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
January 27, 2003 (January 23, 2003)
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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 Incorporation) (Commission File No.)(IRS Employer 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 5. Other Events.
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A copy of the press release issued by Hexcel Corporation, a Delaware
corporation (the "Company"), on January 23, 2003 is filed as Exhibit
99.1 to this Current Report and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits
99.1 Press Release issued by the Company on January 23, 2003.
Signature
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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.
HEXCEL CORPORATION
January 27, 2003
/s/ William J. Fazio
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William J. Fazio
Corporate Controller and
Chief Accounting Officer
Exhibit Index
Exhibit No. Description
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99.1 Press Release issued by the Company on January 23, 2003.
Exhibit 99.1
Hexcel Reports 2002 Fourth Quarter and Year-End Results
STAMFORD, Conn.--(BUSINESS WIRE)--Jan. 23, 2003--Hexcel
Corporation (NYSE/PCX: HXL)
Highlights:
- Year-end debt, net of cash, reduced to $613.5 million, down
$22.5 million for the quarter and $60.8 million for the year
- Cash fixed costs for the year reduced by 22.8%, exceeding the
$60.0 million target, and resulting in improved gross margins
as a percentage of sales
- Operating income in quarter of $12.3 million and $60.2 million
for the year
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Unaudited
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Quarter Ended Year-Ended
(In millions, except per share December 31, December 31,
data) 2002 2001 2002 2001
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Net sales $ 206.5 $ 239.1 $ 850.8 $ 1,009.4
Gross margin % 19.2% 14.7% 19.0% 18.9%
Operating income (loss) $ 12.3 $(357.4) $ 60.2 $ (316.2)
Adjusted EBITDA (a) $ 25.7 $ 19.9 $ 109.4 $ 119.2
Provision for income taxes (b) $ 2.5 $ 31.5 $ 11.3 $ 40.5
Litigation gain $ - $ - $ 9.8 $ -
Equity in losses of affiliated
companies and write-down of an
investment $ (1.5) $ (10.1) $ (10.0) $ (9.5)
Net loss $ (6.1) $(413.8) $ (13.6) $ (433.7)
Diluted loss per share $ (0.16) $(10.88) $ (0.35) $ (11.54)
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(a) Excludes business consolidation and restructuring expenses,
litigation gain, impairment of goodwill and other purchased
intangibles, gain (loss) on early retirement of debt, expenses
associated with the announced equity investment, compensation
expenses associated with the former CEO's retirement, interest,
taxes, depreciation, amortization, equity in earnings (losses) of
affiliated companies and a write-down of an investment in
affiliated companies. The Company reports Adjusted EBITDA as
defined by the Company's senior credit facility, as it is used in
the computation of all the financial maintenance covenants in that
facility.
(b) The 2001 fourth quarter and year-end results reflect the impact of
the write-down of U.S. deferred tax assets and the impact of
ceasing to record the tax benefits from U.S. operating losses
commencing during the second quarter of 2001.
Hexcel Corporation (NYSE/PCX: HXL) today reported results for the
fourth quarter and full year 2002.
Net sales for the fourth quarter of 2002 were $206.5 million as
compared to $239.1 million for the fourth quarter of 2001. Operating
income for the fourth quarter of 2002 was $12.3 million versus an
operating loss $357.4 million for the fourth quarter of 2001. Net loss
for the fourth quarter of 2002 was $6.1 million, or $0.16 per diluted
share, compared to a net loss of $413.8 million, or $10.88 per diluted
share, for the fourth quarter of 2001. As of January 1, 2002, the
Company adopted FAS 142 and ceased amortizing goodwill. The Company's
fourth quarter of 2001 net loss would have been $411.0 million had FAS
142 been in effect at that time.
Fourth quarter 2001 results included $51.1 million in business
consolidation and restructuring expenses, and $349.5 million in
charges representing impairment of goodwill, certain purchased
intangibles, a minority equity investment and U.S. deferred tax
assets. Excluding business consolidation and restructuring expenses
and the impairment charges, and assuming that the Company ceased
amortizing goodwill in 2001, the Company's pretax losses for the
fourth quarter of 2002 and 2001 were $2.3 million and $9.2 million,
respectively.
For the full year of 2002, net sales were $850.8 million as
compared to $1,009.4 million in 2001. Operating income for the year
was $60.2 million versus an operating loss of $316.2 million in 2001.
Net loss for 2002 was $13.6 million, or $0.35 per diluted share,
compared to a net loss of $433.7 million, or $11.54 per diluted share,
for 2001. The Company's net loss for 2001 would have been $421.2
million had the Company ceased amortizing goodwill during the period.
Excluding business consolidation and restructuring charges, the
litigation gain reported in 2002 and the impairment charges reported
in 2001, and assuming that the Company ceased amortizing goodwill in
2001, the Company's pretax loss in 2002 was $1.6 million, as compared
to a pretax loss of $3.7 million in 2001.
Adjusted EBITDA for the fourth quarter of 2002 was $25.7 million
versus $19.9 million for the fourth quarter of 2001. For the full
year, Adjusted EBITDA was $109.4 million in 2002 and $119.2 million in
2001. The Company reports Adjusted EBITDA as defined by the Company's
senior credit facility, as it is used in the computation of all of the
financial covenants in that facility.
Chief Executive Officer Comments
Commenting on Hexcel's fourth quarter results, Mr. David E.
Berges, Chairman, President and Chief Executive Officer, said, "In the
quarter, the Company continued to benefit from the results of its cost
reduction programs launched in November 2001. Throughout the year, we
have exceeded our goals for reductions in cash fixed costs. This
quarter, those cost reductions permitted us to achieve a more
normalized level of operating income as a percentage of sales, despite
revenues being $32.6 million, or 13.6%, lower when compared to the
fourth quarter of 2001."
Mr. Berges added, "I am particularly pleased to report that once
again we were able to reduce our total debt during the quarter. During
the fourth quarter of 2002, our total debt, net of cash, decreased
$22.5 million to $613.5 million. Reductions in inventories by a
further $13.5 million to $113.6 million contributed to this reduction
in debt. Inventories are now at the lowest point since we acquired the
Ciba Composites business in 1996 and yet our on-time delivery
performance improved in the year. Net debt is now $60.8 million lower
than a year ago despite $24.3 million in cash restructuring costs to
right-size our Company."
Mr. Berges continued, "The year 2002 was a year of significant
accomplishment for Hexcel. Despite a dramatic sales decline due to
difficult market conditions, we met all of our financial commitments.
For the most part, this was a result of the benefits derived from the
restructuring program announced in November of 2001."
Mr. Berges concluded, "This performance in the face of adversity,
combined with Hexcel's strong market position in the Company's
long-term growth markets, facilitated the recently announced agreement
to raise $125.0 million in equity. Armed with this new capital
commitment, we expect to refinance our senior credit facility with the
maturity of the new senior debt set well into the expected recovery
cycle."
Revenue Trends
Consolidated revenues of $206.5 million for the fourth quarter of
2002 were 13.6% lower than 2001 fourth quarter revenues of $239.1
million, driven overwhelmingly by the sharp reduction in sales to the
commercial aerospace market. Had the same U.S. dollar, British pound
and Euro exchange rates applied in the fourth quarter of 2002 as in
the fourth quarter of 2001, revenues for the fourth quarter of 2002
would have been $199.1 million, reflecting the weakening of the U.S.
dollar over the prior year.
- Commercial Aerospace. Sales to aircraft producers and their
subcontractors continued to reflect the sharp impact of
reducing aircraft build rates in 2002 compared to 2001.
Revenues for the 2002 fourth quarter were $96.3 million, 22.5%
lower than the 2001 fourth quarter revenues of $124.2 million.
For the full year, revenues were $391.1 million, 27.4% lower
than revenues of $538.9 million in the prior year, reflecting
the four to six month lead times in which Hexcel's deliveries
precede build schedules.
- Industrial Markets. Sales for the 2002 fourth quarter of $59.9
million were 5.8% lower than the $63.6 million reported in the
fourth quarter of 2001. The Company saw lower demand for its
reinforcement fabrics used in military body armor
applications. Sales were impacted by delays in funding for
military body armor programs and pending product transition
within the military services. Demand for the Company's
products used in other non-aerospace applications, including
architectural, automotive, civilian body armor, recreation
equipment, and wind energy applications, continued to show
strength. In particular, sales of composite materials used in
wind energy applications achieved record quarterly revenues.
Industrial sales for 2002 were $253.9 million, up slightly
from $250.2 million in 2001. Due to the lack of clarity in
military soft body armor demand, the Company's Industrial
revenues may fluctuate for several quarters even though the
prospects for growth from wind energy, automotive, and other
applications remain strong.
- Space & Defense. Revenues of $37.2 million for the fourth
quarter of 2002 were 6.3% lower than the unusually strong
fourth quarter of 2001. While the Company's space & defense
revenues tend to vary quarter to quarter due to military
procurement schedules, sales associated with military aircraft
and helicopters continue to trend upwards as the new
generation of military aircraft in the United States and
Europe ramp up in production. For the full year, revenues were
$147.5 million, 2.9% higher than revenues of $143.3 million in
the prior year.
- Electronics. Sales for the 2002 fourth quarter were $13.1
million, up 12.9% from the fourth quarter of 2001. Although
sales showed some improvement over the lower sales experienced
in the fourth quarter of 2001, sales continue to be affected
by a severe industry downturn in the global electronics market
that began in 2001 and has persisted throughout 2002. The
Company still sees no evidence of a substantial near term
recovery in this market. Sales for 2002 were $58.3 million, or
24.3%, lower than 2001 primarily because the industry downturn
mentioned above did not begin until late in the first quarter
of 2001.
Based, in part, on the factors discussed above, the Company
currently estimates that its 2003 net sales are likely to be in the
range of $800 million to $850 million.
Gross Margin and Operating Income
Gross margin for the fourth quarter of 2002 was $39.6 million, or
19.2% of sales, compared with $35.2 million, or 14.7% of sales, for
the same period last year. For the year, gross margin was $161.3
million, or 19.0% of sales, compared with $190.8 million, or 18.9%,
for 2001, as the Company's cost reduction programs took effect and
operations adjusted to lower levels of production.
Operating income for the 2002 fourth quarter was $12.3 million, or
6.0% of sales, compared to an operating loss of $357.4 million for the
2001 fourth quarter. Operating income for the full year was $60.2
million, or 7.1% of sales. Full year operating income, as a percentage
of sales, achieved by the Company in 2002 is at a more normalized
level despite a $158.6 million drop in revenues. Included in selling,
general and administrative expenses for the 2002 fourth quarter were
$1.5 million of expenses incurred in connection with the announced
equity investment. Excluding these expenses and the $12.5 million
benefit of adopting the new accounting standard for the amortization
of goodwill, selling, general and administrative expenses in the year
2002 were $24.0 million lower than in 2001.
Investments in Affiliated Companies
Equity in losses of affiliated companies was $1.5 million for the
fourth quarter of 2002, reflecting primarily losses reported by the
Company's joint ventures in China and Malaysia as they ramp up
production of aerospace composite structures. Equity in losses of
affiliated companies was $10.1 million in the fourth quarter of 2001,
and included a $7.8 million write-down of the Company's carrying value
of its equity investment in an affiliated company. These losses by
affiliated companies do not affect the Company's cash flows.
Debt
Total debt, net of cash, decreased by $22.5 million to $613.5
million as of December 31, 2002, compared to September 30, 2002.
Operating cash flow in the quarter benefited from reductions in
working capital. The Company had undrawn revolver and overdraft
revolver availability under its senior credit facility of $87.9
million as of December 31, 2002 after having made a voluntary
reduction in revolver commitment of $21.2 million in December. This
reduction reduces the spread the Company will pay on advances in 2003
and fees payable for unutilized commitments. The total commitment
under the senior credit facility as of December 31, 2002 after
scheduled amortization and the voluntary commitment reductions, and
including a letter of credit facility of $30.0 million, was $297.6
million.
In January 2002, the senior credit facility was amended, relaxing
the quarterly financial maintenance covenants to accommodate the
Company's revised business plans and projections for 2002. As of
December 31, 2002, the Company was in compliance with the revised
financial covenants. The January 2002 amendment did not change the
financial covenant test values for 2003. While the Company intends to
refinance the senior credit facility in conjunction with the announced
$125.0 million equity investment in the first half of 2003, it is not
known if the transaction will close before the end of the first
quarter. The Company is therefore planning to seek an amendment to the
existing senior credit facility so that the financial covenants will
accommodate the Company's expected financial performance in the first
two quarters of 2003.
The $125.0 million equity investment is subject to customary
closing conditions, including regulatory approvals and the approval of
Hexcel's stockholders as well as a refinancing of its senior credit
facility for a term of four or more years with certain threshold
maturity and covenant requirements. If this equity investment were not
to be completed, the Company would require further amendment of the
financial covenants under the existing senior credit facility, and
would need to arrange financing for the maturity of its convertible
subordinated notes, due August 1, 2003. While the Company believes
that it will successfully complete the $125.0 million equity
investment, there can be no assurances that the transaction will be
completed. If the transaction has not closed by the time of the filing
of the Company's Annual Report on Form 10-K for the year ended
December 31, 2002, the Company's independent accountants' opinion will
likely include an explanatory paragraph highlighting the liquidity
uncertainties.
Hexcel will host a conference call at 11:00 A.M. EST, today,
Thursday, January 23, 2003 to discuss the fourth quarter results and
respond to questions. The telephone number for the conference call is
(913) 981-5508 and the confirmation code is 727140. 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 seven days.
Hexcel Corporation is the world's leading advanced structural
materials company. It develops, manufactures and markets lightweight,
high-performance reinforcement products, composite materials and
engineered products for use in commercial aerospace, space and
defense, electronics, and industrial 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), future sales volumes, cost
reductions from its restructuring programs together with their
associated improvements, manufacturing productivity, gross margin
performance, EBITDA, equity in earnings (losses) of affiliated
companies, working capital management, amendment of the senior credit
facility, the issuance of convertible preferred stock for $125.0
million in cash, refinancing the senior credit facility and the
refinancing of the 7% convertible subordinated notes due August 1,
2003. 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, conditions in the
financial markets 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 to reflect future events.
Hexcel Corporation (the "Company") and certain persons may be
deemed to be participants in the solicitation of proxies relating to
the proposed transaction among the Company, Berkshire Partners LLC and
Greenbriar Equity Group LLC and the proposed transaction among the
Company and affiliates of Goldman Sachs Group, Inc. (together, the
"Transactions"). The participants in such solicitation may include the
Company's executive officers and directors, none of whom own in excess
of 1% of the Company's common stock. Further information regarding
persons who may be deemed participants will be available in the
Company's proxy statement to be filed with the Securities and Exchange
Commission in connection with the Transactions.
This press release is not a proxy statement. The Company has not
yet filed a proxy statement in connection with the solicitation of
proxies relating to the proposed Transactions. Stockholders of the
Company will receive such a statement and a proxy card in connection
with the solicitation. STOCKHOLDERS OF THE COMPANY ARE ADVISED TO READ
THE STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Such statement (when available) and other
relevant documents may also be obtained, free of charge, on the
Securities and Exchange Commission's website (http://www.sec.gov) or
by request by contacting Investor Relations Department, Hexcel
Corporation, Two Stamford Plaza, 281 Tresser Boulevard, 16th Floor,
Stamford, Connecticut 06901-3238.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
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Unaudited
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Quarter Ended Year-Ended
(In millions, except per share December 31, December 31,
data) 2002 2001 2002 2001
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Net sales $ 206.5 $ 239.1 $ 850.8 $ 1,009.4
Cost of sales 166.9 203.9 689.5 818.6
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Gross margin 39.6 35.2 161.3 190.8
Selling, general and
administrative expenses 23.8 27.8 85.9 120.9
Research and technology expenses 3.7 4.6 14.7 18.6
Business consolidation and
restructuring expenses (0.2) 51.1 0.5 58.4
Impairment of goodwill and other
purchased intangibles - 309.1 - 309.1
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Operating income (loss) 12.3 (357.4) 60.2 (316.2)
Litigation gain - - 9.8 -
Interest expense (14.4) (15.2) (62.8) (64.8)
Gain (loss) on early retirement
of debt (a) - 0.4 0.5 (2.7)
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Income (loss) before income
taxes (2.1) (372.2) 7.7 (383.7)
Provision for income taxes (b) 2.5 31.5 11.3 40.5
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Loss before equity in losses (4.6) (403.7) (3.6) (424.2)
Equity in losses in affiliate
companies and a write-down of
an investment (1.5) (10.1) (10.0) (9.5)
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Net loss $ (6.1) $(413.8) $ (13.6) $ (433.7)
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Net loss per share:
Basic $ (0.16) $(10.88) $ (0.35) $ (11.54)
Diluted $ (0.16) $(10.88) $ (0.35) $ (11.54)
Weighted average shares: (c)
Basic 38.5 38.0 38.4 37.6
Diluted 38.5 38.0 38.4 37.6
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(a) Effective in 2002, the Company adopted FAS 145. In connection with
its adoption, the Company's gain (loss) on early retirement of
debt in 2001 was reclassified from an extraordinary item to a
separate line item below operating income. During 2002, the
Company recognized a gain on the retirement of convertible
subordinated debentures, due 2011, in accordance with its sinking
fund requirements.
(b) Reflects the impact of ceasing to record the tax benefits from
U.S. operating losses commencing in the second quarter of 2001.
(c) The Company's convertible subordinated notes, due 2003,
convertible subordinated debentures, due 2011, and stock options
were excluded from the computations of net loss per diluted share
for the quarters and years ended December 31, 2002 and 2001, as
they were anti-dilutive.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
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Unaudited
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December September December
(In millions, except per share 31, 30, 31,
data) 2002 2002 2001
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Assets
Current assets:
Cash and cash equivalents $ 8.2 $ 16.2 $ 11.6
Accounts receivable, net 117.3 126.7 140.5
Inventories, net 113.6 127.1 131.7
Prepaid expenses and other assets 9.2 6.5 4.4
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Total current assets 248.3 276.5 288.2
Property, plant and equipment 642.8 631.4 617.0
Less accumulated depreciation (333.4) (321.5) (287.8)
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Net property, plant and equipment 309.4 309.9 329.2
Goodwill and other purchased intangibles,
net of accumulated amortization 74.4 73.6 72.4
Investments in affiliated companies 34.0 36.3 56.9
Other assets 42.0 40.4 42.7
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Total assets $ 708.1 $ 736.7 $ 789.4
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Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of
capital lease obligations $ 61.9 $ 63.3 $ 17.4
Accounts payable 55.5 56.0 58.6
Accrued liabilities 101.9 103.9 131.7
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Total current liabilities 219.3 223.2 207.7
Long-term notes payable and capital lease
obligations 559.8 588.9 668.5
Other non-current liabilities 56.4 47.2 45.8
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Total liabilities 835.5 859.3 922.0
Stockholders' equity:
Preferred stock, no par value, 20.0
shares of stock authorized, no shares
issued or outstanding in 2002 and 2001 - - -
Common stock, $0.01 par value, 100.0
shares of stock authorized, shares
issued and outstanding of 39.8 at
December 31, 2002, 39.6 at September 30,
2002, and 39.4 at December 31, 2001 0.4 0.4 0.4
Additional paid-in capital 288.2 288.0 287.7
Accumulated deficit (381.5) (375.4) (367.9)
Accumulated other comprehensive loss (21.2) (22.4) (39.7)
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(114.1) (109.4) (119.5)
Less - Treasury stock, at cost, 1.3
shares at December 31, 2002 And 1.2
shares at September 30, 2002 and
December 31, 2001 (13.3) (13.2) (13.1)
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Total stockholders' equity (127.4) (122.6) (132.6)
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Total liabilities and stockholders'
equity $ 708.1 $ 736.7 $ 789.4
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Total debt, net of cash $ 613.5 $ 636.0 $ 674.3
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Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
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Unaudited
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Quarter Ended Year-Ended
December 31, December 31,
(In millions) 2002 2001 2002 2001
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Cash flows from operating
activities
Net loss $ (6.1) $(413.8) $ (13.6) $ (433.7)
Reconciliation to net cash
provided by operating
activities:
Depreciation and amortization 12.1 17.1 47.2 63.2
Deferred income taxes (0.1) 30.5 1.2 27.6
Business consolidation and
restructuring expenses (0.2) 51.1 0.5 58.4
Business consolidation and
restructuring payments (4.8) (6.6) (24.3) (12.0)
Impairment of goodwill and
other purchased intangibles - 309.1 - 309.1
Equity in losses of and
write-down of an investment
in affiliated companies 1.5 10.1 10.0 9.5
Loss (gain) on early
retirement of debt - - (0.5) 0.7
Working capital changes and
other 28.1 13.1 45.4 12.2
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Net cash provided by operating
activities 30.5 10.6 65.9 35.0
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Cash flows from investing
activities
Capital expenditures (6.4) (7.9) (14.9) (38.8)
Sale of an ownership interest
in an affiliated company - - 10.0 -
Other 1.1 - 2.6 0.5
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Net cash used for investing
activities (5.3) (7.9) (2.3) (38.3)
- ----------------------------------------------------------------------
Cash flows from financing
activities
Proceeds (repayments) of credit
facilities, net (28.8) (2.0) (57.4) 24.6
Repayments of long-term debt
and capital lease obligations,
net (3.1) (5.9) (9.9) (12.1)
Debt issuance costs - - - (3.5)
Activity under stock plans and
other (0.2) - - (0.4)
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Net cash provided by (used for)
financing activities (32.1) (7.9) (67.3) 8.6
- ----------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents (1.1) 0.3 0.3 1.2
- ----------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (8.0) (4.9) (3.4) 6.5
Cash and cash equivalents at
beginning of year 16.2 16.5 11.6 5.1
- ----------------------------------------------------------------------
Cash and cash equivalents at end
of year $ 8.2 $ 11.6 $ 8.2 $ 11.6
- ----------------------------------------------------------------------
Supplemental Data:
Cash interest paid $ 4.4 $ 6.0 $ 59.3 $ 62.0
Cash taxes paid $ 5.1 $ 8.3 $ 8.4 $ 20.4
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The following schedule of adjusted amounts is not based on
generally accepted accounting principles in the United States, but is
provided to explain the impact of certain items in a way that is
commonly used by investors and financial analysts to analyze and
compare companies. Adjusted EBITDA is used in the computation of all
of the financial maintenance covenants under the Company's Senior
Credit Facility. This schedule may not be comparable to similarly
titled financial measures of other companies, does not represent
alternative measures of Hexcel's cash flows or operating income, and
should not be considered in isolation or as an alternative for
measures of performance presented in accordance with generally
accepted accounting principles.
Hexcel Corporation and Subsidiaries
Schedule of Adjusted Amounts
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Unaudited
--------------------------------------
Quarter Ended Year-Ended
December 31, December 31,
(In millions) 2002 2001 2002 2001
- ----------------------------------------------------------------------
Net loss (as reported on GAAP
basis) $ (6.1) $(413.8) $ (13.6) $ (433.7)
Interest expense 14.4 15.2 62.8 64.8
Provision for income taxes 2.5 31.5 11.3 40.5
Depreciation & amortization 12.1 17.1 47.2 63.2
Equity in losses in affiliated
companies and a write-down of
an investment 1.5 10.1 10.0 9.5
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EBITDA 24.4 (339.9) 117.7 (255.7)
Business consolidation and
restructuring expenses (0.2) 51.1 0.5 58.4
Impairment of goodwill and
other purchased intangibles - 309.1 - 309.1
Litigation gain - - (9.8) -
(Gain) loss on early retirement
of debt - (0.4) (0.5) 2.7
Expenses associated with the
announced equity investment 1.5 - 1.5 -
Compensation expenses
associated with the former
CEO's retirement - - - 4.7
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Adjusted EBITDA $ 25.7 $ 19.9 $ 109.4 $ 119.2
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Hexcel Corporation and Subsidiaries
Net Sales to Third-Party Customers by Product Group and Market Segment
- ----------------------------------------------------------------------
Unaudited
-------------------------------------------------
Space
Commercial Indus- & Elect-
(In millions) Aerospace trial Defense ronics Total
- ----------------------------------------------------------------------
Fourth Quarter 2002
Net Sales
Reinforcements $ 11.5 $ 23.2 $ - $ 13.1 $ 47.8
Composites 63.9 36.7 33.9 - 134.5
Structures 20.9 - 3.3 - 24.2
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Total $ 96.3 $ 59.9 $ 37.2 $ 13.1 $ 206.5
47% 29% 18% 6% 100%
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Third Quarter 2002
Net Sales
Reinforcements $ 11.5 $ 23.8 $ - $ 14.2 $ 49.5
Composites 58.5 37.7 32.3 - 128.5
Structures 19.0 - 4.0 - 23.0
- ----------------------------------------------------------------------
Total $ 89.0 $ 61.5 $ 36.3 $ 14.2 $ 201.0
44% 31% 18% 7% 100%
- ----------------------------------------------------------------------
Fourth Quarter 2001
Net Sales (a)
Reinforcements $ 12.0 $ 32.9 $ - $ 11.6 $ 56.5
Composites 83.3 30.7 36.1 - 150.1
Structures 28.9 - 3.6 - 32.5
- ----------------------------------------------------------------------
Total $ 124.2 $ 63.6 $ 39.7 $ 11.6 $ 239.1
52% 27% 16% 5% 100%
- ----------------------------------------------------------------------
2002 Net Sales
Reinforcements $ 49.0 $ 110.6 $ - $ 58.3 $ 217.9
Composites 256.6 143.3 132.5 - 532.4
Structures 85.5 - 15.0 - 100.5
- ----------------------------------------------------------------------
Total $ 391.1 $ 253.9 $ 147.5 $ 58.3 $ 850.8
46% 30% 17% 7% 100%
- ----------------------------------------------------------------------
2001 Net Sales (a)
Reinforcements $ 54.5 $ 114.2 $ - $ 77.0 $ 245.7
Composites 374.1 136.0 128.7 - 638.8
Structures 110.3 - 14.6 - 124.9
- ----------------------------------------------------------------------
Total $ 538.9 $ 250.2 $ 143.3 $ 77.0 $ 1,009.4
53% 25% 14% 8% 100%
- ----------------------------------------------------------------------
(a) As part of a restructuring program, the Company changed the
responsibility and reporting of one of its product lines effective
January 1, 2002. Hexcel's business segment reporting has therefore
been revised beginning with the first quarter of 2002. Coincident
with this change, Hexcel revised the names of its reporting
business segments to Reinforcements, Composites and Structures.
The 2001 results have been restated for comparative purposes.
Hexcel Corporation and Subsidiaries
Segment Data
- ----------------------------------------------------------------------
Unaudited
------------------------------------------------
Corpo-
rate
Reinforce- Compos- Struct- & Total
ments ites ures Other
(In millions) (b)
- ----------------------------------------------------------------------
Fourth Quarter 2002
- ----------------------------------------------------------------------
Net sales to
external customers $ 47.8 $ 134.5 $ 24.2 $ - $ 206.5
Intersegment sales 17.4 3.4 - - 20.8
- ----------------------------------------------------------------------
Total sales 65.2 137.9 24.2 - 227.3
Operating income
(loss) 4.1 16.1 - (7.9) 12.3
Depreciation and
amortization 3.7 8.0 0.4 - 12.1
Business
consolidation and
restructuring
expenses 0.2 0.8 (0.1) (1.1) (0.2)
Capital expenditures 1.4 4.7 0.2 0.1 6.4
- ----------------------------------------------------------------------
Third Quarter 2002
- ----------------------------------------------------------------------
Net sales to
external customers $ 49.5 $ 128.5 $ 23.0 $ - $ 201.0
Intersegment sales 16.6 4.2 - - 20.8
- ----------------------------------------------------------------------
Total sales 66.1 132.7 23.0 - 221.8
Operating income
(loss) 5.2 16.0 (0.8) (5.1) 15.1
Depreciation and
amortization 3.7 7.2 0.6 0.1 11.6
Business
consolidation and
restructuring
expenses (0.5) 0.2 0.2 - (0.1)
Capital expenditures 0.8 2.4 0.1 - 3.3
- ----------------------------------------------------------------------
Fourth Quarter 2001(a)
- ----------------------------------------------------------------------
Net sales to
external customers $ 56.5 $ 150.1 $ 32.5 $ - $ 239.1
Intersegment sales 16.9 4.3 - - 21.2
- ----------------------------------------------------------------------
Total sales 73.4 154.4 32.5 - 260.3
Operating loss (309.4) (27.0) (5.7) (15.3) (357.4)
Depreciation and
amortization 6.6 9.3 1.0 0.2 17.1
Business
consolidation and
restructuring
expenses 15.6 20.9 5.7 8.9 51.1
Capital expenditures 2.0 5.4 0.3 0.2 7.9
- ----------------------------------------------------------------------
2002
- ----------------------------------------------------------------------
Net sales to
external customers $ 217.9 $ 532.4 $ 100.5 $ - $ 850.8
Intersegment sales 70.3 17.2 - - 87.5
- ----------------------------------------------------------------------
Total sales 288.2 549.6 100.5 - 938.3
Operating income
(loss) 19.6 65.8 0.4 (25.6) 60.2
Depreciation and
amortization 15.4 29.3 2.4 0.1 47.2
Business
consolidation and
restructuring
expenses (0.5) 1.9 0.2 (1.1) 0.5
Capital expenditures 4.0 10.4 0.4 0.1 14.9
- ----------------------------------------------------------------------
2001 (a)
- ----------------------------------------------------------------------
Net sales to
external customers $ 245.7 $ 638.8 $ 124.9 $ - $ 1,009.4
Intersegment sales 90.2 22.7 - - 112.9
- ----------------------------------------------------------------------
Total sales 335.9 661.5 124.9 - 1,122.3
Operating income
(loss) (304.6) 36.8 (4.5) (43.9) (316.2)
Depreciation and
amortization 26.1 32.1 4.1 0.9 63.2
Business
consolidation and
restructuring
expenses 18.8 24.5 5.7 9.4 58.4
Capital expenditures 18.0 19.3 0.6 0.9 38.8
- ----------------------------------------------------------------------
(a) Effective January 1, 2002, the Company revised its business
segment reporting as part of a restructuring program. The 2001
results have been restated for comparative purposes.
(b) The Company does not allocate corporate expenses to its business
segments.
Hexcel Corporation and Subsidiaries
Schedule of Net Debt
- ----------------------------------------------------------------------
Unaudited
-------------------
December December
31, 31,
(In millions) 2002 2001
- ----------------------------------------------------------------------
Senior Credit Facility $ 179.7 $ 233.9
European credit and overdraft facilities 0.2 3.5
9.75% Senior subordinated notes, due 2009, net of
unamortized discount of $1.2 as of December 31,
2002, and $1.4 as of December 31, 2001 338.8 338.6
7.0% Convertible subordinated notes, due 2003 46.9 46.9
7.0% Convertible subordinated debentures, due 2011 22.7 24.5
Various notes payable - 0.1
- ----------------------------------------------------------------------
Total notes payable 588.3 647.5
Capital lease obligations 33.4 38.4
- ----------------------------------------------------------------------
Total notes payable and capital lease obligations $ 621.7 $ 685.9
- ----------------------------------------------------------------------
Cash and cash equivalents 8.2 11.6
- ----------------------------------------------------------------------
Net Debt $ 613.5 $ 674.3
- ----------------------------------------------------------------------
CONTACT: Hexcel Corporation, Stamford
Investors:
Stephen C. Forsyth, 203/969-0666 ext. 425
stephen.forsyth@hexcel.com
or
Media:
Michael Bacal, 203/969-0666 ext. 426
michael.bacal@hexcel.com