Exhibit 99.1
Hexcel Reports 2003 First Quarter Results
STAMFORD, Conn.--(BUSINESS WIRE)--April 21, 2003--Hexcel Corp.
(NYSE:HXL)
Highlights:
-- Completed balance sheet refinancing on March 19, 2003,
reducing debt and moving major scheduled amortization to 2008
and beyond.
-- Operating income up 29.3% to $17.2 million compared to first
quarter of 2002.
Unaudited
-------------------
Quarter Ended
March 31,
(In millions, except per share data) 2003 2002
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Net sales $ 228.6 $ 222.1
Gross margin % 20.1% 17.8%
Operating income $ 17.2 $ 13.3
Operating income % 7.5% 6.0%
Loss on early retirement of debt $ 4.0 $ -
Provision for income taxes(a) $ 2.3 $ 2.5
Equity in losses of affiliated companies $ (0.4) $ (2.4)
Net loss $ (3.2) $ (9.2)
Deemed preferred dividends and accretion $ (0.5) $ -
Net loss available to common shareholders $ (3.7) $ (9.2)
Diluted net loss per common share $ (0.10) $ (0.24)
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(a) The Company's tax provision primarily reflects taxes on foreign
income. The Company continues to establish a non-cash valuation
allowance attributable to currently generated U.S. net operating
losses until such time as the U.S. operations have returned to
consistent profitability.
Hexcel Corporation (NYSE:HXL) (PCX:HXL) today reported net sales
for the first quarter, 2003 of $228.6 million as compared to $222.1
million for the 2002 first quarter.
Operating income for the first quarter of 2003 was $17.2 million
compared to $13.3 million for the same quarter last year. Net loss for
the quarter was $3.2 million, or $0.09 per diluted common share,
compared to $9.2 million, or $0.24 per diluted common share, for the
first quarter of 2002. After reflecting deemed preferred dividends and
accretion, the net loss available to common shareholders was $3.7
million, or $0.10 per diluted common share.
First quarter 2003 results included $0.7 million in business
consolidation and restructuring expenses. In addition, a $4.0 million
loss on early retirement of debt, related to the write-off of
unamortized deferred financing costs, was incurred as a result of the
refinancing of the Company's capital structure. Excluding business
consolidation and restructuring expenses and loss on early retirement
of debt, the Company's pretax income for the first quarter of 2003 was
$4.2 million, compared to a pretax loss of $3.6 million in the
comparable 2002 quarter.
Chief Executive Officer Comments
Commenting on Hexcel's first quarter results, David E. Berges,
Chairman, President and Chief Executive Officer, said, "This was a
quarter of significant accomplishment for the Company. The operating
income and gross margin improvements realized in the quarter were
consistent with the performance of recent quarters, fueled by the cost
reduction actions launched in November 2001. But, the completion of a
major refinancing of our balance sheet was the highlight of the
period. As a result of the refinancing, we have lowered our debt to
the level we think appropriate for our outlook. More importantly, the
Company dealt with the major debt maturities it had over the next two
years and now does not have a major scheduled debt re-payment
obligation until 2008."
Berges concluded, "We are excited by the accomplishments achieved
in the last two years. Faced with an unprecedented decline in our
markets we quickly 'right-sized' -- and thanks to this quarter's
refinancing, we've also 'right-shaped' the Company's balance sheet. We
can now place more focus on exploiting the potential of our products
and their applications, while continuing to target operational
performance improvements and debt reduction."
Revenue Trends
Consolidated revenues of $228.6 million for the first quarter of
2003 were 2.9% higher than 2002 first quarter revenues of $222.1
million, driven by improved sales to space and defense markets and the
impact of changes in foreign exchange rates. Since the end of the
first quarter of 2002, the Euro has strengthened against the U.S.
dollar by approximately 24%, increasing the dollar value of our sales
made in Euros. Had the same U.S. dollar, British pound and Euro
exchange rates applied in the first quarter of 2003 as in the first
quarter of 2002, revenues for the first quarter of 2003 would have
been $14.5 million lower at $214.1 million, or down 3.6%.
-- Commercial Aerospace. Sales to aircraft producers and their
subcontractors for the 2003 first quarter were $106.8 million,
3.3% higher than the 2002 first quarter revenues of $103.4
million due to the impact of exchange rate changes. While the
downturn in the commercial aerospace market appears to have
leveled off, revenues were higher than the fourth quarter of
2002, reflecting some seasonality in customer ordering
patterns.
-- Industrial Markets. Sales for the 2003 first quarter of $66.8
million were almost the same as the revenues of $67.0 million
reported in the first quarter of 2002. After a slow start to
the quarter, reinforcement fabrics used in military body armor
moved up sharply late in the quarter, but were lower than the
record levels achieved in the first quarter of 2002. Sales to
our other industrial segments were comparable to the same
quarter last year.
-- Space & Defense. Revenues of $40.4 million for the first
quarter of 2003 continued to display the benefits of
increasing military aircraft production, with a 14.8%
year-over-year increase. The Company benefits from its
extensive qualifications to supply composite materials and
composite structures to a broad range of military aircraft and
helicopter programs. Although sales associated with military
aircraft and helicopters are expected to continue to trend
upwards, the Company's revenues may vary quarter to quarter
based on customer ordering patterns.
-- Electronics. Sales for the 2003 first quarter were $14.6
million, within the range of what the Company has seen since
the downturn in the global electronics industry that began in
early 2001.
Gross Margin, Operating Income and Provision for Income Taxes
Gross margin for the first quarter of 2003 was $46.0 million, or
20.1% of sales, compared with $39.6 million, or 17.8% of sales, for
the same period last year, as the Company's cost reduction programs
continue to take effect and operations adjust to lower levels of
production.
Operating income for the 2003 first quarter was $17.2 million, or
7.5% of sales, compared to $13.3 million, or 6.0% of sales, for the
2002 first quarter. Included in selling, general and administrative
expenses for the 2003 first quarter were $0.3 million of expenses
incurred in connection with the equity investment. Depreciation for
the quarter was $12.5 million compared to $11.8 million in the first
quarter of 2002. The increase in deprecation primarily reflects
changes in foreign currency exchange rates. Business consolidation and
restructuring expenses were $0.7 million in the first quarters of both
2002 and 2003.
The provision for income taxes was $2.3 million in the quarter
compared to $2.5 million in the first quarter of 2002. The Company
will continue to increase its tax provision rate through the
establishment of a non-cash valuation allowance attributable to
currently generated U.S. net operating losses until such time as the
U.S. operations have returned to consistent profitability.
Refinancing of the Company's Capital Structure
On March 19, 2003, the Company completed the refinancing of its
balance sheet with the issuance of mandatorily redeemable convertible
preferred stock for $125.0 million in cash, the issuance of $125.0
million of 9-7/8% senior secured notes due 2008, and the establishment
of a new $115.0 million senior secured credit facility. The proceeds
from the sale of the convertible preferred stock have been used to
provide for the redemption of the Company's 7% convertible
subordinated notes due 2003 and to reduce senior debt outstanding
under the Company's then existing senior credit facility. The
remaining advances under the then existing facility, after the
application of the equity proceeds, were repaid with the proceeds from
the issuance of the 9-7/8% senior secured notes due 2008 and modest
drawings under the new senior secured credit facility. In connection
with the refinancing, the Company incurred a $4.0 million loss on
early retirement of debt, due to the write-off of unamortized deferred
financing costs.
The Company estimates that following the refinancing, its
quarterly interest expense during 2003 will be in the range of $12.5
million to $13.5 million, of which $0.8 million will relate to the
financing costs and discounts on the issuance of debt. Further, the
Company expects that its capital expenditures in 2003 will be less
than $25 million.
Deemed preferred dividends and accretion relating to the
convertible preferred securities was $0.5 million during the quarter.
The estimated average quarterly expense relating to deemed preferred
dividends and accretion in 2003 will be approximately $3.0 million. A
description of the accounting for these securities can be found in the
Company's Form 8-K filed on April 7, 2003.
Investments in Affiliated Companies
Equity in losses of affiliated companies was $0.4 million for the
first quarter of 2003, reflecting primarily losses reported by the
Company's joint ventures in China and Malaysia as they continue to
ramp up production of aerospace composite structures. Equity in losses
of affiliated companies was $2.4 million in the first quarter of 2002.
These losses by affiliated companies do not affect the Company's cash
flows.
Debt
Total debt, net of cash, decreased in the quarter by $94.7 million
to $518.8 million as of March 31, 2003, reflecting the Company's
refinancing transactions. The reduction in debt in the quarter arising
from the refinancing transactions net of expenses was $112.0 million.
Excluding the refinancing transactions, total debt, net of cash,
increased by $17.3 million primarily driven by the timing of the
Company's semi-annual interest payments and higher working capital due
to increased sales compared to the fourth quarter of 2002.
Interest expense during the quarter was $13.7 million compared to
$17.6 million in the first quarter of 2002, reflecting, in part, lower
debt balances and lower interest rates. Included in interest expense
in the first quarter of 2002 were $1.7 million of bank amendment fees
and expenses. As the refinancing transactions were not completed until
March 19, 2003, they had minimal impact on reported interest expense
for the quarter.
Hexcel will host a conference call at 11:00 a.m. EDT, tomorrow,
Tuesday, April 22, 2003 to discuss the first quarter results and
respond to questions. In making its comments during this conference
call, the Company will refer to a presentation that will be posted to
the investor relation section of its Web site before 9:00 a.m. EDT
tomorrow morning. The telephone number for the conference call is
719/457-2645 and the confirmation code is 490841. The call will be
simultaneously hosted on Hexcel's Web site at
www.hexcel.com/investors/index.html. The presentation can be accessed
at the same Web address. 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
composite structures 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 business consolidation and restructuring programs
together with their associated improvements, manufacturing
productivity, gross margin performance, operating income, equity in
losses of affiliated companies, working capital management, interest
expense and capital expenditure levels. 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 and Subsidiaries
Condensed Consolidated Statements of Operations
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Unaudited
------------------------
Quarter Ended March 31,
(In millions, except per share data) 2003 2002
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Net sales $ 228.6 $ 222.1
Cost of sales 182.6 182.5
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Gross margin 46.0 39.6
Selling, general and administrative expenses 23.8 21.6
Research and technology expenses 4.3 4.0
Business consolidation and restructuring
expenses 0.7 0.7
- ----------------------------------------------------------------------
Operating income 17.2 13.3
Interest expense 13.7 17.6
Loss on early retirement of debt 4.0 -
- ----------------------------------------------------------------------
Loss before income taxes (0.5) (4.3)
Provision for income taxes 2.3 2.5
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Loss before equity in earnings (2.8) (6.8)
Equity in losses of affiliated companies (0.4) (2.4)
- ----------------------------------------------------------------------
Net loss (3.2) (9.2)
Deemed preferred dividends and accretion (0.5) -
- ----------------------------------------------------------------------
Net loss available to common shareholders $ (3.7) $ (9.2)
======================================================================
Net loss per common share:
Basic:
Net loss $ (0.09) $ (0.24)
Deemed preferred dividends and accretion (0.01) -
- ----------------------------------------------------------------------
Net loss available to common shareholders $ (0.10) $ (0.24)
Diluted:
Net loss $ (0.09) $ (0.24)
Deemed preferred dividends and accretion (0.01) -
- ----------------------------------------------------------------------
Net loss available to common shareholders $ (0.10) $ (0.24)
Weighted average common shares(a):
Basic 38.5 38.2
Diluted 38.5 38.2
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(a) The Company's convertible subordinated notes, due 2003,
convertible subordinated debentures, due 2011, and all stock
options were excluded from the computations of diluted net loss
per common share for the quarters ended March 31, 2003 and 2002,
as they were anti-dilutive. In addition, the Company's recently
issued mandatorily redeemable convertible preferred stock was
excluded from the March 31, 2003 computation of diluted net loss
per common share, as they were anti-dilutive.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
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Unaudited
------------------------
March 31, December 31,
(In millions, except per share data) 2003 2002
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Assets
Current assets:
Cash and cash equivalents $ 13.1 $ 8.2
Accounts receivable, net 141.0 117.3
Inventories, net 126.6 113.6
Prepaid expenses and other assets 9.6 9.2
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Total current assets 290.3 248.3
Property, plant and equipment 644.6 642.8
Less accumulated depreciation (342.4) (333.4)
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Net property, plant and equipment 302.2 309.4
Goodwill, net 75.1 74.4
Investments in affiliated companies 33.6 34.0
Other assets 44.9 42.0
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Total assets $ 746.1 $ 708.1
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Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Notes payable and current maturities of
capital lease obligations $ 9.0 $ 621.7
Accounts payable 73.9 54.9
Accrued liabilities 87.4 102.5
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Total current liabilities 170.3 779.1
Long-term notes payable and capital lease
obligations 522.9 -
Other non-current liabilities 58.5 56.4
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Total liabilities 751.7 835.5
Mandatorily redeemable convertible preferred
stock, 125,000 shares of series A and
125,000 shares of series B authorized,
issued and outstanding at March 31, 2003 96.9 -
Stockholders' equity (deficit):
Preferred stock, no par value, 20.0 shares
of stock authorized, no shares issued or
outstanding - -
Common stock, $0.01 par value, 200.0 shares
of stock authorized, and 39.9 shares issued
and outstanding at March 31, 2003, and
100.0 shares of stock authorized, and 39.8
shares issued and outstanding at December
31, 2002. 0.4 0.4
Additional paid-in capital 311.7 288.2
Accumulated deficit (384.7) (381.5)
Accumulated other comprehensive loss (16.4) (21.2)
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(89.0) (114.1)
Less - Treasury stock, at cost, 1.3 shares
at March 31, 2003 and at December 31, 2002 (13.5) (13.3)
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Total stockholders' equity (deficit) (102.5) (127.4)
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Total liabilities and stockholders' equity
(deficit) $ 746.1 $ 708.1
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Total debt, net of cash $ 518.8 $ 613.5
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Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
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Unaudited
-------------------------
Quarter Ended March 31,
(In millions) 2003 2002
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Cash flows from operating activities
Net loss $ (3.2) $ (9.2)
Reconciliation to net cash provided by
operating activities:
Depreciation 12.5 11.8
Amortization of debt discount and deferred
financing costs 1.0 1.0
Deferred income taxes 0.2 0.2
Business consolidation and restructuring
expenses 0.7 0.7
Business consolidation and restructuring
payments (2.8) (9.4)
Equity in losses of affiliated companies 0.4 2.4
Loss on early retirement of debt 4.0 -
Working capital changes and other (25.4) (8.6)
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Net cash used for operating activities (12.6) (11.1)
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Cash flows from investing activities
Capital expenditures (2.3) (1.8)
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Net cash used for investing activities (2.3) (1.8)
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Cash flows from financing activities
Proceeds from senior secured credit
facilities, net 12.0 -
Proceeds from issuance of 9-7/8% senior
secured notes, net of discount 123.7 -
Proceeds from (repayments of) senior credit
facility, net (179.7) 8.2
Redemption of 7% convertible subordinated
notes (46.9) -
Proceeds from (repayments of) capital lease
obligations and other debt, net 1.0 (1.9)
Proceeds from issuance of mandatorily
redeemable convertible preferred stock 125.0 -
Issuance costs related to debt and equity
offerings (14.1) -
Activity under stock plans 0.1 0.1
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Net cash provided by financing activities 21.1 6.4
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Effect of exchange rate changes on cash and
cash equivalents (1.3) (1.4)
- ----------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 4.9 (7.9)
Cash and cash equivalents at beginning of
period 8.2 11.6
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Cash and cash equivalents at end of period $ 13.1 $ 3.7
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Supplemental Data:
Cash interest paid $ 24.5 $ 25.6
Cash taxes paid $ 2.8 $ 1.0
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Hexcel Corporation and Subsidiaries
Net Sales to Third-Party Customers by Product Group and Market Segment
- ----------------------------------------------------------------------
Unaudited
---------------------------------------------------
Commercial Space &
(In millions) Aerospace Industrial Defense Electronics Total
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First Quarter 2003
Net Sales
Reinforcements $ 13.5 $ 29.8 $ - $ 14.6 $ 57.9
Composites 75.1 37.0 35.4 - 147.5
Structures 18.2 - 5.0 - 23.2
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Total 66.8 40.4 14.6 228.6
$106.847% $ 29% $ 18% $ 6% $ 100%
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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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First Quarter 2002
Net Sales
Reinforcements $ 12.4 $ 33.1 $ - $ 16.5 $ 62.0
Composites 66.3 33.9 31.5 - 131.7
Structures 24.7 - 3.7 - 28.4
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Total 103.4 67.0 35.2 16.5 222.1
$ 47% $ 30% $ 16% $ 7% $ 100%
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Hexcel Corporation and Subsidiaries
Segment Data
- ----------------------------------------------------------------------
Unaudited
---------------------------------------------------
Corporate
(In millions) Reinforce- Composites Structures & Total
ments Other(a)
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First Quarter 2003
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Net sales to
external
customers $ 57.9 $ 147.5 $ 23.2 $ - $228.6
Intersegment
sales 23.0 5.3 - - 28.3
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Total sales 80.9 152.8 23.2 - 256.9
Operating income
(loss) 3.9 18.8 1.2 (6.7) 17.2
Depreciation 4.3 7.6 0.6 - 12.5
Business
consolidation
and
restructuring
expenses 0.1 0.6 - - 0.7
Capital
expenditures 1.3 1.0 - - 2.3
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Fourth Quarter 2002
- ----------------------------------------------------------------------
Net sales to
external
customers $ 47.8 $ 134.5 $ 24.2 $ - $206.5
Intersegment
sales 17.4 3.4 - - 20.8
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Total sales 65.2 137.9 24.2 - 227.3
Operating income
(loss) 4.2 16.1 - (8.0) 12.3
Depreciation 3.7 8.0 0.4 - 12.1
Business
consolidation
and
restructuring
expenses (net
credits) 0.2 0.8 (0.1) (1.1) (0.2)
Capital
expenditures 1.4 4.7 0.2 0.1 6.4
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First Quarter 2002
- ----------------------------------------------------------------------
Net sales to
external
customers $ 62.0 $ 131.7 $ 28.4 $ - $222.1
Intersegment
sales 18.2 4.7 - - 22.9
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Total sales 80.2 136.4 28.4 - 245.0
Operating income
(loss) 3.6 15.0 0.9 (6.2) 13.3
Depreciation 4.0 7.1 0.7 - 11.8
Business
consolidation
and
restructuring
expenses 0.3 0.4 - - 0.7
Capital
expenditures 0.5 1.3 - - 1.8
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(a) The Company does not allocate corporate expenses to its business
segments.
Hexcel Corporation and Subsidiaries
Schedule of Net Debt
- ----------------------------------------------------------------------
Unaudited
-------------------------
March 31, December 31,
(In millions) 2003 2002
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Senior Secured Credit Facility, due 2008 $ 12.0 $ -
Senior Credit Facility, due 2005 - 179.7
European credit and overdraft facilities 2.6 0.2
9.875% Senior secured notes, due 2008, net
of unamortized discount of $1.3 as of March
31, 2003 123.7 -
9.75% Senior subordinated notes, due 2009,
net of unamortized discount of $1.1 as of
March 31, 2003, and $1.2 as of December 31,
2002 338.9 338.8
7.0% Convertible subordinated notes, due
2003 - 46.9
7.0% Convertible subordinated debentures,
due 2011 22.7 22.7
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Total notes payable 499.9 588.3
Capital lease obligations 32.0 33.4
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Total notes payable and capital lease
obligations $ 531.9 $ 621.7
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Cash and cash equivalents 13.1 8.2
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Net Debt $ 518.8 $ 613.5
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CONTACT: Hexcel Corporation, Stamford
Stephen C. Forsyth (investors), 203/969-0666 ext. 425
stephen.forsyth@hexcel.com
or
Michael Bacal (media), 203/969-0666 ext. 426
michael.bacal@hexcel.com