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Hexcel Reports 2011 Third Quarter Results

Dépèche transmise le 24 octobre 2011 par Business Wire

STAMFORD, Conn.--(BUSINESS WIRE)--Regulatory News:

 

Third Quarter 2011 Highlights

Sales of $351.8 million were 19.5% higher than last year (17.3% in constant currency)
led again by strong Commercial Aerospace sales (up 31.2% in constant currency).

 

Net Income Was $32.2 Million, $0.32 Diluted EPS ($0.34 Adjusted Diluted EPS, See Table
C), versus $15.6 Million, $0.16 Diluted EPS ($0.20 Adjusted Diluted EPS Last Year).

 

2011 adjusted diluted EPS guidance increased to a range of $1.18 to $1.23 (from
$1.05 - $1.12) and sales increased to a range of $1,375 million to $1,400 million.

 
     

Quarter Ended
September 30,

       

Nine Months Ended
September 30,

   
 
(In millions, except per share data)           2011         2010     % Change         2011         2010     % Change
               
Net Sales $ 351.8 $ 294.5 19.5% $ 1,037.1 $ 862.6 20.2%
Net sales change in constant currency 17.3% 18.1%
Operating Income 46.0 34.5 33.3% 142.6 98.8 44.3%
Net Income 32.2 15.6 106% 96.0 54.5 76%
Diluted net income per common share $ 0.32 $ 0.16 100% $ 0.95 $ 0.55 73%
 

Non-GAAP Measures for y-o-y comparisons:

Adjusted Operating Income (table C) $ 48.7 $ 34.5 41.1% $ 139.6 $ 102.3 36.5%
As a % of sales 13.8% 11.7% 13.5% 11.9%
Adjusted Net Income (table C) 34.0 19.9 71% 91.2 57.5 59%
Adjusted diluted net income per share       $   0.34     $   0.20     70%     $   0.91     $   0.58     57%
 

Hexcel Corporation (NYSE:HXL)(Paris:HXL), today reported results for the third quarter of 2011. Net sales during the quarter were $351.8 million, 19.5% higher than the $294.5 million reported for the third quarter of 2010. Operating income for the period was $46.0 million, compared to $34.5 million last year. Net income for the third quarter of 2011 was $32.2 million, or $0.32 diluted earnings per share, compared to $15.6 million or $0.16 diluted earnings per share in 2010. Excluding the items in Table C, adjusted diluted net income for the third quarter of 2011 was $0.34 per share compared to $0.20 per share in the third quarter of 2010.

Chief Executive Officer Comments

Mr. Berges commented, “This was another strong quarter that exceeded our expectations. For the quarter, we had a 31.6% increase in commercial aerospace sales, driven by increased airplane build rates, the ramp-up of new programs and restocking by our customers. Solid gross margin performance coupled with our cost control efforts resulted in a 13.8% adjusted operating margin. Add the strong operating performance to the benefits of a lower tax rate this quarter and we achieved a 70% increase in adjusted diluted EPS compared to last year. Based on these favorable year-to-date results and our current outlook for the remainder of the year, we are increasing 2011 adjusted diluted EPS guidance to $1.18 - $1.23 (from $1.05 - $1.12). We are also raising our sales guidance for the year to $1,375 million - $1,400 million (from $1,325 million - $1,375 million).”

Looking ahead, Mr. Berges said, “With year to date commercial aerospace sales up 29%, our outlook for this market has strengthened significantly in recent quarters. The A380, B787 and B747-8 are each now ramping up simultaneously and legacy aircraft build rate increases have been announced by Boeing and Airbus. In addition, two re-engined narrow-body programs (A320neo and B737 MAX) will increase Hexcel content on the highest volume aircraft sooner than an all-new aircraft would have. As a result, we are working to pull forward our capital investments to support higher demand. We anticipate providing further 2012 guidance in December, after we have concluded our planning cycle, but we expect to exceed the $200 million top end of our prior capital expenditure range for 2012.”

Markets

Commercial Aerospace

  • Commercial Aerospace sales of $207.4 million increased 31.6% (31.2% in constant currency) for the quarter as compared to the third quarter 2010. Revenues attributed to new aircraft programs (A380, A350, B787, B747-8) increased more than 35% versus the same period last year and continue to comprise more than 25% of our total Commercial Aerospace sales. Airbus and Boeing legacy aircraft related sales for the quarter were up over 25% compared to the third quarter of 2010 as we see the additional demand for upcoming line-rate increases.
  • Sales to “Other Commercial Aerospace,” which include regional and business aircraft customers, were up over 30% for both the quarter and year to date compared to the same periods last year, maintaining their improved level of the first two quarters of 2011.

Space & Defense

  • Space & Defense sales of $80.9 million were 8.7% higher (7.4% in constant currency) than the third quarter of 2010. We continue to benefit from rotorcraft related growth as new programs and blade retrofit programs are increasingly composites based.

Industrial

  • Total Industrial sales of $63.5 million for the third quarter of 2011 were 1.6% higher (4.5% lower in constant currency) than the third quarter of 2010. Wind sales were down modestly in constant currency from the third quarter of 2010, but up more than 10% from the second quarter of 2011. This was the third straight quarter of sequential growth for wind sales.

Operations

  • Gross margin was 24.6% of net sales for the quarter as compared to 23.9% in the third quarter of 2010 due to good leverage on the strong sales volume. Despite the typical summer seasonal schedules, third quarter of 2011 sales were almost the same level as the second quarter of 2011 for the first time in recent history. On a constant currency basis, selling, general and administrative expenses were about 2% higher than last year helping us achieve adjusted operating income of 13.8% for the quarter compared to 11.7% for the third quarter of 2010.

Tax

  • The tax provision was $12.0 million for the third quarter of 2011, an effective tax rate of 27.4%. The current quarter benefited from both the reduction in our estimated tax rate for the year from 31.8% to 31%, and the release of $1.0 million of reserves for uncertain tax positions. Last year’s third quarter tax provision was $6.8 million, a 30.4% effective tax rate.

Cash and other

  • Free cash flow for the first nine months of 2011 was $11.5 million versus $37.6 million in 2010, as higher earnings were offset by increased capital spending. Free cash flow is defined as cash provided from operating activities less cash paid for capital expenditures. Total debt, net of cash as of September 30, 2011 was $200.4 million, a decrease of $14.6 million from December 31, 2010. Our accrual based capital expenditures were $104.3 million for the first nine months of 2011, and we now expect these expenditures for 2011 to be at the high end of our $150 million - $175 million range for the year as we accelerate our expansion programs.
  • Interest expense for the third quarter was $2.2 million compared to $5.3 million last year. The decrease primarily reflects the lower borrowing rate as a result of the July 2010 refinancing and the February 1, 2011 bond redemption, as well as lower outstanding debt.
  • The third quarter of 2011 results include a pre-tax charge of $2.7 million for additional environmental reserves (recorded in other operating expense) primarily to remediate our former Lodi, New Jersey manufacturing facility sold in 1986. We had expected to substantially complete the remediation by the end of this year, but severe regional flooding, particularly from hurricane Irene, has extended the completion date to next year and increased the remediation costs.

Hexcel will host a conference call at 10:00 A.M. ET, tomorrow, October 25, 2011 to discuss the third quarter results and respond to analyst questions. The telephone number for the conference call is (719) 325-2452 and the confirmation code is 4985717. 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 composites 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 such as wind turbine blades.

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 changes in commercial aerospace revenues, the estimates and expectations based on aircraft production rates made publicly available by Airbus and Boeing, the revenues we may generate from an aircraft model or program, the impact of delays in new aircraft programs, the outlook for space & defense revenues and the trend in wind energy, recreation and other industrial applications); our ability to maintain and improve margins in light of the changes in product mix, efficiency improvements, continued cost reduction efforts and the current economic environment; outcome of legal matters; the magnitude and timing of capital expenditures in relation to market demand; and the impact of the above factors on our expectations of 2011 financial results. 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 raw material costs, competition, product mix, inability to achieve planned manufacturing improvements and cost reductions, supply chain disruptions, conditions in the financial markets and changes in currency exchange rates, interest rates, governmental and environmental regulations and tax codes. 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
September 30,

Nine Months Ended
September 30,

(In millions, except per share data)           2011       2010       2011       2010  
Net sales $   351.8 $   294.5 $   1,037.1 $   862.6
Cost of sales           265.3       224.0       780.6       647.6  
 
Gross margin 86.5 70.5 256.5 215.0
% Gross margin 24.6 % 23.9 % 24.7 % 24.9 %
 
Selling, general and administrative expenses 29.9 28.7 92.5 89.7
Research and technology expenses 7.9 7.3 24.4 23.0
Other operating (income) expense (a)           2.7             (3.0 )     3.5  
 
Operating income 46.0 34.5 142.6 98.8
 
Interest expense, net 2.2 5.3 9.3 19.0
Non-operating expense (b)                 6.8       4.9       6.8  
 

Income before income taxes and equity in earnings from

affiliated companies 43.8 22.4 128.4 73.0
Provision for income taxes (c)           12.0       6.8       33.5       18.9  
 
Income before equity in earnings from affiliated companies 31.8 15.6 94.9 54.1
Equity in earnings from affiliated companies           0.4             1.1       0.4  
 
Net income       $   32.2   $   15.6   $   96.0   $   54.5  
 
Basic net income per common share: $ 0.33   $ 0.16   $ 0.97   $ 0.56  
 

Diluted net income per common share:

$ 0.32   $ 0.16   $ 0.95   $ 0.55  
 
 
Weighted-average common shares:
Basic 99.0 97.7 98.6 97.6
Diluted           101.1       100.0       100.7       99.9  
 

a)

Other operating expense for the third quarter of 2011 and the nine months ended September 30, 2010 includes an increase in
environmental reserves primarily for remediation of a manufacturing facility sold in 1986 for $2.7 million and $3.5 million, respectively.
Other operating income for the nine months ended September 30, 2011 also includes a $5.7 million benefit from the curtailment of a
pension plan.

b)

Non-operating expense for the nine months ended September 30, 2011 is the accelerated amortization of deferred financing costs and
expensing of the call premium from redeeming $150 million of 6.75% senior subordinated notes. The $6.8 million non-operating
expense in the third quarter 2010 reflects the accelerated amortization of deferred financing costs as a result of the refinancing of our
Senior Secured Credit Facility.

c)

Provision for income taxes for the nine months ended September 30, 2011 includes a release of $5.5 million of reserves in the second
quarter primarily for uncertain tax positions as a result of an audit settlement. Provision for income taxes for the nine months ended
September 30, 2010 includes $3.5 million of New Clean Energy Manufacturing Tax Credits awarded in January 2010 for qualifying capital
investments made in our U.S. wind energy facility in 2009.

Business Wire

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Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited

(In millions)

     

September 30,
2011

       

December 31,
2010

Assets          
Current assets:
Cash and cash equivalents $ 48.4

 

$ 117.2
Accounts receivable, net 208.5 173.9
Inventories, net 213.3 169.9
Prepaid expenses and other current assets       59.8           36.7  
Total current assets 530.0 497.7
Property, plant and equipment 1,170.3 1,063.9
Less accumulated depreciation       (506.3 )         (465.6 )
Property, plant and equipment, net 664.0 598.3
Goodwill and other intangible assets, net 57.7 56.2
Investments in affiliated companies 21.9 19.9
Deferred tax assets 29.9 63.6
Other assets       17.6           22.4  
Total assets     $ 1,321.1         $ 1,258.1  
 
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of capital lease obligations $ 11.9 $ 27.6
Accounts payable 113.9 83.0
Accrued liabilities       94.9           95.3  
Total current liabilities 220.7 205.9
Long-term notes payable and capital lease obligations 236.9 304.6
Other non-current liabilities       74.2           88.2  
Total liabilities 531.8 598.7
 
Stockholders' equity:

Common stock, $0.01 par value, 200.0 shares authorized, 100.4 shares issued at
     September 30, 2011 and 99.5 shares issued at December 31, 2010

1.0 1.0
Additional paid-in capital 579.9 552.3
Retained earnings 244.4 148.4
Accumulated other comprehensive loss