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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
September 24, 1998 (September 15, 1998)
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Date of report (Date of earliest event reported)
Hexcel Corporation
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-8472 94-1109521
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(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
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(Address of Principal Executive Offices and Zip Code)
(203) 969-0666
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(Registrant's telephone number, including area code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. OTHER EVENTS.
BUSINESS ACQUISITION
On September 15, 1998, Hexcel Corporation ("Hexcel" or the "Company") acquired
from Clark-Schwebel, Inc. and its subsidiaries (collectively, the "Seller")
certain assets and operating liabilities of its industrial fabrics business (the
"Acquired Fabrics Business"). This acquisition was completed pursuant to an
Asset Purchase Agreement dated July 25, 1998, as amended, by and among Hexcel,
Stamford CS Acquisition Corp., Clark-Schwebel Holdings, Inc., and
Clark-Schwebel, Inc., a copy of which has been previously filed by the Company
in a Current Report on Form 8-K dated July 30, 1998.
In exchange for the net assets of the Acquired Fabrics Business and in partial
payment for a related ownership interest in a European fabrics joint venture
(the "European Joint Venture Interest"), Hexcel paid the Seller approximately
$444 million in cash, subject to certain potential adjustments. The Company
also agreed to pay an additional $19 million to complete the acquisition of the
European Joint Venture Interest, which is comprised of 43.6% of the outstanding
common stock of the venture and options to purchase up to an additional 40% of
such stock. Consummation of the acquisition of the European Joint Venture
Interest is subject to the receipt of certain regulatory approvals. If such
approvals are not received on or before January 24, 1999, either the Company or
the Seller may terminate the Company's obligation to acquire the European Joint
Venture Interest, in which case the Company's commitment to pay the additional
$19 million will be extinguished and the Company will be entitled to receive a
share of the sales proceeds resulting from the disposition of the European Joint
Venture Interest by the Seller. The Company will account for the acquisition of
the Acquired Fabrics Business and the European Joint Venture Interest using the
purchase method of accounting.
In connection with the acquisition of the Acquired Fabrics Business, Hexcel also
agreed to lease $50 million of property, plant and equipment used in the
Acquired Fabrics Business from an affiliate of the Seller, pursuant to a
long-term lease with purchase options. Furthermore, the Company obtained a new
global credit facility (the "Senior Credit Facility") that provides for up to
$910 million of borrowing capacity. Borrowings under the Senior Credit Facility
were used to fund the cash purchase price of approximately $444 million and to
refinance the Company's previous bank debt. The Senior Credit Facility is also
available to provide for ongoing working capital requirements and general
corporate purposes. Following the transactions of September 15, 1998,
outstanding borrowings and letter of credit commitments under the Senior Credit
Facility totaled approximately $615 million.
1
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Hexcel's consolidated results of operations for the third quarter of 1998 will
include the results of the Acquired Fabrics Business for the 15 day period that
it was owned by the Company. The Company's 1998 third and fourth quarter
results will also reflect certain non-recurring charges resulting from this
acquisition. The aggregate total of these non-recurring charges is estimated at
approximately $3.1 million on a pre-tax basis, or 4 cents per diluted share on
an after-tax basis. In addition to these non-recurring charges, the Acquired
Fabrics Business is currently expected to reduce Hexcel's 1998 fourth quarter
earnings in the range of 1 to 3 cents per diluted share. During July and August
of 1998, the Acquired Fabrics Business experienced a reduction in sales volumes
resulting from a period of inventory adjustment in the printed circuit board
segment of the electronics industry. However, the volume of sales orders has
recently begun to increase, suggesting that this period of inventory adjustment
is now coming to an end. If the level of sales orders continues to strengthen,
then the dilutive impact of the Acquired Fabrics Business on the Company's
fourth quarter earnings may be less than anticipated. The Acquired Fabrics
Business is expected to be accretive to the Company's earnings beginning in
1999.
BUSINESS CONSOLIDATION
In addition to the non-recurring charges directly resulting from the acquisition
of the Acquired Fabrics Business, Hexcel expects to record a charge during the
fourth quarter of 1998 for certain costs necessary to consolidate the Acquired
Fabrics Business with the Company's existing fabrics operations. The final
amount of this charge cannot be determined until the Company's business
consolidation plan has been finalized over the next six to eight weeks. Once
such plans are completed, the Company will announce details of its consolidation
program and estimates of the anticipated costs and savings.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Certain statements contained in this Current Report on Form 8-K constitute
"forward-looking statements." Such forward-looking statements include, but are
not limited to, estimates of the impact of the Acquired Fabrics Business on
Hexcel's future earnings, estimates of certain costs necessary to consolidate
the Acquired Fabrics Business with the Company's existing fabrics operations,
and expectations regarding the volume of sales orders of the Acquired Fabrics
Business. Such forward-looking statements also include estimates involving the
acquisition of the net assets of the Acquired Fabrics Business, including the
European Joint Venture Interest and leased property, plant and equipment, such
as the following estimates contained in the accompanying unaudited pro forma
information: (a) the final purchase price for the assets and operating
liabilities of the Acquired Fabrics Business, including certain potential
adjustments; (b) the final allocation of the purchase price to the net assets
acquired; (c) net borrowings and interest expense under the new Senior Credit
Facility; (d) the cost of consolidating the Acquired Fabrics
2
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Business with Hexcel, and the potential synergistic benefits that may result
from this consolidation; and (e) the non-recurring charges to be recorded in
connection with these transactions. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results to be materially different.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF THE ACQUIRED FABRICS BUSINESS.
Financial statements of the Acquired Fabrics Business are not
included in this Current Report on Form 8-K. Hexcel will file
such financial statements as soon as practicable after the
date hereof.
(b) PRO FORMA FINANCIAL INFORMATION.
The required pro forma financial information is contained in
Exhibit 99.2.
(c) EXHIBITS.
2.1 Amendment No. 1 to the Asset Purchase Agreement by and
among Hexcel, Stamford CS Acquisition Corp.,
Clark-Schwebel Holdings, Inc. and Clark-Schwebel, Inc.,
dated September 15, 1998.
99.1 Press release dated September 16, 1998, relating to the
closing of the acquisition by Hexcel of certain assets
of Clark-Schwebel, Inc. and its subsidiaries.
99.2 Unaudited Pro Forma Financial Information.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 24, 1998
HEXCEL CORPORATION
By: /s/ WAYNE C. PENSKY
Name: Wayne C. Pensky
Title: Corporate Controller;
Chief Accounting Officer
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
2.1 Amendment No. 1 to the Asset Purchase Agreement by and
among Hexcel, Stamford CS Acquisition Corp.,
Clark-Schwebel Holdings, Inc. and Clark-Schwebel,
Inc., dated September 15, 1998.
99.1 Press release dated September 16, 1998, relating to
the closing of the acquisition by Hexcel of certain
assets of Clark-Schwebel, Inc. and its subsidiaries.
99.2 Unaudited Pro Forma Financial Information.
</TABLE>
5
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EXHIBIT 2.1
AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 1, dated as of September 14, 1998 (this
"Amendment") by and among Stamford CS Acquisition Corp., a Delaware corporation
("Stamford"), Hexcel Corporation, a Delaware corporation ("Buyer"), and, as of
the Effective Date, Clark-Schwebel Holdings, Inc., a Delaware corporation
("CSH"), and Clark-Schwebel, Inc., a Delaware corporation ("CS Inc."), amends
the Asset Purchase Agreement dated as of July 25, 1998 (the "Asset Purchase
Agreement"), by and among Stamford, Buyer, and, as of the Effective Date, CSH
and CS Inc.
RECITALS
WHEREAS, Stamford and Buyer are currently parties to the Asset
Purchase Agreement;
WHEREAS, on the Effective Date, CSH, as successor in interest to
Stamford, will become a party to the Asset Purchase Agreement by operation of
law, and, as the parent of CS Inc., shall cause CS Inc. to become a party to the
Asset Purchase Agreement; and
WHEREAS, the parties hereto wish to amend the Asset Purchase Agreement
as herein provided;
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meaning ascribed to such terms in the Asset Purchase Agreement.
2. AMENDMENTS TO ASSET PURCHASE AGREEMENT.
(A) Section 1.1(a) of the Asset Purchase Agreement is hereby amended
by adding the following language immediately after "Closing" in the second line
thereof:
"or the Deferred Closing with respect to the Interglas Assets, as
applicable (it being understood that the Interglas Assets will be
retained by CSI Inc. or its subsidiaries until the Deferred
Closing and in no event shall any of the Interglas Assets be
sold, conveyed,
<PAGE>
assigned, transferred or delivered to Buyer until the Deferred
Closing),"
(B) Section 1.1(a)(xiii) of the Asset Purchase Agreement is hereby
amended by adding the following language immediately before "and all related
documents and instruments":
", all dividends and other distributions paid or declared in
respect of the Interglas Shares from the closing of the Merger
through and including the Deferred Closing, provided there is a
Deferred Closing"
(C) Section 1.1(a)(xv) of the Asset Purchase Agreement is hereby
amended by deleting from the third line thereof the following: ", the Tech-Fab
License Agreement."
(D) Section 1.1(a)(xviii) of the Asset Purchase Agreement is hereby
amended by adding the following language at the end thereof:
"other than the Retained Cash (the "Acquired Cash")"
(E) Section 1.1(a) of the Asset Purchase Agreement is hereby amended
by adding the following language at the end thereof:
"For avoidance of doubt, the parties agree that Buyer is
purchasing the capital stock of all of the non-Domestic
Subsidiaries of CS Inc. (other than as provided in Section
1.1(c)(ii) ) (the "Purchased Subsidiaries") and is not purchasing
the assets of the Purchased Subsidiaries."
(F) Section 1.1(c) of the Asset Purchase Agreement is hereby amended
by deleting Section 1.1(c)(ii) in its entirety and replacing such section with
the following:
"(ii) all capital stock of Domestic Subsidiaries held by CS
Inc., Stamford or any of their subsidiaries and all
capital stock and all of the assets of Clark-Schwebel
Foreign Sales Corporation, a Virgin Islands
corporation";
(G) Section 1.1(c) of the Asset Purchase Agreement is hereby amended
by adding a new Section 1.1(c)(v) which read as follows:
<PAGE>
"(v) cash and cash equivalents of CSH, CS Inc. and any of their
subsidiaries in an amount equal to $10,129,935.03 (the "Retained
Cash.")"
(H) Section 1.1(d)(vi) of the Asset Purchase Agreement is hereby
amended by deleting "and 11.9" and replacing such words with ", 11.9 and 11.21".
(I) Section 1.1(d) of the Asset Purchase Agreement is hereby amended
by adding a new Section 1.1(d)(vii) which shall read as follows:
"(vii) any and all obligations and liabilities of CSH or CS Inc.
and its subsidiaries arising from or relating to the assets that
are leased to Buyer or one of its affiliates pursuant to the
Lease"
(J) Section 1.1(e)(i) is hereby amended by adding the following
language immediately after the reference to "Section 1.1(d)(iv)":
"and Section 1.1(d)(vii)"
(K) Section 1.1(e)(i) is hereby further amended by adding the
following language immediately after the reference to "the Lease":
"or as expressly set forth in any of the Operative Documents (as
defined in the Participation Agreement)"
(L) Section 1.1(e)(iii) of the Asset Purchase Agreement is hereby
amended by deleting from the second and third lines thereof the following:
"and Employee Bonuses (as defined in the Merger Agreement)"
(M) Section 1.2 of the Asset Purchase Agreement is hereby amended by
deleting Section 1.2(a) and 1.2(b) in their entirety and replacing such sections
with the following:
"(a) $449,075,951.20 (the "Purchase Price") (of which
$11,000,000 of the Purchase Price is a pre-payment for the
Interglas Assets (the "Interglas Pre-Payment")) payable to
CS Inc. at the Closing, by wire transfer of immediately
available funds to such bank account as shall be designated
by CS Inc. at least two business day prior to Closing.
(b) Reserved."
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(N) Section 1.2(d) of the Asset Purchase Agreement is hereby amended
by deleting reference to "$22 million" and replacing such reference with the
following:
"$30,000,000 less the Interglas Pre-Payment less the amount of
the fees paid to Credit Suisse First Boston in connection with
the Cap Agreement which have not been previously refunded and
paid, directly or indirectly, to Buyer pursuant to Section 4.21
hereof (the "Cap Refund") plus the CS International Expenses, if
any (as defined in Section 4.22(b))"
(O) Section 1.5 of the Asset Purchase Agreement is hereby amended by
adding a new Section 1.5(f) which shall read as follows:
"(f) all dividends and other distributions paid in respect of the
Interglas Shares from the closing of the Merger through and
including the Deferred Closing."
(P) Section 4.8 of the Asset Purchase Agreement is hereby
amended by changing the phrase "loss payee" to "named insured' in both places
where it appears therein and by inserting the phrase "as Buyer shall designate
on or prior to the Closing Date" between the words "under such policies" and
"with respect to the Prior Occurrences" in both places where such words appear
therein.
(Q) Article IV of the Asset Purchase Agreement is hereby amended by
adding a new Section 4.20, 4.21 and 4.22 which shall read as follows:
"Section 4.20 MAINTENANCE OF SUBSIDIARIES. (a) From and after
the Effective Date through the earlier to occur of the Deferred
Closing or the termination of this Agreement pursuant to Article VII
hereof, CSH and CS Inc. agree to, and agree to cause their affiliates
to, preserve and maintain the status of Clark-Schwebel International,
Inc. as a Delaware investment holding company;
(b) From and after the Effective Date through and includ-
ing the Closing, CSH and CS Inc. agree to, and agree to cause their
affiliates to, not remove Jack Schwebel, Risuke Tanimura and Alfred
Kwok as directors of Clark-Schwebel Group Hong Kong, Ltd., a Hong Kong
company, PROVIDED that CSH and CS Inc. may remove, or cause the
removal of, such directors upon receipt of the prior written consent
of Buyer, such consent not to be unreasonably withheld.
(c) From and after the Effective Date through and includ-
<PAGE>
ing the Deferred Closing, CSH and CS Inc. agree to, and agree to cause
their affiliates to, not remove the current directors of CS Interglas
AG that were designated by CS International, PROVIDED that CSH and CS
Inc. may remove, or cause the removal of, such directors upon receipt
of the prior written consent of Buyer, such consent not to be
unreasonably withheld.
Section 4.21. CAP AGREEMENT REFUNDS. CSH and CS Inc. agree
to pay Buyer, immediately upon receipt thereof, any refund of the fees
paid to Credit Suisse First Boston in connection with the Cap
Agreement, provided that Buyer shall not be entitled to such refund
after the Deferred Closing if the Deferred Purchase Price was reduced
pursuant to Section 1.2(d) to take into account the Cap Agreement. CS
Inc. agrees to take all necessary action to cause the Trust to
distribute to CS Inc. pursuant to Section 5.3 of the Trust Agreement
all refunds of fees, costs, expenses or other amounts paid by or on
behalf of the Trust in connection with the Cap Agreement or Cap
Refund.
Section 4.22 TERMINATION OF LETTER AGREEMENT AND AGREEMENT
REGARDING THE INTERGLAS ASSETS. (a) The certain letter agreement,
dated July 25, 1998 from Stamford CS Acquisition Corp to Hexcel
Corporation relating to the matters set forth in Section 4.22(b) is
hereby terminated.
(b) In the event that this Agreement is terminated pursuant to
Article VII hereof prior to the consummation of the transactions
contemplated by the Deferred Closing but subsequent to the Closing
Date, then CS Inc. shall use its commercially reasonably efforts to
sell, transfer and assign all of the Interglas Assets and all
dividends or other distributions paid or declared in respect of the
Interglas Shares from the Effective Date to a bona fide, unrelated
third party at a fair market, arms-length negotiated cash purchase
price (a "Third Party Sale"). In connection with any such Third Party
Sale, Buyer and CS Inc. agree to cooperate in good faith to maximize
the purchase price to be paid for the Interglas Assets and all
dividends or other distributions paid or declared in respect of the
Interglas Shares from the Effective Date. With respect to any such
Third Party Sale, CS Inc. and Buyer hereby agree to share the proceeds
of such Third Party Sale (net of reasonable expenses incurred in
connection with such Third Party Sale) (the "Net Sale Proceeds") in
the following manner: (i) first, Net Sale Proceeds shall be used for
the reimbursement of expenses actually incurred by CS International in
respect of its ownership of the Interglas Assets during the period
from the Closing up to but not including the closing date of the Third
Party Sale (the "CS International Expenses"), (ii) second, Net-Sale
Proceeds for the next $3 million shall be remitted solely to
<PAGE>
Buyer, (iii) third, Net-Sale Proceeds for the next $31.67 million
shall be remitted 60% to CS Inc. and 40% to Buyer; and (iv) fourth,
all remaining Net Sale Proceeds shall be remitted solely to Buyer."
(R) Section 8.3 of the Asset Purchase Agreement is hereby amended by
adding the following new clauses (iii), (iv), (v) and (vi) immediately following
the end of clause (ii):
"(iii) the representations and warranties of CS Inc. set forth in
(A) the following sections of the Participation Agreement:
Section 3.4(b)(iv) to the extent of references to "material
agreements" or "other instruments", Section 3.4(b)(v), Section
3.4(e), Section 3.4(f), Section 3.4(g), Section 3.4(h), Section
3.4(i), and Section 3.4(k) and (B) the bill of sale and deeds
contemplated by Section 4.1(f) of the Participation Agreement,
(iv) any representations and warranties of the CS Inc. in the
Trust Agreement and indemnification obligations of CS Inc. under
Section 8.1 of the Trust Agreement, (v) any Lessor Lien (as
defined in the Lease) other than any Lessor Lien that arises
exclusively as a result of the action or inaction of CS Inc. or
its affiliates after the Closing of the transactions contemplated
by the Lease and (vi) affidavits, deeds, bills of sale, gap
indemnities, certificates and instruments of transfer executed on
the Closing Date by CS Inc. in connection with the Lease, the
Participation Agreement, the Trust Agreement and the transactions
contemplated thereby.
(S) Article VIII of the Asset Purchase Agreement is hereby amended by
adding a new Section 8.6 which shall read as follows:
"Section 8.6. OTHER INDEMNIFICATION. The indemnification
obligations of Buyer under Section 8.3 shall be in addition to
the indemnification obligations of Lessee (as defined under the
Lease) in the Participation Agreement, provided however, that a
Seller Indemnitee shall not be indemnified more than once for any
Losses."
(T) Article X of the Asset Purchase Agreement is hereby amended by
adding the following definitions which shall appear in alphabetical order in
Article X:
""Acquired Cash" shall have the meaning set forth in Section
1.1(a)(xviii) hereof."
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""Cap Agreement" shall mean the interest rate cap agreement
entered into in connection with and as contemplated by the
Participation Agreement with a Cap Strike equal to current three-year
Treasury yield and an underlying index of USD-LIBOR-BBA for the period
from September 17, 1998 through September 17, 2001."
""Cap Refund" shall have the meaning set forth in Section 1.2(d)
hereof."
""CS International Expenses" shall have the meaning set forth in
Section 4.22(b)."
""Interglas Pre-Payment" shall have the meaning set forth in
Section 1.2(a) hereof."
""Net Sale Proceeds" shall have the meaning set forth in Section
4.22(b) hereof."
""Participation Agreement" shall mean the Participation Agreement
among Hexcel CS Corporation, CSI Leasing Trust, Wilmington Trust
Company, Clark-Schwebel, Inc., Buyer and Credit Suisse First Boston to
be dated on or about the Closing Date."
""Purchased Subsidiaries" shall have the meaning set forth in
Section 1.1(a) hereof."
""Retained Cash" shall have the meaning set forth in Section
1.1(a)(v).
""Tech-Fab Partnership Agreement" means that certain Partnership
Agreement, dated as of December 18, 1984, between Clark-Schwebel
Holding Corporation and Vabobel B.V. , as amended from time to time."
""Third Party Sale" shall have the meaning set forth in Section
4.21(b) hereof."
""Trust" shall mean CSI Leasing Trust, a Delaware business trust,
or other similar entity which is the lessor under the Lease."
""Trust Agreement" shall mean the Business Trust Agreement, dated
as of September 14, 1998, between CS Inc. and Wilmington Trust
Company, as owner trustee."
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(U) Article X of the Asset Purchase Agreement is amended by deleting
the definition of "Tech-Fab Distribution Agreement" appearing therein.
(V) Article X of the Asset Purchase Agreement is amended by deleting
the words "and Tech-Fab" appearing at the end of the definition of the term
"Tech-Fab Cross Distributorship Agreement" and adding in place thereof, the
words "and Clark-Schwebel Fiber Glass Corporation".
3. EFFECTIVE DATE. This Amendment shall be deemed an agreement between
Stamford and Buyer until executed by CSH and CS Inc., at which time it shall be
deemed to be an agreement among Buyer, CSH (as successor to Stamford) and CS
Inc. Stamford shall cause CSH and CS Inc. to execute this Amendment immediately
following the Effective Date.
4. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof)
as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.
5. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
STAMFORD CS ACQUISITION CORP.
By:
--------------------------------
Title:
CLARK-SCHWEBEL HOLDINGS, INC.
By:
--------------------------------
Title:
CLARK-SCHWEBEL, INC.
By:
--------------------------------
Title:
HEXCEL CORPORATION
By:
--------------------------------
Title:
<PAGE>
EXHIBIT 99.1
CONTACT: MEDIA:
RONALD S. ZIEMBA
203-969-0666 EXT. 405
[email protected]
INVESTORS:
STEPHEN C. FORSYTH
203-969-0666 EXT. 425
[email protected]
ACQUISITION ESTABLISHES HEXCEL AS MATERIALS SUPPLIER
TO ELECTRONICS AND TELECOMMUNICATIONS INDUSTRIES
PURCHASE OF CERTAIN CLARK-SCHWEBEL ASSETS COMPLETED
STAMFORD, CT, September 16, 1998 -- Hexcel Corporation (NYSE/PCX: HXL) announced
today that it had completed its previously announced acquisition of certain
assets of Clark-Schwebel, Inc. Hexcel said the acquisition positions the
company as a global leader in supplying high-quality materials for the
electronics and telecommunications industries.
Assets acquired to date include Clark-Schwebel's wholly owned US operations as
well as Clark-Schwebel's interests in two joint ventures, Asahi-Schwebel Co.,
Ltd. and Clark-Schwebel Tech-Fab. Hexcel's acquisition of Clark-Schwebel's
interest in CS-Interglas AG is pending European regulatory approval and is
expected to close in the fourth quarter.
The purchase price for the entire transaction, including the wholly owned US
operations and the three joint venture interests, is $463 million. In addition,
Hexcel will lease $50 million of property, plant and equipment under a long term
lease with purchase options.
Clark-Schwebel is the world's sales and technology leader in the production of
high-quality glass fiber fabrics used to make printed circuit boards for
electronics and telecommunications equipment such as computers, cellular
telephones, televisions and automotive components. Clark-Schwebel fabrics are
also used in reinforced composite materials, ballistic protection and other
applications that demand the strength, chemical resistance and other
high-performance capabilities of glass and other specialty fibers.
<PAGE>
"This is an important strategic transaction for Hexcel," said John J. Lee, the
company's chairman and chief executive officer. "It establishes Hexcel as a
leading global supplier to the electronics and telecommunications industries,
both of which have strong long term growth potential. This will be an excellent
complement to Hexcel's existing leadership positions in commercial aerospace,
space and defense. On a pro forma basis, the acquisition increases our
non-commercial-aerospace sales to about 50% of total sales, from about 35%
currently."
Mr. Lee added, "The acquisition also globalizes our fabrics operations, which
now will have worldwide leadership positions in glass, carbon and Kevlar
reinforcement fabrics. Now that the transaction is closed, our objective is to
build a single, global business that combines the best of Hexcel's and
Clark-Schwebel's capabilities."
Clark-Schwebel has about 1,300 full-time employees and operates manufacturing
facilities in Anderson, SC; Washington, GA; Cleveland, GA; and Statesville, NC.
In 1997 Clark-Schwebel's wholly owned operations in the United States had $240
million of sales and $49 million of EBITDA. In addition, Clark-Schwebel's
Asahi-Schwebel and CS Tech-Fab joint ventures had about $173 million in
combined 1997 sales. The company's CS-Interglas joint venture had about $155
million in sales in 1997.
With its existing operations in Lyon, France and Sequin, TX, Hexcel is the
world's largest producer of carbon fiber reinforcement fabrics. In addition,
Hexcel has attractive niche positions in fiberglass and other specialty fabrics.
These products are used for a range of aerospace, electronic, decorative and
other applications.
The acquisition was funded by borrowings under a new $910 million global credit
facility arranged by Credit Suisse First Boston. The new credit facility was
also used to refinance Hexcel's existing bank debt. Donaldson, Lufkin &
Jenrette served as Hexcel's financial advisor for the transaction.
Hexcel Corporation is the world's leading advanced structural materials company.
It manufactures lightweight, high performance carbon fibers, structural fabrics,
composite materials and engineered products for use in commercial aerospace,
space and defense, recreation and general industrial applications. Hexcel's
1997 revenues were $937 million.
#
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DISCLAIMER ON FORWARD LOOKING STATEMENTS
This news release contains statements that are forward looking, including
statements relating to strategic acquisitions, diversification, sales, growth
prospects, medium term goals, production efficiencies and costs, profitability,
regulatory approvals and other subjects. These statements are not projections
or assured 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 competition,
product mix and currency. Additional risk factors are described in the
company's filings with the SEC. The company does not undertake an obligation to
update its forward looking statements to reflect future events or circumstances.
Accordingly, individuals should not place undue reliance on such statements.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.2
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On September 15, 1998, Hexcel Corporation ("Hexcel" or the "Company") acquired
from Clark-Schwebel, Inc. and its subsidiaries (collectively, "Clark-Schwebel"
or the "Seller") certain assets and operating liabilities of its industrial
fabrics business (the "Acquired Fabrics Business"). This acquisition was
completed pursuant to an Asset Purchase Agreement dated July 25, 1998, as
amended, by and among Hexcel, Stamford CS Acquisition Corp., Clark-Schwebel
Holdings, Inc. and Clark-Schwebel, Inc.
In exchange for the net assets of the Acquired Fabrics Business and in partial
payment for a related ownership interest in a European fabrics joint venture
(the "European Joint Venture Interest"), Hexcel paid the Seller approximately
$444 million in cash, subject to certain potential adjustments. The Company also
agreed to pay an additional $19 million to complete the acquisition of the
European Joint Venture Interest, which is comprised of 43.6% of the outstanding
common stock of the venture and options to purchase up to an additional 40% of
such stock. Consummation of the acquisition of the European Joint Venture
Interest is subject to the receipt of certain regulatory approvals. If such
approvals are not received on or before January 24, 1999, either the Company or
the Seller may terminate the Company's obligation to acquire the European Joint
Venture Interest, in which case the Company's commitment to pay the additional
$19 million will be extinguished and the Company will be entitled to receive a
share of the sales proceeds resulting from the disposition of the European Joint
Venture Interest by the Seller.
In connection with the acquisition of the Acquired Fabrics Business, Hexcel also
agreed to lease $50 million of property, plant and equipment used in the
Acquired Fabrics Business from an affiliate of the Seller, pursuant to a
long-term lease with purchase options. Furthermore, the Company obtained a new
global credit facility (the "Senior Credit Facility") that provides for up to
$910 million of borrowing capacity. Borrowings under the Senior Credit Facility
were used to fund the cash purchase price of approximately $444 million and to
refinance the Company's previous bank debt. The Senior Credit Facility is also
available to provide for ongoing working capital requirements and general
corporate purposes.
The following unaudited pro forma condensed combined balance sheet as of June
30, 1998 was prepared to illustrate the effects of (a) the acquisition of
certain assets and operating liabilities of the Acquired Fabrics Business from
the Seller, (b) the acquisition of the European Joint Venture Interest; (c) the
lease of $50 million in property, plant and equipment used in the Acquired
Fabrics Business from an affiliate of the Seller, and (d) initial borrowings
under the new Senior Credit Facility to finance the acquisition of the Acquired
Fabrics Business and the European Joint Venture Interest and to refinance
Hexcel's previous bank debt (collectively, the "Pro Forma Transactions"), as if
these transactions had occurred on June 30, 1998. The following unaudited pro
forma condensed combined statements of operations for the six months ended June
30, 1998 and for the year ended December 31, 1997 have been prepared to
illustrate the estimated effects of the Pro Forma Transactions as if they had
occurred at the beginning of the periods presented.
The unaudited pro forma financial information presented below is derived from
the audited financial statements of Hexcel and Clark-Schwebel as of and for the
years ended December 31, 1997 and January 3, 1998, respectively, and from the
unaudited financial statements of Hexcel and Clark-Schwebel as of and for the
six month periods ended June 30, 1998 and July 4, 1998, respectively. The
acquisition of certain assets and operating liabilities has been accounted for
using the purchase method of accounting. Accordingly, the estimated purchase
price has been allocated to the assets acquired and liabilities assumed based
upon preliminary estimates
<PAGE>
of fair market values, subject to revision when additional information
concerning asset and liability valuations is obtained.
The following unaudited pro forma financial information is not necessarily
indicative of the results of operations or financial condition that would have
been reported had the events assumed therein occurred on the dates indicated,
nor is it necessarily indicative of results of operations or financial position
that may be achieved in the future. This pro forma financial information is
based on a number of assumptions and estimates made by management using
available information, and does not give effect to certain changes in the
operating results of the combined pro forma business that may result from the
Pro Forma Transactions. Among other things, this pro forma financial information
does not reflect any operating cost reductions or other synergistic benefits
that management expects to achieve as a result of combining the Acquired Fabrics
Business with Hexcel, or the associated costs necessary to achieve such
benefits. In addition, the pro forma results of operations presented below
exclude certain pre-tax non-recurring charges that result directly from the
acquisition, including: (a) an approximately $2 million increase in cost of
sales during the first three months following the acquisition, resulting from
the adjustment of acquired inventories to estimated fair value, and (b) the
write-off of approximately $1.1 million in capitalized debt issuance costs in
connection with the refinancing of the Company's previous bank debt with the new
Senior Credit Facility.
PRELIMINARY PURCHASE PRICE ALLOCATION
For purposes of preparing the accompanying unaudited pro forma financial
information, the aggregate purchase price of $463 million, which includes the
commitment to pay $19 million to complete the acquisition of the European Joint
Venture Interest, has been allocated to the net assets being acquired on the
basis of preliminary estimates of fair market values as of June 30, 1998. These
preliminary estimates of fair market values are as follows:
(AMOUNTS IN THOUSANDS OF US DOLLARS)
<TABLE>
<S> <C>
Accounts receivable $ 22,153
Inventories 39,799
Prepaid expenses and other assets 615
Property, plant and equipment 20,000
Investments in joint ventures, intangibles and other assets (including the
European Joint Venture Interest) 420,775
Accounts payable (22,994)
Accrued liabilities (13,231)
Other non-current liabilities (4,117)
---------------
Estimated fair value of net assets acquired, excluding transaction costs 463,000
Estimated transaction costs incurred and capitalized by Hexcel 13,500
---------------
Estimated fair value of net assets acquired, including transaction costs $ 476,500
------------------------------------------------------------------------------------------------------
</TABLE>
In connection with the acquisition of the Acquired Fabrics Business, Hexcel
also agreed to lease $50 million of property, plant and equipment used in the
Acquired Fabrics Business from an affiliate of the Seller, pursuant to a
long-term lease with purchase options.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------------------
HISTORICAL PRO FORMA
----------------------- ---------------------------
CLARK-
HEXCEL SCHWEBEL ADJUSTMENTS COMBINED
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,969 $ 14,175 $ (14,175)(a) $ 6,969
Accounts receivable 197,388 22,153 -- 219,541
Inventories 183,257 35,799 4,000 (b) 223,056
Prepaid expenses and other assets 23,623 615 -- 24,238
--------- --------- ----------- -----------
Total current assets 411,237 72,742 (10,175) 473,804
Net property, plant and equipment 340,789 57,942 12,058 (c) 410,789
Investments in joint ventures, intangibles and other assets 92,587 113,309 319,860 (d) 525,756
--------- --------- ----------- -----------
Total assets $ 844,613 $ 243,993 $ 321,743 $ 1,410,349
--------- --------- ----------- -----------
--------- --------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 16,055 $ -- $ -- $ 16,055
Accounts payable 70,225 22,994 -- 93,219
Accrued liabilities 95,291 17,631 (4,400)(e) 108,522
--------- --------- ----------- -----------
Total current liabilities 181,571 40,625 (4,400) 217,796
Long-term notes payable and capital lease obligations 301,819 155,994 370,506 (f) 828,319
Indebtedness to related parties 35,459 -- -- 35,459
Other non-current liabilities 36,759 23,717 (19,600)(g) 40,876
--------- --------- ----------- -----------
Total liabilities 555,608 220,336 346,506 1,122,450
Total shareholders' equity 289,005 23,657 (24,763)(h) 287,899
--------- --------- ----------- -----------
Total liabilities and shareholders' equity $ 844,613 $ 243,993 $ 321,743 $ 1,410,349
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
<PAGE>
PRO FORMA ADJUSTMENTS -- UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
(AMOUNTS IN THOUSANDS OF US DOLLARS) 1998
-----------------
<S> <C>
(a) Adjustment to eliminate the cash and cash equivalents of the Acquired Fabrics
Business which were not acquired by Hexcel. (14,175)
-----------------------------------------------------------------------------------------------------------------
(b) Adjustment to increase the basis of acquired inventories to an estimated fair
value of $39,799. 4,000
-----------------------------------------------------------------------------------------------------------------
(c) Adjustment to increase the basis of acquired property, plant and
equipment to estimated fair value, and to recognize the estimated
fair value of property, plant and equipment to be leased pursuant
to a long-term lease with purchase options. 12,058
-----------------------------------------------------------------------------------------------------------------
(d) Adjustment to reflect the following:
Increase in the basis of acquired investments in joint ventures,
intangibles and other assets to an estimated aggregate fair value
of $420,775. 307,466
Capitalization of certain transaction costs incurred in connection
with completing the acquisition and obtaining the new Senior
Credit Facility. 13,500
Write-off of the unamortized balance of capitalized debt issuance
costs for Hexcel's previous bank debt, in connection with the
refinancing of such debt. (1,106)
-----------------
Net adjustment 319,860
-----------------------------------------------------------------------------------------------------------------
(e) Adjustment to eliminate certain current liabilities of the Acquired Fabrics
Business which were not assumed by Hexcel. (4,400)
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JUNE 30,
(AMOUNTS IN THOUSANDS OF US DOLLARS) 1998
-----------------
<S> <C>
(f) Adjustment to reflect the following:
Net borrowings under the new Senior Credit Facility to finance the
acquisition of certain assets and operating liabilities of the
Acquired Fabrics Business. 444,000
Obligation arising from the commitment to pay an additional $19,000 for
the European Joint Venture Interest, subject to the receipt of certain
regulatory approvals. 19,000
Obligation arising from the lease of property, plant and equipment from an
affiliate of the Seller. 50,000
Borrowings under the new Senior Credit Facility to finance certain
transaction costs. 13,500
Elimination of the debt obligations of the Acquired Fabrics Business which
were not assumed by Hexcel. (155,994)
-----------------
Net adjustment 370,506
-----------------------------------------------------------------------------------------------------------------
(g) Adjustment to eliminate certain non-current liabilities of the Acquired Fabrics
Business which were not assumed by Hexcel. (19,600)
-----------------------------------------------------------------------------------------------------------------
(h) Adjustment to reflect the following:
Elimination of the net shareholders' equity of the Acquired Fabrics Business. (23,657)
Recognition of the write-off of the unamortized balance of capitalized debt
issuance costs relating to Hexcel's previous bank debt. (1,106)
-----------------
Net adjustment (24,763)
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
------------------------------------------------------------
HISTORICAL PRO FORMA
--------------------------- ---------------------------
CLARK-
HEXCEL SCHWEBEL ADJUSTMENTS COMBINED
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 530,278 $ 111,664 $ -- $ 641,942
Cost of sales (392,961) (84,546) (500)(a) (478,007)
---------- ------------ ----------- ---------
Gross margin 137,317 27,118 (500) 163,935
Selling, general and administrative expenses (54,359) (6,854) (4,700)(b) (65,913)
Research and technology expenses (11,066) (1,162) -- (12,228)
Business acquisition and consolidation expenses
-- -- -- --
---------- ------------ ----------- ---------
Operating income 71,892 19,102 (5,200) 85,794
Interest expense (13,711) (8,885) (9,800)(c) (32,396)
Other expense -- (2) -- (2)
---------- ------------ ----------- ---------
Income before income taxes 58,181 10,215 (15,000) 53,396
Benefit (provision) for income taxes (21,133) (4,090) 5,813 (d) (19,410)
Equity in earnings of joint ventures, net - 2,521 1,220 (e) 3,741
---------- ------------ ----------- ---------
Net income $ 37,048 $ 8,646 $ (7,967) $ 37,727
---------- ------------ ----------- ---------
---------- ------------ ----------- ---------
Net income per share:
Basic $ 1.00 $ 1.02
Diluted 0.86 0.88
---------- ---------
---------- ---------
Weighted average shares:
Basic 36,867 36,867
Diluted 46,419 46,419
---------- ---------
---------- ---------
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
--------------------------------------------------------------
HISTORICAL PRO FORMA
---------------------------- ----------------------------
CLARK-
HEXCEL SCHWEBEL ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 936,855 $ 240,204 $ -- $ 1,177,059
Cost of sales (714,223) (184,901) (1,000)(a) (900,124)
----------- ----------- ----------- -----------
Gross margin 222,632 55,303 (1,000) 276,935
Selling, general and administrative expenses (102,449) (13,713) (8,915)(b) (125,077)
Research and technology expenses (18,383) (2,274) -- (20,657)
Business acquisition and consolidation expenses (25,343) -- -- (25,343)
----------- ----------- ----------- -----------
Operating income 76,457 39,316 (9,915) 105,858
Interest expense (25,705) (15,176) (23,043)(c) (63,924)
Other income -- 35 -- 35
----------- ----------- ----------- -----------
Income before income taxes 50,752 24,175 (32,958) 41,969
Benefit (provision) for income taxes 22,878 (9,657) 12,819 (d) 26,040
Equity in earnings of joint ventures, net -- 3,997 2,755 (e) 6,752
----------- ----------- ----------- -----------
Net income $ 73,630 $ 18,515 $ (17,384) $ 74,761
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share:
Basic $ 2.00 $ 2.03
Diluted 1.74 1.76
----------- -----------
----------- -----------
Weighted average shares:
Basic 36,748 36,748
Diluted 45,997 45,997
----------- -----------
----------- -----------
</TABLE>
<PAGE>
PRO FORMA ADJUSTMENTS -- UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS
<TABLE>
<CAPTION>
THE SIX
MONTHS THE YEAR
ENDED ENDED
(AMOUNTS IN THOUSANDS OF US DOLLARS) 6/30/98 12/31/97
--------------- ---------------
<S> <C> <C>
(a) Adjustment to reflect the increase in depreciation costs resulting
from the adjustment to fair value of acquired property, plant and
equipment, and from the recognition at fair value of property,
plant and equipment to be leased pursuant to a long-term lease
with purchase options. (500) (1,000)
-----------------------------------------------------------------------------------------------------------------
(b) Adjustment to reflect the following:
Elimination of management fees and other expenses paid by the
Acquired Fabrics Business to the selling shareholders. 500 1,485
Amortization of the excess of purchase price over the net assets
acquired (using a 30-year weighted average amortization period,
based on asset lives ranging from 3 to 40 years). (5,200) (10,400)
-----------------------------------
Net adjustment (4,700) (8,915)
-----------------------------------------------------------------------------------------------------------------
(c) Adjustment to reflect the following:
Elimination of interest expense on debt obligations of the Acquired
Fabrics Business which were not assumed by Hexcel. 8,885 15,176
Net increase in interest expense attributable to borrowings under the
new Senior Credit Facility to finance the acquisition and to
refinance Hexcel's previous bank debt. (16,885) (34,619)
(Interest on outstanding borrowings under the Senior Credit
Facility is computed at variable rates based on the London
interbank rate or, at the option of Hexcel, the base rate of the
administrative agent for the lenders. For purposes of estimating
pro forma adjustments, a weighted average interest rate of
approximately 7.5% has been used.)
Estimated interest expense under a long-term lease for $50,000 of
property, plant and equipment. (1,800) (3,600)
-----------------------------------
Net adjustment (9,800) (23,043)
-----------------------------------------------------------------------------------------------------------------
(d) Adjustment to reflect an average income tax rate of 36% on the Acquired
Fabrics Business and on related transaction costs. 5,813 12,819
-----------------------------------------------------------------------------------------------------------------
(e) Adjustment to reflect Hexcel's ability to utilize certain tax
attributes to reduce aggregate tax expense on the equity in
earnings of the Acquired Fabrics Business joint ventures. 1,220 2,755
-----------------------------------------------------------------------------------------------------------------
</TABLE>
