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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
December 30, 1998 (December 23, 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)
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DELAWARE 1-8472 94-1109521
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(State of (Commission File No.) (IRS Employer
Incorporation) Identification
No.)
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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.
CS-INTERGLAS ACQUISITION
On December 23, 1998, Hexcel Corporation ("Hexcel" or the "Company")
completed its acquisition of a 43.6% equity interest in CS-Interglas AG
("CS-Interglas"), together with fixed-priced options to increase such equity
interest to 84%, as part of Hexcel's acquisition of the fabrics business of
Clark-Schwebel, Inc. and its subsidiaries (the "Clark-Schwebel Acquisition").
The Company paid a deferred purchase price of $19 million to complete this
acquisition. CS-Interglas is headquartered in Erbach, Germany and had
approximately $155 million in sales in 1997.
BUSINESS CONSOLIDATION PROGRAM
As a result of the Clark-Schwebel Acquisition, changing market conditions
and the need for continuous improvement, the Company is intensifying its
business consolidation efforts to achieve more rapid cost reductions throughout
its organization. These efforts will include implementing an aggressive value
chain management program and reducing costs through the Company's Lean
Enterprise program. In addition, the Company has initiated a reorganization of
its business operations to focus on improved operating effectiveness and to
integrate the Clark-Schwebel business into existing fabrics operations. The
Company has consolidated its U.S., European and Asian composite materials
businesses into a single global business unit. As a result of these and other
actions, the Company anticipates recording approximately $12 million of business
acquisition and consolidation costs in the fourth quarter of 1998. Approximately
one-half of this charge will be for writedowns of certain assets held for
disposition.
Beginning in 1999 the Company anticipates that annual cash savings from its
business consolidation activities will be approximately $10 million. In
addition, the Company has identified specific actions that it believes will
result in significant savings from its Lean Enterprise and value chain
management initiatives. The Company believes that these savings should help
offset, but not eliminate, the expected negative impacts in 1999 of price
competition and product mix changes.
In addition to these initiatives, the Company expects to complete a global
capacity and utilization review of its worldwide facilities requirements during
1999. This review may result in the closing or right-sizing of one or more
facilities and in the recognition of additional business consolidation charges
in 1999.
In connection with these actions, the Company is closely scrutinizing its
capital expenditure and working capital plans. Capital expenditures for 1999 are
expected to be approximately $45 to $50 million. This compares to capital
expenditures estimated at $65 million for 1998, which includes the acquired
fabrics business of Clark-Schwebel for three and one-half months. The Company is
also implementing programs to improve working capital, including reductions in
inventory levels, which programs are expected to contribute to the Company's
efforts in achieving $100 million of free cash flow over the 15-month period
beginning in fourth quarter 1998.
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FORWARD-LOOKING STATEMENTS AND RISK FACTORS
This Current Report on Form 8-K includes and incorporates by reference
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements relate to analyses and other
information which are based on forecasts of future results and estimates of
amounts not yet determinable. These forward-looking statements are identified by
their use of terms and phrases such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "plan," "predict," "will" and similar
terms and phrases, including references to assumptions.
Such forward-looking statements include, but are not limited to: (a)
expectations regarding Hexcel's financial condition and liquidity, as well as
future free cash flows and earnings; (b) estimates of the total cost and annual
cash savings resulting from Hexcel's business consolidation programs; (c)
estimates regarding Hexcel's cash expenditure and working capital plans; and (d)
expectations regarding the benefits of accelerating and expanding Hexcel's Lean
Enterprise and business consolidation programs and implementing value chain
management initiatives.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to be materially
different. Such factors include, but are not limited to, the following: the
integration of the acquired Clark-Schwebel business without disruption to
manufacturing, marketing and distribution activities; changes in general
economic and business conditions; changes in current pricing levels; changes in
political, social and economic conditions and local regulations, particularly in
Asia and Europe; changes in aerospace delivery rates; reductions in sales to any
significant customers, particularly Boeing or Airbus; changes in sales mix;
changes in government defense procurement budgets; changes in military aerospace
programs technology; industry capacity; competition; disruptions of established
supply channels; and manufacturing capacity constraints. Additional information
regarding these factors is contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 and subsequent Quarterly Reports on Form
10-Q, which are incorporated by reference herein.
If one or more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect, the Company's actual results may vary materially
from those expected, estimated or projected. The Company does not undertake to
update its forward-looking statements or risk factors to reflect future events
or circumstances.
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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.
Date: December 30, 1998
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HEXCEL CORPORATION
BY:
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/S/ IRA J. KRAKOWER
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Name: Ira J. Krakower
Title: Senior Vice President, General Counsel and
Secretary
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