Exhibit 99.1
Hexcel Reports 2006 Third Quarter Results
Third Quarter 2006 Highlights
-- Sales of $289.1 million up 4.5% year-over-year
-- Commercial Aerospace sales up 20.1%, Wind Energy up 16.4% over prior
year
-- Net income $15.7 million compared to $1.1 million in the third
quarter, 2005
-- Earnings of $0.16 per diluted common share for the quarter
STAMFORD, Conn.--(BUSINESS WIRE)--Oct. 25, 2006--Hexcel Corporation
(NYSE/PCX: HXL) today reported results for the third quarter of 2006.
Third Quarter Results
Net sales for the quarter were $289.1 million, 4.5% higher than the $276.6
million reported for the third quarter of 2005. Quarterly operating income was
$25.7 million, after reflecting an accrual for environmental remediation expense
of $2.0 million, stock compensation expense of $1.7 million and $1.4 million of
business consolidation & restructuring expenses. The tax provision for the
quarter was reduced by a $3.6 million release of valuation allowance against a
portion of the Company's deferred tax assets related to capital losses. Net
income for the quarter was $15.7 million or $0.16 per diluted share compared to
net income of $1.1 million in the third quarter of 2005.
Chief Executive Officer Comments
Mr. Berges commented, "This was a particularly strong quarter of growth in
revenues from the commercial aerospace market. If we exclude the estimated
impact of revenues from the A380 program, sales increased approximately 17%
year-on-year reflecting our increased production levels across broad based
positions with Boeing, Airbus, and manufacturers of engines, nacelles, and
smaller aircraft. Industrial sales declined 14% year-on-year despite strong
growth in sales of products for wind energy applications due to a 49% fall-off
in sales to ballistic applications."
"The recently announced delay in deliveries of the A380 was certainly a
disappointment, but does not reduce the significant potential of this program
for Hexcel over the coming years. The detailed production plans of Airbus and
its many subcontractors have yet to fully clarify, but we expect limited
contribution from the program until 2008. Nevertheless, we still project that
our commercial aerospace revenues will continue to grow in 2007 on the strength
of Boeing as well as the "other aerospace" customers who represented over 30% of
this segment in 2005."
"Gross margins increased from 21.1% in the third quarter, 2005 to 21.4%
this quarter excluding the accrual of $2.0 million for projected additional
remediation costs at a former manufacturing site. The incremental gross margin
on the year-over-year sales increase was 28.8%, in line with our average
performance over the last couple of years."
Mr. Berges concluded, "We are moving forward with our previously announced
plans for the sale of the non-composite portions of our Reinforcements business
segment and to consolidate the company into a single operating unit. The result
will be a new, lighter, stronger and faster Hexcel with significant competitive
advantage in attractive markets."
Third Quarter 2006 Business Highlights
Commercial Aerospace
-- Commercial aerospace sales grew by 19% in constant currency. The
growth was driven by the increases in aircraft production in 2006 and
2007 by Boeing, Airbus and other aircraft manufacturers as well as the
resultant growth in demand by aircraft engine and nacelle
manufacturers.
-- Sales related to the A380 program declined compared to the second
quarter, 2006 as the effect of the push-out in deliveries worked its
way though the supply chain, but the decline was slower than
originally anticipated when the delays were first announced. Sales to
this program have ranged from 5-10% of Hexcel's commercial aerospace
revenues in recent quarters.
-- Hexcel remains focused on the product development and selection
requirements related to the new Boeing 787, Boeing 747-8 and Airbus
A350 programs. The progress to date related to the Boeing 787
continues to give us confidence that this program will result in
Hexcel's best Boeing aircraft as measured by revenue per plane.
Hexcel's position on each of these programs will be augmented by the
materials it provides for the production of engines and nacelles
anticipated to be utilized on these aircraft.
Industrial
-- On a constant currency basis, industrial sales for the quarter were
down 16% year-on-year due to the decline in revenues from ballistic
applications partially offset by growth in other industrial
applications.
-- Wind energy revenues grew 12% in constant currency compared to the
prior year despite some customers reporting supply chain difficulties
related to mechanical components. Major customers are building
manufacturing plants in the U.S. and China to support the expanding
global nature of renewable energy markets.
-- Ballistics revenues continued their decline from the surge levels of
2003 to 2005, down 49% compared to the third quarter, 2005 and 24%
compared to the second quarter, 2006. With new personal protection
funding recently authorized by Congress, we expect an improved outlook
for the end of 2006 and 2007.
Space & Defense
-- Space & Defense sales for the quarter showed a modest decline, down 3%
in constant currency compared to the third quarter, 2005. The lower
revenues were principally a result of inventory corrections from
certain rotorcraft customers.
-- Despite the year-on-year reductions this quarter, the outlook for
rotorcraft program related demand remains robust with line rate
increases projected in the coming years by many customers.
Environmental
-- The Company accrued $2.0 million related to the additional cost now
projected to be required to complete the remediation of a former
manufacturing plant in New Jersey.
Business Consolidation & Restructuring
-- Business consolidation & restructuring expenses in the quarter of $1.4
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 occur in the first
quarter, 2007. Upon closure, the Company will then demolish the
Livermore facility in preparation for the sale of the property.
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 $4.2 million of
reported pre-tax income in the third quarter, 2006. Cash taxes for the
quarter were $1.7 million.
-- The provision includes the reversal of $3.6 million of the valuation
allowance against the Company's U.S. deferred tax assets related to
capital losses. The reversal has been made as the probable sale of an
asset associated with our portfolio realignment will result in a gain
that is expected to utilize this capital loss.
Total Debt, Net of Cash
-- Total debt, net of cash remained constant over the last quarter
despite higher capital spending related to our carbon fiber expansion.
The U.S. elements of the project are now ahead of schedule and the
Spanish plant is on schedule. Production trials at the U.S. carbon
fiber facilities are now expected to commence before the end of 2006.
Hexcel expects to continue its pace of capital investment to support
its growth outlook.
Portfolio Review Update
-- As previously announced in July, Hexcel is exploring strategic
alternatives for portions of its Reinforcement business segment
including the ballistic, electronic and architectural product lines.
The Company has retained Merrill Lynch & Co. as the Company's
financial advisor to assist with the potential disposition of certain
of these non-core assets. The process is underway and should be
completed within the next six months.
-- Revenues from Ballistics, Electronics, Architectural and General
Industrial weaving applications, the portions of the Reinforcements
business segment that we anticipate divesting were $38.8 million for
the third quarter, 2006 compared to $52.7 million for the third
quarter, 2005. On same basis, revenues for the nine months ended
September 30, 2006 were $134.5 million compared to $171.0 million in
the third quarter, 2005. In the course of undertaking the potential
disposition, revenues associated with the divestiture may change based
on the final structure of the transaction(s).
-- 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. While progress is being made in developing these
actions, they are not yet at a stage where the Company can fully
estimate their aggregate cost and benefits.
-- Later in the fourth quarter, after the completion of the annual
planning cycle, Hexcel anticipates providing its 2007 outlook post
divestiture as well as details related to any restructuring actions.
Hexcel will host a conference call at 12:00 P.M. EDT, tomorrow, October 26,
2006 to discuss the portfolio review and the third quarter results, responding
to questions. The telephone number for the conference call is (347) 284-6930 and
the confirmation code is 6416827. 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,
the impact of the push-out in initial A380 deliveries, the outlook for revenues
from rotorcraft applications and the trend in revenues from military soft body
armor applications), the Company's focus on maintaining and improving margins
and the timing of potential divestitures. 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
---------------------------------
Nine Months
Quarter Ended Ended
September 30, September 30,
(In millions, except per share data) 2006 2005 2006 2005
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Net sales $ 289.1 $ 276.6 $ 912.1 $ 878.5
Cost of sales 229.1 218.2 709.3 683.7
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Gross margin (a) 60.0 58.4 202.8 194.8
% Gross Margin 20.8% 21.1% 22.2% 22.2%
Selling, general and administrative
expenses (b) 26.6 26.9 86.1 79.9
Research and technology expenses 6.3 6.0 21.4 19.5
Business consolidation and
restructuring expenses 1.4 1.0 5.5 1.8
Other expense, net (c) - 15.8 - 15.1
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Operating income 25.7 8.7 89.8 78.5
% Operating Margin 8.9% 3.1% 9.8% 8.9%
Interest expense, net (d) 6.8 7.4 21.7 26.7
Non-operating expense (e) - - - 40.9
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Income before income taxes 18.9 1.3 68.1 10.9
Provision for income taxes 4.2 1.4 23.5 8.6
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Income (loss) before equity in
earnings 14.7 (0.1) 44.6 2.3
Equity in earnings of affiliated
companies 1.0 1.2 3.2 2.6
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Net income 15.7 1.1 47.8 4.9
Deemed preferred dividends and
accretion (f) - (11.8) - (16.4)
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Net income (loss) available to
common shareholders $ 15.7 $ (10.7) $ 47.8 $ (11.5)
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Net income (loss) per common share
(g):
Basic $ 0.17 $ (0.17) $ 0.51 $ (0.20)
Diluted $ 0.16 $ (0.17) $ 0.50 $ (0.20)
Weighted-average common shares (g):
Basic 93.7 62.4 93.3 56.9
Diluted 95.2 62.4 95.4 56.9
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(a) Gross margin includes in the third quarter and first nine
months of 2006 an accrual for environmental remediation cost of $2.0
million.
(b) Includes transaction costs of $1.2 million associated with the
first quarter 2006 secondary offering. Includes in the third quarter
of 2005, $1.9 million of legal fees and expenses associated with the
two litigation matters and $1.0 million of transaction costs related
to the secondary offering of common shares.
(c) Relates to an accrual of $15.8 million during the third
quarter of 2005 for the settlement of litigation matters. September
year-to-date includes an accrual of $16.5 million for the settlement
of litigation matters partially offset by a $1.4 million gain on an
asset sale.
(d) 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)
(e) 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.
(f) Includes in the third quarter of 2005, a $10.1 million charge
arising from the conversion of mandatorily redeemable convertible
preferred stock in connection with the Company's secondary offering of
its common stock in August 2005.
(g) Due to the special items charged during the third quarter of
2005 (see notes (b), (c) and (f) above), 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
quarter ended September 30, 2005 and, as such, the basic weighted
average common share count of 62.4 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
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Unaudited
--------------------------------
September December
30, June 30, 31,
(In millions, except per share data) 2006 2006 2005
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Assets
Current assets:
Cash and cash equivalents $ 13.0 $ 8.8 $ 21.0
Accounts receivable, net (a) 187.8 196.1 155.9
Inventories, net 166.6 160.6 150.4
Prepaid expenses and other current
assets 34.7 35.1 43.0
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Total current assets 402.1 400.6 370.3
Property, plant and equipment 755.1 721.4 726.0
Less accumulated depreciation (414.5) (405.2) (440.8)
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Net property, plant and equipment 340.6 316.2 285.2
Goodwill and other intangible assets 75.7 75.3 74.7
Investments in affiliated companies 16.5 15.5 14.3
Deferred tax assets 110.2 111.2 107.8
Other assets 30.6 32.7 28.3
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Total assets $ 975.7 $ 951.5 $ 880.6
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Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities
of capital lease obligations $ 5.0 $ 5.1 $ 3.0
Accounts payable (b) 92.2 95.6 94.5
Accrued liabilities 93.8 94.0 98.3
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Total current liabilities 191.0 194.7 195.8
Long-term notes payable and capital
lease obligations 426.8 422.5 416.8
Other non-current liabilities 61.2 59.2 57.3
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Total liabilities 679.0 676.4 669.9
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 September 30, 2006 and June 30,
2006, and 94.1 shares issued at
December 31, 2005 1.0 1.0 0.9
Additional paid-in capital 477.3 475.4 455.0
Accumulated deficit (174.7) (190.4) (222.5)
Accumulated other comprehensive income
(loss) 12.4 8.4 (7.3)
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316.0 294.4 226.1
Less - Treasury stock, at cost, 1.7
shares at September 30, 2006 and June
30, 2006, and 1.5 shares at December
31, 2005 (19.3) (19.3) (15.4)
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Total stockholders' equity 296.7 275.1 210.7
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Total liabilities and stockholders'
equity $ 975.7 $ 951.5 $ 880.6
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(a) The third quarter 2006 revenues are seasonally lower due to
the European vacation period, resulting in a reduction in accounts
receivable as of September 30, 2006.
(b) Third quarter 2006 accounts payable balances are also
seasonally lower due to the European vacation period, resulting from a
reduction in raw material purchases in the quarter compared to the
second quarter.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements
of Cash Flows Unaudited
======================================================================
Quarter Ended Nine Months Ended
September 30, September 30,
(In millions) 2006 2005 2006 2005
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Cash flows from operating
activities
Net income $ 15.7 $ 1.1 $ 47.8 $ 4.9
Reconciliation to net cash
provided by operating activities:
Depreciation and amortization 10.3 11.4 33.7 35.5
Amortization of debt discount
and deferred financing costs 0.4 0.5 1.3 1.7
Deferred income taxes 1.3 0.7 12.2 1.0
Business consolidation and
restructuring expenses 1.4 1.0 5.5 1.8
Business consolidation and
restructuring payments (2.3) (0.8) (5.4) (1.9)
Loss on early retirement of
debt - - - 40.9
Equity in earnings of
affiliated companies (1.0) (1.2) (3.2) (2.6)
Dividends from affiliated
companies - 1.0 1.3 2.1
Share-based compensation 1.7 0.5 7.6 1.7
Changes is assets and
liabilities:
Decrease (increase) in accounts
receivable 10.0 14.6 (23.6) (21.3)
Increase in inventories (5.1) (6.1) (11.0) (25.7)
(Increase) decrease in prepaid
expenses and other current
assets (1.1) (1.8) (0.8) 2.4
Increase (decrease) in accounts
payable and accrued
liabilities (0.3) 11.1 (5.6) (10.0)
Changes in other non-current
assets and long-term
liabilities - 1.3 (7.4) 0.4
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Net cash provided by operating
activities 31.0 33.3 52.4 30.9
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Cash flows from investing
activities
Capital expenditures (32.5) (15.8) (81.2) (32.4)
Deposits for property purchases 0.8 - (1.1) -
Proceeds from the sale of assets - - - 1.4
Investment in affiliated
companies - - - (7.5)
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Net cash used for investing
activities (31.7) (15.8) (82.3) (38.5)
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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 4.9 (25.0) 11.5 10.0
Proceeds from senior credit
facility - term B loan - - - 225.0
Repayments of senior credit
facility - term B loan (0.4) - (0.9) (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 (0.3) (2.1) 1.0 2.0
Issuance costs related to debt
offerings - 0.1 - (12.1)
Debt retirement costs - - - (30.0)
Activity under stock plans 0.3 4.3 10.7 10.1
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Net cash provided by (used for)
financing activities 4.5 (22.7) 22.3 (39.5)
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Effect of exchange rate changes on
cash and cash equivalents 0.4 (1.0) (0.4) 2.2
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Net increase (decrease) in cash
and cash equivalents 4.2 (6.2) (8.0) (44.9)
Cash and cash equivalents at
beginning of period 8.8 18.5 21.0 57.2
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Cash and cash equivalents at end
of period $ 13.0 $ 12.3 $ 13.0 $ 12.3
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Supplemental Data:
Cash interest paid $ 10.2 $ 10.7 $ 23.8 $ 37.1
Cash taxes paid $ 1.7 $ 2.7 $ 6.4 $ 9.6
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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 September 30, 2006 and 2005 (Unaudited) Table A
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(In millions) As Reported Constant Currency (a)
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FX
B/(W) Effect B/(W)
Market Segment 2006 2005 % (b) 2006 %
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Commercial Aerospace $ 149.9 $ 124.8 20.1 $ 1.6 $148.3 18.8
Industrial 76.5 88.7 (13.8) 1.8 74.7 (15.8)
Space & Defense 50.0 50.7 (1.4) 0.7 49.3 (2.8)
Electronics 12.7 12.4 2.4 0.1 12.6 1.6
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Consolidated Total $ 289.1 $ 276.6 4.5 $ 4.2 $284.9 3.0
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Consolidated % of Net
Sales % % %
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Commercial Aerospace 51.8 45.1 52.1
Industrial 26.5 32.1 26.2
Space & Defense 17.3 18.3 17.3
Electronics 4.4 4.5 4.4
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Consolidated Total 100.0 100.0 100.0
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Nine Months Ended September 30, 2006 and 2005 (Unaudited) Table B
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(In millions) As Reported Constant Currency (a)
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FX
B/(W) Effect B/(W)
Market Segment 2006 2005 % (b) 2006 %
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Commercial Aerospace $ 463.3 $ 399.9 15.9 $ (1.6) $464.9 16.3
Industrial 252.8 280.3 (9.8) (2.3) 255.1 (9.0)
Space & Defense 156.2 153.7 1.6 (0.8) 157.0 2.1
Electronics 39.8 44.6 (10.8) (0.2) 40.0 (10.3)
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Consolidated Total $ 912.1 $ 878.5 3.8 $ (4.9) $917.0 4.4
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Consolidated % of Net
Sales % % %
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Commercial Aerospace 50.8 45.5 50.7
Industrial 27.7 31.9 27.8
Space & Defense 17.1 17.5 17.1
Electronics 4.4 5.1 4.4
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Consolidated Total 100.0 100.0 100.0
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Latest Twelve Months ("LTM") Ended September 30, (Unaudited) Table
2006 and 2005 C
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(In millions) As Reported Constant Currency (a)
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FX
LTM LTM B/(W) Effect LTM B/(W)
Market Segment 2006 2005 % (b) 2006 %
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Commercial Aerospace $ 592.8 $ 520.8 13.8 $ (4.1)$ 596.9 14.6
Industrial 338.3 371.6 (9.0) (5.2) 343.5 (7.6)
Space & Defense 211.8 204.0 3.8 (2.2) 214.0 4.9
Electronics 52.1 58.5 (10.9) (0.4) 52.5 (10.3)
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Consolidated Total $1,195.0 $1,154.9 3.5 $(11.9)$1,206.9 4.5
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Consolidated % of Net
Sales % % %
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Commercial Aerospace 49.6 45.1 49.5
Industrial 28.3 32.2 28.5
Space & Defense 17.7 17.7 17.7
Electronics 4.4 5.0 4.3
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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, nine months and the latest twelve months ended September 30,
2006 have been estimated using the same U.S. dollar, British pound and
Euro exchange rates as applied for the respective periods in the prior
year 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
Segment Data Table D
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Unaudited
-----------------------------------------------------
Corporate
Reinforce- & Other
(In millions) ments Composites Structures (a) Total
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Third Quarter 2006
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Net sales to
external
customers $ 59.2 $ 201.4 $ 28.5 $ - $ 289.1
Intersegment
sales 31.1 6.8 - - 37.9
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Total sales 90.3 208.2 28.5 - 327.0
Operating
income (loss) 7.5 25.0 3.6 (10.4)(b) 25.7
Depreciation
and
amortization 2.8 7.1 0.4 - 10.3
Business
consolidation
and
restructuring
expenses 1.1 0.3 - - 1.4
Capital
expenditures
and deposits
for property
purchases 1.7 27.9 1.4 0.7 31.7
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Third Quarter 2005
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Net sales to
external
customers $ 69.4 $ 186.8 $ 20.4 $ - $ 276.6
Intersegment
sales 29.2 6.3 - - 35.5
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Total sales 98.6 193.1 20.4 - 312.1
Operating
income (loss) 9.2 23.6 1.6 (25.7)(c) 8.7
Depreciation
and
amortization 3.4 7.4 0.5 0.1 11.4
Business
consolidation
and
restructuring
expenses - 1.0 - - 1.0
Capital
expenditures 1.3 13.2 0.1 1.2 15.8
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First Nine Months 2006
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Net sales to
external
customers $ 194.2 $ 638.9 $ 79.0 $ - $ 912.1
Intersegment
sales 103.4 21.6 - - 125.0
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Total sales 297.6 660.5 79.0 - 1,037.1
Operating (b)
income (loss) 22.4 87.5 9.8 (29.9)(d) 89.8
Depreciation
and
amortization 10.4 21.9 1.3 0.1 33.7
Business
consolidation
and
restructuring
expenses 4.2 1.4 - (0.1) 5.5
Capital
expenditures
and deposits
for property
purchases 5.4 72.2 2.2 2.5 82.3
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First Nine Months 2005
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Net sales to
external
customers $ 223.5 $ 596.0 $ 59.0 $ - $ 878.5
Intersegment
sales 98.7 18.8 - - 117.5
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Total sales 322.2 614.8 59.0 - 996.0
Operating
income (loss) 32.9 83.1 (e) 4.9 (42.4)(f) 78.5
Depreciation
and
amortization 10.6 23.4 1.4 0.1 35.5
Business
consolidation
and
restructuring
expenses - 1.8 - - 1.8
Capital
expenditures 3.6 27.3 0.1 1.4 32.4
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(a) The Company does not allocate corporate expenses to its
business segments.
(b) Includes an accrual for environmental remediation cost of $2.0
million
(c) Includes a litigation settlement expense of $15.8 million,
$1.9 million in related legal fees and expenses and $1.0 million in
transaction costs related to the secondary offering of common shares.
(d) Includes transaction costs of $1.2 million associated with the
first quarter 2006 secondary offering.
(e) Includes a gain on sale of assets of $1.4 million for the nine
months ended September 30 2005.
(f) Includes accruals for litigation settlements of $16.5 million,
$2.4 million in legal fees and expenses related to the third quarter
settlements, and $1.0 million in transaction costs related to the
secondary offering of common shares.
Hexcel Corporation and Subsidiaries Table E
Schedule of Net Income (Loss) Per Common Share
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Unaudited
---------------------------------
Nine Months
Quarter Ended Ended
September 30, September 30,
(In millions, except per share data) 2006 2005 2006 2005
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Basic net income (loss) per common
share:
Net income $ 15.7 $ 1.1 $ 47.8 $ 4.9
Deemed preferred dividends and
accretion - (11.8) - (16.4)
- ----------------------------------------------------------------------
Net income (loss) available to
common shareholders $ 15.7 $(10.7) $ 47.8 $ (11.5)
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Weighted average common shares
outstanding 93.7 62.4 93.3 56.9
Basic net income (loss) per common
share $ 0.17 $(0.17) $ 0.51 $ (0.20)
- ----------------------------------------------------------------------
Diluted net income (loss) per common
share:
Net income $ 15.7 $ 1.1 $ 47.8 $ 4.9
Deemed preferred dividends and
accretion - (11.8) - (16.4)
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Net income (loss) available to common
shareholders $ 15.7 $(10.7) $ 47.8 $ (11.5)
Plus: Deemed preferred dividends and
accretion - - - -
- ----------------------------------------------------------------------
Net income available to common
shareholders plus assumed
conversions $ 15.7 $(10.7) $ 47.8 $ (11.5)
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Weighted average common shares
outstanding - Basic 93.7 62.4 93.3 56.9
Plus incremental shares from assumed
conversions:
Restricted stock units 0.2 - 0.4 -
Stock options 1.3 - 1.7 -
Convertible preferred stock - - - -
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Weighted average common shares
outstanding-Dilutive (a) 95.2 62.4 95.4 56.9
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Diluted net income (loss) per common
share $ 0.16 $(0.17) $ 0.50 $ (0.20)
- ----------------------------------------------------------------------
(a) As a result of certain special items charged during the third
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 for the quarter ended
September 30, 2005 and, as such, the basic weighted average common
share count of 62.4 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
quarter ended September 30, 2005 based on a diluted weighted average
share count of 95.6 million.
As a result of the special items charged during the third quarter
of 2005 as well as the refinancing expense incurred 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 for the nine month
period ended September 30, 2005. As such, the basic weighted average
common share count of 56.9 million was used in the diluted earnings
per share computation. Had we not incurred these charges during the
first quarter and third quarter of 2005, the Company would have
calculated diluted earnings per share based on a diluted weighted
average share count of 94.8 million.
Hexcel Corporation and Subsidiaries Table F
Schedule of Interest Expense
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Unaudited
-------------------------------
Nine Months
Quarter Ended Ended
September 30, September 30,
(In millions) 2006 2005 2006 2005
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Interest on debt instruments $ 7.3 $ 6.8 $ 21.9 $ 24.2
Capitalized interest (1.1) - (2.3) -
Banking, commitment and other fees 0.2 0.2 0.8 0.9
Amortization of financing costs and
discounts (non-cash) 0.4 0.4 1.3 1.6
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Interest Expense $ 6.8 $ 7.4 $ 21.7 $ 26.7
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Hexcel Corporation and Subsidiaries
Reconciliation of GAAP and Non-GAAP Measures
Table G
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Unaudited
------------------
Quarter Ended
September 30,
(In millions) 2006 2005
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GAAP operating income $ 25.7 $ 8.7
- - Environmental remediation cost 2.0 -
- - Business consolidation & restructuring expenses 1.4 1.0
- - Litigation settlement expense - 15.8
- - Legal fees and expenses related to litigation
settlements - 1.9
- - Secondary offering transaction costs - 1.0
-------- --------
Non-GAAP operating income $ 29.1 $ 28.4
======== ========
Includes
- ----------------------------------------------------
- - Stock compensation expense $ 1.7 $ 0.5
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Table H
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Unaudited
-------------------------------
September December
30, June 30, 31,
(In millions) 2006 2006 2005
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Notes payable and current maturities of
capital lease obligations $ 5.0 $ 5.1 $ 3.0
Long-term notes payable and capital
lease obligations 426.8 422.5 416.8
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Total debt 431.8 427.6 419.8
Cash and cash equivalents 13.0 8.8 21.0
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Total debt, net of cash $ 418.8 $ 418.8 $ 398.8
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Management believes that operating income before business consolidation and
restructuring and other special items, 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