Regulatory News:
Hexcel Corporation (NYSE:HXL)(Paris:HXL):
Quarter Ended
March 31,
(In millions, except per share data)
2012 2011 % Change Net Sales
$
400.1 $ 331.6 20.7% Net sales change in constant currency
22.0% Operating Income
60.6 47.2 28% Net Income
39.6
26.4 50% Diluted net income per common share
$ 0.39 $
0.26 50% Non-GAAP Measures for y-o-y comparisons: Adjusted
Operating Income (table C)
$ 60.6 $ 41.5 46% As a %
of sales
15.1% 12.5% Adjusted Net Income (table C)
39.6 25.3 57% Adjusted diluted net income per share
$ 0.39 $ 0.25 56%
Hexcel Corporation (NYSE: HXL), today reported results for the
first quarter of 2012. Net sales during the quarter were $400.1
million, 20.7% higher than the $331.6 million reported for the
first quarter of 2011. Operating income for the period was $60.6
million, compared to $47.2 million last year. Net income for the
first quarter of 2012 was $39.6 million, or $0.39 per diluted
share, compared to $26.4 million or $0.26 per diluted share in
2011. Excluding the impact of items in Table C, adjusted diluted
net income for the first quarter of 2011 was $0.25 per share.
Chief Executive Officer
Comments
Mr. Berges commented, “This was another strong quarter for
Hexcel, as solid execution combined with increased sales delivered
excellent results. For the quarter, our adjusted diluted EPS of
$0.39 was 56% higher than last year, on a 22% increase in constant
currency sales, as we achieved $400 million in sales. We are also
particularly pleased that our operating income exceeded 15% of net
sales. Revenues from the commercial aerospace market, now 60% of
our total sales, grew 23% this quarter compared to the prior year.
We continue to focus on leveraging our additional sales to higher
margins, even as we prudently add people and infrastructure to
support current and anticipated future growth."
Looking ahead, Mr. Berges said, “2012 has gotten off to a very
strong start. Our capital expansion program continues on our
accelerated schedule, as we add capacity to meet surging demand.
Based on our current market outlook and first quarter results, we
are increasing 2012 adjusted diluted EPS guidance to $1.45 - $1.55
(from $1.33 - $1.45). We are also raising our sales guidance for
the year to $1.55 billion - $1.65 billion (from $1.5 billion - $1.6
billion).”
Markets
Commercial Aerospace
- Commercial Aerospace sales of $242.3
million increased 22.6% (23.7% in constant currency) for the
quarter as compared to the first quarter of 2011. Revenues
attributed to new aircraft programs (A380, A350, B787, B747-8)
increased more than 20% versus the same period last year and
continue to comprise more than 25% of Commercial Aerospace sales.
Airbus and Boeing legacy aircraft related sales for the quarter
were up over 20% compared to 2011, as we experience increasing
demand related to line-rate increases.
- Sales to “Other Commercial Aerospace,”
which include regional and business aircraft customers, increased
more than 15% for the first quarter compared to 2011, and were up
modestly on a sequential basis.
Space & Defense
- Space & Defense sales of $84.9
million were 6.5% higher (7.5% in constant currency) than the first
quarter of 2011. Rotorcraft sales accounted for all of the growth,
led by strong sales in Europe and Asia Pacific.
Industrial
- Total Industrial sales of $72.9 million
for the first quarter of 2011 were 34.3% higher (37.3% in constant
currency) than the first quarter of 2011. Wind sales have now grown
sequentially for the last five quarters and have reached our
expected run rate for the balance of the year.
Operations
- Strong sales volume and the continued
improvement in operating performance resulted in gross margin of
26.6% of net sales for the quarter, as compared to 25.0% in the
first quarter of 2011. Selling, general and administrative and
Research and technology expenses in the first quarter of 2012 were
10.4% higher than the comparable 2011 period due to higher variable
compensation expenses and the addition of infrastructure and
related staffing to support our growth.
- Adjusted operating income in the 2012
first quarter was $60.6 million or 15.1% of sales as compared to
$41.5 million or 12.5% of sales in 2011. Foreign exchange rates
contributed almost 50 basis points to the higher gross margin and
operating income percentages in the first quarter of 2012 as
compared to 2011.
Cash and other
- Free cash flow for the first quarter of
2012 was a use of $61 million versus a use of $19 million in 2011.
While seasonal effects typically cause cash usage in the first
quarter, this period was further impacted by outlays for our
capital expansion program as well as the working capital required
for the $45 million sequential sales growth. Cash used for capital
expenditures was $83 million in the first quarter of 2012 as
compared to $36 million in 2011. We expect free cash flow to be a
modest use in the second quarter followed by an offsetting source
in the second half of 2012, so that it ends the year at around the
same level as the first quarter usage. Free cash flow is defined as
cash provided from operating activities less cash paid for capital
expenditures.
- Total debt, net of cash as of March 31,
2012 was $260.6 million, an increase of $59.2 million from December
31, 2011. As of March 31, 2012 we had $195 million in available
borrowing capacity and cash on hand.
2012 Outlook
We have updated our 2012 outlook:
- Sales to be in the range of $1.55 to
$1.65 billion; previously it was $1.5 to $1.6 billion.
- Adjusted diluted earnings per share to
be in the range of $1.45 to $1.55; previously it was $1.33 to
$1.45.
- Accrual basis capital expenditures
remain in the range of $250 to $275 million. We expect our capital
spending to be funded by our cash from operating activities and our
existing credit facilities. We expect free cash flow for the year
to be in the range of a use of $50 - $75 million.
*****
Hexcel will host a conference call at 10:00 A.M. ET, tomorrow,
April 24, 2012 to discuss the first quarter results and respond to
analyst questions. The telephone number for the conference call is
(785) 830-1997 and the confirmation code is 5154822. 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 market segments we serve (including changes in
commercial aerospace revenues, the estimates and expectations based
on aircraft production rates made publicly available by Airbus and
Boeing, 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
and other industrial applications); our ability to maintain and
improve margins in light of the changes in product mix, efficiency
improvements, continued cost reduction efforts and the current
economic environment; outcome of legal matters; the magnitude and
timing of capital expenditures in relation to market demand; and
the impact of the above factors on our expectations of 2012
financial 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 raw material costs, competition, product mix,
inability to achieve planned manufacturing improvements and cost
reductions, supply chain disruptions, conditions in the financial
markets and changes in currency exchange rates, interest rates,
governmental and environmental regulations 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)
2012 2011
Net sales
$ 400.1 $ 331.6 Cost of sales
293.7 248.6 Gross
margin
106.4 83.0 % Gross margin
26.6 % 25.0 %
Selling, general and administrative expenses
36.6
32.9 Research and technology expenses
9.2 8.6 Other
operating (income) (a) — (5.7 )
Operating income
60.6 47.2 Interest expense,
net
3.0 4.2 Non-operating expense (b) —
4.9 Income before income taxes and
equity in earnings from affiliated companies
57.6 38.1
Provision for income taxes
18.4
12.2 Income before equity in earnings from
affiliated companies
39.2 25.9 Equity in earnings from
affiliated companies
0.4
0.5 Net income
$ 39.6
$ 26.4 Basic net income per common
share:
$ 0.40 $ 0.27 Diluted net
income per common share:
$ 0.39 $ 0.26
Weighted-average common shares: Basic
99.8 98.2 Diluted
101.7
100.4
(a) Other operating (income) for the quarter ended March 31,
2011 includes a $5.7 million benefit from the curtailment of a
pension plan.
(b) Non-operating expense for the quarter ended March 31, 2011
is the accelerated amortization of deferred financing costs and
expensing of the call premium from redeeming $150 million of 6.75%
senior subordinated notes.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance
Sheets
Unaudited
(In millions)
March 31, 2012 December 31, 2011
Assets
Current assets: Cash and cash equivalents $
48.7 $ 49.5 Accounts receivable, net
251.0 199.3
Inventories, net
232.0 215.7 Prepaid expenses and other
current assets
53.1 59.8
Total current assets
584.8 524.3 Property,
plant and equipment
1,271.6 1,223.5 Less accumulated
depreciation
(511.3 )
(501.4 ) Property, plant and equipment, net
760.3 722.1
Goodwill and other intangible assets, net
57.7 57.4
Investments in affiliated companies
22.4 21.7 Deferred tax
assets
26.1 33.0 Other assets
15.6
17.6 Total assets $
1,466.9 $ 1,376.1
Liabilities
and Stockholders' Equity Current liabilities: Notes payable and
current maturities of capital lease obligations $
14.5 $
12.6 Accounts payable
119.2 141.7 Accrued liabilities
87.1 93.2 Total current
liabilities
220.8 247.5 Long-term notes payable and
capital lease obligations
294.8 238.3 Other non-current
liabilities
87.0 88.1
Total liabilities
602.6 573.9 Stockholders'
equity: Common stock, $0.01 par value, 200.0 shares authorized,
102.0 shares issued at March 31, 2012 and 101.0 shares issued at
December 31, 2011
1.0 1.0 Additional paid-in capital
604.3 589.2 Retained earnings
323.5 283.9 Accumulated
other comprehensive loss
(25.4 )
(39.8 )
903.4 834.3 Less – Treasury stock, at cost,
2.5 shares at March 31, 2012 and 2.2 shares at December 31, 2011.
(39.1 ) (32.1 ) Total
stockholders' equity
864.3
802.2 Total liabilities and stockholders' equity
$
1,466.9 $ 1,376.1
Hexcel
Corporation and Subsidiaries Condensed Consolidated
Statements of Cash Flows Unaudited Year to Date Ended
March 31,
(In millions)
2012 2011
Cash flows
from operating activities Net income
$ 39.6 $
26.4 Reconciliation to net cash provided by operating
activities: Depreciation and amortization
14.0 14.1
Amortization of debt discount and deferred financing costs and call
premium expense
0.5 5.4 Deferred income taxes
12.0
9.3 Equity in earnings from affiliated companies
(0.4
) (0.5 ) Share-based compensation
7.5 6.4 Pension
curtailment gain — (5.7 ) Excess tax benefits on share-based
compensation
(4.7 ) (2.0 ) Changes in assets
and liabilities: (Increase) in accounts receivable
(48.3
) (30.1 ) (Increase) in inventories
(13.5 )
(24.3 ) Decrease (increase) in prepaid expenses and other current
assets
2.6 (1.0 ) Increase in accounts payable/accrued
liabilities
17.7 24.7 Other – net
(4.8
) (5.8 ) Net cash provided by operating
activities (a)
22.2 16.9
Cash flows from investing activities Capital
expenditures and deposits for capital purchases (b)
(82.9 ) (35.9 ) Net cash used in
investing activities
(82.9 )
(35.9 )
Cash flows from financing activities
Borrowings (repayment) from senior secured credit facility
59.0 (35.0 ) Borrowings (repayments) from credit line
0.7 (1.3 ) Repayments of capital lease obligations and other
debt, net
(0.2 ) (0.1 ) Repayment of senior secured
credit facility – term loan
(1.2 ) (1.2 ) Borrowings
from senior secured credit facility — 135.0 Repayment of 6.75%
senior subordinated notes — (150.0 ) Call premium payment for 6.75%
senior subordinated notes — (3.4 ) Activity under stock plans
0.8 3.1 Net cash
used in financing activities
59.1
(52.9 ) Effect of exchange rate changes on
cash and cash equivalents
0.8
5.3 Net (decrease) in cash and cash equivalents
(0.8 ) (66.6 ) Cash and cash equivalents at beginning
of period
49.5 117.2
Cash and cash equivalents at end of period
$
48.7 $ 50.6
Supplemental
Data: Free cash flow (a)+(b)
$ (60.7 ) $
(19.0 ) Accrual basis additions to property, plant and equipment
$ 44.7 $ 25.2
Hexcel Corporation and
Subsidiaries Net Sales to Third-Party Customers by Market
Segment Quarters Ended March 31, 2012 and 2011
(Unaudited) Table A (In millions)
As
Reported Constant Currency (a) Market
Segment 2012 2011
B/(W) %
FX
Effect (b)
2011 B/(W)
%
Commercial Aerospace
$ 242.3 $ 197.6
22.6 $ (1.8)
$ 195.8
23.7 Space & Defense
84.9 79.7
6.5
(0.7)
79.0 7.5 Industrial
72.9
54.3
34.3 (1.2)
53.1 37.3 Consolidated Total
$ 400.1 $ 331.6
20.7
$ (3.7)
$ 327.9 22.0
Consolidated % of Net Sales %
%
%
Commercial Aerospace
60.6 59.6
59.7
Space & Defense
21.2 24.0
24.1 Industrial
18.2 16.4
16.2 Consolidated
Total 100.0 100.0
100.0
(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, 2011 have been estimated using the same U.S. dollar, British
pound and Euro exchange rates as applied for the respective period
in 2012 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 (b)
Engineered Products Corporate & Other (a)
Total First Quarter 2012
Net
sales to external customers
$ 316.2
$ 83.9 $ — $
400.1 Intersegment sales
15.9
0.1 (16.0 )
— Total sales
332.1 84.0
(16.0 ) 400.1 Operating income (loss)
65.8 11.8 (17.0 ) 60.6 %
Operating margin
19.8 % 14.0 %
15.1 % Depreciation and amortization
12.9 1.1 — 14.0 Stock-based
compensation expense
2.1 0.4 5.0 7.5
Accrual based additions to capital expenditures
43.6 1.1
— 44.7 First Quarter 2011
Net
sales to external customers $ 256.3 $ 75.3 $ — $ 331.6 Intersegment
sales 13.9 0.3
(14.2 ) — Total sales 270.2 75.6 (14.2
) 331.6 Operating income (loss) (b) 49.8 12.5 (15.1 ) 47.2 %
Operating margin 18.4 % 16.5 % 14.2 % Other operating income
5.7 — — 5.7 Depreciation and amortization 12.9 1.1 0.1 14.1
Stock-based compensation expense 1.6 0.3 4.5 6.4 Accrual based
additions to capital expenditures 24.3
0.9 — 25.2
(a) We do not allocate corporate expenses to the operating
segments.
(b) In the quarter ended March 31, 2011 Composite Materials
operating income includes a $5.7 million benefit from the
curtailment of a pension plan.
Hexcel Corporation and Subsidiaries Reconciliation of
GAAP and Non-GAAP Operating Income and Net Income
Table C Unaudited Quarter Ended
March 31,
(In millions)
2012 2011 GAAP operating
income
$ 60.6 $ 47.2 - Other operating income (a)
— (5.7 ) Adjusted Operating
Income
$ 60.6 $ 41.5 % of Net Sales
15.1
% 12.5 % - Stock Compensation Expense
$ 7.5 $
6.4 - Depreciation and Amortization
14.0
14.1 Adjusted EBITDA
$
82.1 $ 62.0 Unaudited
Quarter Ended March 31,
2012 2011 (In millions,
except per diluted share data)
As Reported
EPS As Reported EPS GAAP
net income
$ 39.6 $ 0.39 $ 26.4 $ 0.26
- Other operating income (net of tax) (a)
— — (4.1 )
(0.04 ) - Other non-operating expense (net of tax) (b)
— — 3.0
0.03 Adjusted net income
$
39.6 $ 0.39 $ 25.3
$ 0.25
(a) Other operating income for the quarter ended March 31, 2011
includes a $5.7 million benefit from the curtailment of a pension
plan.
(b) Non-operating expense for the quarter ended March 31, 2011
is the accelerated amortization of deferred financing costs and
expensing of the call premium from redeeming $150 million of 6.75%
senior subordinated notes.
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. 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 Net
Income Per Common Share
Table D
Unaudited Quarter Ended
March 31,
(In millions, except per share data)
2012 2011
Basic net income per common share: Net income
$ 39.6 $ 26.4 Weighted average common shares
outstanding
99.8 98.2
Basic net income per common share $
0.40 $ 0.27
Diluted net income per common
share: Net income
$ 39.6 $ 26.4 Weighted average
common shares outstanding – Basic
99.8 98.2 Plus
incremental shares from assumed conversions: Restricted stock units
0.7 0.8 Stock Options
1.2
1.4 Weighted average common shares outstanding–Dilutive
101.7 100.4
Diluted net
income per common share $ 0.39 $
0.26
Hexcel Corporation and Subsidiaries Schedule of
Total Debt, Net of Cash Table E Unaudited
March 31, December 31, March 31, (In millions)
2012 2011 2011 Notes payable and
current maturities of capital lease obligations
$
14.5 $ 12.6 $ 11.4 Long-term notes payable and capital lease
obligations
294.8 238.3
268.4 Total Debt
309.3 250.9
279.8 Less: Cash and cash equivalents
(48.7
) (49.5 ) (50.6 ) Total debt,
net of cash
$ 260.6 $ 201.4
$ 229.2
Hexcel Corporation, 281 Tresser Boulevard,
Stamford, CT 06901 (203) 969-0666
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