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
April 25, 2000 (April 19, 2000)
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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)
Item 5. Other Events.
A copy of the press release issued by Hexcel Corporation, a Delaware
corporation (the "Company"), on April 19, 2000 is filed as Exhibit 99.1 to
this Current Report and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(c) Exhibits
99.1 Press Release issued by the Company on April 19, 2000.
<PAGE>
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: April 25, 2000
HEXCEL CORPORATION
By: /s/ Kirk G. Forbeck
------------------------------------
Name: Kirk G. Forbeck
Title: Chief Accounting Officer
EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release issued by the Company on April 19, 2000
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]
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Media:
Michael Bacal
(203) 969-0666 EXT. 426
[email protected]
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HEXCEL REPORTS 2000 FIRST QUARTER RESULTS
ADJUSTED EBITDA FOR THE QUARTER RISES 24% TO $38.0 MILLION,
COMPARED TO $30.7 MILLION IN THE FOURTH QUARTER, 1999
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<CAPTION>
QUARTER ENDED
MARCH 31, DECEMBER 31,
------------------------------ ---------------
<S> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE DATA) 2000 1999 1999
-------------------------------------------------------------- ------------- ----- ----------- ---------------
-------------------------------------------------------------- -- ---------- ----- ----------- ---- ----------
Net sales $ 279.8 $ 316.2 $ 268.6
Gross margin % 22.2% 22.4% 20.1%
Adjusted operating income % (a) 8.2% 9.5% 6.1%
Adjusted EBITDA (b) $ 38.0 $ 45.6 $ 30.7
Business consolidation expenses $ 1.2 $ 2.8 $ 2.3
Net income (loss) $ 2.6 $ 5.2 $ (2.7)
Adjusted net income (loss) (a) $ 3.4 $ 7.0 $ (1.2)
-------------------------------------------------------------- -- ---------- ----- ----------- ---- ----------
Diluted net income (loss) per share $ 0.07 $ 0.14 $ (0.07)
Adjusted diluted net income (loss) per share (a) $ 0.09 $ 0.19 $ (0.03)
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<FN>
(a) Excludes business consolidation expenses and related income taxes, as
applicable.
(b) Excludes business consolidation expenses, interest, taxes,
depreciation, amortization and equity in income of affiliated
companies.
</FN>
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STAMFORD, CT, April 19, 2000 - Hexcel Corporation (NYSE/PCX: HXL) today reported
net income for the first quarter of 2000 of $2.6 million, or $0.07 per diluted
share. This compares with net income of $5.2 million, or $0.14 per diluted
share, for the first quarter of 1999, and a net loss of $2.7 million, or $0.07
per diluted share, for the fourth quarter of 1999. Excluding pre-tax business
consolidation expenses of $1.2 million, adjusted net income for the first
quarter of 2000 was $3.4 million, or $0.09 per diluted share. This compares to
adjusted net income of $0.19 per diluted share for the same period in 1999, and
an adjusted net loss of $0.03 per diluted share for the 1999 fourth quarter.
Adjusted EBITDA for the 2000 first quarter was $38.0 million, versus $45.6
million for the first quarter of 1999 and $30.7 million for the fourth quarter
of 1999.
Planned deliveries of commercial aircraft by The Boeing Company declined from
620 aircraft in 1999, to 490 aircraft in 2000. The company's first quarter 1999
net sales reflected the peak of Boeing's commercial aircraft production.
However, as Hexcel delivers its products on average six to nine months ahead of
the delivery of an aircraft, it began to see the impact of reduced Boeing
production rates by the end of the second quarter of 1999. The impact was
further amplified as Boeing and its subcontractors adjusted inventory in their
supply chain. As a result, the company's performance in the second half of 1999
was distinctly lower than that seen in the first half of the year. Consequently,
comparisons of the company's quarterly performance to the fourth quarter of 1999
provide a more insightful analysis of the company's improved underlying
performance trend than comparisons with the first quarter of 1999.
<PAGE>
REVENUE TRENDS
Primarily as a result of the change in Boeing commercial aircraft build rates,
net sales for the first quarter of 2000 declined by 12% compared to the first
quarter of 1999. First quarter 2000 net sales were also reduced by certain space
and defense contracts which concluded in the second half of 1999. Further, the
strengthening of the US dollar against the Euro in the last twelve months has
reduced revenues in US dollars by approximately $9 million compared to the first
quarter of 1999.
Compared with the fourth quarter of 1999, net sales rose by 4% in the first
quarter of 2000, benefiting from an apparent stabilizing of demand from Boeing,
as well as increased demand from the partners of Airbus Industrie. Boeing has
publicly indicated that it may be able to sustain aircraft production at the
current rate of about 490 per year, due in part to the continued economic
recovery in Asia, while Airbus is projecting a modest increase in aircraft
deliveries to more than 300 per year. In addition, sales volumes for the
company's lightweight fiberglass fabrics used in electronics applications
continued to grow, reflecting both the growing appetite for electronic devices
throughout the world, as well as the company's success in securing additional
business from a major producer of high-quality PCB laminates.
GROSS MARGIN AND ADJUSTED OPERATING INCOME
Gross margin for the first quarter of 2000 was $62.2 million or 22.2% of net
sales, compared with $70.8 million or 22.4% of net sales in the same quarter of
1999, and $54.0 million or 20.1% of net sales in the fourth quarter of 1999. The
decline in gross margin dollars, relative to the first quarter of last year,
reflects lower sales levels, while the maintenance of a comparable gross margin
percentage reflects the beneficial impact of the company's cost reduction
activities. The improvement in gross margin from the fourth quarter of 1999 to
the first quarter of 2000 reflects both the modest increase in sales, in
particular to the commercial aerospace market segment, as well as the ongoing
focus on cost management.
Adjusted operating income for the 2000 first quarter was $6.9 million lower than
the same quarter of 1999, as the $8.6 million decline in gross margin was
partially mitigated by a reduction in selling, general and administrative
expenses. Adjusted operating income was $6.5 million higher in the first quarter
of 2000 than the fourth quarter of 1999, reflecting the increase in sales and
gross margin.
CHAIRMAN'S COMMENTS
Commenting on Hexcel's first quarter 2000 results, Mr. John J. Lee, Chairman and
CEO said, "The first quarter produced a 24% increase in adjusted EBITDA compared
to the fourth quarter, 1999, which was a stronger improvement in performance
than we had anticipated. This performance reflects the benefit of an increase in
sales compared to the fourth quarter of 1999, and the growing impact of our Lean
Enterprise and business consolidation programs. While the company still has much
to do to complete its cost reduction and productivity improvement goals, these
results give us confidence that we will be able to sustain the improvements made
in the first quarter throughout 2000."
Mr. Lee observed, "After having faced declining demand in our significant
markets in much of 1999, business conditions now appear to have stabilized,
resulting in improved operating performance over the second half of 1999. The
commercial aerospace market appears to have flattened out and the impact of
customer inventory reductions appears to be behind us. While we don't expect any
significant improvement in sales of our carbon fiber products in 2000,
performance has stabilized. The outlook for our industrial markets remains one
of growth -- particularly in automotive and wind energy applications."
"Demand for lightweight electronic fabrics continues to grow," noted Mr. Lee,
"and capacity is tightening. During 1999, Hexcel reduced its heavyweight
electronic fabric production capacity with the closure of its Cleveland, Georgia
plant. During the quarter we have started to switch some of our remaining
heavyweight fabric production capacities to meet lightweight fabric demand. In
addition, we will be installing additional lightweight fabric looms by the end
of the year to meet the expected continuing growth in demand. Overall, we are
encouraged that we are starting to see results from our strategic initiative to
increase our presence in the electronics market."
Mr. Lee continued, "On April 3, 2000, we announced that we had entered into a
definitive agreement to sell our Bellingham business to Britax International plc
for $116.9 million. We now anticipate that this transaction may close before the
end of this month. As a result, we estimate reporting in the second quarter a
pre-tax gain on the disposal of this business of approximately $65 million to
$75 million. The company's accumulated tax loss carryforwards are more than
sufficient to cover this gain, resulting in most of the proceeds from the sale
being available to repay debt."
<PAGE>
Mr. Lee concluded, "While it is too early to judge whether there will be further
improvements in market conditions this year, we anticipate that our second
quarter should be able to sustain a level of EBITDA similar to that achieved
this quarter, once adjusted for the sale of the Bellingham business. While the
third quarter will evidence its traditional seasonal weakness, we anticipate
that the fourth quarter should also reflect the improvements seen this quarter."
* * *
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, customer inventory reductions and demand for electronics and industrial
products), sales volumes, sales prices, cost reductions, production
efficiencies, productivity improvements, lean enterprise initiatives, business
consolidation activities, adjusted EBITDA and disposition of the Bellingham
business, including estimated gain and repayment of debt. 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 re-qualify manufacturing sites or
products, and currency exchange rate changes. 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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<PAGE>
<TABLE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
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UNAUDITED
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<S> <C> <C>
QUARTER ENDED MARCH 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 2000 1999
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Net sales $ 279.8 $ 316.2
Cost of sales 217.6 245.4
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Gross margin 62.2 70.8
Selling, general and administrative expenses 32.9 34.4
Research and technology expenses 6.3 6.5
Business consolidation expenses 1.2 2.8
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Operating income 21.8 27.1
Interest expense 18.4 19.1
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Income before income taxes 3.4 8.0
Provision for income taxes 1.2 2.8
Equity in income of affiliated companies (0.4) -
- -------------------------------------------------------------------------------------------------------------------
Net income $ 2.6 $ 5.2
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Net income per share:
Basic $ 0.07 $ 0.14
Diluted 0.07 0.14
Diluted, excluding goodwill amortization 0.13 0.20
Weighted average shares:
Basic 36.6 36.4
Diluted 36.8 36.5
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<FN>
The company's convertible subordinated notes, due 2003, and its convertible
subordinated debentures, due 2011, were excluded from the 2000 and 1999
computations of net income per diluted share, as they were antidilutive.
</FN>
</TABLE>
<PAGE>
<TABLE>
HEXCEL CORPORATION AND SUBSIDIARIES
NET SALES TO THIRD-PARTY CUSTOMERS BY PRODUCT GROUP AND MARKET SEGMENT
<CAPTION>
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UNAUDITED
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<S> <C> <C> <C> <C> <C>
COMMERCIAL SPACE &
(IN MILLIONS) AEROSPACE DEFENSE ELECTRONICS INDUSTRIAL TOTAL
- ---------------------------------------- -------------- ---------------- ------------- --------------- --------------
FIRST QUARTER 2000 NET SALES
Reinforcement products $ 15.6 $ 4.1 $ 43.6 $ 23.8 $ 87.1
Composite materials 92.6 19.8 - 34.1 146.5
Engineered products 43.7 2.5 - - 46.2
- ---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- ---------- -- -----------
Total $ 151.9 $ 26.4 $ 43.6 $ 57.9 $ 279.8
54% 9% 16% 21% 100%
- ---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- ---------- -- -----------
FOURTH QUARTER 1999 NET SALES
Reinforcement products $ 10.9 $ 3.0 $ 41.3 $ 25.3 $ 80.5
Composite Materials 85.6 19.7 - 30.5 135.8
Engineered Products 49.5 2.8 - - 52.3
- ---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- ---------- -- -----------
Total $ 146.0 $ 25.5 $ 41.3 $ 55.8 $ 268.6
55% 9% 15% 21% 100%
- ---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- ---------- -- -----------
FIRST QUARTER 1999 NET SALES
Reinforcement products $ 15.3 $ 5.5 $ 42.3 $ 22.7 $ 85.8
Composite materials 119.7 29.6 - 28.9 178.2
Engineered products 48.9 3.3 - - 52.2
- ---------------------------------------- ----- -------- ----- ---------- -- ---------- ---- -------- ---- -----------
Total $ 183.9 $ 38.4 $ 42.3 $ 51.6 $ 316.2
58% 12% 13% 17% 100%
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SEGMENT DATA
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UNAUDITED
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REINFORCEMENT COMPOSITE ENGINEERED CORPORATE
(IN MILLIONS) PRODUCTS MATERIALS PRODUCTS & OTHER 1 TOTAL
- -------------------------------------- ----------------- --------------- ------------- ------------- ----------------
FIRST QUARTER 2000
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- -- -------------
Net sales to external customers $ 87.1 $ 146.5 $ 46.2 $ - $ 279.8
Intersegment sales 27.2 2.3 - - 29.5
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Total sales 114.3 148.8 46.2 - 309.3
Adjusted EBIT 2 10.5 18.5 3.2 (9.2) 23.0
Depreciation and amortization 8.6 4.8 1.0 0.6 15.0
Business consolidation expenses 0.7 0.4 0.1 - 1.2
Capital expenditures 1.0 3.0 0.4 - 4.4
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
FOURTH QUARTER 1999
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Net sales to external customers $ 80.5 $ 135.8 $ 52.3 $ - $ 268.6
Intersegment sales 23.3 2.3 - - 25.6
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Total sales 103.8 138.1 52.3 - 294.2
Adjusted EBIT 6.0 12.1 6.9 (8.5) 16.5
Depreciation and amortization 7.8 4.9 0.8 0.7 14.2
Business consolidation expenses 0.4 1.5 - 0.4 2.3
Capital expenditures 3.6 4.3 0.7 0.3 8.9
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
FIRST QUARTER 1999
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Net sales to external customers $ 85.8 $ 178.2 $ 52.2 $ - $ 316.2
Intersegment sales 35.7 2.8 - - 38.5
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
Total sales 121.5 181.0 52.2 - 354.7
Adjusted EBIT 10.3 25.1 3.9 (9.3) 30.0
Depreciation and amortization 8.9 5.1 0.9 0.7 15.6
Business consolidation expenses 2.6 0.1 0.1 - 2.8
Capital expenditures 4.2 3.6 1.5 0.1 9.4
- ---------------------------------------- -- ----------- ----- ---------- --- --------- -- ---------- ---- -----------
<FN>
- --------
1 The company does not allocate corporate expenses to its business segments.
2 Consists of earnings before interest, taxes, and business consolidation
expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
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UNAUDITED
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<S> <C> <C>
MARCH 31, December 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 2000 1999
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ASSETS
Current assets:
Cash and cash equivalents $ 4.8 $ 0.2
Accounts receivable 177.1 158.6
Inventories 164.0 153.7
Prepaid expenses and other assets 3.7 5.1
Deferred tax asset 10.1 10.2
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Total current assets 359.7 327.8
Property, plant and equipment 612.2 614.5
Less accumulated depreciation (230.5) (222.4)
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Net property, plant and equipment 381.7 392.1
Goodwill and other purchased intangibles, net of accumulated
amortization of $28.2 in 2000 and $24.9 in 1999 407.6 411.2
Investments in affiliated companies and other assets 141.0 130.8
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Total assets $ 1,290.0 $ 1,261.9
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of capital lease obligations $ 26.4 $ 34.3
Accounts payable 88.7 80.3
Accrued liabilities 94.8 95.9
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Total current liabilities 209.9 210.5
Long-term notes payable and capital lease obligations 738.3 712.5
Indebtedness to related parties 24.1 24.1
Other non-current liabilities 47.4 44.7
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Total liabilities 1,019.7 991.8
Stockholders' equity:
Preferred stock, no par value, 20.0 stock authorized,
no stock issued or outstanding in 2000 and 1999 - -
Common stock, $0.01 par value, 100.0 stock authorized,
stock issued and outstanding of 37.5 in 2000 and 37.4 in 1999 0.4 0.4
Additional paid-in capital 274.2 273.6
Retained earnings 14.2 11.6
Accumulated other comprehensive loss (7.8) (4.8)
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281.0 280.8
Less- treasury stock, at cost, 0.8 stock in 2000 and 1999 (10.7) (10.7)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 270.3 270.1
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Total liabilities and stockholders' equity $ 1,290.0 $ 1,261.9
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Total debt, net of cash $ 784.0 $ 770.7
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</TABLE>
<PAGE>
<TABLE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
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UNAUDITED
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<S> <C> <C>
QUARTER ENDED MARCH 31,
(IN MILLIONS) 2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2.6 $ 5.2
Reconciliation to net cash provided by operating activities:
Depreciation and amortization 15.0 15.6
Deferred income taxes (4.5) (1.2)
Business consolidation expenses 1.2 2.8
Business consolidation payments (2.0) (2.2)
Equity in income of affiliated companies (0.4) -
Working capital changes and other (18.0) (2.9)
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Net cash provided by (used for) operating activities (6.1) 17.3
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4.4) (9.4)
Investments in affiliated companies (3.4) -
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Net cash used for investing activities (7.8) (9.4)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) of credit facilities, net 26.5 (229.3)
Proceeds (repayments) of long-term debt and capital lease obligations, net (7.9) 225.7
Debt issuance costs (0.9) (9.0)
Activity under stock plans 0.1 0.2
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Net cash provided by (used for) financing activities 17.8 (12.4)
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Effect of exchange rate changes on cash and cash equivalents 0.7 (0.5)
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Net increase (decrease) in cash and cash equivalents 4.6 (5.0)
Cash and cash equivalents at beginning of year 0.2 7.5
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Cash and cash equivalents at end of period $ 4.8 $ 2.5
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CASH PAID FOR:
Interest $ 25.3 $ 14.8
Taxes - 1.5
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