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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Hexcel Corporation | NYSE:HXL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
2.24 | 3.29% | 70.40 | 70.59 | 68.62 | 68.62 | 1,234,836 | 23:33:19 |
Hexcel Corporation (NYSE: HXL):
Summary of Results from Operations
Quarters Ended
Nine Months Ended
September 30,
September 30,
(In millions, except per share data)
2019
2018
% Change
2019
2018
% Change
Net Sales
$
572.5
$
540.5
5.9
%
$
1,791.4
$
1,628.1
10.0
%
Net sales change in constant currency
6.6
%
11.2
%
Operating Income
109.9
96.5
13.9
%
327.8
275.4
19.0
%
As a % of sales
19.2
%
17.9
%
18.3
%
16.9
%
Net Income
80.3
80.1
0.2
%
233.4
210.5
10.9
%
Diluted net income per common share
$
0.93
$
0.91
2.2
%
$
2.71
$
2.35
15.3
%
Adjusted Operating Income
$
109.9
$
96.5
13.9
%
$
327.8
$
275.4
19.0
%
Adjusted Net Income
77.3
70.5
9.6
%
230.4
199.6
15.4
%
Adjusted diluted net income per share
$
0.90
$
0.80
12.5
%
$
2.68
$
2.23
20.2
%
Hexcel Corporation (NYSE: HXL) today reported third quarter 2019 results including net sales of $572.5 million and adjusted diluted EPS of $0.90.
Nick Stanage, Chairman, CEO and President said: “Hexcel delivered 90 cents of adjusted diluted EPS, or growth of 12.5% compared to the third quarter of 2018. I’m especially pleased with our teams’ performance, delivering strong leverage and a 19.2% operating margin. These strong results reflect our relentless focus on continuous improvement and Operational Excellence. Our generation of Cash from Operations continued to be strong and is now $277 million YTD. As we look forward, we see further growth in our markets, tempered by the extended uncertainty for the timing of the Boeing 737 MAX return to service, which is pushing a portion of our growth originally expected in 2019 into future periods. As a result of this, combined with the continued strong dollar FX impact, we are reducing our 2019 sales guidance while maintaining our 2019 guidance for EPS, capital expenditures and free cash flow. Despite the market uncertainty related to the 737 MAX recertification timing, we are confident on delivering earnings and cash flow in line with our annual guidance and continuing to drive strong shareholder value.”
Markets
Sales for the third quarter of 2019 were $572.5 million, an increase of 5.9% (6.6% in constant currency) compared to the third quarter of 2018.
Commercial Aerospace
Space & Defense
Industrial
Consolidated Operations
Year-to-Date 2019 Results
Sales of $1,791.4 million for the nine months ended September 30, 2019 increased 11.2% in constant currency compared to the same period in 2018.
Commercial Aerospace (68% of YTD sales)
Space & Defense (18% of YTD sales)
Industrial (14% of YTD sales)
Consolidated Operations
Cash and Other
2019 Guidance
* The Company is not providing a quantitative reconciliation of our non-GAAP guidance to the corresponding GAAP information because the GAAP measures that we exclude from our non-GAAP guidance are difficult to predict and are primarily dependent on future uncertainties.
*****
Hexcel will host a conference call at 10:00 a.m. ET, on October 22, 2019 to discuss the third quarter 2019 results. The event will be webcast via the Investor Relations webpage at www.Hexcel.com. The event can also be accessed by dialing +1 (647) 689-5685 and the conference ID is 1749595. Replays of the call will be available on the website.
*****
Hexcel Corporation is a leading advanced composites company. It develops, manufactures and markets lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, engineered core and composite structures, used in commercial aerospace, space and defense and industrial applications. Learn more at www.Hexcel.com.
*****
Disclaimer on Forward Looking Statements
This news release contains statements that are forward looking within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to the estimates and expectations based on aircraft production rates made publicly available by Airbus, Boeing and others; the revenues we may generate from an aircraft model or program; the impact of the possible push-out in deliveries of the Airbus and Boeing backlog and the impact of delays in the startup or ramp-up of new aircraft programs or the final Hexcel composite material content once the design and material selection have been completed; expectations of composite content on new commercial aircraft programs and our share of those requirements; expectations of growth in revenues from space and defense applications, including whether certain programs might be curtailed or discontinued; expectations regarding growth in sales for wind energy, recreation, automotive and other industrial applications; expectations regarding working capital trends and expenditures; expectations as to the level of capital expenditures and when we will complete the construction of capacity expansions and qualification of new products; expectations regarding our ability to maintain and improve margins as we add new facilities and in view of the current economic environment; projections regarding our tax rate; and the anticipated impact of the above factors and various market risks on our expectations of financial results for 2019 and beyond. 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 reductions in sales to any significant customers, particularly Airbus, Boeing or Vestas, including any reduction in sales to Boeing related to a decrease in production volume of the 737 MAX; changes in sales mix; changes in current pricing and cost levels; changes in aerospace delivery rates; changes in government defense procurement budgets; changes in military aerospace program technology; timely new product development or introduction; industry capacity; increased competition; availability and cost of raw materials; supply chain disruptions; inability to install, staff and qualify necessary capacity or achievement of planned manufacturing improvements; cybersecurity breaches or intrusions; currency exchange rate fluctuations; changes in political, social and economic conditions; including, but not limited to, the effect of change in global trade policies and the exit of the U.K. from the European Union; work stoppages or other labor disruptions; unexpected outcome of legal matters or impact of changes in laws or regulations. Additional risk factors are described in our filings with the Securities and Exchange Commission. We do not undertake an obligation to update our forward-looking statements to reflect future events.
Hexcel Corporation and Subsidiaries
Consolidated Statements of Operations
Unaudited
Quarters Ended
Nine Months Ended
September 30,
September 30,
(In millions, except per share data)
2019
2018
2019
2018
Net sales
$
572.5
$
540.5
$
1,791.4
$
1,628.1
Cost of sales
414.6
397.5
1,297.5
1,197.7
Gross margin
157.9
143.0
493.9
430.4
% Gross Margin
27.6
%
26.5
%
27.6
%
26.4
%
Selling, general and administrative expenses
33.8
32.6
122.8
114.3
Research and technology expenses
14.2
13.9
43.3
40.7
Operating income
109.9
96.5
327.8
275.4
Interest expense, net
11.0
10.6
34.9
27.3
Income before income taxes, and equity in earnings/(loss) of affiliated companies
98.9
85.9
292.9
248.1
Provision for income taxes
18.2
7.8
62.4
41.9
Income before equity in earnings/(loss) of affiliated companies
80.7
78.1
230.5
206.2
Equity in earnings/(loss) from affiliated companies
(0.4
)
2.0
2.9
4.3
Net income
$
80.3
$
80.1
$
233.4
$
210.5
Basic net income per common share:
$
0.94
$
0.92
$
2.74
$
2.37
Diluted net income per common share:
$
0.93
$
0.91
$
2.71
$
2.35
Weighted-average common shares:
Basic
85.1
87.0
85.1
88.6
Diluted
86.1
88.1
86.1
89.7
Hexcel Corporation and Subsidiaries
Consolidated Balance Sheets
Unaudited
September 30,
December 31,
(In millions)
2019
2018
Assets
Cash and cash equivalents
$
47.0
$
32.7
Accounts receivable, net
288.9
260.9
Inventories, net
352.2
297.8
Contract assets
56.4
50.5
Prepaid expenses and other current assets
27.1
33.9
Total current assets
771.6
675.8
Property, plant and equipment
3,014.5
2,902.1
Less accumulated depreciation
(1,090.8
)
(1,025.6
)
Net property, plant and equipment
1,923.7
1,876.5
Goodwill and other intangible assets, net
279.4
142.3
Investments in affiliated companies
45.8
48.7
Other assets
134.7
80.8
Total assets
$
3,155.2
$
2,824.1
Liabilities and Stockholders' Equity
Liabilities:
Short-term borrowings
$
9.3
$
9.4
Accounts payable
164.5
161.9
Accrued compensation and benefits
70.6
75.8
Accrued liabilities
102.6
79.6
Total current liabilities
347.0
326.7
Long-term debt
1,115.2
947.4
Retirement obligations
41.9
42.0
Other non-current liabilities
233.3
186.0
Total liabilities
$
1,737.4
$
1,502.1
Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares authorized,
109.3 shares issued at September 30, 2019 and 108.5 shares
issued at December 31, 2018
$
1.1
$
1.1
Additional paid-in capital
826.7
798.3
Retained earnings
1,920.0
1,726.5
Accumulated other comprehensive loss
(161.1
)
(108.0
)
2,586.7
2,417.9
Less – Treasury stock, at cost, 24.7 at September 30, 2019 and 23.7 shares issued at December 31, 2018, respectively
(1,168.9
)
(1,095.9
)
Total stockholders' equity
1,417.8
1,322.0
Total liabilities and stockholders' equity
$
3,155.2
$
2,824.1
Hexcel Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
Nine Months Ended
September 30,
(In millions)
2019
2018
Cash flows from operating activities
Net income
$
233.4
$
210.5
Reconciliation to net cash provided by operating activities:
Depreciation and amortization
107.1
90.8
Amortization related to financing
1.1
1.2
Deferred income taxes
9.3
27.5
Equity in earnings from affiliated companies
(2.9
)
(4.3
)
Stock-based compensation
15.9
14.0
Changes in assets and liabilities:
Increase in accounts receivable
(29.5
)
(27.7
)
Increase in inventories
(56.8
)
(32.1
)
Increase in prepaid expenses and other current assets
(12.5
)
(5.0
)
Increase in accounts payable/accrued liabilities
15.1
0.2
Other - net
(2.9
)
3.3
Net cash provided by operating activities (a)
277.3
278.4
Cash flows from investing activities
Capital expenditures (b)
(162.7
)
(150.2
)
Acquisitions of business and investments in affiliates
(163.2
)
(0.7
)
Net cash used in investing activities
(325.9
)
(150.9
)
Cash flows from financing activities
Net borrowing from senior unsecured credit facilities
177.0
185.0
Repayment of capital lease obligation and other debt, net
(9.6
)
(3.9
)
Issuance costs related to senior credit facility
(2.2
)
-
Dividends paid
(39.9
)
(35.5
)
Repurchase of stock
(66.9
)
(282.8
)
Activity under stock plans
6.4
0.4
Net cash provided by (used in) financing activities
64.8
(136.8
)
Effect of exchange rate changes on cash and cash equivalents
(1.9
)
(3.6
)
Net increase (decrease) in cash and cash equivalents
14.3
(12.9
)
Cash and cash equivalents at beginning of period
32.7
60.1
Cash and cash equivalents at end of period
$
47.0
$
47.2
Supplemental data:
Free Cash Flow (a)+(b)
$
114.6
$
128.2
Accrual basis additions to property, plant and equipment
$
160.9
$
133.5
Hexcel Corporation and Subsidiaries
Net Sales to Third-Party Customers by Market
Quarters Ended September 30, 2019 and 2018
Unaudited
Table A
(In millions)
As Reported
Constant Currency (a)
B/(W)
FX
B/(W)
Market
2019
2018
%
Effect (b)
2018
%
Commercial Aerospace
$
385.9
$
373.1
3.4
$
(0.5
)
$
372.6
3.6
Space & Defense
109.8
90.4
21.5
(0.9
)
89.5
22.7
Industrial
76.8
77.0
(0.3
)
(2.2
)
74.8
2.7
Consolidated Total
$
572.5
$
540.5
5.9
$
(3.6
)
$
536.9
6.6
Consolidated % of Net Sales
%
%
%
Commercial Aerospace
67.4
69.0
69.4
Space & Defense
19.2
16.8
16.7
Industrial
13.4
14.2
13.9
Consolidated Total
100.0
100.0
100.0
Nine Months Ended September 30, 2019 and 2018
Unaudited
(In millions)
As Reported
Constant Currency (a)
B/(W)
FX
B/(W)
Market
2019
2018
%
Effect (b)
2018
%
Commercial Aerospace
$
1,217.9
$
1,139.6
6.9
$
(4.3
)
$
1,135.3
7.3
Space & Defense
329.4
272.2
21.0
(3.6
)
268.6
22.6
Industrial
244.1
216.3
12.9
(9.4
)
206.9
18.0
Consolidated Total
$
1,791.4
$
1,628.1
10.0
$
(17.3
)
$
1,610.8
11.2
Consolidated % of Net Sales
%
%
%
Commercial Aerospace
68.0
70.0
70.5
Space & Defense
18.4
16.7
16.7
Industrial
13.6
13.3
12.8
Consolidated Total
100.0
100.0
100.0
(a)
To assist in the analysis of the Company’s net sales trend, total net sales and sales by market for the quarter ended September 30, 2018 have been estimated using the same U.S. dollar, British pound and Euro exchange rates as applied for the respective period in 2019 and are referred to as “constant currency” sales.
(b)
FX effect is the estimated impact on “as reported” net sales due to changes in foreign currency exchange rates.
Hexcel Corporation and Subsidiaries
Segment Information
Unaudited
Table B
(In millions)
Composite Materials
Engineered Products
Corporate & Other (a)
Total
Third Quarter 2019
Net sales to external customers
$
448.0
$
124.5
$
-
$
572.5
Intersegment sales
23.3
-
(23.3
)
-
Total sales
471.3
124.5
(23.3
)
572.5
Operating income (loss)
100.1
20.3
(10.5
)
109.9
% Operating margin
21.2
%
16.3
%
19.2
%
Depreciation and amortization
30.7
3.7
-
34.4
Stock-based compensation expense
1.2
0.2
1.0
2.4
Accrual based additions to capital expenditures
51.0
2.3
-
53.3
Third Quarter 2018
Net sales to external customers
$
432.8
$
107.7
$
-
$
540.5
Intersegment sales
17.2
-
(17.2
)
-
Total sales
450.0
107.7
(17.2
)
540.5
Operating income (loss)
92.5
15.5
(11.5
)
96.5
% Operating margin
20.6
%
14.4
%
17.9
%
Depreciation and amortization
28.9
2.3
-
31.2
Stock-based compensation expense
1.2
0.2
0.6
2.0
Accrual based additions to capital expenditures
41.4
2.1
-
43.5
Nine Months Ended September 30, 2019
Net sales to external customers
$
1,419.7
$
371.7
$
-
$
1,791.4
Intersegment sales
64.0
0.1
(64.1
)
-
Total sales
1,483.7
371.8
(64.1
)
1,791.4
Operating income (loss)
324.4
51.4
(48.0
)
327.8
% Operating margin
21.9
%
13.8
%
18.3
%
Depreciation and amortization
95.7
11.3
0.1
107.1
Stock-based compensation expense
6.4
1.4
8.1
15.9
Accrual based additions to capital expenditures
156.8
4.1
-
160.9
Nine Months Ended September 30, 2018
Net sales to external customers
$
1,323.2
$
304.9
$
-
$
1,628.1
Intersegment sales
56.7
-
(56.7
)
-
Total sales
1,379.9
304.9
(56.7
)
1,628.1
Operating income (loss)
276.6
41.3
(42.5
)
275.4
% Operating margin
20.0
%
13.5
%
16.9
%
Depreciation and amortization
83.9
6.8
0.1
90.8
Stock-based compensation expense
5.7
1.0
7.3
14.0
Accrual based additions to capital expenditures
130.1
3.4
-
133.5
(a) Hexcel does not allocate corporate expenses to the operating segments.
Hexcel Corporation and Subsidiaries
Reconciliation of GAAP to Non-GAAP Net Income, EPS and Tax Rate
Table C
Unaudited
Quarters Ended September 30,
2019
2018
(In millions, except per diluted share data)
Net Income
EPS
Tax Rate %
Net Income
EPS
Tax Rate %
GAAP
$
80.3
$
0.93
18.4
$
80.1
$
0.91
9.1
Discrete Tax Benefit (a)
(3.0
)
(0.03
)
3.0
(9.6
)
(0.11
)
11.2
Non-GAAP
$
77.3
$
0.90
21.4
$
70.5
$
0.80
20.3
Unaudited
Nine Months Ended September 30,
2019
2018
(In millions, except per diluted share data)
Net Income
EPS
Tax Rate %
Net Income
EPS
Tax Rate %
GAAP
$
233.4
$
2.71
21.3
$
210.5
$
2.35
16.9
Discrete Tax Benefit (a)
(3.0
)
(0.03
)
1.0
(10.9
)
(0.12
)
4.4
Non-GAAP
$
230.4
$
2.68
22.3
$
199.6
$
2.23
21.3
(a)
The quarter ended September 30, 2019 benefited primarily from tax credits identified during the quarter of $3.0 million. The third quarter of 2018 included discrete benefits of $9.6 million primarily related to a change in accounting method and release of a valuation allowance in a foreign jurisdiction. The nine months ended September 30, 2018 also included a discrete benefit of $1.3 million from the release of reserves for uncertain tax positions.
NOTE: Management believes that adjusted net income, adjusted diluted net income per share, the adjusted tax rate, and free cash flow (defined as cash provided by operating activities less cash payments for capital expenditures), which are non-GAAP measures, are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results excluding special items. Special items represent significant charges or credits that are important to an understanding of Hexcel’s overall operating results in the periods presented. Non-GAAP measurements are not recognized in accordance with generally accepted accounting principles and should not be viewed as an alternative to GAAP measures of performance.
Hexcel Corporation and Subsidiaries
Schedule of Total Debt, Net of Cash
Table D
Unaudited
September 30,
December 31,
September 30,
(In millions)
2019
2018
2018
Current portion capital lease
$
0.6
$
0.3
$
-
Euro term loan
8.7
9.1
9.3
Total current debt
9.3
9.4
9.3
Non-current portion of Euro term loan
40.3
51.4
52.5
Senior unsecured credit facility
379.0
202.0
235.0
4.7% senior notes due 2025
300.0
300.0
300.0
3.95% senior notes due 2027
400.0
400.0
400.0
Senior notes original issue discounts
(1.8
)
(2.0
)
(2.1
)
Senior notes deferred financing costs
(4.3
)
(4.8
)
(5.0
)
Other debt
2.0
0.8
0.3
Total long-term debt
1,115.2
947.4
980.7
Total Debt
1,124.5
956.8
990.0
Less: Cash and cash equivalents
(47.0
)
(32.7
)
(47.2
)
Total debt, net of cash
$
1,077.5
$
924.1
$
942.8
View source version on businesswire.com: https://www.businesswire.com/news/home/20191021005769/en/
Kurt Goddard, Vice President – Investor Relations (203) 352-6826 Kurt.Goddard@Hexcel.com
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