Exhibit 99.1
Hexcel Reports 2006 Fourth Quarter and Year-End Results
Fourth Quarter 2006 Highlights
-- Sales from continuing operations of $299.2 up $21.0 million or
7.5% year-on-year
-- On a constant currency basis, Commercial Aerospace sales up
17%; Wind Energy up 29% over prior year
-- Net income from continuing operations of $18.8 million, or
$0.20 per share, including pre-tax business consolidation and
restructuring charges of $9.3 million and a pre-tax gain of
$15.7 million on the sale of a joint venture interest
See Statements of Operations and Reconciliation of GAAP and
Non-GAAP Measures (Table F) for profitability comparisons for the
quarter and 2006 full year.
STAMFORD, Conn.--(BUSINESS WIRE)--Jan. 24, 2007--Hexcel
Corporation (NYSE: HXL), today reported results for the fourth quarter
and full year of 2006. Net sales for the quarter were $299.2 million,
7.5% higher than the $278.2 million reported for the fourth quarter of
2005. Operating income for the fourth quarter was $19.1 million
compared to $25.4 million for the same quarter last year. Operating
income in the fourth quarter of 2006 includes $9.3 million of business
consolidation and restructuring expense and $1.1 million of
transaction costs associated with Hexcel's divestiture activities. Net
income from continuing operations for the fourth quarter of 2006 was
$18.8 million, or $0.20 per diluted common share compared to $136.2
million or $1.44 per diluted common share in 2005. Net income from
continuing operations for the fourth quarter of 2006 includes a gain
on the sale of a joint venture interest. Net income for the fourth
quarter of 2005 included the benefit of the reversal of the majority
of our valuation allowance against our net U.S. deferred tax assets,
which resulted in a benefit to the tax provision of $119.2 million or
$1.26 per diluted common share. (See Table F for further detail).
For the full year of 2006, net sales were $1,193.1 million as
compared to $1,139.5 million in 2005, an increase of 4.7%. Operating
income of $106.4 million in 2006 was $4.5 million higher than the
$101.9 million reported in 2005. Net income from continuing operations
was $65.0 million for 2006 or $0.68 per diluted common share compared
to $139.8 million or $1.49 per diluted common share in 2005.
Chief Executive Officer Comments
Mr. Berges commented, "This was another strong quarter of
double-digit growth in revenues from the commercial aerospace market
demonstrating the diversity of our customer base. Aerospace sales
growth during the quarter was led by a strong year-on-year increase in
revenues from Boeing and their subcontractors, but we also saw solid
growth in revenues from sales to regional aircraft, engines and
nacelle applications. As expected, revenues from Airbus were
essentially flat year-on-year as the supply chain adjusted to the
delays in the A380 program. As described in our 2007 Outlook published
in December, we expect that our 2007 year-on-year Airbus sales
comparisons will be tougher, particularly in the first half, due to
the push-out in the A380 deliveries; however, we continue to expect
revenue growth over 10% from Boeing and other commercial aerospace
programs."
"Industrial sales included a strong 29% year-over-year growth in
wind energy sales for the quarter. Ballistics sales, while down 30%
from last year were up 36% from the third quarter reflecting the
momentum stimulated as new funding by Congress started to flow to our
military body armor customers. While Space & Defense revenues were
still sluggish due to inventory corrections, there were signs that
this adjustment is coming to a conclusion."
"Incremental gross margins were consistent with our historic trend
at 30% for the quarter despite the initial start-up costs of our new
carbon fiber and precursor lines. Our operations have done a
tremendous job in bringing the U.S. capacity on line ahead of
schedule. While we still have some work to do to complete the
shake-down of the new lines, we should start earning a contribution on
these new assets before the end of this quarter."
"We completed the sale of our interest in TechFab LLC during
December and the proceeds were reflected in reduced net debt. This
joint venture was associated with our non-core Reinforcement
businesses. We are on track to complete the sale of our Architectural
business in France during the first quarter of 2007 and are making
progress on the remaining elements of the portfolio review. Meanwhile
our plans to create a fully integrated composites organization are now
being implemented, and will begin to impact our performance in 2007."
"2006 has been a year of accomplishment and transition despite the
short-term disappointments of the A380 delays and the decline in
ballistics revenues. The actions coming out of our portfolio review to
tighten our strategic focus and to strengthen our organization lay the
foundation for continued revenue and margin growth. Our carbon
capacity expansion positions us to begin to support the growing demand
for intermediate modulus and high strength fiber led by the launch of
Boeing's 787 & 747-8 and Airbus' A350XWB; all aircraft with
significantly higher levels of composite materials than their
predecessors."
Mr. Berges concluded, "2007 will be a year of focus for Hexcel. We
will be focused on the realignment of Hexcel's organization; focused
on winning positions on new platforms at our largest customers;
focused on our manufacturing capacity expansion; focused on developing
new markets for our materials; and focused on meeting our margin
expansion goals. Execution of these plans will position Hexcel for
accelerated revenue and earnings growth in 2008 as the production of
the Boeing 787 and Airbus A380 ramp up."
Fourth Quarter and Full Year 2006 Business Highlights
Sales comparisons are provided in constant currency. For more
details, see Tables A & B.
Commercial Aerospace
-- Commercial aerospace sales grew by 17.3% in constant currency
for the quarter and 16.5% for the full year. The growth during
the year 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.
-- The growth in the quarter was led by revenues to Boeing and
their subcontractors, reflecting increased aircraft
production, but also the impact in the fourth quarter of 2005
of the Boeing machinists strike in September 2005.
-- The impact of the A380 delivery push-out was more pronounced
this quarter than in the third quarter of 2006 as the
slow-down in production worked its way through the supply
chain. Sales to this program have ranged from 5-10% of
Hexcel's commercial aerospace revenues in prior quarters,
which will result in weaker year-on-year comparisons in the
first half of 2007.
Industrial
-- On a constant currency basis, industrial sales were down 8.2%
for the quarter and 9.6% for the year due to the year-on-year
decline in revenues from ballistic applications partially
offset by growth in other industrial applications.
-- Wind energy revenues grew in constant currency 29% for the
quarter and 16% for the year.
-- Ballistics revenues for the quarter were down 30% compared to
the fourth quarter of 2005, but were up 36% compared to the
third quarter of 2006. With new personal protection funding
authorized by Congress, we expect the segment to continue to
show improvement in 2007 compared to 2006.
Space & Defense
-- Space & Defense sales in constant currency for the quarter
were 4.0% lower compared to the fourth quarter of 2005. There
was still evidence of continuing inventory corrections at
certain rotorcraft customers in the quarter, but also signs of
demand starting to return to normalized levels.
Operations
-- Gross margins increased to 21.7% in the quarter compared to
21.1% in the fourth quarter of 2005. The gross margin on the
incremental sales of $21.0 million compared to the fourth
quarter of 2005 was 30% consistent with prior trends.
-- SG&A expenditures in the quarter of $28.4 million were $2.1
million higher than the fourth quarter of 2005. Increased
non-cash stock compensation expense following the adoption of
FAS 123(R) as of January 1, 2006 represented $1.1 million of
the increase. SG&A expenses for the quarter also included $1.1
million of transaction costs that are being expensed as
incurred related to our divestiture activities. Increased
non-cash stock compensation expense of $7.0 million
represented the majority of the 2006 full year increase in
SG&A of $8.3 million.
-- Increased R&T spending of $2.4 million in the quarter
reflected expenditures related to new product development and
qualification for new aircraft programs.
-- Operating income for the quarter, excluding business
consolidation and restructuring expense and transaction costs
related to the divestitures, was $29.5 million or 9.9% of
sales (see Table F).
Business Consolidation & Restructuring
-- Business consolidation & restructuring expenses for the
quarter were $9.3 million, with $7.6 million related to our
organizational realignment and reduction of stranded costs
that will result from divestitures associated with the
portfolio review. Business consolidation & restructuring for
the fourth quarter of 2006 also included the continuing costs
associated with the Livermore, CA and Washington, GA plant
closures. The after-tax impact of the $7.6 million
restructuring charge is estimated to be $4.5 million or $0.05
per diluted common share.
Tax
-- As of December 31, 2005, we reversed the majority of our
valuation allowance against our net U.S. deferred tax assets,
resulting in a benefit to the tax provision in the fourth
quarter, 2005 of $119.2 million or $1.26 per diluted common
share.
-- Following the reversal of the valuation allowance in 2005, we
have provided a full tax provision on our U.S. taxable income
in 2006. We continue to adjust our tax provision rate through
the establishment, or release, of a non-cash valuation
allowance attributable to currently generated Belgian net
pre-tax income (losses). This practice will continue until
such time as the Belgian operations have evidenced the ability
to consistently generate income such that, in future years,
management can reasonably expect that the Belgium deferred tax
assets can be utilized.
-- In the fourth quarter of 2006 the tax provision was $10.6
million or 37.2% of pre-tax income. Cash taxes for the quarter
were $2.6 million.
-- For the full year of 2006 the tax provision was $33.2 million
or 35.3% of pre-tax income. Excluding the $4.5 million benefit
of the reversal of the valuation allowance against our U.S.
deferred tax assets related to capital losses in the third and
fourth quarters of 2006, the 2006 full year tax provision was
40.1%. Cash taxes for the year were $9.8 million.
Total Debt, Net of Cash
-- Total debt, net of cash decreased by $32.2 million in the
quarter to $386.6 million as of December 31, 2006. The
reduction in net debt reflected the cash proceeds of $22.0
million from the TechFab sale as well as $10.2 million
generated from the business.
-- Capital spending for the quarter was $38.2 million as we
completed the construction of the U.S. elements of our carbon
fiber expansion ahead of schedule. Production trials commenced
on the new precursor line in Decatur, Alabama and the new
carbon fiber line in Salt Lake City in December 2006.
Meanwhile, the construction of the Spanish carbon fiber line
remained on schedule with completion expected by the end of
2007.
Portfolio Review Update
-- In December of 2006, Hexcel's sale of its equity interest in
TechFab LLC resulted in an after-tax gain of $10.2 million or
about $0.11 per diluted common share. This joint venture was
associated with our non-core Reinforcement businesses.
-- In October of 2006, Hexcel reached an agreement in principle
to sell its architectural business based in France. The
transaction is proceeding as expected and is anticipated to
close during the first quarter of 2007. We have concluded that
the transaction satisfied the accounting considerations to be
classified as "assets held for sale" and have reported the
component as a "discontinued operation" in our financial
statements. Fourth quarter 2006 revenues of the Architectural
business were $5.6 million compared to $4.7 million in the
fourth quarter 2005. Full year 2006 revenues of the
Architectural business were $23.8 million compared to $21.9
million for the full year of 2005. These revenues were
formerly included in the Reinforcements segment of the
Industrial market.
-- Other non-core assets under review include the electronics,
ballistics and industrial portions of our Reinforcements
business segment that had revenues of $38.7 million in the
fourth quarter of 2006 compared to $46.4 million for the
fourth quarter of 2005. On the same basis, revenues for the
full year of 2006 were $155.0 million compared to $200.2
million in the full year of 2005. The specific assets and
associated revenues subject to potential divesture may change
as we complete our review and any related transactions.
Hexcel will host a conference call at 11:00 A.M. ET, tomorrow,
January 25, 2007 to discuss the fourth quarter results and respond to
questions. The telephone number for the conference call is (719)
457-2617 and the confirmation code is 8499401. 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 structural materials, including carbon fibers,
reinforcements, prepregs, honeycomb, matrix systems, adhesives and
composite structures, used in commercial aerospace, space and defense
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 we serve (including growth in
commercial aerospace revenues, the impact of the push-out in A380
deliveries, the outlook for space & defense revenues including
rotorcraft applications and the trend in ballistic revenues from
military soft body armor applications), our focus on maintaining and
improving margins and the scope and 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
our filings with the SEC. We do not undertake an obligation to update
our forward-looking statements to reflect future events.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
- ----------------------------------------------------------------------
Unaudited
-----------------------------------
Quarter Ended Year Ended
December 31, December 31,
(In millions, except per share
data) 2006 2005 2006 2005
- ----------------------------------------------------------------------
Net sales $ 299.2 $ 278.2 $1,193.1 $1,139.5
Cost of sales 234.2 219.6 928.3 889.4
- ----------------------------------------------------------------------
Gross margin (a) 65.0 58.6 264.8 250.1
% Gross Margin 21.7% 21.1% 22.2% 21.9%
Selling, general and administrative
expenses (b) 28.4 26.3 113.2 104.9
Research and technology expenses 8.2 5.8 30.4 25.3
Business consolidation and
restructuring expenses 9.3 1.1 14.8 2.9
Other expense, net (c) - - - 15.1
- ----------------------------------------------------------------------
Operating income 19.1 25.4 106.4 101.9
Interest expense 6.3 7.2 28.0 33.9
Non-operating (income) expense (d) (15.7) - (15.7) 40.9
- ----------------------------------------------------------------------
Income from continuing operations
before income taxes, equity in
earnings and discontinued
operations 28.5 18.2 94.1 27.1
Provision for income taxes (e) 10.6 (117.0) 33.2 (109.1)
- ----------------------------------------------------------------------
Income from continuing operations
before equity in earnings and
discontinued operations 17.9 135.2 60.9 136.2
Equity in earnings of affiliated
companies 0.9 1.0 4.1 3.6
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Net income from continuing
operations 18.8 136.2 65.0 139.8
Income from discontinued
operations, net of tax 0.2 0.2 1.8 1.5
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Net income 19.0 136.4 66.8 141.3
Deemed preferred dividends and
accretion - (14.4) - (30.8)
- ----------------------------------------------------------------------
Net income available to common
shareholders $ 19.0 $ 122.0 $ 66.8 $ 110.5
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Basic net income per common share:
Continuing operations $ 0.20 $ 1.77 $ 0.70 $ 1.81
Discontinued operations - - 0.02 0.03
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Basic net income per common share $ 0.20 $ 1.77 $ 0.72 $ 1.84
Diluted net income per common
share:
Continuing operations $ 0.20 $ 1.44 $ 0.68 $ 1.49
Discontinued operations - - 0.02 0.02
- ----------------------------------------------------------------------
Diluted net income per common
share $ 0.20 $ 1.44 $ 0.70 $ 1.51
Weighted-average common shares:
Basic 93.7 69.1 93.4 60.0
Diluted 95.6 94.4 95.4 93.7
- ----------------------------------------------------------------------
(a) Gross margin includes environmental remediation costs of $2.0
million for the year ended December 31, 2006.
(b) The fourth quarter 2006 and full year 2006 includes $1.1 million
of expenditures associated with our divestiture activities. Includes
transaction costs associated with the first quarter 2006 secondary
offering of $1.2 million for the year ended December 31, 2006.
Includes for the year ended December 31, 2005, $1.9 million of legal
fees and expenses associated with litigation matters, and $1.0
million of transaction costs related to a secondary offering of
common shares.
(c) Includes accruals of $16.5 million for the settlement of
litigation matters and a $1.4 million gain on the sale of assets for
the year ended December 31, 2005.
(d) Non-operating (income) expense includes a $15.7 million gain of
the sale of an investment in an affiliated company and charges of
$40.9 million for the early retirement of debt for the years ended
December 31, 2006 and 2005, respectively.
(e) Provision for income taxes includes a benefit of $119.2 million
arising from the reversal of the valuation allowance against our U.S.
deferred tax assets as of December 31, 2005.
Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
- ----------------------------------------------------------------------
Unaudited
-----------------------------------------
(In millions, except per December 31, September 30, December 31,
share data) 2006 2006 2005
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Assets
Current assets:
Cash and cash equivalents $ 25.7 $ 13.0 $ 21.0
Accounts receivable, net 181.5 183.6 153.0
Inventories, net 171.5 161.0 146.0
Assets held for sale 10.5 10.0 7.6
Prepaid expenses and other
current assets 34.4 34.5 42.7
- ----------------------------------------------------------------------
Total current assets 423.6 402.1 370.3
Property, plant and equipment 834.7 798.6 708.2
Less accumulated depreciation (464.3) (463.1) (428.3)
- ----------------------------------------------------------------------
Net property, plant and
equipment 370.4 335.5 279.9
Goodwill and other
intangibles, net 75.9 75.4 74.5
Investments in affiliated
companies 11.1 16.5 14.3
Assets held for sale 5.9 5.5 5.7
Deferred tax assets 109.8 110.1 107.6
Other assets 25.5 30.6 28.3
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Total assets $ 1,022.2 $ 975.7 $ 880.6
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Liabilities and Stockholders'
Equity
Current liabilities:
Notes payable and current
maturities of capital lease
obligations $ 2.5 $ 5.0 $ 3.0
Accounts payable 104.0 88.7 92.2
Accrued liabilities 108.7 92.0 96.8
Liabilities related to assets
held for sale 6.2 5.3 3.8
- ----------------------------------------------------------------------
Total current liabilities 221.4 191.0 195.8
Long-term notes payable and
capital lease obligations 409.8 426.8 416.8
Liabilities related to assets
held for sale 1.4 1.3 1.2
Other non-current liabilities 82.0 59.9 56.1
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Total liabilities 714.6 679.0 669.9
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, 95.4 shares
issued at December 31, 2006,
95.3 shares issued at
September 30, 2006 and 94.1
shares issued at December
31, 2005 1.0 1.0 0.9
Additional paid-in capital 479.3 477.3 455.0
Accumulated deficit (151.1) (174.7) (222.5)
Accumulated other
comprehensive income (loss) (1.8) 12.4 (7.3)
- ----------------------------------------------------------------------
327.4 316.0 226.1
Less - Treasury stock, at
cost, 1.7 shares at December
31, 2006 and September 30,
2006 and 1.5 shares at
December 31, 2005 (19.8) (19.3) (15.4)
- ----------------------------------------------------------------------
Total stockholders' equity 307.6 296.7 210.7
- ----------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 1,022.2 $ 975.7 $ 880.6
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Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
- ----------------------------------------------------------------------
Unaudited
----------------------------------
Quarter Ended Year Ended
December 31, December 31,
(In millions) 2006 2005 2006 2005
- ----------------------------------------------------------------------
Cash flows from operating activities
Net income $ 19.0 $ 136.4 $ 66.8 $ 141.3
Reconciliation to net cash provided
by operating activities:
Depreciation and amortization 10.5 11.8 44.2 47.3
Amortization of debt discount and
deferred financing costs 0.3 0.3 1.6 2.0
Deferred income taxes (benefit),
including reversal of valuation
allowance 3.9 (119.4) 16.1 (118.4)
Business consolidation and
restructuring expenses 9.3 1.1 14.8 2.9
Business consolidation and
restructuring payments (2.8) (0.8) (8.2) (2.7)
Loss on early retirement of debt - - - 40.9
Equity in earnings of affiliated
companies (0.9) (1.0) (4.1) (3.6)
Dividends from affiliated
companies - 1.0 1.3 3.1
Share-based compensation 1.6 0.5 9.2 2.2
Gain on sale of investment in an
affiliated company (15.7) - (15.7) -
Decrease (increase) in accounts
receivable 8.5 4.4 (15.1) (16.9)
(Increase) decrease in inventories (6.4) 8.9 (17.4) (16.8)
(Increase) decrease in
prepaid/other current assets 0.1 2.0 (0.7) 4.4
Decrease (increase) in accounts
payable/accrued liabilities 21.2 (1.6) 15.6 (11.6)
Changes in non-current assets and
long-term liabilities and other 2.1 1.1 (5.3) 1.5
- ----------------------------------------------------------------------
Net cash provided by operating
activities 50.7 44.7 103.1 75.6
- ----------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures (41.3) (30.3) (122.5) (62.7)
Deposits for capital purchases 3.1 (4.2) 2.0 (4.2)
Proceeds from the sale of assets - - - 1.4
Proceeds from the sale of
investment in an affiliated
company 22.0 - 22.0 -
Investment in affiliated companies - - - (7.5)
- ----------------------------------------------------------------------
Net cash used for investing
activities (16.2) (34.5) (98.5) (73.0)
- ----------------------------------------------------------------------
Cash flows from financing activities
Proceeds from 6.75% senior
subordinated notes - - - 225.0
Proceeds from (repayments of)
senior secured credit facility -
revolver, net (16.5) (5.0) (5.0) 5.0
Proceeds from senior credit
facility - term B loan - - - 225.0
Repayments of senior credit
facility - term B loan (0.5) - (1.4) (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 (2.6) (1.3) (1.6) 0.7
Issuance costs related to debt
offerings - - - (12.1)
Debt retirement costs - - - (30.0)
Activity under stock plans (0.1) 5.1 10.6 15.2
- ----------------------------------------------------------------------
Net cash (used for) provided by
financing activities (19.7) (1.2) 2.6 (40.7)
----------------------------------
Effect of exchange rate changes on
cash and cash equivalents (2.1) (0.3) (2.5) 1.9
- ----------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 12.7 8.7 4.7 (36.2)
Cash and cash equivalents at
beginning of period 13.0 12.3 21.0 57.2
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Cash and cash equivalents at end of
period $ 25.7 $ 21.0 $ 25.7 $ 21.0
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Supplemental Data:
Cash interest paid $ 2.2 $ 2.9 $ 26.0 $ 40.0
Cash taxes paid $ 2.6 $ 2.5 $ 9.8 $ 12.8
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Net Sales to Third-Party Customers by Market Segment
Quarters Ended December 31, (Unaudited) Table A
2006 and 2005
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(In millions) As Reported Constant Currency (a)
- ----------------------------------------------------------------------
B/(W) FX B/(W)
Market Segment 2006 2005 % Effect (b)2006 %
- ----------------------------------------------------------------------
Commercial Aerospace 154.7 $129.5 19.5 2.8 151.9 17.3
Industrial (c) 77.5 80.8 (4.1) 3.3 74.2 (8.2)
Space & Defense 55.0 55.6 (1.1) 1.6 53.4 (4.0)
Electronics 12.0 12.3 (2.4) 0.1 11.9 (3.3)
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Consolidated Total 299.2 $278.2 7.5 7.8 291.4 4.7
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Consolidated % of Net Sales % % %
- ----------------------------------------------------------------------
Commercial Aerospace 51.7 46.6 52.1
Industrial 25.9 29.0 25.5
Space & Defense 18.4 20.0 18.3
Electronics 4.0 4.4 4.1
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Consolidated Total 100.0 100.0 100.0
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Years Ended December 31, (Unaudited) Table B
2006 and 2005
- ----------------------------------------------------------------------
(In millions) As Reported Constant Currency (a)
- ----------------------------------------------------------------------
FX
B/(W) Effect B/(W)
Market Segment 2006 2005 % (b) 2006 %
- ----------------------------------------------------------------------
Commercial Aerospace 618.0 $529.4 16.7 1.1 616.9 16.5
Industrial (c) 312.1 343.9 (9.2) 1.3 310.8 (9.6)
Space & Defense 211.2 209.3 0.9 0.8 210.4 0.5
Electronics 51.8 56.9 (9.0) (0.1) 51.9 (8.8)
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Consolidated Total 1,193.1 $1,139.5 4.7 3.1 1,190.0 4.4
- ----------------------------------------------------------------------
Consolidated % of Net
Sales % % %
- ----------------------------------------------------------------------
Commercial Aerospace 51.8 46.4 51.8
Industrial 26.2 30.2 26.1
Space & Defense 17.7 18.4 17.7
Electronics 4.3 5.0 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 our net sales trend, total net
sales and sales by market for the quarter, and year ended December
31, 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.
(c) Architectural sales of $5.6 million and $4.7 million for the
quarters ended December 31, 2006 and 2005, respectively, and $23.8
million and $21.9 million for the years ended December 31, 2006 and
2005, respectively, have been excluded from the tables above.
Architectural sales for the current and prior periods presented are
included as a component of "income from discontinued operations, net
of tax."
Note: Sales by market by business segment can be found under the
Investor News tab on the Investor Relations section of our web site
www.hexcel.com.
Hexcel Corporation and Subsidiaries Table C
Segment Data
- ----------------------------------------------------------------------
Unaudited
--------------------------------------------------------
Corporate
& Other
(In millions) Reinforcements Composites Structures (a) Total
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Fourth Quarter 2006
- ----------------------------------------------------------------------
Net sales to
external
customers $ 59.2 $ 209.1 $ 30.9 $ - $ 299.2
Intersegment
sales 33.8 8.0 - - 41.8
- ----------------------------------------------------------------------
Total sales 93.0 217.1 30.9 - 341.0
Operating
income
(loss) 6.1 (b) 17.6 3.6 (8.2) 19.1
Depreciation
and
amortization 2.4 7.5 0.4 0.1 10.4
Business
consolidation
and
restructuring
expenses 1.7 7.6 - - 9.3
Capital
expenditures
and deposits 3.3 33.0 (c) 1.2 0.7 38.2
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Fourth Quarter 2005
- ----------------------------------------------------------------------
Net sales to
external
customers $ 63.0 $ 191.0 $ 24.2 $ - $ 278.2
Intersegment
sales 32.5 6.0 - - 38.5
- ----------------------------------------------------------------------
Total sales 95.5 197.0 24.2 - 316.7
Operating
income
(loss) 9.8 20.9 3.1 (8.4) 25.4
Depreciation 3.2 7.9 0.5 - 11.6
Business
consolidation
and
restructuring
expenses 0.3 0.8 - - 1.1
Capital
expenditures 4.0 28.1 (c) 0.6 1.5 34.2
- ----------------------------------------------------------------------
Full Year 2006
- ----------------------------------------------------------------------
Net sales to
external
customers $ 235.2 $ 848.0 $ 109.9 $ - $1,193.1
Intersegment
sales 135.5 29.6 - - 165.1
- ----------------------------------------------------------------------
Total sales 370.7 877.6 109.9 - 1,358.2
Operating
income
(loss) 26.0 (b) 105.1 13.4 (38.1) 106.4
Depreciation
and
amortization 12.1 29.4 1.8 0.2 43.5
Business
consolidation
and
restructuring
expenses 5.9 9.0 - (0.1) 14.8
Capital
expenditures
and deposits 8.4 105.2 (c) 3.4 3.2 120.2
- ----------------------------------------------------------------------
Full Year 2005
- ----------------------------------------------------------------------
Net sales to
external
customers $ 269.3 $ 787.0 $ 83.2 $ - $1,139.5
Intersegment
sales 130.2 24.8 - - 155.0
- ----------------------------------------------------------------------
Total sales 399.5 811.8 83.2 - 1,294.5
Operating
income
(loss) 40.7 104.0 (d) 8.0 (50.8)(e) 101.9
Depreciation 13.1 31.3 1.9 0.1 46.4
Business
consolidation
and
restructuring
expenses 0.3 2.6 - - 2.9
Capital
expenditures 7.4 55.4 (c) 0.7 2.9 66.4
- ----------------------------------------------------------------------
(a) We do not allocate corporate expenses to the business segments.
(b) Includes transaction costs associated with divesture activities of
$1.1 million for the quarter and year-ended December 31, 2006.
(c) Includes deposits for capital purchases of $3.1 million and $2.0
million for the quarter and year ended December 31, 2006,
respectively, and $4.2 million for quarter and year ended December
31, 2005.
(d) Includes gain on sale of assets of $1.4 million for the year ended
December 31, 2005.
(e) Includes litigation settlements of $16.5 million, $1.9 million for
legal fees and expenses associated with litigation matters, and $1.0
million in transaction costs related to the August 2005 secondary
offering of common shares.
Hexcel Corporation and Subsidiaries Table D
Schedule of Net Income Per Common Share
- ----------------------------------------------------------------------
Unaudited
-------------------------------
Quarter Ended Year Ended
December 31, December 31,
(In millions, except per share data) 2006 2005 2006 2005
- ----------------------------------------------------------------------
Basic net income per common share:
Net income $ 19.0 $ 136.4 $66.8 $ 141.3
Deemed preferred dividends and
accretion - (14.4) - (30.8)
- ----------------------------------------------------------------------
Net income available to common
shareholders $ 19.0 $ 122.0 $66.8 $ 110.5
- ----------------------------------------------------------------------
Weighted average common shares
outstanding 93.7 69.1 93.4 60.0
Basic net income per common share (a) $ 0.20 $ 1.77 $0.72 $ 1.84
- ----------------------------------------------------------------------
Diluted net income per common share:
Net income $ 19.0 $ 136.4 $66.8 $ 141.3
Deemed preferred dividends and
accretion - (14.4) - (30.8)
- ----------------------------------------------------------------------
Net income available to common
shareholders $ 19.0 $ 122.0 $66.8 $ 110.5
Plus: Deemed preferred dividends and
accretion - 14.4 - 30.8
- ----------------------------------------------------------------------
Net income available to common
shareholders plus assumed
conversions $ 19.0 $ 136.4 $66.8 $ 141.3
- ----------------------------------------------------------------------
Weighted average common shares
outstanding - Basic 93.7 69.1 93.4 60.0
Plus incremental shares from assumed
conversions:
Restricted stock units 0.3 0.4 0.3 0.4
Stock options 1.6 1.8 1.7 1.8
Convertible preferred stock - 23.1 - 31.5
- ----------------------------------------------------------------------
Weighted average common shares
outstanding-Dilutive (b) 95.6 94.4 95.4 93.7
- ----------------------------------------------------------------------
Diluted net income per common share (c) $ 0.20 $ 1.44 $0.70 $ 1.51
- ----------------------------------------------------------------------
(a) Includes basic net income per common share from discontinued
operations of $0.02 and $0.03 for the year ended December 31, 2006
and 2005, respectively.
(b) All outstanding shares of series A and B mandatorily redeemable
convertible preferred stock were converted to common stock in
December 2005 and August 2005, respectively.
(c) Includes diluted net income per common share from discontinued
operations of $0.02 for both the years ended December 31, 2006 and
2005.
Hexcel Corporation and Subsidiaries Table E
Schedule of Interest Expense
- ----------------------------------------------------------------------
Unaudited
------------------------------
Quarter Ended Year Ended
December 31, December 31,
(In millions) 2006 2005 2006 2005
- ----------------------------------------------------------------------
Interest on debt instruments $ 6.9 $ 6.7 $ 28.8 $ 30.9
Capitalized interest (a) (1.3) (0.1) (3.6) (0.1)
Banking, commitment and other fees 0.3 0.1 1.1 1.0
Amortization of financing costs and
discounts (non-cash) 0.4 0.5 1.7 2.1
- ----------------------------------------------------------------------
Interest Expense $ 6.3 $ 7.2 $ 28.0 $ 33.9
- ----------------------------------------------------------------------
(a) Interest expense capitalized in connection with our carbon fiber
expansion program.
Hexcel Corporation and Subsidiaries Table F
Reconciliation of GAAP and Non-GAAP Measures
- ----------------------------------------------------------------------
Unaudited
-------------------------------
Quarter Ended Year Ended
December 31, December 31,
-------------------------------
(In millions) 2006 2005 2006 2005
- ----------------------------------------------------------------------
GAAP operating income from continuing
operations $ 19.1 $ 25.4 $ 106.4 $ 101.9
- - Business consolidation and
restructuring expense 9.3 1.1 14.8 2.9
- - Litigation settlement expense - - - 16.5
- - Legal fees and expenses related to
litigation settlements - - - 1.9
- - Environmental remediation costs - - 2.0 -
- - Expenses associated with divestiture
activities 1.1 - 1.1 -
- - Secondary offering transaction costs - - 1.2 1.0
- - Gain on sale of assets - - - (1.4)
- ----------------------------------------------------------------------
Non-GAAP operating income from
continuing operations 29.5 26.5 125.5 122.8
- ----------------------------------------------------------------------
Includes:
- - Stock compensation expense $ 1.6 $ 0.5 $ 9.2 $ 2.2
- ----------------------------------------------------------------------
Table G
- ----------------------------------------------------------------------
Unaudited
---------------------------------
December September December
31, 30, 31,
(In millions) 2006 2006 2005
- ----------------------------------------------------------------------
Notes payable and current maturities
of capital lease obligations $ 2.5 $ 5.0 $ 3.0
Long-term notes payable and capital
lease obligations 409.8 426.8 416.8
- ----------------------------------------------------------------------
Total Debt 412.3 431.8 419.8
Cash and cash equivalents 25.7 13.0 21.0
- ----------------------------------------------------------------------
Total debt, net of cash $ 386.6 $ 418.8 $ 398.8
- ----------------------------------------------------------------------
Management believes that operating income and net income before
special items, which are non-GAAP measurements, are meaningful to
investors because they provide a view of Hexcel with respect to
ongoing operating results. Special items represent significant charges
or credits that are important to an understanding of the Hexcel's
overall operating results in the periods presented. In addition,
management believes that total debt, net of cash, which is also a
non-GAAP measure, is an important measure of the Hexcel'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