided by
operating activities:
Depreciation and amortization
34.5
35.5
Amortization related to financing
1.5
0.3
Deferred income taxes
(8.8
)
(0.6
)
Merger and restructuring expenses, net of
payments
1.5
12.6
Equity in earnings from affiliated
companies
1.1
(0.5
)
Stock-based compensation
9.0
14.4
Changes in assets and liabilities:
Increase in accounts receivable
(42.0
)
(42.0
)
Increase in inventories
(7.6
)
(26.4
)
Increase in prepaid expenses and other
current assets
(6.8
)
(7.6
)
Increase (decrease) in accounts
payable/accrued liabilities
30.2
(18.8
)
Other - net
0.2
(0.7
)
Net cash (used in) provided by operating
activities (a)
(1.2
)
8.6
Cash flows from investing
activities
Capital expenditures (b)
(4.9
)
(27.2
)
Net cash used in investing activities
(4.9
)
(27.2
)
Cash flows from financing
activities
Net (repayments) borrowing from senior
unsecured credit facilities
(14.0
)
380.0
Repayments of Euro term loan
-
(49.9
)
Repayment of finance lease obligation and
other debt, net
(0.3
)
(0.1
)
Dividends paid
-
(14.2
)
Repurchase of stock
-
(24.6
)
Activity under stock plans
0.8
(6.4
)
Net cash (used in) provided by financing
activities
(13.5
)
284.8
Effect of exchange rate changes on cash
and cash equivalents
(1.7
)
(1.3
)
Net (decrease) increase in cash and cash
equivalents
(21.3
)
264.9
Cash and cash equivalents at beginning of
period
103.3
64.4
Cash and cash equivalents at end of
period
$
82.0
$
329.3
Supplemental data:
Free Cash Flow (a)+(b)
$
(6.1
)
$
(18.6
)
Accrual basis additions to property, plant
and equipment
$
4.0
$
21.9
Hexcel Corporation and
Subsidiaries
Net Sales to Third-Party Customers by
Market
Quarters Ended March 31, 2021 and
2020
Unaudited
Table A
(In millions)
As Reported
Constant Currency (a)
B/(W)
FX
B/(W)
Market
2021
2020
%
Effect (b)
2020
%
Commercial Aerospace
$
147.6
$
362.9
(59.3
)
$
3.5
$
366.4
(59.7
)
Space & Defense
111.7
111.6
0.1
1.2
112.8
(1.0
)
Industrial
51.0
66.5
(23.3
)
3.5
70.0
(27.1
)
Consolidated Total
$
310.3
$
541.0
(42.6
)
$
8.2
$
549.2
(43.5
)
Consolidated % of Net Sales
%
%
%
Commercial Aerospace
47.6
67.1
66.7
Space & Defense
36.0
20.6
20.5
Industrial
16.4
12.3
12.8
Consolidated Total
100.0
100.0
100.0
(a)
To assist in the analysis of the Company’s net sales trend,
total net sales and sales by market for the quarter ended March 31,
2020 have been estimated using the same U.S. dollar, British pound
and Euro exchange rates as applied for the respective period in
2021 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 Materials
Engineered Products
Corporate & Other
(a)
Total
First Quarter 2021
Net sales to external customers
$
237.2
$
73.1
$
-
$
310.3
Intersegment sales
13.3
0.6
(13.9
)
-
Total sales
250.5
73.7
(13.9
)
310.3
Other operating expense
12.7
(0.7
)
0.1
12.1
Operating (loss) income
7.4
4.7
(22.3
)
(10.2
)
% Operating margin
3.0
%
6.4
%
-3.3
%
Depreciation and amortization
30.8
3.7
-
34.5
Stock-based compensation expense
0.6
0.2
8.2
9.0
Accrual based additions to capital
expenditures
3.6
0.4
-
4.0
First Quarter 2020
Net sales to external customers
$
438.5
$
102.5
$
-
$
541.0
Intersegment sales
24.8
0.5
(25.3
)
-
Total sales
463.3
103.0
(25.3
)
541.0
Other operating expense
0.6
0.3
13.8
14.7
Operating income (loss)
91.5
6.5
(32.3
)
65.7
% Operating margin
19.7
%
6.3
%
12.1
%
Depreciation and amortization
31.8
3.7
-
35.5
Stock-based compensation expense
4.7
1.2
8.5
14.4
Accrual based additions to capital
expenditures
20.2
1.7
-
21.9
a) Hexcel does not allocate corporate expenses to the operating
segments.
Hexcel Corporation and
Subsidiaries
Reconciliation of GAAP to Non-GAAP
Operating (Loss) Income, Net (Loss) Income, EPS, Tax Rate and
Operating Cash Flow to Free Cash Flow
Table C
Unaudited
Quarters Ended
March 31,
(In millions)
2021
2020
GAAP operating (loss) income
$
(10.2
)
$
65.7
Other operating expense (a)
12.1
14.7
Non-GAAP operating income
$
1.9
$
80.4
Unaudited
Quarters Ended March 31,
2021
2020
(In millions, except per diluted share
data)
Net Income
EPS
Net Income
EPS
GAAP
$
(14.0
)
$
(0.17
)
$
42.4
$
0.50
Other operating expense (a)
8.8
0.11
11.4
0.14
Tax benefit (b)
(3.2
)
(0.04
)
-
-
Non-GAAP
$
(8.4
)
$
(0.10
)
$
53.8
$
0.64
Unaudited
Quarters Ended March 31,
(In millions)
2021
2020
Net cash provided by operating
activities
$
(1.2
)
$
8.6
Less: Capital expenditures
(4.9
)
(27.2
)
Free cash flow (non-GAAP)
$
(6.1
)
$
(18.6
)
(a)
The quarter ended March 31, 2021
includes restructuring costs primarily related to severance. The
quarter ended March 31, 2020 includes costs related to the
terminated merger with Woodward, Inc.
(b)
The quarter ended March 31, 2021
includes a discrete tax benefit of $3.2 million from the
revaluation of deferred tax liabilities related to a favorable U.S.
state tax law change.
NOTE: Management believes that adjusted operating income
(loss), adjusted net income (loss), adjusted diluted net income
(loss) per share and free cash flow, which are non-GAAP measures,
are meaningful to investors because they provide a view of Hexcel
with respect to the underlying 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. 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)
2021
2020
2020
Current portion finance lease
$
0.3
$
0.9
$
0.6
Total current debt
0.3
0.9
0.6
Senior unsecured credit facility
214.0
228.0
693.0
4.7% senior notes due 2025
300.0
300.0
300.0
3.95% senior notes due 2027
400.0
400.0
400.0
Senior notes original issue discounts
(1.4
)
(1.5
)
(1.7
)
Senior notes deferred financing costs
(3.4
)
(3.5
)
(4.0
)
Other debt
2.8
2.5
2.2
Total long-term debt
912.0
925.5
1,389.5
Total Debt
912.3
926.4
1,390.1
Less: Cash and cash equivalents
(82.0
)
(103.3
)
(329.3
)
Total debt, net of cash
$
830.3
$
823.1
$
1,060.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210419005804/en/
Kurt Goddard, Vice President – Investor Relations (203) 352-6826
Kurt.Goddard@Hexcel.com
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