Exhibit 99.1
Hexcel Reports 2006 Second Quarter Results;
Hexcel Will Focus on Superior Growth Potential of Advanced
Composites and Explore Strategic Alternatives for Portions
of Reinforcements Business Segment;
Will Retain Composites Reinforcement Product Lines
STAMFORD, Conn.--(BUSINESS WIRE)--July 24, 2006--Hexcel
Corporation (NYSE/PCX: HXL):
Second Quarter 2006 Highlights
-- Sales of $316.0 million up 1.5% year-over-year despite 40%
decline in ballistics revenues
-- Commercial Aerospace sales up over 11% vs. second quarter,
2005 and approximately 5% vs. first quarter, 2006
-- Gross margin of 22.7% and operating margin of 11.2% (excluding
business consolidation & restructuring expenses but including
stock based compensation)
-- Total debt, net of cash down $10.1 million to $418.8 million
Hexcel Corporation (NYSE/PCX: HXL) today reported results for the
second quarter of 2006 and the conclusion of a portfolio review.
Portfolio Review
In order to take full advantage of the many growing applications
for advanced composite materials, Hexcel has decided to narrow its
focus and consolidate activities around its carbon fiber,
reinforcements for composites, honeycomb, matrix and structures
product lines. Hexcel will explore strategic alternatives for its
Reinforcements business segment which includes its ballistics,
electronics and architectural product lines. Reinforcements products
related to composites will be retained and, together with the
Composites and Structures business segments, merged into one business
unit. Hexcel has retained Merrill Lynch & Co. as the Company's
financial advisor to assist in the strategic review and potential
disposition of the non-core assets.
Chairman, President and CEO, Mr. David E. Berges discussed these
decisions, "For the last five years we have been on a mission to
expand our operating margins to a level appropriate to support the
pace of technology change and capital requirements. After 9/11, we
took painful cuts that allowed margin growth despite the sales
decline. Since then our business model has been to drive operating
leverage by containing costs as we grow. As a result our adjusted
operating margins (see Table H for reconciliation to GAAP operating
margins) have grown from 7.1% for the calendar year of 2002 to 11.1%
in the first half of 2006. It is now time to take these additional
steps to strengthen our strategic position and maintain the momentum
of Hexcel's growth of margins and returns."
"As the performance demands of advanced composite materials
increase, Hexcel's ability to vertically integrate the optimization of
fiber, polymer chemistry, reinforcements and structures into a systems
solution gives the Company a critical competitive advantage. This
leads to our decision to consolidate our advanced composites products
lines into a single business unit. Combining the key elements of
current business segments enables us to improve the pace of
development and the technology supporting our product offerings,
develop a common approach to our customers, and provide Hexcel new
opportunities to streamline and strengthen our organizational
efficiency."
"In light of the extremely attractive opportunities for advanced
composites we have determined that it is appropriate to narrow the
focus of our business portfolio and operations to those with the
greatest potential of sustainable growth, such as commercial and
military aerospace, wind energy and other applications for advanced
composites."
"The dedicated teams working in the product lines we now call
non-core have done a wonderful job over the past years in their
respective markets. These are well run, profitable business lines with
opportunities deserving of focus, capital and resources. But for
Hexcel, the enormous sea change in composite penetration in our core
markets warrants a laser-like strategy to maximize our long-term
shareholder value."
Concluding his remarks on strategy, Mr. Berges commented: "With
the implementation of these actions, we will be able to maintain the
momentum of our quest for margin expansion and fund the investment
needs of our growth with improved returns. Most importantly, we will
be better structured to optimize our competitive position to take full
advantage of the significant growth projected for advanced composite
materials, our core strength."
Second Quarter Results
Net sales for the quarter were $316.0 million, 1.5% higher than
the $311.3 million reported for the second quarter of 2005. Quarterly
operating income was $34.3 million, after reflecting stock
compensation expense of $2.5 million and $1.1 million of business
consolidation & restructuring expenses. Net income for the quarter was
$17.6 million compared to net income of $26.2 million in the second
quarter of 2005. The tax provision for the quarter was $7.1 million
higher than in the second quarter, 2005 primarily due to the Company
providing a full tax provision on its U.S. taxable income in 2006. The
resulting net income available to common shareholders for the quarter
was $17.6 million, or $0.18 per diluted common share, compared to net
income of $23.9 million, or $0.28 per diluted common share, for the
second quarter of 2005.
Mr. Berges, commented, "Revenues this quarter were less than our
expectations at the start of the year. Ballistic revenues continued to
decline from their record levels at the peak of the U.S. military soft
body armor re-equipping cycle, but at a faster pace than we had
anticipated. Our revenues from space & defense showed more modest
growth this quarter. These applications have long evidenced a record
of quarter-to-quarter variability and the quarter does not reflect a
change in the outlook for this market. Commercial aerospace sales
again grew by double digits driven by the 2006 production rate
increases at Boeing and Airbus. Nevertheless, despite the decline in
ballistics revenues we were able to maintain our gross and adjusted
operating margins at 22.7% and 11.2% respectively."
"The push-out in deliveries of the A380 announced on June 13th was
certainly a disappointment but does not reduce the significant
potential of this program for Hexcel over the coming years. The
production requirements of Airbus and its many subcontractors for this
program in the second half of 2006 have yet to fully clarify. However,
we expect that production rates will slow from the first half of 2006.
While this makes forecasting a little more complex, we still project
that our commercial aerospace revenues will grow by 10% or better in
2006. With the projected ramp up in A380 aircraft deliveries in 2008,
our revenues from this program are expected to start to grow again by
the second half of 2007."
Mr. Berges concluded, "Our planned portfolio and organizational
changes will give us additional opportunities to further de-leverage
and improve despite the temporary slowing of our revenue growth pace."
Second Quarter 2006 Business Highlights
Commercial Aerospace
-- Commercial aerospace sales grew by 11.4% in constant currency
year-over-year, benefiting from the planned increases in
aircraft production in 2006 by Boeing, Airbus and the regional
aircraft manufacturers.
-- R&T expenses were $7.5 million for the quarter as Hexcel
continues to support product development and qualification
processes related to the Boeing 787 and Airbus A350.
-- Hexcel continues to build on its strong prepreg base for
primary and secondary aircraft structures with the
introduction of new innovative products for the aerospace
market. Four of these were promoted at the 2006 Farnborough
Air Show: HexMC(R) (molding material), HexTOOL(TM) (tooling
material), HexWEB(R) Acousti-Cap(TM) (noise attenuating
honeycomb) and Fibrelam(R) 2200 (light weight floor panels).
These products already have proven commercial applications and
generated much additional interest at the show.
Industrial
-- Wind energy revenues grew 9.0% in constant currency compared
to the prior year reflecting the worldwide growth in
installations of wind turbines. Major customers are building
manufacturing plants in the U.S. and China to support the
expanding global nature of renewable energy markets.
-- Ballistics revenues declined 39.6% compared to the second
quarter, 2005 and 20.8% compared to the first quarter, 2006 as
demand for soft body armor continued to decline from the surge
levels seen in the period 2003 to 2005. The Company's 2006
revenue outlook published on June 27 assumed that ballistic
revenues will continue to decline sequentially over the
remaining quarters of this year.
-- Our industrial sales for the quarter were down 9.9%
year-on-year in constant currency due to the decline in
revenues from ballistic applications partially offset by
growth in other industrial applications.
Space & Defense
-- Space & Defense sales for the quarter grew less than normal,
up 0.9% in constant currency compared to the second quarter,
2005. The revenues that the Company derives from military and
space programs tend to vary quarter to quarter based on
customer ordering patterns and manufacturing campaigns.
-- The outlook for helicopter demand over the next few years
remains robust with future line rate increases projected by
many customers.
FAS 123R
-- The Company adopted the provisions of Financial Accounting
Standards Board Statement No. 123(R) "Share Based Payment"
effective January 1, 2006. The financial statements for the
second quarter, 2006 reflect the non-cash attribution of
expense associated with the fair value of stock options
granted to employees. Prior to the adoption of FAS 123(R), the
financial statements reflected just the attribution of expense
associated with the fair value of restricted stock awards. The
non-cash expense related to such equity compensation included
in the second quarter, 2006 financial statements was $2.5
million compared to $0.7 million in the second quarter, 2005.
We expect equity compensation expense to be in the range of $3
to 4 million for the second half of the year.
Business Consolidation & Restructuring Expense
-- Business consolidation & restructuring expenses in the quarter
of $1.1 million primarily related to the planned closure of
the Company's Washington, Georgia plant to be completed before
the end of 2006. They also reflected expenses related to the
planned closure of the Company's Livermore, California plant
targeted to be completed in the first half, 2007.
Tax
-- Following the reversal of the majority of the Company's
valuation allowance against its U.S. deferred tax assets as of
December 31, 2005, the Company provided a full tax provision
of $10.7 million, or 39.3% of reported pre-tax income in the
second quarter, 2006. Cash taxes for the quarter were $2.3
million.
Total Debt, Net of Cash
-- Despite the higher capital spending related to our carbon
fiber expansion, the Company generated a modest amount of cash
for the quarter as net debt declined by $10.1 million. The
expansion project remains on schedule.
-- The Company expects that working capital will decline over the
second half of the year, having now reached the traditional
second quarter seasonal high.
Reinforcements Business Segment
-- Based on Hexcel's initial assumptions, the revenues from this
business segment excluding the reinforcement for composites
products to be retained are estimated to have been $220
million in 2005. On the same assumptions, the revenues for the
first six months of 2006 are estimated to have been $96
million compared to $118 million in the first half of 2005.
The net asset investment, without the attribution of any debt
or cash, associated with these activities is estimated to have
been in the range of $120 to $130 million as of December,
2005. In the event of a sale of some or all of these
businesses, the net proceeds will be used to repay debt,
strengthening the Company's balance sheet and providing
financial flexibility to fund growth investments in advanced
composites products.
-- The Company will incur certain business consolidation and
restructuring expenses in the course of consolidating its
existing business segments. Estimates of the cost and benefits
of these actions may be provided in our third quarter earnings
release.
Hexcel will host a conference call at 10:00 A.M. EDT, tomorrow,
July 25, 2006 to discuss the portfolio review and the second quarter
results, responding to questions. The telephone number for the
conference call is (719) 457-2680 and the confirmation code is
9427090. The call will be simultaneously hosted on Hexcel's web site
at www.hexcel.com/investors/index.html. Replays of the call will be
available on the web site for approximately three days.
Hexcel Corporation is a leading advanced 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 anticipated trends in constant
currency for the market segments the Company serves (including growth
in commercial aerospace revenues following the push-out in A380
deliveries, customers requirements for A380 related production in the
second half of 2006 and 2007, the outlook for helicopter production
and the trend in revenues from soft body armor applications) and the
Company's focus on maintaining and improving margins. 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 Six Months
June 30, Ended
June 30,
(In millions, except per share data) 2006 2005 2006 2005
- ----------------------------------------------------------------------
Net sales $316.0 $311.3 $623.0 $601.9
Cost of sales 244.3 240.7 480.2 465.5
- ----------------------------------------------------------------------
Gross margin 71.7 70.6 142.8 136.4
% Gross Margin 22.7% 22.7% 22.9% 22.7%
Selling, general and administrative
expenses (a) (b) 28.8 26.5 59.5 53.1
Research and technology expenses (a) 7.5 7.7 15.1 13.4
Business consolidation and restructuring
expenses 1.1 0.4 4.1 0.8
Other income, net - (0.9) - (0.7)
- ----------------------------------------------------------------------
Operating income 34.3 36.9 64.1 69.8
Interest expense, net (c) 7.1 7.4 14.9 19.3
Non-operating expense (d) - 0.6 - 40.9
- ----------------------------------------------------------------------
Income before income taxes 27.2 28.9 49.2 9.6
Provision for income taxes 10.7 3.6 19.3 7.2
- ----------------------------------------------------------------------
Income before equity in earnings 16.5 25.3 29.9 2.4
Equity in earnings of affiliated
companies 1.1 0.9 2.2 1.4
- ----------------------------------------------------------------------
Net income 17.6 26.2 32.1 3.8
Deemed preferred dividends and accretion - (2.3) - (4.6)
- ----------------------------------------------------------------------
Net income (loss) available to common
shareholders $ 17.6 $ 23.9 $ 32.1 $ (0.8)
- ----------------------------------------------------------------------
Net income (loss) per common share (e):
Basic $ 0.19 $ 0.44 $ 0.34 $(0.01)
Diluted $ 0.18 $ 0.28 $ 0.34 $(0.01)
Weighted-average common shares (e):
Basic 93.4 54.5 93.2 54.2
Diluted 95.5 94.9 95.4 54.2
- ----------------------------------------------------------------------
(a) The presentation of research and technology expenses has been
changed to include certain new product qualification costs that
were previously reported under selling, general and administrative
expenses. Prior periods have been reclassified to conform to this
presentation.
(b) Includes transaction costs of $1.2 million associated with the
first quarter 2006 secondary offering.
(c) The reduction in interest expense reflects the benefits of lower
interest rates as a result of the Company's debt refinancing which
occurred during the first quarter of 2005. Included in the first
quarter of 2005, was an additional expense of $1.0 million, net of
interest income, due to the lag between the issuance on February
1, 2005 of the 6.75% senior subordinated notes due 2015 and the
partial redemption of the 9.75% senior subordinated notes on March
3, 2005. (Refer to Table F)
(d) During the first quarter of 2005, we refinanced substantially all
of our debt, and as a result recorded a $40.3 million loss on
early retirement of debt. This charge consists of tender offer and
call premiums of $25.2 million, the write-off of unamortized
deferred financing costs and original issuance discounts of $10.3
million, a loss of $3.6 million related to the cancellation of
interest rate swap agreements and $1.2 million in transaction
costs in connection with the refinancing.
(e) Due to the loss on early retirement of debt charged during the
first quarter of 2005 (see note (d)), the impact of the conversion
of the mandatorily redeemable convertible preferred stock,
restricted stock units and stock options into shares of common
stock in the computation of diluted earnings per share were
anti-dilutive for the six months ended June 30, 2005 and, as such,
the basic weighted average common share count of 54.2 million was
used in the diluted earnings per share computation. Refer to Table
E for further information relating to basic and diluted net income
(loss) per share.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
- ----------------------------------------------------------------------
Unaudited
----------------------------------
(In millions, except per share data) June 30, March 31, December 31,
2006 2006 2005
- ----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 8.8 $ 23.9 $ 21.0
Accounts receivable, net 196.1 194.3 155.9
Inventories, net 160.6 156.3 150.4
Prepaid expenses and other current
assets 35.1 35.2 43.0
- ----------------------------------------------------------------------
Total current assets 400.6 409.7 370.3
Property, plant and equipment 721.4 689.5 726.0
Less accumulated depreciation (405.2) (392.1) (440.8)
- ----------------------------------------------------------------------
Net property, plant and equipment 316.2 297.4 285.2
Goodwill and other intangible assets 75.3 74.8 74.7
Investments in affiliated companies 15.5 14.7 14.3
Deferred tax assets 111.2 111.6 107.8
Other assets 32.7 31.0 28.3
- ----------------------------------------------------------------------
Total assets $ 951.5 $ 939.2 $ 880.6
- ----------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities
of capital lease obligations $ 5.1 $ 6.5 $ 3.0
Accounts payable 95.6 102.6 94.5
Accrued liabilities 94.0 88.6 98.3
- ----------------------------------------------------------------------
Total current liabilities 194.7 197.7 195.8
Long-term notes payable and capital
lease obligations 422.5 446.3 416.8
Other non-current liabilities 59.2 57.6 57.3
- ----------------------------------------------------------------------
Total liabilities 676.4 701.6 669.9
Stockholders' equity:
Preferred stock, no par value, 20.0
shares authorized, no shares
issued or outstanding - - -
Common stock, $0.01 par value, 200.0
shares authorized, 95.3 shares
issued at June 30, 2006, 94.8
shares issued at March 31, 2006 and
94.1 shares issued at December 31,
2005 1.0 0.9 0.9
Additional paid-in capital 475.4 465.9 455.0
Accumulated deficit (190.4) (208.0) (222.5)
Accumulated other comprehensive
income (loss) 8.4 (2.3) (7.3)
- ----------------------------------------------------------------------
294.4 256.5 226.1
Less - Treasury stock, at cost, 1.7
shares at June 30, 2006, 1.6 at
March 31, 2006 and 1.5 shares at
December 31, 2005 (19.3) (18.9) (15.4)
- ----------------------------------------------------------------------
Total stockholders' equity 275.1 237.6 210.7
- ----------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 951.5 $ 939.2 $ 880.6
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Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of
Cash Flows Unaudited
======================================================================
Quarter Ended Six Months
June 30, Ended June 30,
(In millions) 2006 2005 2006 2005
- ----------------------------------------------------------------------
Cash flows from operating activities
Net income $ 17.6 $ 26.2 $ 32.1 $ 3.8
Reconciliation to net cash provided by
(used for) operating activities:
Depreciation and amortization 11.8 11.8 23.4 24.1
Amortization of debt discount and
deferred financing costs 0.5 0.4 0.9 1.2
Deferred income taxes 5.4 0.3 10.9 0.3
Business consolidation and
restructuring expenses 1.1 0.4 4.1 0.8
Business consolidation and
restructuring payments (2.0) (0.3) (3.1) (1.1)
Loss on early retirement of debt - 0.6 - 40.9
Equity in earnings of affiliated
companies (1.1) (0.9) (2.2) (1.4)
Share-based compensation 2.5 0.7 5.9 1.2
Changes is assets and liabilities:
(Increase) decrease in accounts
receivable 3.0 (14.1) (33.6) (35.9)
(Increase) decrease in inventories (1.3) 0.3 (5.9) (19.6)
(Increase) decrease in prepaid
expenses and
other current assets (0.3) (1.3) 0.3 4.2
Decrease in accounts payable and
accrued liabilities (4.9) (0.8) (5.3) (21.1)
Changes in other non-current assets
and long-term liabilities (2.6) (0.5) (7.4) (0.9)
- ----------------------------------------------------------------------
Net cash provided by (used for)
operating activities 29.7 22.8 20.1 (3.5)
- ----------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures (26.3) (9.1) (48.7) (16.6)
Deposits for property purchases (0.1) - (1.9) -
Proceeds from the sale of assets - 1.4 - 1.4
Dividends from affiliated companies 0.5 1.1 1.3 1.1
Investment in affiliated companies - - - (7.5)
- ----------------------------------------------------------------------
Net cash used for investing activities (25.9) (6.6) (49.3) (21.6)
- ----------------------------------------------------------------------
Cash flows from financing activities (a)
Proceeds from 6.75% senior subordinated
notes - - - 225.0
Proceeds from (repayments of) senior
secured credit
Facility - revolver, net (23.4) 8.0 6.6 35.0
Proceeds from senior credit facility -
term B loan - - - 225.0
Repayments of senior credit facility -
term B loan (0.5) (40.0) (0.5) (40.0)
Repayments of 9.75% senior subordinated
notes - - - (285.3)
Redemption of 7.0% convertible
subordinated debentures - - - (19.2)
Redemption of 9.875% senior secured
notes - - - (125.0)
Proceeds from (repayments of) capital
lease obligations and other debt, net (1.6) 2.7 1.3 4.1
Issuance costs related to debt
offerings - (0.4) - (12.2)
Debt retirement costs - - - (30.0)
Activity under stock plans 6.8 3.5 10.4 5.8
- ----------------------------------------------------------------------
Net cash provided by (used for)
financing activities (18.7) (26.2) 17.8 (16.8)
- ----------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents (0.2) 2.3 (0.8) 3.2
- ----------------------------------------------------------------------
Net decrease in cash and cash
equivalents (15.1) (7.7) (12.2) (38.7)
Cash and cash equivalents at beginning
of period 23.9 26.2 21.0 57.2
- ----------------------------------------------------------------------
Cash and cash equivalents at end of
period $ 8.8 $ 18.5 $ 8.8 $ 18.5
- ----------------------------------------------------------------------
Supplemental Data:
Cash interest paid $ 3.1 $ 2.1 $ 13.6 $ 26.4
Cash taxes paid $ 2.3 $ 4.3 $ 4.7 $ 6.9
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(a) In the first quarter, 2005 we refinanced most of our debt capital.
See our 2005 Annual Report on Form 10-K for details.
Net Sales to Third-Party Customers by Market Segment
Quarters Ended June 30, 2006 and 2005
(Unaudited) Table A
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(In millions) As Reported Constant Currency (a)
- ----------------------------------------------------------------------
FX
Effect B/(W)
Market Segment 2006 2005 B/(W)% (b) 2006 %
- ----------------------------------------------------------------------
Commercial Aerospace $ 160.2 $ 143.9 11.3 $ (0.1)$160.3 11.4
Industrial 88.6 98.2 (9.8) 0.1 88.5 (9.9)
Space & Defense 54.2 53.8 0.7 (0.1) 54.3 0.9
Electronics 13.0 15.4 (15.6) - 13.0 (15.6)
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Consolidated Total $ 316.0 $ 311.3 1.5 $ (0.1)$316.1 1.5
- ----------------------------------------------------------------------
Consolidated % of Net
Sales % % %
- ----------------------------------------------------------------------
Commercial Aerospace 50.7 46.2 50.7
Industrial 28.0 31.5 28.0
Space & Defense 17.2 17.3 17.2
Electronics 4.1 5.0 4.1
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Consolidated Total 100.0 100.0 100.0
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Six Months Ended June 30, 2006 and 2005
(Unaudited) Table B
- ----------------------------------------------------------------------
(In millions) As Reported Constant Currency (a)
- ----------------------------------------------------------------------
FX
Effect B/(W)
Market Segment 2006 2005 B/(W)% (b) 2006 %
- ----------------------------------------------------------------------
Commercial Aerospace $313.4 $275.1 13.9 $(3.2)$316.6 15.1
Industrial 176.3 191.6 (8.0) (4.1) 180.4 (5.8)
Space & Defense 106.2 103.0 3.1 (1.5) 107.7 4.6
Electronics 27.1 32.2 (15.8) (0.3) 27.4 (14.9)
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Consolidated Total $623.0 $601.9 3.5 $(9.1)$632.1 5.0
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Consolidated % of Net Sales % % %
- ----------------------------------------------------------------------
Commercial Aerospace 50.3 45.7 50.1
Industrial 28.3 31.8 28.6
Space & Defense 17.0 17.1 17.0
Electronics 4.4 5.4 4.3
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Consolidated Total 100.0 100.0 100.0
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Latest Twelve Months ("LTM") Ended June 30, 2006 and 2005
(Unaudited) Table C
- ----------------------------------------------------------------------
(In millions) As Reported Constant Currency (a)
- ----------------------------------------------------------------------
FX
LTM LTM Effect LTM B/(W)
Market Segment 2006 2005 B/(W)% (b) 2006 %
- ----------------------------------------------------------------------
Commercial Aerospace $ 567.7 $ 512.5 10.8 $(3.2)$ 570.9 11.4
Industrial 350.5 371.2 (5.6) (4.1) 354.6 (4.5)
Space & Defense 212.5 195.0 9.0 (1.5) 214.0 9.7
Electronics 51.8 62.7 (17.4) (0.3) 52.1 (16.9)
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Consolidated Total $1,182.5 $1,141.4 3.6 $(9.1)$1,191.6 4.4
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Consolidated % of Net
Sales % % %
- ----------------------------------------------------------------------
Commercial Aerospace 48.0 44.9 47.9
Industrial 29.6 32.5 29.7
Space & Defense 18.0 17.1 18.0
Electronics 4.4 5.5 4.4
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Consolidated Total 100.0 100.0 100.0
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(a) To assist in the interpretation of the Company's net sales trend,
the value of total net sales and sales by market for the quarter,
six months and the latest twelve months ended June 30, 2006 have
been estimated using the same U.S. dollar, British pound and Euro
exchange rates as applied for the respective periods in 2005 and
are referred to as "constant currency" sales.
(b) FX effect is the estimated impact on "as reported" net sales due
to changes in foreign currency exchange rates.
Hexcel Corporation and Subsidiaries Table D
Segment Data
- ----------------------------------------------------------------------
Unaudited
-------------------------------------------------------
(In millions) Reinforcements Composites Structures Corporate Total
& Other
(a)
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Second Quarter
2006
- ----------------------------------------------------------------------
Net sales to
external
customers $ 66.4 $ 222.9 $ 26.7 $ - $316.0
Intersegment
sales 36.4 6.9 - - 43.3
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Total sales 102.8 229.8 26.7 - 359.3
Operating
income (loss) 7.0 32.6 3.6 (8.9) 34.3
Depreciation
and
amortization 3.9 7.4 0.4 0.1 11.8
Business
consolidation
and
restructuring
expenses 0.7 0.4 - - 1.1
Capital
expenditures
and deposits
for property
purchases 1.4 23.7 0.7 0.6 26.4
- ----------------------------------------------------------------------
Second Quarter
2005
- ----------------------------------------------------------------------
Net sales to
external
customers $ 77.2 $ 213.5 $ 20.6 $ - $311.3
Intersegment
sales 33.1 6.0 - - 39.1
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Total sales 110.3 219.5 20.6 - 350.4
Operating
income (loss) 11.6 31.4 2.2 (8.3) 36.9
Depreciation
and
amortization 3.5 7.9 0.4 - 11.8
Business
consolidation
and
restructuring
expenses - 0.4 - - 0.4
Capital
expenditures 1.8 7.2 - 0.1 9.1
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First Six
Months 2006
- ----------------------------------------------------------------------
Net sales to
external
customers $ 135.0 $ 437.5 $ 50.5 $ - $623.0
Intersegment
sales 72.3 14.8 - - 87.1
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Total sales 207.3 452.3 50.5 - 710.1
Operating
income (loss) 14.9 62.5 6.2 (19.5)(b) 64.1
Depreciation
and
amortization 7.6 14.8 0.9 0.1 23.4
Business
consolidation
and
restructuring
expenses 3.1 1.1 - (0.1) 4.1
Capital
expenditures
and deposits
for
property
purchases 3.7 44.3 0.8 1.8 50.6
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First Six
Months 2005
- ----------------------------------------------------------------------
Net sales to
external
customers $ 154.1 $ 409.2 $ 38.6 $ - $601.9
Intersegment
sales 69.5 12.5 - - 82.0
- ----------------------------------------------------------------------
Total sales 223.6 421.7 38.6 - 683.9
Operating
income (loss) 23.7 59.5 3.3 (16.7) 69.8
Depreciation
and
amortization 7.2 16.0 0.9 - 24.1
Business
consolidation
and
restructuring
expenses - 0.8 - - 0.8
Capital
expenditures 2.3 14.1 - 0.2 16.6
- ----------------------------------------------------------------------
(a) The Company does not allocate corporate expenses to its business
segments.
(b) Includes transaction costs of $1.2 million associated with the
first quarter 2006 secondary offering.
Hexcel Corporation and Subsidiaries Table E
Schedule of Net Income (Loss) Per Common Share
- ----------------------------------------------------------------------
Unaudited
-------------------------------
Quarter Ended Six Months Ended
June 30, June 30,
(In millions, except per share data) 2006 2005 2006 2005
- ----------------------------------------------------------------------
Basic net income (loss) per common
share:
Net income $ 17.6 $ 26.2 $ 32.1 $ 3.8
Deemed preferred dividends and
accretion - (2.3) - (4.6)
- ----------------------------------------------------------------------
Net income (loss) available to common
shareholders $ 17.6 $ 23.9 $ 32.1 $ (0.8)
- ----------------------------------------------------------------------
Weighted average common shares
outstanding 93.4 54.5 93.2 54.2
Basic net income (loss) per common
share $ 0.19 $ 0.44 $ 0.34 $ (0.01)
- ----------------------------------------------------------------------
Diluted net income (loss) per common
share:
Net income $ 17.6 $ 26.2 $ 32.1 $ 3.8
Deemed preferred dividends and
accretion - (2.3) - (4.6)
- ----------------------------------------------------------------------
Net income (loss) available to common
shareholders $ 17.6 $ 23.9 $ 32.1 $ (0.8)
Plus: Deemed preferred dividends and
accretion - 2.3 - -
- ----------------------------------------------------------------------
Net income available to common
shareholders plus assumed
conversions $ 17.6 $ 26.2 $ 32.1 $ (0.8)
- ----------------------------------------------------------------------
Weighted average common shares
outstanding - Basic 93.4 54.5 93.2 54.2
Plus incremental shares from assumed
conversions:
Restricted stock units 0.3 0.5 0.3 -
Stock options 1.8 3.1 1.9 -
Convertible preferred stock - 36.8 - -
- ----------------------------------------------------------------------
Weighted average common shares
outstanding-Dilutive (a) 95.5 94.9 95.4 54.2
- ----------------------------------------------------------------------
Diluted net income (loss) per common
share $ 0.18 $ 0.28 $ 0.34 $ (0.01)
- ----------------------------------------------------------------------
(a) As a result of the loss on early retirement of debt charged during
the first quarter of 2005, the impact of the conversion of the
mandatorily redeemable convertible preferred stock, restricted
stock units and stock options into shares of common stock in the
computation of diluted earnings per share were anti-dilutive six
months ended June 30, 2005 and, as such, the basic weighted
average common share count of 54.2 million was used in the diluted
earnings per share computation. Had we not incurred the
aforementioned charges, the Company would have calculated diluted
earnings per share for the six months ended June 30, 2005 based on
a diluted weighted average share count of 94.5 million.
Hexcel Corporation and Subsidiaries Table F
Schedule of Interest Expense
- ----------------------------------------------------------------------
Unaudited
---------------------------------
Quarter Ended Six Months Ended
June 30, June 30,
(In millions) 2006 2005 2006 2005
- ----------------------------------------------------------------------
Interest on debt instruments $ 7.1 $ 6.8 $ 14.6 $ 17.4
Capitalized interest (0.7) - (1.2) -
Banking, commitment and other fees 0.2 0.2 0.6 0.7
Amortization of financing costs and
discounts (non-cash) 0.5 0.4 0.9 1.2
- ----------------------------------------------------------------------
Interest Expense $ 7.1 $ 7.4 $ 14.9 $ 19.3
- ----------------------------------------------------------------------
Hexcel Corporation and Subsidiaries
Reconciliation of GAAP and Non-GAAP Measures
Table G
- ----------------------------------------------------------------------
Unaudited
----------------------
Quarter Ended
June 30,
(In millions) 2006 2005
- ----------------------------------------------------------------------
GAAP operating income $ 34.3 $ 36.9
- - Business Consolidation & Restructuring Expense 1.1 0.4
---------- ----------
Non-GAAP Operating Income $ 35.4 $ 37.3
========== ==========
Includes
- ------------------------------------------------
- - Stock Compensation Expense $ 2.5 $ 0.7
- ----------------------------------------------------------------------
Table H
- ----------------------------------------------------------------------
Unaudited
-------------------------------
Six Months Ended Year Ended
June 30, December 31,
(In millions) 2006 2002
- ----------------------------------------------------------------------
GAAP operating income $ 64.1 $ 60.2
- - Business Consolidation &
Restructuring Expense 4.1 0.5
- - Secondary Offering Transaction
Expenses 1.2 -
--------------- --------------
Non-GAAP Operating Income $ 69.4 $ 60.7
=============== ==============
% Operating Margin 11.1% 7.1%
Includes
- ---------------------------------------
- - Stock Compensation Expense $ 5.9 $ 0.8
- ----------------------------------------------------------------------
Table I
- ----------------------------------------------------------------------
Unaudited
------------------------------------
June 30, March 31, December 31,
(In millions) 2006 2006 2005
- ----------------------------------------------------------------------
Notes payable and current
maturities of capital lease
obligations $ 5.1 $ 6.5 $ 3.0
Long-term notes payable and
capital lease obligations 422.5 446.3 416.8
- ----------------------------------------------------------------------
Total Debt 427.6 452.8 419.8
Cash and cash equivalents 8.8 23.9 21.0
- ----------------------------------------------------------------------
Total debt, net of cash $ 418.8 $ 428.9 $ 398.8
- ----------------------------------------------------------------------
Management believes that operating income before business
consolidation and restructuring and secondary offering transaction
expenses, which is a non-GAAP measurement, is meaningful to investors
because it provides a view of the Company with respect to ongoing
operating results. In addition, management believes that total debt,
net of cash, which is also a non-GAAP measure, is an important measure
of the Company's liquidity. Such non-GAAP measurements are not
recognized in accordance with generally accepted accounting principles
and should not be viewed as an alternative to GAAP measures of
performance.
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