HXL - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2017 Hexcel Corporation Earnings Conference Call. At this time, all participants are a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operation Instructions] As a reminder, this call maybe recorded. I would now like to introduce your host for today’s conference Mr. Officer. Financial Chief Winterlich, Patrick Please go sir. ahead,

Patrick Winterlich

Good earnings conference everyone. Welcome XXXX. to XXXX quarter fourth Corporation’s call Hexcel morning, on XX, January

Before the cover beginning, let formalities. me

uncertainties estimates, the to First, meaning Harbor course of a actual of judgments our Relations Investor that results be within Litigation call release. of assumptions, factors Company’s statements factors or today. Securities our may everyone may to press Certain of replay I the Reform about from page the night’s call. XXXX. the in want are A make statements during will caused Private available materially SEC provisions of variety on by forward-looking They any last call website. Act could the contained related filings this statements constitute we detailed in the remind statements outcomes involve cause to Safe forward-looking and and Such of differ this this forward-looking

recorded Corporation without being our is rebroadcast call by expressed or copyrighted this and material. cannot recorded Hexcel Lastly, permission. be It is

request. on that your detailed Vice President; quarter in Kurt of the issued of our this release constitutes The yesterday. today results call our Relations. me CEO purpose consent Investor call our and Goddard, Nick to to is and review President participation Chairman, XXXX are Your Stanage, With fourth our news

over call turn Nick. me to let the Now

Nick Stanage

morning Good joining and today. thank Patrick. everyone, for Thanks, you us

year capped strong we remain off for results XXXX. positioned Our another enter and quarter Hexcel as fourth well we

and X%. earnings share night’s record X.X% $XXX release, were fourth adjusted our quarter As per year-over-year of you million than saw the sales up grew more last in our

continued impact forecasted the previously on that vigilance Our on sales adjusted our costs. capacity on were favorable lower focus guidance which than provided our and efficiencies, manufacturing was managing utilization, our EPS illustrates of within

particularly a than higher $XXX with guidance. which our initial free of cash generation record are flow was We the pleased million XX%

cash generate entered as our five $X expect at our period the our then XXXX, flow end years to going investor billion and now into for details of peak year briefing, you each planning December and cash of into Patrick to we over end. of I’m some will our the the generation we free quarter through year insight get cycle. we markets As reiterated XXXX give of

for more in and are usual, be above highs. As all programs Commercial by on from know year-over-year ramp programs traffic the up to passenger chipset our AXXX. in at OEM and than previously of and connection accelerated backlogs strong Starting widebody rates the from various our communicated Commercial reductions internal was all Global growth. XXXX realize end and of levels with growth reduction met XXX only XX% production including factors remain the cargo build Max. comparisons continues benefitting most we offset production new supply markets Hexcel did down will Aerospace, programs, adjustments in track currency. expressed as XXX legacy Neo and also on growth with constant time XXXX remain of we chain the air levels, benefitted in record Aerospace various expectations. are timing OEM we record this and AXXX, load Not ramp you AXXX and these That said, the

of growth This over digit than jet late expect regional and the as future UTC schedules $X contract more double System its as we in programs an revenues Aerospace as XXXX, we on with business look recovery billion fueled we some single up market. of ramp our seeing XXX. extension announced In contract to represents key the generate in XXXX, term. other our to Aerospace into we As high were accelerating Commercial by digit growth Commercial Aerospace, well

generally V-XX as key expecting and Turning X.X%. Fighter, sales, in the the saw to Strike including year than progressed particularly programs Space we year certain dragging quarter, full the Joint then flat to and Osprey growth stronger performance the began Black year the Defense, the fourth expected in helicopter we Hawk

see U.S. defense positive the the underlying AXXXM, budget the headwind Airbus trends sales of so stable are production the For XXXX, cut offset announced we generally we with expecting the some of by year. recently for

down primary is XXXX which to contain Industrial to Industrial, turning by more contained new transitioning sold as of hybrid this in sales material less us our XXXX overall wind our confidence energy. for driven composite Finally projection. were gives blade energy sales customer, XX% mix The material blades composite and year-over-year Vestas,

XXXX. an note recently to in particularly confident the to announced and We realize did sales with areas expanded announced also in automotive of We Industrial in agreement business Vestas that grew tax remain the credit production place in in growth legislation. double-digit like supply the our We recently left significant growth we we other about XX%. would where was see

of it to key three priorities you over pillars handing the success. Patrick, our form our I'd like of to remind Before that strategic

and to our broaden are materials adoption and both for future, and weigh material collaborations driving growth, us sustained manufacturing to ratio and the the solutions technologies Advanced our through providing continually materials best technical composites for of positioning R&T significantly in of the advanced customers. innovation First, of to growth. strength the structural we drive and internally acquisitions and invest innovation, development and

aerospace acquisitions our XXXX concluded Performance Materials capability expands example, our product include that to XD in additive particularly in broadens prepreg For enhanced technology our two while Structil Oxford manufacturing. offerings we portfolio.

This and lower and part to for of parts now are defense aerospace, the number pieces of additive for of a weight, and within while strength better markets. With OPM, acquisition design leader durability. in performance more world performance in high the we consolidating complex enhance XD technology enables space printing parts

each of the size potential contributors While top both our of to line is of become these modest today, to entities material they overtime.

and become And and their to our has has It achieving help capital investing cash achieve and expected manufacturing entitlement us did targeted capacity excellence, react throughout returning efficiencies adjacencies; provides growth research, achieve enables to chain. in shareholders excellent and operating third, to our variations research objectives. by drive operational to to XXXX productivity it driving our and Operational to by margin to market increasing the material next both customers share and opportunities sales CapEx in supply improvements generation in while expand through us enabled M&A buybacks. disciplined fundamental our despite to Second, technology, to for discipline This focusing discipline enhancements. us processes consolidations, advancements organic and rapidly technology our demand; we investments and fund continuing and deployment softness. through technologies growth enable achieve returns the on and of in to dividends support

new Alabama to and the and expansion Decatur, We continue addition the France fiber the and of fiber a Roussillon, our a of the announced to completed a at precursor completing the line XXXX beginning to our include business. lines PAN previously Lake in and line invest XXXX City priorities line. multi-year add in We in fiber at Morocco site facility spending facility, Salt completing the capital facility carbon

a moving recent say Before words on, changes. I’d like to the law about tax few

will year at return, benefits to and that this benefits we to support innovation, XX% by returning shareholder see realize organic this which and of legislation earnings of encouraged repurchases. M&A going The summary, remain growth, the accretive and and includes significant least expect forward. very expect our look for the proud results In we the full delivered of quarter and solid earnings XXXX. team optimistic out as net and dividends I’m accomplished. to year, we to highly share what shareholders through We We’re

flow free is and expect cash growth greater than record to generate we to poised accelerate, sales $XXX million. Our

same We With to shareholder we our time it that, expanding are I’ll track creation. the our to our remain more generate market long-term in growth long-term deliver turn at leadership sustained over to committed solidly on targets while technology the color position numbers. and on value Patrick provide to to XXXX

Patrick Winterlich

Thank you, Nick.

a Let our review me quick by start of providing markets.

would discuss year-over-year currency. in constant I As comparison usual,

aware, our however, a of British mix currency results reported euros impact cost in is our influence basis pounds our dollars; dollars, As manufacturing of as significant majority you Europe. are is intuitive. in and and is movements have of we not denominated The presence revenue a some it

As a costs. against lower do and dollar our sales the British translate strengthens result, euro pound, when the as the our

Sales increases X.X% quarter is fourth record. year-over-year the quarter margin patterns year up This up XXXX improved. our fourth new quarter and us our sets for was which million a countered our seasonal were $XXX.X setting in typical well therefore of our the So expense of XXXX. is incoming to of strongest and

a results full Our decrease were of year $X.XX X.X%. billion,

XXXX $X.XX, increase an the adjusted versus $X.XX, X.X% for was EPS of of X.X%. diluted an quarter the increase full and Our fourth was for

market, our of to sales. total for our XX% accounted XXXX Aerospace Turning Commercial

full fourth as year quarter sales the X.X% increased For $XXX.X to X.X% for XXXX. down quarter, the but to these compared XXXX, were of the million a versus fourth record

increase While aircraft in effected ramp, fourth build particularly scheduled the from jet the sales by rate benefitted adversely widebody new an was regional business AXXX and the cuts sales, narrowbody quarter the the XXX. full year and

Soft supply accounted AXXX XX% other our XXXX of reduction disclosed and Space sales Defense the sales. previously and chain headwinds. for AXXX shipset demands

V-XX million, improvement. compared the for Strike to fourth, For Strength programs XX.X% the X.X% most Black to period were XXXX of in as year. drove Fighter, in full Osprey the the these the increased Joint sales $XX.X same helicopter Hawk and and up

comprised the Future Our programs, composite XXXX to XX% so Vertical project. adopted aircraft, sales. Army's potential western Industrial we new military are Lift U.S. and European sales widely on watching solutions are as closely such U.S.

For sales $XX.X to were of the fourth fourth XXXX. of compared the quarter million reflecting decrease X.X% quarter XXXX, a

Industrial For the sales year, XX.X%. full were down

and for XX% down XX% year. automotive. quarter for discussed, to the however more see margins of primarily were sales did Nick to quarter fourth a the the on which the due weakness results, gross wind in than quarter growth double-digit in As fourth more full XX.X%, than compared XXXX. were basis, in consolidated Consolidated XX% was as We the energy

to Strong controls facility startup year, largely impact XXXX. quarter facilities costs of XXXX. and margin million $XX at Roussillon, improvements compared training France Casablanca third Casablanca, offset in XX.X% XX% For as completed the was productivity in Morocco. in approximately The and new the full in gross of our and was cost the

compared products with of to the expected was the mid larger recent Construction It quality Roussillon, reflecting for completed cash and produced expenditures. expenses lower line were flow support and a new in million year, reflecting quarter fiber expenses year, X% same about support being full all the the as with as to and SG&A our in for X% period as X% we Research the at technology the tight prior functions. line France. higher products, levels. full be Depreciation $X across in roughly We full same PAN the compared invest XXXX, higher year, million is controls to increase and discretionary and and to the $XX cost in to the the were as X% a process in continues higher fourth fourth are technologies, in for year the quarter XXXX. XXXX to the in compared in period for and innovation investments productivity continue improvements. pleased carbon quarter, fourth

percent X.X% XX.X% the $XX compared operating for For $XX.X quarter, of of adjusted fourth income or or XXXX. sales to XX% sales as fourth the quarter million increased million in to

year, by was For the percentage. XXXX, sales basis to approximately of XX.X% approximately year's impacted as XXXX's contributed but points, income Exchange basis rates XX% operating to million, compared income to adjusted or as points the X.X% operating down sales operating quarter $XXX.X percentage full million fourth XX full income in compared XXXX. of XX to negatively $XXX.X

operating XXXX’s Our fourth composite margin fourth generated for income a as XX.X% quarter a margin material quarter. in XX.X% to segment compared the

full For XXXX. XX.X% was margin compared in XX% composite income year, materials operating the to

margin. course as Our curves quarter engineered for of can timing program and structured quarterly segment generated XX.X% engineered margin XXXX’s the compared businesses comprised XX.X% meet margin in quarter. product the fluctuations Learning income in the fourth operating to an fourth a and our

XX.X% For XX.X% a operating margin to compared XXXX. the full year, as the income segment in generated

well the resulted I fourth to reminder, lower X%, and more a for fourth a although benefit for I compares quarter product businesses quarter quarter as passed The in from you further which the than coming usual a fourth of most bit The will the included in quarter ups due the impacted than margins relating by on authorities law We impacts X% continue at the continues transition the law The tax to capital The adjustments capital on net charge Hexcel This $XX.X to provide XX.X% to Cuts has the very XXXX, a composite guidance in to balances. an change we and impact foreign reply over in law would. in of of our the cash minus of to Company return $X.X this Therefore, GAAP understand. taken an the expect understand other change uncertain there rate believe substantial changes. of from taxes with revaluation in change much these level of charged and related therefore and relation relevant liabilities longer segment tax deferred new the The for taxes reflecting EPS. discrete non-recurring overseas years. normally share-based effective XXXX. benefits to same XX.X% segment As the deductions $XX in little for million. be tax but deferred complicated sure net approximately lower The resulted credit million, was tax P&L a the adjustments and tax tax of Jobs base impacts been approximately purposes. transition million in quarter provision as provision benefit net of quarter those of quarter in to this on projected and Act. see balances tax make one-time $X will non-cash Tax are of approximately for is million. materials, benefit talking tax I total has spend positive the attractive. the Hexcel tax million resulted to fourth a as tax payments true more a time, across cash recently compensation segment of quarters impact be cash the the additional law of of could help The to the engineered tax profits employees million. reversal than The $XX credits to a am tax other invested is which tax pay tax the our the in $X.XX primarily approximately XXXX provisions The share positions. also of Hexcel tax including depreciation liabilities tax of the the with diluted depreciation as At million. fourth has a eight P&L on bonus of $X.XX of credit $XX these associated worth earnings rules because will $X.X typical included per provision including about credits tax election

nine first discrete non-recurring XXXX including So an $XX.X additional of remind you, the of months million benefits.

items effective and net tax XXXX tax was impact Excluding provided the tax for the initial XXXX an our guidance included these our based our for Please effective estimate reviews, changes, on of rate non-recurring discrete in the note, XX%. benefit income will rate rate in the we XX%. law effective tax be adjusted was December on of XX.X%. Based around

to outside of those expectations from has a growth tax change the simpler of repatriation the for touch generated should tax Hexcel environment regions. I for in U.S. not near in do the substantial of the from Therefore, into good in Following law on repatriation. the of see facilitate to cash changes, expect on overseas we U.S. historically our want the done cash term. to the a job new U.S., our very although flows profits profits investments back funding

million expenditures million $XX.X in of Nick flow more compared double for the were compared year contributed we to $XX.X higher $XX.X $XXX significantly XXXX million As forecast. which million improvements a XXXX. than $XXX.X initially cash mentioned, was for record, to and free levels Working year, Accrued in million $XXX the capital our capital use the million XXXX. of million a the than $XXX.X

$XXX.X remaining a spending We previously purchase to and reprogram. share we spent lower our on and expect in announced, million repurchases $XXX.X million share under As XXXX have beyond. XXXX much in see

back Before turning in like to the review XXXX guidance I'd we to provided it Nick, December.

the using standard up being our to by result for new in XXXX. not of X, recognizing accounting continue Sales billion January we billion regulatory the for in material adoption. primarily believe us this line at high new certain revenue in wind prior approach retrospective We Hexcel to midpoint. shared. $X.X standard be do of vary think anticipate We revenue relative is Hexcel statements, This expect will impact goods Industrial, adopting standard or share. double-digit modified this or $X.X ongoing stable number, down Aerospace customers that to growth and is Defense Space driven sales. the or Commercial Within In and from by consolidated energy in guidance, will and recognition remain effect to could $X.XX financial the quarter-to-quarter with sales growth $X.XX X% that growth the single-digit. the per

$XXX effective to $X.XX This the XXXX, range XX%. I be $X.XX an from to expected which to to buyback. guidance to of returning $X.XX call net stock in December reflects increase me of $XXX million Capital rate million. $XXX the which previous For let XX%. expect Nick. through to is are of tax we XX% expenditures provided $X.XX back EPS anticipate effective and assumed an our income forecast of in would than the greater an to of reiterate rate be Free that, cash that like tax represents shareholders greater flow than we With turn dividends to million. of

Nick Stanage

cash record XXXX best fourth for than the flow steep ended Patrick. expected a was despite year We earnings and sales. a saw Company. the robust Thanks, the increase quarter Hexcel and with lower for year a in strong on free the

we wind. commercial aerospace have particularly XXXX, and we in As enter tremendous momentum

with in continue and cash record drive sales should shareholder increasing value. our We in enhanced coupled a long-term flow year which XXXX, earnings, to execution, expect diligent

such, take investment. we’re attractive With remains incredibly an that, to Hexcel questions. As ready

Operator

line Jefferies. the from of Our Kahyaoglu Instructions] question Sheila comes [Operator first of

open. line Your is

Sheila Kahyaoglu

reform. your invest. touched this capital that just, thinking are here? you a all? at little bit about M&A and change And this a continues deployment company Does first, Hexcel guess from the is Patrick, strategy tax you on with I how pipeline to

Patrick Winterlich

to which doesn’t to shareholder would continue It argue, will then very we’ve M&A growth, buyback. guidance Obviously, constrained law and change always and return In then and disciplined. in relation the down Sheila. tax taking we’re morning, fundamentally we through we fundamentally around Good capital as and as the both M&A, deployment that. strategy revised changes EPS, in required organic will R&T we continue and be the haven’t where we Company invested stock to projects to capital announced our remains dividends do

We that additional technology that’s consolidate revenue where and accretive will and are for appropriate. look enhance our portfolio targets attractive

changes, welcome the answer to So, obviously, we change strategy. does your the tax law fundamentally not think I but is simple question our it

Sheila Kahyaoglu

then gearing on could you And in you on other any Is guess, at that you all? I some elaborate commercial from pickup OEMs? bizjets. or mentioned recovery your cabin, bizjet on are what if in it class

Patrick Winterlich

Yes, Bombardier from seeing Sheila, strong and Embraer even those growth projecting strong hold XXXX. sales from so Gulfstream through we’re to and

and our launched New content programs hasn’t programs. on increased have been those

So, in we’re seeing strong growth the XXXX certainly nice other a commercial for recovery and segment. aerospace

Operator

you. Thank

question next is from Sison Our of Mike KeyBanc.

Your open. line is

Mike Sison

just lot ago. weeks a you’re and a Auto working at the like on couple Seems folks new question you of carbon quick Show In Can the of some auto. some seeing momentum of highlighted that projects terms you're fiber Detroit the on? talk of of about maybe

Patrick Winterlich

It structural up a strength, and platforms where us continue momentum composites continues certainly to opportunity to a Well, automotive. Lamborghini, big real differentiate. with like aesthetics Mubea need for to or in various BMW, specialty we on offer market those work pick an such

saw Patrick to as we’ll have in said, no forward. plus range. percent think growth growth XX continue going we the I So see doubt I

and as a looking the markets and are a to real to the where sustainable target is and commodity. challenge the and that makers our the it's that is specifically means defined for, application think identify advantage, not I a need are competitive technology those there processing fit continue auto

the forward a do So, our where or need real going way metals job the that structural are takeout areas just focusing will on we're Mike

Mike Sison

the of follow-up, do how fourth And growth quick encouraged as quarter, terms see turn year positive that organic in to that Aerospace the you Commercial then accelerating see unfolds? in

Patrick Winterlich

not rate we cautious only the Well, increases XX, will continue narrowbodies, XX the Out secular the that Neo are new year, to going to rooting looking penetration, another execution continue AXXX Boeing the curves with and see are ramp Certainly, are to and the to so grow. but increased coming. do the to the and at deliver. well. on But growth the is grow, will certainly everyone and am in rates on Max both everyone expect programs I go and Max, steep recognizes a Neo there. Airbus to for the the the bit

see going to we widebody, the the down is still pressure X.X. XXX to as On ramp some

supply maybe a a Clearly, has there adjustments the adjustment in of optimize think chain those Mike. believe to there'll that in of reductions behinds the but So us we bulk increased supply push and efficiencies AXXX. But little little widebody that net on more chain, net, maybe we supply chain, be more most the and happened.

Operator

Thank you.

next Research. is Our from question Vertical Robert of Stallard

Your is open. line

Robert Stallard

if sits strong could has about And do wondering, higher. of moment rates capacity another was had there that your wondering with just even your that? order is was I you for the comment follow obviously I where Max? the Airbus raising what discussion and capacity Boeing up and and intake to because year at Neo on the

Patrick Winterlich

announced evaluate go above to we approaching plans have to they place capacity we'll XX. rates place Well, have that. If or that, in deliver certainly in their

So carbon fungible. times, assets our for example fiber this -- and many are we communicated

for fall that with deliver investment are off, need the do. So utilization. see saying, when going optimize what any Right we to don't growth our further consume to so now, and OEs impact or programs are capital achieve programs that the I we narrowbodies, they

part of Now some will for having AXXX like fiber JSF, strategy fiber and PAN line Alabama announced and investment and we that, the of our and indicator have to platforms programs and blade said another the other require continue that's that still line.

Robert Stallard

would Aerospace. at OEMs? you characterize moment environment the on with staying Commercial secondly, the then And pricing How the

Patrick Winterlich

to as position are help their customers, cost and the goals pricing always view our our while And us margins. be is their that The trying competitive for provider environment low performance them and to their opportunity maintaining we always and an optimize achieve their margins.

efficiency, to to their drive deliver drive we productivity, drive things, we we them innovation to identifying new do help So, ways goals.

takeout So, request, highly around be defined meet but programs, Maybe will again the takeout doesn’t tax change on forever. long contribute as and time, we’re I’m our customers’ needs. and cost as and they’ll a our going cost fact to the around been legislation even communicated it far the have direction that concerned, how challenge for to they're solve

Operator

Thank question our Richard you. next from Buckingham And is Research. of Safran

line open. Your is

Richard Safran

first I question for you. is guess Patrick this

wanted comments ask you impacted So I on to about your how global footprint your tax and you.

in So know new rates, starting to facilities U.S. have given I incentivized I a ’XX? the know in manufacturing tax might your Germany. -- footprint? reduction and new you about up, have footprint you you’re wanted something how U.S. Particularly thinking you have is and you work that to Is change the in in there perhaps your France consider consider law more you There facility

Patrick Winterlich

established, customer both our think the answer I'd footprint, customers I the we’re local I Richard, in So we and that well our mean, to deliberately very Europe, that I is value I strongly. that, legacy locality in think very and to way think be U.S.

a unlikely we’re of many going think and move existing that strength I it's that’s footprints. sides, for think any I it's Hexcel, been of the but relationship to years very strength

is I future, XX% clearly justification out probably don’t have tax a XX% today, going but anything to investments I we U.S. to model attach in model rate as a to that potentially specific that good to as think includes the obviously model. a rate case. help that for U.S. the financial you’re alluding is

in the past understand the I future. we’re So general, and the discipline not our we��ll to change with question and investments going in as evaluate always think

Richard Safran

of hear just beginning already general, but I rotorcraft. really business it turned? any Was I in answered V-XX Now, missed it. that interested ‘m I apologize, if and there? if I the in just you there could you in Sikorsky? a comment, Was didn’t all at improvement And part has this the

Nick Stanage

did growth So, at Patrick Sikorsky. see by fourth the that’s was in up the can I’ll not flat, enough and and much and it is much driven strong commercial just show we anything rotorcraft steady. pretty that’s take broader rotorcraft. V-XX Commercial, way pretty But military it quarter out was much pretty shot you a correct was not than and that it say changed know but plan has to XXXX holding me.

So, it Richard. was broader though than Sikorsky

Operator

Thank you.

question is Cowen. Khanna Gautam from next Our of

Your line is open.

Gautam Khanna

orders Richard’s of To Or where question. just you in the now defense beyond? fourth there is Was and orders, in on have follow sustaining up QX space? and there improvement quarter lumpy at sort non-recurring something to in visibility

Patrick Winterlich

we now, on Black continues So, XXXX is, what Gautam on say programs out, grow. our was in were it particularly Fighter steady. the like fairly guess was which a there where and of were we’re AXXXM anything I would aware I we in strong which doesn’t the change quarter. remains Strike the said, will Airbus headwind Obviously, positive included really as certainly around that don’t our Joint to think for jumps was you Nick I V-XX recognize It the guidance. Hawk that had out the guidance JSF called

our and stable see guidance. defense some we outlook but So pluses and remains as our for minuses, space

Gautam Khanna

of programs over -- the next actual model the of lingering and just any that variance the and And rates mentioned right any to XXX attached destock some you to at point? year, the some should so may of the are alike. programs, have kind we destocking as guys there we you Nick through now? Is Or this

Patrick Winterlich

in of adjustment of supply be additional the little there'll the waste due of the coming we bit and into us, which a half, take in to supply Well, softness built we our see on to impact But behind with on the think forecast, coming little maybe to is we inventory a nothing of certainly and and to XXX, work first bulk again, there, the we the rate system. XXXX. the we down always X.X, some AXXX. optimize that suppliers both that, our chain, three Having chain customers the saw said that our quarters first out our the

ongoing your needle the an that's modeling effort, should it perspective. move from So but

Operator

you. Thank

Ken question next of Herbert is Our from Canaccord.

Your open. is line

Ken Hebert

the might a Was called fourth the I think how guess year on and particular, you working working incremental first we part of specifically, any improvements really in for maybe XXXX, nice perhaps quarter mean maybe what as I of implied capital Just in that strong guide? free forward should flow capital that on other 'XX? be free Patrick about the And out. full opportunities some cash cash in pull of and

Patrick Winterlich

it existing did and of through in because strategies. extremely simple to R&D really performance. We terms, able it that we relation we are down and results, depreciation capital. pleased I was tax revenue, million free a which our of cash XXXX working had inventory please forward, receivables XXXX and mean EBITDA our was a but None cetera. flow job et XXX with. credits pull our very to the in all in was tax We reduce to drove cash were bonus good

CapEx under As I we changes impact the relation I significant look our obviously tax XXX think the million we've from forward greater we is $XX to net obviously tax cash In that forecast where free up. to performance, is step tax called lower than which cash got out XXXX flow, in million. a reform that factoring

but with on some down, have cash We get do significant. takes tax. to hugely tax the do some it's some then coming transition So, benefit. we puts not outflows There's and the rate

we're So, point We it doesn't in good a picture dramatically. the for target aiming and that's the this still is time. XXX what change where think

Ken Hebert

in forward? us multiple your the when Alabama, there? in requirements in of base or lines sort lines you of the maintenance CapEx, that peak alter putting is or of moving spending capacity And spending how does can additions of you as remind two view the terms -- capital for And or sort you're

Patrick Winterlich

-- to it you to maintenance it is difficult a really needle jump move last on CapEx point, just is to question if the going our, I to don't which such always think your pinpoint.

I massively. That in line think I fiber new on expenditure and ’XX the the the move one ’XX, December. say through when as sort would number, will $XX and won’t facility million We place ‘XX completed. line the PAN indicator will expenditure a announced be carbon of lines range take that in

period. that be that know, will As fairly this through spending far as even I

Operator

you. Thank

question of Lipke Our is from next Stephens. Drew

is line open. Your

Drew Lipke

half startup I new new what from am about facility we curious, breaking we should here? maybe then ground? of And think in in as cost first Alabama ’XX lines that sort impact of the expect

Patrick Winterlich

Okay.

be it’s terms training So roughly through of for and million line. Morocco sort take couple PAN again, premature, quarter the and of on in so run three we and million a but the a we so in based up we to more new of headwinds headcounts relation Roussillon of and out will still XXXX, some XXXX similar have a quarter new that’s Morocco. a to $X been the is little fiber is magnitude complete, called going That quarter Roussillon cost quarters headwinds The has into so, going $XX -- a XXXX. two. since to -- rate, all or some of and line with Alabama could bit have in and one on. path running

in headwind Roussillon, before will be productive, However, terms fully some it’s France. be it training as not extent the quite perhaps is the of an for at transition. There headcount existing and cost but smoother the plant facility same and a will

DrewLipke

quarterly for Is million the or full year? that X

Patrick Winterlich

I’m first saying is for already which the the year. of year the full half

DrewLipke

Okay.

you the sales about we going kind see Should new margins out any absent throughout XX that, in being basis year. up change acceleration So as we of cost on think and million XX start that points incremental down forward anniversary sales end up as would ’XX, the in been have margins called we cost? in

Patrick Winterlich

to that's I we already, of in headwinds but away But takes obviously built and and guidance. you take terms into puts Obviously, our mean if year the margin. have help, going for it's

We’ve but a It We’re At best of think can. can. performance mix the sort mid-XXs target. much we is what that will out depend bottom of for push. we obviously as or on to called the to business so we the we’re continue take XX% trying margin we as strong to incremental to push trying will as

Operator

Thank you.

Our Noah Goldman from Poponak next question from Sachs. is

line Your is open.

Noah Poponak

and for first end the growth to kind model back presumably widebody on in the growth because them. coming but or what reengineer single growth that reasonably of it’s ’XX commercial leading that think you’re and plan guess cadence, a the the they up, I projecting at high closer XXX ’XX of why for been largely and staring aerospace bodies XXXX you’re piece but AXXX or for wanted had mix I from inventory the OEMs. here, digit of to a has pace Obviously, need kind half from guess market still go wasn’t the half second So the I’m of the I to you, sort to the decent ’XX of part ’XX destock down, bridge half growth wasn’t small half to second of the is mix the second maybe I the didn't. revenue, to smooth the faster wondering

the the those half would a to healthy 'XX. of be would I in hope imagine back So revenue started of mix

of 'XX? So I how in kind of things single kind am from half missing that the of close bridge 'XX to flat moved upper back in what to

Nick Stanage

move towards going decline. from I the is way the to Neo what you XX. rate about maybe guess going enjoy down its And mix and March for see step Max. four repeat to grow. is to slightly. Airbus be X. XX about probably 'XX AXXX, or the XXXX We're of going The might mean year XXX, we'll The narrowbodies and XXX Boeing midyear would that's continues we per year I probably as way up, to to up of close, still going probably I to the I X said. But might rate for take -- the legacy X mean it's you've to to some it that going transition quarter go say, our is both to about us. for the it'd the AXXX we is in end working at but look see this at is go down probably by and to

for the where and by you by expecting so see gap sure to outlook. I not we're single-digit quite in that steady growth stand high we called am aerospace, see we I stand commercial out XXXX that think So, we is, but

Noah Poponak

growth 'XX? narrowbodies quantify you and in It 'XX. in the your versus for explanation was where that dollars most mean to that of rate 'XX? does us, rate of portion for that likely in ability just larger 'XX would seem in much our 'XX the like in Or I to 'XX the half would much back of it in being goes be the a go any and absolute was versus what in like how revenue where it reengined

Patrick Winterlich

a content what don't of year. next And platform. our and want we year There's We XXX,XXX it's on platform, we percentage point drive Max really you Neos Neo get But Neo or into on. either XXX,XXX growth or when from a don't your specifics. how ship that. shipset next new to And the a a supply spot estimate no have question, the depending or on significant legacy. XXX,XXX, an ship certainly increase chain, legacy we XXX,XXX so many Max But call again, increasing out is and versus to complex on the

Operator

you. Thank

next Kapsch Chris of is from Our Capital. question Loop

Your line open. is

Chris Kapsch

the so without on for of you one. at follow-up the high program I being sort it seem I and -- and it last was AXXX the And in had growth least given doesn't though like think the like yet that. last quarter. sounds commercial there is aero based guidance in what discussed above fourth flattish this quarter, get high single-digit growth, can So, it evening, a single-digit as we AXXX your looks maybe on

a on flat in ramp would -- you over course been can XXXX? in comps that of expect quarter? you is the the back the Or rate see expect what to So growth in a in should growth that? program, for we And the quarter? just to over you reacceleration might AXXX bit why first elaborate for the then to see that up timeframe more the little have Do bounce the it wondering, going

Patrick Winterlich

Yes.

we to low in XXXX. see do growth the for single-digit, expect Chris, high double-digit AXXX So,

oddball comparison quarter-over-quarter of run is exceptionally a be out to was quarter honest the think rate. I four was what an high. stands It the bit really XXXX in

And a so, it off. this quarter that little bit to made comparative

I read much too So into that. wouldn’t

rather and XXXX just quarter whatever was being was offbeat. slightly For than four reason, it lumpy high XXXX very

to growth project and I XXXX. do expect we think where the into XXXX was continue we

Chris Kapsch

growth growth revenue in the implied Would for double digit or growth the that in more ’XX the with overall? -- just for consistent in be platform A-XXX

Patrick Winterlich

Low double Chris. digit,

Chris Kapsch

strong little out even a so And year. and at guidance sensitivity of at full talked is speak about And breaking hedged just about dollars, and little ’XX for your the bit unique a hedging that then, lot we ’XX? in point? you sell the for bit the this to given a euros assumption it obviously material Hexcel currency your curious you are What's in and looks all as in have of the the And terms relationship? how dollar-euro started and just you you the

Nick Stanage

XX out that some quarters We've we’ve done for hedged and time.

XXXX into into So, yes, I have XX% out hedging and out XXXX. even perhaps

now. but about mean is right the acknowledge of dollar point for year of us is a results weakening materially I probably yes for We’re right will in our it a that bit that change time. at two at a thirds, the headwind. headwind to I of you’re this sort this this a XX% hedged weakening wouldn’t point bit out call dollar

Operator

Thank you.

Lee Our Research. Wolf next of William question is from

is line open. Your

William Lee

In how target I will past, and XXXX? How expenses research you grow We that year-over-year XX% tracked the should technology about over we think growth. below about year. in fast the believe last

catch to expect up we see should So in XXXX? some

Patrick Winterlich

consistently, need We double sure capability. spend we hire spend. I think We right we we identify to the have when for say we digit. spend find what we and we opportunities talent XX% what basically the to make

So on projects. it is based critical qualifications, a on little lumpy based

in don’t just a what in up. a ballpark bit, you’ll it directionally So, right. based but your for or on XX% Xx catch we is expect It's down have little a that come modeling maybe, big see

Operator

you. and Thank conclude Ladies gentlemen does today’s that call.

day. disconnect. all a have Everyone may great You

Hexcel (HXL) 25 Jan 182017 Q4 Earnings call transcript