Exhibit 99.1
NEWS RELEASE
Hexcel Corporation, 281 Tresser Boulevard, Stamford, CT 06901 (203) 969-0666
CONTACT: INVESTORS:
STEPHEN C. FORSYTH
(203) 969-0666 EXT. 425
[email protected]
MEDIA:
MICHAEL BACAL
(203) 969-0666 EXT. 426
[email protected]
HEXCEL REPORTS 2000 THIRD QUARTER RESULTS
SALES TO ELECTRONICS AND INDUSTRIAL MARKETS CONTINUE TO GROW,
SALES TO AEROSPACE MARKETS REMAIN STABLE
ADJUSTED EBITDA FOR THE THIRD QUARTER IS
$31.0 MILLION IN 2000, COMPARED WITH $30.1 MILLION
ON A PRO FORMA BASIS FOR THE SAME PERIOD IN 1999
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Quarter Ended September 30,
----------------- ---------------
<S> <C> <C>
(In millions, except per share data) 2000 1999
---------------------------------------------------------------- -------------- ----------------- ---------------
PRO FORMA (a):
Sales $247.5 $252.1
Adjusted EBITDA (b) $31.0 $30.1
Adjusted net income (loss) (c) $2.2 $(1.1)
Adjusted diluted earnings (loss) per share (c) $0.06 $(0.03)
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AS REPORTED:
Sales $247.5 $274.1
Gross margin % 20.9% 18.8%
Adjusted operating income % (c) 6.8% 6.0%
Adjusted EBITDA (b) $31.0 $32.0
Net income (loss) $0.1 $(30.1)
Adjusted net income (loss) (c) $2.2 $(1.3)
Diluted earnings (loss) per share $0.00 $(0.82)
Adjusted diluted earnings (loss) per share (c) $0.06 $(0.04)
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(a) Pro forma results give effect to the April 26, 2000 sale of the Bellingham
aircraft interiors business as if the transaction had occurred at the
beginning of the period.
(b) Excludes business consolidation expenses, interest, taxes, depreciation,
amortization, and equity in income and a write-down of an investment in
affiliated companies.
(c) Excludes business consolidation expenses and a write-down of an investment
in an affiliated company.
STAMFORD, CT, October 18, 2000 - Hexcel Corporation (NYSE/PCX: HXL) today
reported results for the third quarter of 2000. The third quarter is typically
the company's weakest quarter of the year due to the seasonal impact of the
European vacation period. Net income for the 2000 third quarter was $0.1
million, compared with a net loss of $30.1 million for the third quarter of
1999. Net income adjusted to exclude business consolidation expenses was $2.2
million for the third quarter of 2000, or $0.06 per diluted share, versus a pro
forma adjusted net loss of $1.1 million, or $0.03 per diluted share, for the
third quarter of 1999. Adjusted EBITDA for the third quarter of 2000 was $31.0
million, versus pro forma adjusted EBITDA of $30.1 million for the 1999 third
quarter. Pro forma results give effect to the sale of the Bellingham aircraft
interiors business as if it had occurred at the beginning of the period.
REVENUE TRENDS
Third quarter 2000 revenues of $247.5 million were $4.6 million or 1.8% lower
than comparable pro forma revenues for the 1999 third quarter. Had the same US
dollar, British pound and Euro exchange rates applied in the third quarter 2000
as in the third quarter 1999, revenues would have been $6.9 million or 2.7%
higher than the pro forma total for the third quarter of 1999 of $252.1 million.
Commenting on Hexcel's third quarter 2000 revenues, Mr. John J. Lee, Chairman
and CEO said, "The improving trends we have seen in the last two quarters
continue to be evident in our results, after adjusting for the seasonal factors
that typically cause the third quarter to be the lowest revenue quarter of the
year. The growth in sales to electronics and industrial markets has
continued, despite a persistent weakening of the European currencies which
complicates year-on-year comparisons. With the exception of our Engineered
Products business, commercial aerospace revenues either equal or exceed the
levels of the prior year, reflecting the fact that this market has stabilized."
o Commercial aerospace revenues for the company's Reinforcement Products
and Composite Materials business segments, totaling $94.3 million for
the 2000 third quarter, were slightly greater than revenues in the
third quarter of 1999, despite weaker European exchange rates. This
reflects the stabilization of Boeing build rates and the steadily
improving performance of Airbus. Boeing has publicly indicated that
it expects to sustain aircraft production at or slightly above the
current rate of about 490 per year, while Airbus is reportedly planning
to increase aircraft deliveries from about 320 in 2000 to more than
350 in 2001. The benefit Hexcel obtains from future increases in
build rates will depend on the mix of aircraft produced, and the impact
on the aerospace supply chain of ongoing efforts to improve the
efficiency and reduce the cost of aircraft production.
o Commercial aerospace sales by the Engineered Products business were
$8.8 million or 27% lower than the third quarter of 1999. The decrease
reflects the timing of customer programs and the impact of Boeing's
1999 build rate reductions. This business segment delivers product to
customers shortly before aircraft completion and delivery. As a result,
unlike Hexcel's other segments, this business did not experience the
impact of 1999 build rate reductions until late in the fourth quarter
of that year and by the same measure, will take longer to reflect any
improvement in commercial aerospace demand.
o Electronics sales of $44.7 million for the 2000 third quarter were $4.1
million or 10.1% higher than the comparable 1999 period. The growth in
sales over the third quarter of 1999 reflects a sustained increase in
demand for lightweight, high-performance glass fabrics used in
electronics applications, driven by improved economic conditions in
Asia and Europe and the growing use of electronic devices throughout
the world. This sales growth is expected to continue through 2001 and
beyond, and Hexcel has made commitments to increase its capacity to
manufacture lightweight, high-performance glass fabrics in order to
continue to meet customer demand in this attractive market.
o Sales to industrial markets of $55.6 million for the 2000 third quarter
were $3.7 million or 7.1% higher than the 1999 third quarter. Soft body
armor, wind energy applications and automotive components continue to
drive revenue growth. Sales of advanced structural materials to the
wind energy and automotive segments are currently growing at annualized
rates in excess of 30%, reflecting growing demand for low-cost,
renewable energy supplies and improved automobile safety, as well as
Hexcel's success in developing a range of new product applications.
GROSS MARGIN AND ADJUSTED OPERATING INCOME
Gross margin for the third quarter of 2000 was $51.7 million or 20.9% of sales,
compared with $48.1 million or 19.1% of sales on a pro forma basis for the third
quarter of 1999. Adjusted operating income for the 2000 third quarter was $16.9
million or 6.8% of sales, versus $14.7 million or 5.8% of sales for the 1999
third quarter on a pro forma basis.
Mr. Lee observed, "The benefits from our cost reduction actions and a return to
growth are now being reflected in our operating profitability. Our Reinforcement
Products business has increased their operating income by 80% compared to the
third quarter of 1999, benefiting from reduced costs, improved product mix and
growth in sales of both electronic and ballistic fabrics. Our Composite
Materials business has improved their operating profitability by 23% on
comparable revenues to the third quarter of 1999, driven by cost reductions and
improved productivity. In sharp contrast, our Engineered Products business is
not performing in line with expectations. This business has not yet succeeded in
aligning its costs and productivity to the lower Boeing build rates, and so
shows reduced operating profitability compared to 1999."
EQUITY IN EARNINGS OF AFFILIATED COMPANIES
Equity in earnings of affiliated companies of $1.7 million contributed strongly
to third quarter net income in 2000. The primary source of these earnings is
Hexcel's electronic fabrics venture in Asia, which is benefiting from the
increase in worldwide demand for electronic devices. This compares with a $19.9
million loss from the write-down of an investment in an affiliated company in
the third quarter of 1999.
Mr. Lee noted, "As a result of growth in the company's electronics and
industrial businesses, we are making selective investments to expand our
capacity to manufacture certain products, and anticipate further
opportunities to invest in growth in 2001. These investments in growing our
business are currently being funded by operating cash flow."
<PAGE>
OUTLOOK
Mr. Lee concluded, "The growth we have seen from electronic, automotive and wind
energy market segments is set to continue in the coming year. At the same time
we will start to see the benefit of the ramp up in production of new military
aircraft programs. Our operating leverage will enable us to translate increased
demand to higher profitability in 2001. In the shorter term, the performance of
our Engineered Products business discussed above and the timing of customer
requirements towards the end of the year, indicate that fourth quarter revenues
will be a little weaker than previously indicated resulting in EBITDA for the
quarter in a range of $33 - $35 million. However, as we enter next year we
continue to anticipate EBITDA increasing as revenues grow. In addition to the
profit contribution from operations, the fourth quarter results will also
include a non-recurring credit related to a US benefit plan, that will be offset
in part by certain expenses being incurred by the company in connection with the
purchase of approximately 14.5 million shares of Hexcel's common stock from Ciba
Specialty Chemicals by an investor group affiliated with Goldman Sachs. The net
impact of these unusual items will be to increase the reported fourth quarter
pre-tax operating income by $1 to 2 million."
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YEAR-TO-DATE RESULTS
--------------------------------------------------- ----------------------- -------------------------------------
Nine Months Ended September 30,
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<S> <C> <C>
(In millions, except per share data) 2000 1999
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PRO FORMA:
Sales $779.9 $834.1
Adjusted EBITDA $106.9 $114.9
Adjusted net income $13.8 $12.1
Adjusted diluted earnings per share $0.37 $0.33
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AS REPORTED:
Sales $798.8 $882.9
Gross margin % 21.8% 21.4%
Adjusted operating income % 8.0% 8.2%
Adjusted EBITDA $107.8 $119.6
Net income (loss) $53.2 $(20.6)
Adjusted net income $12.2 $11.0
Diluted earnings (loss) per share $1.28 $(0.56)
Adjusted diluted earnings per share $0.33 $0.30
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* * *
Hexcel Corporation is the world's leading advanced structural materials company.
It develops, manufactures and markets lightweight, high-performance
reinforcement products, composite materials and engineered products for use in
commercial aerospace, space and defense, electronics, and industrial
applications.
DISCLAIMER ON FORWARD LOOKING STATEMENTS
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This press release contains statements that are forward looking, including
statements relating to market conditions (including commercial aircraft build
rates and demand for electronics and industrial products), sales volumes, cost
reductions, production efficiencies and improvements, EBITDA, unusual expenses
and credits, diluted earnings per share, capital expenditures, and operating
cash flows. 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, inability to
achieve planned manufacturing improvements and cost reductions, and changes in
currency exchange rates. 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.
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HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Unaudited
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Quarter Ended Sept. 30, Nine Months Ended Sept. 30,
<S> <C> <C> <C> <C>
(In millions, except per share data) 2000 1999 2000 1999
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Net sales $ 247.5 $ 274.1 $ 798.8 $ 882.9
Cost of sales 195.8 222.6 624.4 694.4
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Gross margin 51.7 51.5 174.4 188.5
Selling, general and administrative expenses 29.8 29.4 93.9 97.4
Research and technology expenses 5.0 5.8 16.6 18.6
Business consolidation expenses 3.3 13.6 4.5 17.8
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Operating income 13.6 2.7 59.4 54.7
Gain on sale of
Bellingham aircraft interiors business - - 68.3 -
Interest expense 16.0 18.4 51.6 55.9
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Income (loss) before income taxes (2.4) (15.7) 76.1 (1.2)
Provision for (benefit from) income taxes (0.8) (5.5) 26.8 (0.4)
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Income (loss) before equity in earnings (1.6) (10.2) 49.3 (0.8)
Equity in earnings and write-down of an investment
in affiliated companies 1.7 (19.9) 3.9 (19.8)
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Net income (loss) $ 0.1 $ (30.1) $ 53.2 $ (20.6)
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Net income (loss) per share:
Basic $ 0.00 $ (0.82) $ 1.45 $ (0.56)
Diluted 0.00 (0.82) 1.28 (0.56)
Diluted, excluding goodwill amortization 0.06 (0.77) 1.42 (0.42)
Weighted average shares:
Basic 36.9 36.5 36.7 36.4
Diluted 38.0 36.5 45.3 36.4
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The company's convertible subordinated notes, due 2003, and its convertible
subordinated debentures, due 2011, were excluded from the 1999 and third quarter
2000 computations of net income (loss) per diluted share, as they were
antidilutive.
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HEXCEL CORPORATION AND SUBSIDIARIES
ACTUAL AND PRO FORMA NET SALES TO THIRD-PARTY CUSTOMERS BY PRODUCT GROUP AND MARKET SEGMENT
---------------------------------------- ----------------------------------------------------------------------------
Unaudited
-------------- ---------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL SPACE &
(In millions) AEROSPACE DEFENSE ELECTRONICS INDUSTRIAL TOTAL
---------------------------------------- -------------- ---------------- ------------- --------------- --------------
THIRD QUARTER 2000 NET SALES
Reinforcement products $ 14.3 $ 2.6 $ 44.7 $ 26.8 $ 88.4
Composite materials 80.0 24.3 - 28.8 133.1
Engineered products 23.9 2.1 - - 26.0
---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- ---------- -- -----------
Total $ 118.2 $ 29.0 $ 44.7 $ 55.6 $ 247.5
48% 12% 18% 22% 100%
---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- ---------- -- -----------
PRO FORMA SECOND QUARTER 2000 NET SALES
Reinforcement products $ 17.1 $ 3.5 $ 46.8 $ 27.2 $ 94.6
Composite materials 87.5 26.0 - 33.5 147.0
Engineered products 25.5 2.1 - - 27.6
---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- ---------- -- -----------
Total $ 130.1 $ 31.6 $ 46.8 $ 60.7 $ 269.2
48% 12% 17% 23% 100%
---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- ---------- -- -----------
PRO FORMA THIRD QUARTER 1999 NET SALES
Reinforcement products $ 12.3 $ 4.2 $ 40.6 $ 24.2 $ 81.3
Composite materials 81.2 25.7 - 27.7 134.6
Engineered products 32.7 3.5 - - 36.2
---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- -------- ---- -----------
Total $ 126.2 $ 33.4 $ 40.6 $ 51.9 $ 252.1
50% 13% 16% 21% 100%
---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- -------- ---- -----------
ACTUAL AND PRO FORMA SEGMENT DATA
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Unaudited
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REINFORCEMENT COMPOSITE ENGINEERED CORPORATE
(In millions) PRODUCTS MATERIALS PRODUCTS & OTHER1 TOTAL
-------------------------------------- ----------------- --------------- ------------- ------------- ----------------
THIRD QUARTER 2000
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- -- -------------
Net sales to external customers $ 88.4 $ 133.1 $ 26.0 $ - $ 247.5
Intersegment sales 20.9 1.8 - - 22.7
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Total sales 109.3 134.9 26.0 - 270.2
Adjusted EBIT2 11.4 14.7 0.2 (9.4) 16.9
Depreciation and amortization 8.3 4.5 0.7 0.6 14.1
Business consolidation expenses 0.2 2.7 0.4 - 3.3
Capital expenditures 4.2 4.1 0.4 0.5 9.2
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
PRO FORMA SECOND QUARTER 2000
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Net sales to external customers $ 94.6 $ 147.0 $ 27.6 $ - $ 269.2
Intersegment sales 25.1 1.8 - - 26.9
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Total sales 119.7 148.8 27.6 - 296.1
Adjusted EBIT 12.7 19.0 2.1 (9.1) 24.7
Depreciation and amortization 8.6 4.7 0.7 0.6 14.6
Business consolidation expenses (2.9) 2.0 0.9 - -
Capital expenditures 3.3 4.6 0.1 0.5 8.5
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
PRO FORMA THIRD QUARTER 1999
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Net sales to external customers $ 81.3 $ 134.6 $ 36.2 $ - $ 252.1
Intersegment sales 24.9 1.9 - - 26.8
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Total sales 106.2 136.5 36.2 - 278.9
Adjusted EBIT 6.3 12.0 4.8 (8.4) 14.7
Depreciation and amortization 8.9 5.1 0.7 0.7 15.4
Business consolidation expenses 3.5 8.1 1.3 0.6 13.5
Write-down of investment in an
affiliated company 20.0 - - - 20.0
Capital expenditures 3.0 4.2 0.2 - 7.4
---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
<FN>
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1 The company does not allocate corporate expenses to its business segments.
2 Consists of earnings before interest, taxes, and business consolidation expenses.
</FN>
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HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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Unaudited
--------------------------------------------
<S> <C> <C>
SEPTEMBER 30, December 31,
(In millions, except per share data) 2000 1999
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ASSETS
Current assets:
Cash and cash equivalents $ 13.8 $ 0.2
Accounts receivable 160.6 158.6
Inventories 152.4 153.7
Prepaid expenses and other assets 5.4 5.1
Deferred tax asset 9.9 10.2
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Total current assets 342.1 327.8
Property, plant and equipment 591.1 614.5
Less accumulated depreciation (239.6) (222.4)
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Net property, plant and equipment 351.5 392.1
Goodwill and other purchased intangibles, net of accumulated
amortization of $32.8 in 2000 and $24.9 in 1999 394.5 411.2
Investments in affiliated companies and other assets 128.3 130.8
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Total assets $ 1,216.4 $ 1,261.9
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of capital lease obligations $ 26.6 $ 34.3
Accounts payable 77.0 80.3
Accrued liabilities 97.5 95.9
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Total current liabilities 201.1 210.5
Long-term notes payable and capital lease obligations 628.9 712.5
Indebtedness to related parties 24.3 24.1
Other non-current liabilities 46.4 44.7
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Total liabilities 900.7 991.8
Stockholders' equity:
Preferred stock, no par value, 20.0 shares of stock authorized,
no shares issued or outstanding in 2000 and 1999 - -
Common stock, $0.01 par value, 100.0 shares of stock authorized,
shares issued and outstanding of 37.8 in 2000 and 37.4 in 1999 0.4 0.4
Additional paid-in capital 279.5 273.6
Retained earnings 64.8 11.6
Accumulated other comprehensive loss (18.2) (4.8)
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326.5 280.8
Less - Treasury stock, at cost, 0.9 shares in 2000 and 0.8 in 1999 (10.8) (10.7)
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Total stockholders' equity 315.7 270.1
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Total liabilities and stockholders' equity $ 1,216.4 $ 1,261.9
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Total debt, net of cash $ 666.0 $ 770.7
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HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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Unaudited
----------------------------------------------------------
Quarter Ended Sept. 30, Nine Months Ended Sept.30,
<S> <C> <C> <C> <C>
2000 1999 2000 1999
(In millions)
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 0.1 $ (30.1) $ 53.2 $ (20.6)
Reconciliation to net cash provided by operating
activities:
Depreciation and amortization 14.1 15.6 43.9 47.1
Deferred income taxes (4.7) (8.9) 11.8 (10.8)
Gain on sale of Bellingham aircraft interiors business - - (68.3) -
Business consolidation expenses 3.3 13.6 4.5 17.8
Business consolidation payments (3.4) (1.2) (8.3) (7.8)
Equity in income and write-down of an investment in
affiliated companies (1.7) 19.9 (3.9) 19.8
Working capital changes and other 0.9 32.1 (20.1) 43.6
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Net cash provided by operating activities 8.6 41.0 12.8 89.1
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (9.2) (8.7) (22.2) (26.7)
Proceeds from sale of Bellingham aircraft interiors business - - 113.3 -
Proceeds from sale of other assets 2.3 3.4 -
Investments in affiliated companies - (2.0) (6.0) (2.0)
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Net cash provided by (used for) investing activities (6.9) (10.7) 88.5 (28.7)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) of credit facilities, net 5.7 (26.1) 30.6 (273.4)
Proceeds (repayments) of long-term debt and capital lease
obligations, net (1.5) (1.2) (118.7) 223.6
Debt issuance costs - (1.3) (0.9) (10.8)
Activity under stock plans 1.9 0.6 2.2 1.3
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Net cash used for financing activities 6.1 (28.0) (86.8) (59.3)
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Effect of exchange rate changes on cash and cash equivalents (1.0) (0.2) (0.9) (0.8)
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Net increase in cash and cash equivalents 6.8 2.1 13.6 0.3
Cash and cash equivalents at beginning of period 7.0 5.7 0.2 7.5
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Cash and cash equivalents at end of period $ 13.8 $ 7.8 $ 13.8 $ 7.8
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CASH PAID FOR:
Interest $ 23.6 $ 30.8 $ 56.3 $ 51.5
Taxes 3.3 (2.4) 6.2 7.7
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