SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
May 10, 2000 (April 26, 2000)
-------------------------------------
Date of report (Date of earliest event reported)
Hexcel Corporation
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-8472 94-1109521
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(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
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(Address of Principal Executive Offices and Zip Code)
(203) 969-0666
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(Registrant's telephone number, including area code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
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On April 26, 2000, Hexcel Corporation (the "Company") completed the
sale of its Bellingham aircraft interiors business to Britax Cabin
Interiors, Inc. ("Britax"), a wholly owned subsidiary of Britax
International plc, pursuant to an Asset-Purchase Agreement dated March 31,
2000 between the Company and Britax. A copy of the agreement is attached to
this report as Exhibit 2.1. The divested Bellingham business is engaged in
the design, engineering, manufacture and sale of commercial aircraft
interior components and systems for refurbishment, reconfiguration and OEM
applications.
The purchase price paid by Britax to the Company for the Bellingham
business at closing was $115.4 million in cash reflecting estimated pre-
closing changes in the net assets of Bellingham, subject to certain
further post-closing adjustments. The Company estimates reporting in the
second quarter of 2000, a pre-tax gain of approximately $65 million to $75
million relating to the sale. Net proceeds from the sale were used to
repay a portion of the Company's outstanding term debt under its senior
credit facility.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION.
-----------------------------------------
Unaudited pro forma consolidated financial statements as of and for
the year ended December 31, 1999, and as of and for the quarter ended March
31, 2000 are attached hereto on pages PF-1 through PF-7.
Additionally, pro forma and actual net sales to third-party customers
by product group and market segment and business segment data, for each of
the quarters ended March 31, June 30, September 30, and December 31, 1999,
as well as for the year ended December 31, 1999, and the quarter ended
March 31, 2000, are attached to this report as Exhibits 99.2 through 99.5.
(c) EXHIBITS.
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2.1 Asset-Purchase Agreement dated March 31, 2000 between Hexcel
Corporation and Britax Cabin Interiors, Inc.
99.1 Press Release.
99.2 Unaudited Pro Forma 1999 and First Quarter 2000 Net Sales to
Third-Party Customers by Product Group and Market Segment.
99.3 Unaudited Actual 1999 and First Quarter 2000 Net Sales to Third-Party
Customers by Product Group and Market Segment.
99.4 Unaudited Pro Forma 1999 and First Quarter 2000 Business Segment Data.
99.5 Unaudited Actual 1999 and First Quarter 2000 Business Segment Data.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 10, 2000
HEXCEL CORPORATION
By: /S/ KIRK FORBECK
----------------
Name: Kirk Forbeck
Title: Corporate Controller
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated statements of operations for
the fiscal year ended December 31, 1999, and the quarter ended March 31, 2000,
as well as the unaudited pro forma condensed consolidated balance sheets as of
December 31, 1999 and March 31, 2000, were prepared to illustrate the estimated
effects of the sale of Bellingham, a division of Hexcel Corporation ("Hexcel"),
and the application of the net proceeds from the sale to debt outstanding under
Hexcel's senior credit facility. The unaudited pro forma consolidated
statements of operations assume that the sale occurred at the beginning of the
periods presented. The unaudited pro forma condensed consolidated balance
sheets assume that the sale occurred as of the respective balance sheet date.
The unaudited pro forma financial information presented is derived from the
audited financial statements of Hexcel as of and for the year ended December 31,
1999, and the unaudited financial statements of Hexcel as of and for the three
months ended March 31, 2000. The unaudited pro forma financial information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of Hexcel, including the notes thereto, appearing in Hexcel's Annual
Form 10-K for the year ended December 31, 1999. The unaudited pro forma
financial information does not purport to be indicative of the results of
operations or financial condition that would have been reported had the events
assumed occurred on the dates indicated, nor does it purport to be indicative of
results of operations, or financial condition that may be achieved in the
future.
PF-1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
---------------------------------
ADJUSTMENTS PRO FORMA
HEXCEL BELLINGHAM (NOTE 1) CONSOLIDATED
------------- ------------- ----------- -------------
Net sales $ 1,151.5 $ 70.0 $ - $ 1,081.5
Cost of sales 909.0 55.1 - 853.9
------------- ------------- ----------- -------------
Gross margin 242.5 14.9 - 227.6
Selling, general and administrative expenses 128.7 6.9 - 121.8
Research and technology expenses 24.8 - - 24.8
Business acquisition and consolidation expenses 20.1 - - 20.1
------------- ------------- ----------- -------------
Operating income 68.9 8.0 - 60.9
Interest expense 73.9 - (8.1) (a) 65.8
------------- ------------- ----------- -------------
Income (loss) before income taxes (5.0) 8.0 (8.1) (4.9)
Recovery of (provision for) income taxes 1.7 (2.8) 2.8 (b) 1.7
Equity in income and write-down of
investments in affiliated companies (20.0) - - (20.0)
------------- ------------- ----------- -------------
Net income (loss) $ (23.3) $ 5.2 $ (5.3) $ (23.2)
------------- ------------- ----------- -------------
Net loss per share:
Basic $ (0.64) $ (0.64)
Diluted (0.64) (0.64)
Weighted average shares
Basic 36.4 36.4
Diluted 36.4 36.4
OTHER FINANCIAL DATA
EBITDA (Note 3) $ 130.3 $ 9.1 $ - $ 121.2
Adjusted EBITDA (Note 3) 150.4 9.1 - 141.3
Cash flows provided by (used for):
Operating activities 133.7 4.6 (7.0) 136.1
Investing activities (40.3) (3.5) - (36.8)
Financing activities (99.5) (1.1) 7.0 (105.4)
Depreciation and amortization 61.3 1.1 - 60.2
Capital expenditures 35.6 3.5 - 32.1
Ratio of earnings to fixed charges 0.7x - - 0.7x
<FN>
See accompanying notes to Unaudited Pro Forma Financial Information
</FN>
PF-2
UNAUDITED PRO FORMA FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF OPERATIONS
QUARTER ENDED MARCH 31, 2000
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
---------------------------------
ADJUSTMENTS PRO FORMA
HEXCEL BELLINGHAM (NOTE 1) CONSOLIDATED
------------- ------------- ----------- -------------
Net sales $ 279.8 $ 16.6 $ - $ 263.2
Cost of sales 217.6 12.1 - 205.5
------------- ------------- ----------- -------------
Gross margin 62.2 4.5 - 57.7
Selling, general and administrative expenses 32.9 3.4 - 29.5
Research and technology expenses 6.3 - - 6.3
Business consolidation expenses 1.2 - - 1.2
------------- ------------- ----------- -------------
Operating income 21.8 1.1 - 20.7
Interest expense 18.4 - (2.3) (a) 16.1
------------- ------------- ----------- -------------
Income before income taxes 3.4 1.1 (2.3) 4.6
Provision for income taxes (1.2) (0.4) 0.8 (b) (1.6)
Equity in income of affiliated companies 0.4 - - 0.4
------------- ------------- ----------- -------------
Net income $ 2.6 $ 0.7 $ (1.5) $ 3.4
------------- ------------- ----------- -------------
Net income per share:
Basic $ 0.07 $ 0.09
Diluted 0.07 0.09
Weighted average shares
Basic 36.6 36.6
Diluted 36.8 36.8
Other Financial Data
EBITDA (Note 3) $ 36.8 $ 1.4 $ - $ 35.4
Adjusted EBITDA (Note 3) 38.0 1.4 - 36.6
Cash flows provided by (used for):
Operating activities (6.1) 1.6 (1.2) (6.5)
Investing activities (7.8) (0.2) - (7.6)
Financing activities 17.8 (1.4) 1.2 18.0
Depreciation and amortization 15.0 0.3 - 14.7
Capital expenditures 4.4 0.2 - 4.2
Ratio of earnings to fixed charges 1.2x - - 1.3x
<FN>
See accompanying notes to Unaudited Pro Forma Financial Information
</FN>
PF-3
UNAUDITED PRO FORMA FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999
(IN MILLIONS)
HISTORICAL
-----------------------------
ADJUSTMENTS PRO FORMA
HEXCEL BELLINGHAM (NOTE 2) CONSOLIDATED
------------ ------------- ----------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 0.2 $ - $ - $ 0.2
Accounts receivable 158.6 14.6 - 144.0
Inventories 153.7 9.1 - 144.6
Prepaid expenses and other assets 5.1 0.1 (0.3) (a) 4.7
Deferred tax asset 10.2 - (0.2) (b) 10.0
------------ ------------- ----------- -------------
Total current assets 327.8 23.8 (0.5) 303.5
Net property, plant and equipment 392.1 20.3 - 371.8
Goodwill and other purchased intangibles, net 411.2 4.9 406.3
Investments in affiliated companies and other assets 130.8 - (27.2) (b) 103.6
------------ ------------- ----------- -------------
Total assets $ 1,261.9 $ 49.0 $ (27.7) $ 1,185.2
------------ ------------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of capital
lease obligations $ 34.3 $ - $ (5.7) (c) $ 28.6
Accounts payable 80.3 5.4 - 74.9
Accrued liabilities 95.9 1.7 (1.1) (d) 93.1
------------ ------------- ----------- -------------
Total current liabilities 210.5 7.1 (6.8) 196.6
Long-term notes payable and capital lease obligations 712.5 - (106.3) (c) 606.2
Indebtedness to related parties 24.1 - - 24.1
Other non-current liabilities 44.7 0.2 - 44.5
------------ ------------- ----------- -------------
Total liabilities 991.8 7.3 (113.1) 871.4
Total stockholders' equity 270.1 41.7 85.4 (e) 313.8
------------ ------------- ----------- -------------
Total liabilities and stockholders' equity $ 1,261.9 $ 49.0 $ (27.7) $ 1,185.2
------------ ------------- ----------- -------------
<FN>
See accompanying notes to Unaudited Pro Forma Financial Information.
</FN>
PF-4
UNAUDITED PRO FORMA FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000
(IN MILLIONS)
HISTORICAL
---------------------------
ADJUSTMENTS PRO FORMA
HEXCEL BELLINGHAM (NOTE 2) CONSOLIDATED
------------ ----------- --------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 4.8 $ - $ - $ 4.8
Accounts receivable 177.1 10.8 - 166.3
Inventories 164.0 9.2 - 154.8
Prepaid expenses and other assets 3.7 0.1 (0.5) (a) 3.1
Deferred tax asset 10.1 - (0.8) (b) 9.3
------------ ----------- --------- -------------
Total current assets 359.7 20.1 (1.3) 338.3
Net property, plant and equipment 381.7 20.2 - 361.5
Goodwill and other purchased intangibles, net 407.6 4.9 - 402.7
Investments in affiliated companies and other assets 141.0 - (26.4) (b) 114.6
------------ ----------- --------- -------------
Total assets $ 1,290.0 $ 45.2 $ (27.7) $ 1,217.1
------------ ----------- --------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of capital
lease obligations $ 26.4 $ - $ (6.1) (c) $ 20.3
Accounts payable 88.7 4.0 - 84.7
Accrued liabilities 94.8 4.1 (1.0) (d) 89.7
------------ ----------- --------- -------------
Total current liabilities 209.9 8.1 (7.1) 194.7
Long-term notes payable and capital lease obligations 738.3 - (105.8) (c) 632.5
Indebtedness to related parties 24.1 - - 24.1
Other non-current liabilities 47.4 0.2 - 47.2
------------ ----------- --------- -------------
Total liabilities 1,019.7 8.3 (112.9) 898.5
Total stockholders' equity 270.3 36.9 85.2 (e) 318.6
------------ ----------- --------- -------------
Total liabilities and stockholders' equity $ 1,290.0 $ 45.2 $ (27.7) $ 1,217.1
------------ ----------- --------- -------------
<FN>
See accompanying notes to Unaudited Pro Forma Financial Information
</FN>
PF-5
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 1 - ADJUSTMENTS TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(a) Adjustment to reflect the net decrease in interest expense attributable to
repayments of term debt under the senior credit facility. Interest on
outstanding borrowings under the senior credit facility is computed at
variable rates based on the London interbank rate, or, at the option of
Hexcel, at the base rate of the administrative agent for the lenders. For
purpose of estimating pro forma adjustments, a weighted average interest
rate of approximately 7.25% and 8.25% was used for the year ended December
31, 1999 and the quarter ended March 31, 2000, respectively.
(b) Adjustment to reflect an approximate average income tax rate of 35.2%.
NOTE 2 - ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE
SHEETS
(a) Represents the removal of deferred transaction costs in connection with
the sale of Bellingham.
(b) Reflects the estimated deferred income tax effect relating to the sale of
Bellingham and to the resulting pro forma reduction of interest expense.
(c) Adjustment to reduce indebtedness under the senior credit facility with
net cash proceeds from the sale of Bellingham.
(d) Adjustment to reduce the senior credit facility's accrued interest due to
the reduction in indebtedness.
(e) The net increase in stockholders' equity primarily represents the after-tax
gain on the sale of Bellingham, including the transfer of Bellingham's
equity to Hexcel.
NOTE 3 - EBITDA AND ADJUSTED EBITDA
"EBITDA" is defined as income before interest, taxes, depreciation,
amortization and equity in income and write-down in affiliated companies.
"Adjusted EBITDA" is defined as EBITDA before business acquisition and
consolidation expenses. Hexcel believes that EBITDA and adjusted EBITDA provide
useful information regarding Hexcel's ability to service its indebtedness,
but should not be considered in isolation or as a substitute for operating
income or cash flow from operations, which is determined in accordance with
generally accepted accounting principles, as an indicator of Hexcel's
operating performance or as a measure of Hexcel's liquidity. Adjusted EBITDA may
not be comparable to other similarly titled financial measures of other
companies.
PF-6
A reconciliation of net income to EBITDA and adjusted EBITDA is as follows (in millions):
HISTORICAL
-----------------------------
PRO FORMA
HEXCEL BELLINGHAM ADJUSTMENTS CONSOLIDATED
------------ ------------- --------------- -------------
FOR THE YEAR ENDED DECEMBER 31, 1999
Net income (loss) $ (23.3) $ 5.2 $ (5.3) $ (23.2)
Provision for (recovery of) income taxes (1.7) 2.8 (2.8) (1.7)
Interest expense 73.9 - 8.1 65.8
Depreciation and amortization 61.3 1.1 - 60.2
Equity in income and write-down in
affiliated companies 20.0 - 20.0
Other 0.1 - - 0.1
------------ ------------- --------------- -------------
EBITDA 130.3 9.1 - 121.2
Business acquisition and consolidation expenses 20.1 - - 20.1
------------ ------------- --------------- -------------
Adjusted EBITDA $ 150.4 $ 9.1 $ - $ 141.3
------------ ------------- --------------- -------------
FOR THE QUARTER ENDED MARCH 31, 2000
Net income $ 2.6 $ 0.7 $ (1.5) $ 3.4
Provision for income taxes 1.2 0.4 (0.8) 1.6
Interest expense 18.4 - 2.3 16.1
Depreciation and amortization 15.0 0.3 - 14.7
Equity in income of affiliated companies (0.4) - - (0.4)
------------ ------------- --------------- -------------
EBITDA 36.8 1.4 - 35.4
Business consolidation expenses 1.2 - - 1.2
------------ ------------- --------------- -------------
Adjusted EBITDA $ 38.0 $ 1.4 $ - $ 36.6
------------ ------------- --------------- -------------
PF-7