Exhibit 99.1
Hexcel Reports 2004 First Quarter Results
STAMFORD, Conn.--(BUSINESS WIRE)--April 21, 2004--Hexcel
Corporation (NYSE/PCX:HXL):
Highlights:
-- Net sales up 15% to $262.8 million (up 10% to $252.0 in
constant currency) compared to the first quarter of 2003.
-- Operating income up 38% to $23.7 million compared to the first
quarter of 2003.
-- Net income of $8.1 million for the quarter, up $11.3 million
from last year.
Unaudited
--------------
Quarter Ended,
March 31,
(In millions, except per share data) 2004 2003
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Net sales $262.8 $228.6
Gross margin % 20.8% 20.1%
Operating income $23.7 $17.2
Operating income % 9.0% 7.5%
Other expense $0.1 $4.0
Provision for income taxes (a) $3.4 $2.3
Equity in earnings (losses) of affiliated companies $0.3 $(0.4)
Net income (loss) $8.1 $(3.2)
Deemed preferred dividends and accretion $(3.1) $(0.5)
Net income (loss) available to common shareholders $5.0 $(3.7)
Diluted net income (loss) per common share $0.09 $(0.10)
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(a) The Company's tax provision primarily reflects taxes on foreign
income. The Company will continue to adjust its tax provision rate
through the establishment, or release, of a non-cash valuation
allowance attributable to currently generated U.S. and Belgian net
operating income (losses) until such time as the U.S. and Belgian
operations, respectively, generate income in future years to
utilize the net operating losses in full.
*T
Constant Currency
To assist in the interpretation of the Company's net sales trend,
the value of total net sales and sales by market for the first quarter
of 2004, as disclosed in this news release, has been estimated using
the same U.S. dollar, British pound and Euro exchange rates as applied
for the respective period in 2003. Such estimated net sales are titled
"constant currency" in this news release. Actual sales by market
segment are provided in Table A attached.
Hexcel Corporation (NYSE/PCX: HXL) today reported results for the
first quarter of 2004. Net sales for the first quarter of 2004 were
$262.8 million as compared to $228.6 million for the first quarter of
2003. In constant currency, revenues for the first quarter of 2004
were $23.4 million, or 10.2%, higher than the first quarter of 2003.
Operating income for the first quarter of 2004 was $23.7 million
compared to $17.2 million for the same quarter last year. Depreciation
expense for the quarter at $13.3 million was $0.8 million higher than
the first quarter of 2003 expense of $12.5 million, while business
consolidation and restructuring expenses for the quarter were $0.5
million compared to $0.7 million in the first quarter of 2003.
Net income for the quarter was $8.1 million compared to a net loss
of $3.2 million for the same quarter of 2003. After reflecting deemed
preferred dividends and accretion, net income available to common
shareholders for the quarter was $5.0 million, or $0.09 per diluted
common share, compared to a net loss of $3.7 million, or $0.10 per
diluted common share, for the first quarter of 2003.
Chief Executive Officer Comments
Commenting on Hexcel's first quarter results, Mr. David E. Berges,
Chairman, Chief Executive Officer and President, said, "Thanks to the
leverage provided by revenue growth in almost every part of our
business, we were able this quarter to capitalize on the hard work and
tough decisions of the last two and a half years. In addition to top
line growth, fixed cost control, productivity efforts, debt reduction
and joint venture progress all contributed to very positive quarter
for Hexcel."
Mr. Berges continued, "Our sales to Industrial and Space & Defense
markets continue to grow, combined they're up almost 20% in constant
currency from the same quarter last year. This strength is broad based
- - ballistics, helicopter programs, wind energy, and recreation
applications led the way. While we are disappointed with the
cancellation of the RAH-66 Comanche helicopter program, it represented
less than $4 million of our revenues for the quarter. Almost as
gratifying, we are finally seeing some modest improvement in our
Commercial Aerospace and Electronics markets from their low levels of
the past few years. While the electronics market is still in a
recovery phase, it is becoming clear that Hexcel's decision to
concentrate on higher performance electronic products will ultimately
be the right one for both ourselves and our customers."
Revenue Trends
As in recent quarters, the year-over-year exchange rate shift had
a significant impact on top line sales. For a better understanding of
the real underlying trends, constant currency analysis by market are
provided as follows:
At last year's rates, Commercial Aerospace revenues would have
been $107.4 million for the first quarter of 2004, an increase of $1.5
million over the revenues in the same quarter of 2003. While the
downturn in the commercial aerospace market appears to have leveled
off, revenues to this market from our Structures business declined by
$3.1 million, or 17.0%, compared to the first quarter of 2003. This
decline reflects the continued transition of work to the Structures'
Asian joint ventures.
Adjusted for currency, Industrial revenues for the quarter would
have been $79.9 million, an increase of $13.1 million, or 19.6%,
compared to revenues of $66.8 million in the first quarter of 2003.
Sales of reinforcement fabrics used in soft body armor and sales of
composites for recreational equipment applications each showed
year-on-year growth exceeding 25%. The continued strong demand for
ballistics reinforcement fabrics used in military applications began
in March 2003 and is expected to continue throughout this year,
showing modest growth over 2003 in the coming quarters.
Space & Defense revenues in constant currency of $49.5 million
were up $8.2 million, or 19.9%, from the first quarter of 2003,
reflecting higher military aircraft production. During the first
quarter of 2004, the Company saw revenue growth from many programs,
including the F-22 Raptor and many U.S. and European helicopter and
blade replacement programs. A "stop work" notice was received after
the cancellation of the Comanche program. Sales for this program were
$3.8 million and $1.4 million in the first quarters of 2004 and 2003,
respectively, and $14.1 million for the full year of 2003.
Electronics revenues for the quarter in constant currency would
have been $15.2 million compared to the 2003 first quarter revenues of
$14.6 million. The Company's electronics product mix continued to
shift towards higher-end applications, which is consistent with the
overall market movement of lower margin commodity type products to
Asia. The Company's focus on advanced technology materials and
specialty applications is expected to enhance performance in this
segment despite sales continuing at lower levels than we have seen in
past recovery cycles.
Other Income / Expense
Other expense, net was $0.1 million for the first quarter of 2004,
as the Company recognized a $0.7 million loss on the early retirement
of debt and a $0.6 million gain attributable to the de-mutualization
of an insurance company. During the first quarter of 2004, the Company
became aware of an existing asset custodial account created upon the
de-mutualization of an insurance company in December 2001. Assets
distributed to the custodial account resulted from the existence of
certain group life insurance, disability and dental plans insured by
the de-mutualized company. The assets held in the account will be used
to defray a portion of future funding requirements associated with
these plans. The $0.7 million loss on the early retirement of debt
results from the premium paid, as well as the write-off of related
unamortized deferred financing costs and original issuance discount.
In the first quarter of 2003, the Company recognized a $4.0 million
loss on early retirement of debt as the Company re-financed its
capital structure. These items are reported as other expense, net (see
Table D).
Debt
Total debt, net of cash, increased during the quarter by $4.6
million to $446.3 million as of March 31, 2004. The increase in net
debt reflects the Company's historical trend of using cash in the
first quarter as a result of annual compensation and benefit payments,
coupon payments and working capital increases from year-end levels.
During the quarter, the Company used some of its excess cash on hand
to lower its outstanding debt by $13.1 million as it repurchased $10.0
million principal amount of its 9.75% senior secured notes, due 2009,
and reduced its borrowings under the senior secured credit facility
and European overdraft facilities (see Table F for the components of
net debt).
Interest expense during the quarter was $12.4 million compared to
$13.7 million in the first quarter of 2003. The decline in interest
expense reflects the substantial reduction in total debt during 2003
(see Table C for details of the components of interest expense).
The non-cash deemed preferred dividends and accretion expense
relating to the mandatorily redeemable convertible preferred stock was
$3.1 million and $0.5 million for the first quarter 2004 and 2003,
respectively. The recording of deemed preferred dividends and
accretion began March 19, 2003, the date the Company completed the
refinancing of its capital structure. A description of the accounting
for these securities can be found in the Company's Form 8-K filed on
April 7, 2003.
Hexcel will host a conference call at 11:00 A.M. EDT, tomorrow,
Thursday, April 22, 2004 to discuss the first quarter results and
respond to questions. The telephone number for the conference call is
(913) 981-4913 and the confirmation code is 591794. 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 a 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) 2004 2003
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Net sales $262.8 $228.6
Cost of sales 208.2 182.6
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Gross margin 54.6 46.0
Selling, general and administrative expenses 25.5 23.8
Research and technology expenses 4.9 4.3
Business consolidation and restructuring expenses 0.5 0.7
- ----------------------------------------------------------------------
Operating income 23.7 17.2
Interest expense 12.4 13.7
Other expense, net 0.1 4.0
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Income (loss) before income taxes 11.2 (0.5)
Provision for income taxes 3.4 2.3
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Income (loss) before equity in earnings (losses) 7.8 (2.8)
Equity in earnings (losses) of affiliated companies 0.3 (0.4)
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Net income (loss) 8.1 (3.2)
Deemed preferred dividends and accretion (3.1) (0.5)
- ----------------------------------------------------------------------
Net income (loss) available to common shareholders $ 5.0 $ (3.7)
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Net income (loss) per common share (a):
Basic $ 0.13 $(0.10)
Diluted $ 0.09 $(0.10)
Weighted average common shares (a):
Basic 38.9 38.5
Diluted 90.9 38.5
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(a) The Company's convertible subordinated debentures, due 2011, were
excluded from the computations of diluted net income (loss) per
common share for the quarters ended March 31, 2004 and 2003. In
addition, the Company's convertible subordinated notes, due 2003,
mandatorily redeemable convertible preferred stock, and all stock
options were excluded from the computation of diluted net loss per
common share for the quarter ended March 31, 2003, as they were
anti-dilutive. Refer to Table E for further information relating
to the computations of basic and diluted net income (loss) per
common share.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
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Unaudited
----------------------
March 31, December 31,
(In millions, except per share data) 2004 2003
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Assets
Current assets:
Cash and cash equivalents $ 24.0 $ 41.7
Accounts receivable, net 144.8 126.2
Inventories, net 130.4 120.5
Prepaid expenses and other current assets 18.5 16.2
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Total current assets 317.7 304.6
Property, plant and equipment 683.7 688.0
Less accumulated depreciation (401.6) (394.1)
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Net property, plant and equipment 282.1 293.9
Goodwill 76.4 76.9
Investments in affiliated companies 7.7 7.4
Other assets 39.2 39.9
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Total assets $ 723.1 $ 722.7
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Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Notes payable and current maturities of capital
lease obligations $ 0.5 $ 2.1
Accounts payable 81.5 64.1
Accrued liabilities 92.7 97.7
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Total current liabilities 174.7 163.9
Long-term notes payable and capital lease
obligations 469.8 481.3
Other non-current liabilities 63.6 64.9
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Total liabilities 708.1 710.1
Mandatorily redeemable convertible preferred stock,
0.125 shares of series A and 0.125 shares of series
B authorized, issued and outstanding at March 31,
2004 and December 31, 2003 109.1 106.0
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 40.0 shares issued at March 31, 2004
and December 31, 2003 0.4 0.4
Additional paid-in capital 301.5 303.5
Accumulated deficit (384.5) (392.6)
Accumulated other comprehensive income (loss) 2.5 8.8
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(80.1) (79.9)
Less - Treasury stock, at cost, 1.4 shares at March
31, 2004 and 1.3 shares at December 31, 2003 (14.0) (13.5)
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Total stockholders' equity (deficit) (94.1) (93.4)
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Total liabilities and stockholders' equity (deficit) $ 723.1 $ 722.7
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Total debt, net of cash $ 446.3 $ 441.7
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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) 2004 2003
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Cash flows from operating activities
Net income (loss) $ 8.1 $ (3.2)
Reconciliation to net cash provided by (used for)
operating activities:
Depreciation 13.3 12.5
Amortization of debt discount and deferred
financing costs 0.9 1.0
Deferred income taxes (benefit) (0.2) 0.2
Business consolidation and restructuring expenses 0.5 0.7
Business consolidation and restructuring payments (1.5) (2.8)
Equity in (earnings) losses of affiliated companies (0.3) 0.4
Working capital changes and other (18.1) (21.4)
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Net cash provided by (used for) operating activities 2.7 (12.6)
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Cash flows from investing activities
Capital expenditures (4.5) (2.3)
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Net cash used for investing activities (4.5) (2.3)
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Cash flows from financing activities
Proceeds from (repayments of) senior secured credit
facilities, net (3.4) 12.0
Proceeds from issuance of 9.875% senior secured notes,
net of discount - 123.7
Proceeds from (repayments of) senior credit facility,
net - (179.7)
Redemption of 7% convertible subordinated notes - (46.9)
Redemption of 9.75% senior subordinated notes (10.5) -
Proceeds from (repayments of) capital lease
obligations and other debt, net (1.8) 1.0
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 (0.4) 0.1
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Net cash (used for) provided by financing activities (16.1) 21.1
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Effect of exchange rate changes on cash and cash
equivalents 0.2 (1.3)
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Net increase (decrease) in cash and cash equivalents (17.7) 4.9
Cash and cash equivalents at beginning of period 41.7 8.2
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Cash and cash equivalents at end of period $ 24.0 $ 13.1
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Supplemental Data:
Cash interest paid $ 17.2 $ 24.5
Cash taxes paid $ 3.4 $ 2.8
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Hexcel Corporation and Subsidiaries Table A
Net Sales to Third-Party Customers by Product Group and Market Segment
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Unaudited
-------------------------------
Commercial Space &
(In millions) Aerospace Industrial Defense
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First Quarter 2004 Net Sales
Reinforcements $ 14.9 $ 43.4 $ -
Composites 80.5 41.5 49.1
Structures 15.1 - 2.5
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Total $ 110.5 $ 84.9 $ 51.6
42% 32% 20%
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Fourth Quarter 2003 Net Sales
Reinforcements $ 12.5 $ 35.2 $ -
Composites 64.0 37.6 42.0
Structures 14.5 - 3.2
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Total $ 91.0 $ 72.8 $ 45.2
41% 33% 20%
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First Quarter 2003 Net Sales
Reinforcements $ 13.5 $ 29.8 $ -
Composites 74.2 37.0 36.3
Structures 18.2 - 5.0
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Total $ 105.9 $ 66.8 $ 41.3
47% 29% 18%
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(In millions) Electronics Total
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First Quarter 2004 Net Sales
Reinforcements $ 15.8 $ 74.1
Composites - 171.1
Structures - 17.6
- ----------------------------------------------------------------------
Total $ 15.8 $262.8
6% 100%
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Fourth Quarter 2003 Net Sales
Reinforcements $ 12.4 $ 60.1
Composites - 143.6
Structures - 17.7
- ----------------------------------------------------------------------
Total $ 12.4 $221.4
6% 100%
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First Quarter 2003 Net Sales
Reinforcements $ 14.6 $ 57.9
Composites - 147.5
Structures - 23.2
- ----------------------------------------------------------------------
Total $ 14.6 $228.6
6% 100%
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Hexcel Corporation and Subsidiaries Table B
Segment Data
- ----------------------------------------------------------------------
Unaudited
-------------------------------------
(In millions) Reinforcements Composites Structures
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First Quarter 2004
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Net sales to external customers $ 74.1 $ 171.1 $ 17.6
Intersegment sales 26.4 4.6 -
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Total sales 100.5 175.7 17.6
Operating income (loss) 7.6 22.6 0.5
Depreciation 4.2 8.6 0.5
Business consolidation and
restructuring expenses 0.2 0.4 -
Capital expenditures 1.5 3.0 -
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Fourth Quarter 2003
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Net sales to external customers $ 60.1 $ 143.6 $ 17.7
Intersegment sales 20.3 4.0 -
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Total sales 80.4 147.6 17.7
Operating income (loss) 4.0 13.8 0.6
Depreciation 5.3 8.7 0.5
Business consolidation and
restructuring expenses (net credits) 0.8 0.5 0.1
Capital expenditures 2.5 6.4 0.2
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First Quarter 2003
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Net sales to external customers $ 57.9 $ 147.5 $ 23.2
Intersegment sales 23.0 5.3 -
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Total sales 80.9 152.8 23.2
Operating income (loss) 3.9 18.8 1.2
Depreciation 4.3 7.6 0.6
Business consolidation and
restructuring expenses 0.1 0.6 -
Capital expenditures 1.3 1.0 -
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Corporate
(In millions) & Other(a) Total
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First Quarter 2004
- ----------------------------------------------------------------------
Net sales to external customers $ - $262.8
Intersegment sales - 31.0
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Total sales - 293.8
Operating income (loss) (7.0) 23.7
Depreciation - 13.3
Business consolidation and restructuring
expenses (0.1) 0.5
Capital expenditures - 4.5
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Fourth Quarter 2003
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Net sales to external customers $ - $221.4
Intersegment sales - 24.3
- ----------------------------------------------------------------------
Total sales - 245.7
Operating income (loss) (7.7) 10.7
Depreciation - 14.5
Business consolidation and
restructuring expenses (net credits) 0.2 1.6
Capital expenditures - 9.1
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First Quarter 2003
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Net sales to external customers $ - $228.6
Intersegment sales - 28.3
- ----------------------------------------------------------------------
Total sales - 256.9
Operating income (loss) (6.7) 17.2
Depreciation - 12.5
Business consolidation and
restructuring expenses - 0.7
Capital expenditures - 2.3
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(a) The Company does not allocate corporate expenses to its business
segments.
Hexcel Corporation and Subsidiaries Table C
Schedule of Interest Expense
- ----------------------------------------------------------------------
Unaudited
-------------
Quarter Ended
March 31,
(In millions) 2004 2003
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Interest on debt instruments $11.1 $12.2
Banking, commitment and other fees 0.4 0.5
Amortization of financing costs and discounts (non-cash) 0.9 1.0
- ----------------------------------------------------------------------
Interest Expense $12.4 $13.7
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Hexcel Corporation and Subsidiaries Table D
Schedule of Other Expense, Net
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Unaudited
-------------
Quarter Ended
March 31,
(In millions) 2004 2003
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Gain from the de-mutualization of an insurance company $ 0.6 $ -
Loss on early retirement of debt, net (0.7) (4.0)
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Other Expense, Net $(0.1)$(4.0)
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Hexcel Corporation and Subsidiaries Table E
Schedule of Net Income (Loss) Per Common Share
- ----------------------------------------------------------------------
Unaudited
-------------
Quarter Ended
March 31,
(In millions, except per share data) 2004 2003
- ----------------------------------------------------------------------
Basic net income (loss) per common share:
Net income (loss) $ 8.1 $ (3.2)
Deemed preferred dividends and accretion (3.1) (0.5)
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Net income (loss) available to common shareholders $ 5.0 $ (3.7)
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Weighted average common shares outstanding 38.9 38.5
Basic net income (loss) per common share $0.13 $(0.10)
- ----------------------------------------------------------------------
Diluted net income (loss) per common share:
Net income (loss) $ 8.1 $ (3.2)
Deemed preferred dividends and accretion (3.1) (0.5)
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Net income (loss) available to common shareholders $ 5.0 $ (3.7)
Plus: Deemed preferred dividends and accretion 3.1 -
- ----------------------------------------------------------------------
Net income (loss) available to common shareholders plus
assumed conversions $ 8.1 $ (3.7)
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Weighted average common shares outstanding - Basic 38.9 38.5
Plus incremental shares from assumed conversions:
Restricted stock units 0.4 -
Stock options 1.8 -
Convertible preferred stock 49.8 -
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Weighted average common shares outstanding - Dilutive 90.9 38.5
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Diluted net income (loss) per common share $0.09 $(0.10)
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Hexcel Corporation and Subsidiaries Table F
Schedule of Net Debt
- ----------------------------------------------------------------------
Unaudited
----------------------
March 31, December 31,
(In millions) 2004 2003
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Senior Secured Credit Facility, due 2008 $ 0.5 $ 4.0
European credit and overdraft facilities 0.2 1.9
9.875% Senior secured notes, due 2008, net of
unamortized discount of $1.1 at March 31, 2004 and
December 31, 2003 123.9 123.9
9.75% Senior subordinated notes, due 2009, net of
unamortized discount of $0.9 at March 31, 2004 and
$1.0 at December 31, 2003 (a) 320.7 328.5
7.0% Convertible subordinated debentures, due 2011 21.0 21.0
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Total notes payable 466.3 479.3
Capital lease obligations 4.0 4.1
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Total notes payable and capital lease obligations $ 470.3 $ 483.4
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Cash and cash equivalents 24.0 41.7
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Net Debt $ 446.3 $ 441.7
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(a) Includes an increase of $1.6 million at March 31, 2004 and a
decrease of $0.5 million at December 31, 2003 for derivative
contracts under SFAS No. 133. During the fourth quarter of 2003,
the Company entered into interest rate swap agreements for an
aggregate notional amount of $100.0 million, effectively
converting the fixed interest rate of 9.75% into variable interest
rates.
CONTACT: Hexcel Corporation
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