- Q1 2023 GAAP diluted EPS of $0.50 compared to Q1 2022 GAAP
diluted EPS of $0.21.
- Q1 2023 adjusted diluted EPS of $0.50, compared to Q1 2022
adjusted diluted EPS of $0.22.
- Q1 2023 Sales were $458 million, an increase of 17.2% over
Q1 2022 sales of $391 million (18.0% increase in constant
currency).
- Full year 2023 guidance is reaffirmed.
See Table C for reconciliation of GAAP and non-GAAP operating
income, net income, earnings per share and operating cash flow to
free cash flow. Free cash flow is cash from operations less capital
expenditures.
Hexcel Corporation (NYSE: HXL):
Summary of Results from
Operations
Quarters Ended
March 31,
(In millions, except per share data)
2023
2022
% Change
Net Sales
$
457.7
$
390.6
17.2
%
Net sales change in constant currency
18.0
%
Operating Income
62.8
30.1
108.6
%
Net Income
42.7
17.8
139.9
%
Diluted net income per common share
$
0.50
$
0.21
138.1
%
Non-GAAP measures for year-over-year
comparison (Table C)
Adjusted Operating Income
$
63.0
$
31.1
102.6
%
As a % of sales
13.8
%
8.0
%
Adjusted Net Income
42.9
18.6
130.6
%
Adjusted diluted net income per share
$
0.50
$
0.22
127.3
%
Hexcel Corporation (NYSE: HXL) today reported first quarter 2023
results including net sales of $458 million and adjusted diluted
EPS of $0.50 per share.
Chairman, CEO and President Nick Stanage said, “Our relentless
focus on execution and growing demand drove an 18% increase in
sales, and we delivered adjusted operating income that was more
than double the same period last year. The margin expansion
reflects strong operating leverage from higher production levels as
our key markets grow. Hexcel is well-positioned to benefit from the
multi-year production ramps our aerospace customers have announced,
as well as growth in other markets – all of which will lead to
significant cash generation and expanding shareholder value.”
Mr. Stanage continued, “Innovating the next generation of
advanced lightweight composite materials is at the heart of who we
are and what we do, so it was a pleasure last month to welcome many
customers and partners to join us at the grand opening of our new
Center of Research & Technology Excellence in Salt Lake City,
Utah. This state-of-the-art facility will allow us to expand our
research and broaden our technology portfolio. It will provide an
even stronger platform for us to collaborate with our customers on
the latest developments in lightweight sustainable solutions, to
create a better world for us all.”
Markets
Sales in the first quarter of 2023 were $457.7 million compared
to $390.6 million in the first quarter of 2022.
Commercial Aerospace (62% of YTD Sales)
- Commercial Aerospace sales of $284.5 million increased 30.0%
(30.0% in constant currency) for the first quarter of 2023 compared
to the first quarter of 2022 led by growth in the Airbus A350 and
A320neo programs. Other Commercial Aerospace increased 23.5% for
the first quarter of 2023 compared to the first quarter of 2022 on
expanding business jet demand.
Space & Defense (28% of YTD Sales)
- Space & Defense sales of $126.2 million increased 6.8%
(7.6% in constant currency) for the quarter as compared to the
first quarter of 2022 with growth across a number of platforms
globally, including fixed-wing aircraft and both military and
civilian rotorcraft.
Industrial (10% of YTD Sales)
- Total Industrial sales of $47.0 million in the first quarter of
2023 decreased 12.1% (9.1% in constant currency) compared to the
first quarter of 2022, due to lower wind energy sales that were
partially offset by sales growth in recreation, automotive and
other industrial markets.
Consolidated Operations
Gross margin for the first quarter of 2023 was 27.9% compared to
22.2% in first quarter of 2022 with the improvement driven by
strong production volume leverage, and also reflecting a favorable
sales mix, favorable absorption and a beneficial foreign exchange
impact. As a percentage of sales, selling, general and
administrative and R&T expenses for the first quarter of 2023
were 14.1% compared to 14.2% for the first quarter of 2022.
Adjusted operating income in the first quarter of 2023 was $63.0
million or 13.8% of sales, compared to $31.1 million, or 8.0% of
sales in 2022. The impact of exchange rates on operating income as
a percentage of sales was favorable by approximately 80 basis
points in the first quarter of 2023 compared to Q1 2022.
Cash and other
- The first quarter 2023 tax expense was $11.7 million compared
to a tax expense of $4.7 million for the first quarter of
2022.
- Net cash used for operating activities in the first quarter of
2023 was $23.4 million, compared to a use of $19.0 million for the
first quarter of 2022. Working capital increased to support higher
sales and was a cash use of $104.0 million in the first quarter of
2023 compared to a use of $74.3 million in the first quarter of
2022. Capital expenditures on a cash basis were $18.1 million for
the first quarter of 2023. Free cash flow was ($41.5) million in
the first quarter of 2023 compared to ($39.9) million in the first
quarter of 2022. Free cash flow is defined as cash generated from
operating activities less cash paid for capital expenditures.
Capital expenditures on an accrual basis were $16.8 million for the
first quarter of 2023 compared to $11.1 million for the first
quarter of 2022.
- The Company did not repurchase any common stock during the
first quarter of 2023 and the remaining authorization under the
share repurchase program on March 31, 2023, was $217 million.
- As announced today, the Board of Directors declared a quarterly
dividend of $0.125 per share payable to stockholders of record as
of May 5, 2023, with a payment date of May 12, 2023.
2023 Guidance
(unchanged)
- Sales of $1.725 billion to $1.825 billion
- Adjusted diluted earnings per share of $1.70 to $1.90
- Free cash flow greater than $140 million
- Accrual basis capital expenditures of approximately $90
million
- Underlying effective tax rate is estimated to be 23%
Hexcel will host a conference call at 10:00 a.m. ET, on April
25, 2023, to discuss first quarter 2023 results. The event will be
webcast via the Investor Relations webpage at www.Hexcel.com. The
event can also be accessed by dialing +1 (646) 960-0452. The
conference ID is 3428143. Replays of the call will be available on
the website.
About Hexcel
Hexcel Corporation is a global leader in advanced lightweight
composites technology. We propel the future of flight, energy
generation, transportation, and recreation through excellence in
providing innovative high-performance material solutions that are
lighter, stronger and tougher, helping to create a better world for
us all. Our broad and unrivaled product range includes carbon
fiber, specialty reinforcements, prepregs and other
fiber-reinforced matrix materials, honeycomb, resins, engineered
core and composite structures for use in commercial aerospace,
space and defense, and industrial applications.
Disclaimer on Forward Looking Statements
This news release contains statements that are forward looking
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements relating to the estimates and
expectations based on aircraft production rates provided by Airbus,
Boeing and others; the revenues we may generate from an aircraft
model or program; the impact of the 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 with regard to regulatory clearances or the
build rate of the Boeing 737 MAX or Boeing 787 and the related
impact on our revenues; expectations with regard to raw material
cost and availability; expectations of composite content on new
commercial aircraft programs and our share of those requirements;
expectations regarding revenues from space and defense
applications, including whether certain programs might be curtailed
or discontinued; expectations regarding sales for wind energy,
recreation, automotive and other industrial applications;
expectations regarding working capital trends and expenditures and
inventory levels; expectations as to the level of capital
expenditures and timing of completion of capacity expansions and
qualification of new products; expectations regarding our ability
to improve and maintain margins; expectations regarding the sale of
certain of our assets; projections regarding our tax rate;
expectations with regard to the continued impact of the conflict
between Russia and Ukraine; expectations regarding our strategic
initiatives and other goals, including, but not limited to, our
sustainability goals; expectations regarding the outcome of legal
matters or the impact of changes in laws or regulations or
government policies; expectations with regard to cybersecurity
measures taken to protect confidential and proprietary information
and the anticipated impact of the above factors and various market
risks on our expectations of financial results for 2023 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 the extent of the impact of the
conflict between Russia and Ukraine and the ongoing market recovery
following the COVID-19 pandemic, including continued disruption in
global financial markets and supply chains, and labor shortages,;
reductions in sales to any significant customers, particularly
Airbus or Boeing, including related to the timing of pending
regulatory clearances for the Boeing 737 MAX and the Boeing 787 or
other geopolitical events or conditions; our ability to effectively
adjust production and inventory levels to align with customer
demand; our ability to effectively motivate, retain and hire the
necessary workforce; availability and cost of raw materials,
including the impact of supply shortages and inflation; supply
chain disruptions, which may be exacerbated by the conflict between
Russia and Ukraine; our ability to successfully implement or
realize our business strategies, plans, goals and objectives of
management, including our sustainability goals and any
restructuring or alignment activities in which we may engage;
changes in sales mix; changes in current pricing and cost levels,
including cost inflation, as well as increasing energy prices
resulting from the conflict between Russia and Ukraine; 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; inability to install, staff and qualify
necessary capacity or complete capacity expansions to meet customer
demand; cybersecurity-related risks including the potential impact
of 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,
such as sanctions imposed as a result of the conflict between
Russia and Ukraine; work stoppages or other labor disruptions; our
ability to successfully complete any strategic acquisitions,
investments or dispositions; compliance with environmental, health,
safety and other related laws and regulations, including those
related to climate change; the effects of natural disasters or
other severe weather events, which may be worsened by the impact of
climate change, and other severe catastrophic events, including any
public health crisis; the potential impact of environmental, social
and governance matters; and the 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
Condensed Consolidated Statements of
Operations
Unaudited
Quarters Ended
March 31,
(In millions, except per share data)
2023
2022
Net sales
$
457.7
$
390.6
Cost of sales
330.0
303.9
Gross margin
127.7
86.7
% Gross Margin
27.9
%
22.2
%
Selling, general and administrative
expenses
50.8
44.7
Research and technology expenses
13.9
10.9
Other operating expense
0.2
1.0
Operating income
62.8
30.1
Interest expense, net
9.4
9.1
Income before income taxes, and equity in
earnings of affiliated companies
53.4
21.0
Income tax expense
11.7
4.7
Income before equity in earnings of
affiliated companies
41.7
16.3
Equity in earnings from affiliated
companies
1.0
1.5
Net income
$
42.7
$
17.8
Basic net income per common share:
$
0.50
$
0.21
Diluted net income per common share:
$
0.50
$
0.21
Weighted-average common shares:
Basic
84.6
84.3
Diluted
85.5
84.9
Hexcel Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
Unaudited
March 31,
December 31,
(In millions)
2023
2022
Assets
Cash and cash equivalents
$
105.7
$
112.0
Accounts receivable, net
265.3
222.7
Inventories, net
354.6
319.3
Contract assets
28.6
32.0
Prepaid expenses and other current
assets
44.2
38.9
Assets held for sale
9.5
9.5
Total current assets
807.9
734.4
Property, plant and equipment
3,116.1
3,087.9
Less accumulated depreciation
(1,465.4
)
(1,430.1
)
Net property, plant and equipment
1,650.7
1,657.8
Goodwill and other intangible assets,
net
255.2
256.0
Investments in affiliated companies
52.7
47.6
Other assets
140.8
141.5
Total assets
$
2,907.3
$
2,837.3
Liabilities and Stockholders'
Equity
Liabilities:
Short-term borrowings
$
0.2
$
0.2
Accounts payable
122.0
155.5
Accrued compensation and benefits
61.0
69.6
Accrued liabilities
106.9
104.5
Total current liabilities
290.1
329.8
Long-term debt
768.5
723.3
Retirement obligations
44.3
42.7
Other non-current liabilities
182.2
187.3
Total liabilities
$
1,285.1
$
1,283.1
Stockholders' equity:
Common stock, $0.01 par value, 200.0
shares authorized, 110.6 shares issued at March 31, 2023 and 110.4
shares issued at December 31, 2022
$
1.1
$
1.1
Additional paid-in capital
920.8
905.0
Retained earnings
2,137.2
2,104.9
Accumulated other comprehensive loss
(152.1
)
(174.4
)
2,907.0
2,836.6
Less – Treasury stock, at cost, 26.2
shares at March 31, 2023 and 26.2 shares at December 31, 2022
(1,284.8
)
(1,282.4
)
Total stockholders' equity
1,622.2
1,554.2
Total liabilities and stockholders'
equity
$
2,907.3
$
2,837.3
Hexcel Corporation and
Subsidiaries
Condensed Consolidated Statements of
Cash Flows
Unaudited
Quarters Ended
March 31,
(In millions)
2023
2022
Cash flows from operating
activities
Net income
$
42.7
$
17.8
Reconciliation to net cash used for
operating activities:
Depreciation and amortization
30.7
32.2
Amortization related to financing
0.1
0.3
Deferred income taxes
(2.1
)
(1.8
)
Equity in earnings from affiliated
companies
(1.0
)
(1.5
)
Stock-based compensation
12.9
10.4
Restructuring expenses, net of
payments
(2.1
)
(5.0
)
Impairment of assets
1.7
-
Changes in assets and liabilities:
Increase in accounts receivable
(40.5
)
(54.7
)
Increase in inventories
(32.6
)
(24.4
)
Decrease (increase) in prepaid expenses
and other current assets
0.1
(8.6
)
(Decrease) increase in accounts
payable/accrued liabilities
(31.0
)
13.4
Other - net
(2.3
)
2.9
Net cash used for operating activities
(a)
(23.4
)
(19.0
)
Cash flows from investing
activities
Capital expenditures (b)
(18.1
)
(20.9
)
Net cash used for investing activities
(18.1
)
(20.9
)
Cash flows from financing
activities
Borrowings from senior unsecured credit
facilities
65.0
35.0
Net repayments from senior unsecured
credit facilities
(20.0
)
-
Repayment of finance lease obligation and
other debt, net
(0.1
)
(0.3
)
Dividends paid
(10.5
)
(8.5
)
Activity under stock plans
0.4
(0.3
)
Net cash provided by financing
activities
34.8
25.9
Effect of exchange rate changes on cash
and cash equivalents
0.4
(0.9
)
Net decrease in cash and cash
equivalents
(6.3
)
(14.9
)
Cash and cash equivalents at beginning of
period
112.0
127.7
Cash and cash equivalents at end of
period
$
105.7
$
112.8
Supplemental data:
Free Cash Flow (a)+(b)
$
(41.5
)
$
(39.9
)
Accrual basis additions to property, plant
and equipment
$
16.8
$
11.1
Hexcel Corporation and
Subsidiaries
Net Sales to Third-Party Customers by
Market
Quarters Ended March 31, 2023 and
2022
Unaudited
Table A
(In millions)
As Reported
Constant Currency (a)
B/(W)
FX
B/(W)
Market
2023
2022
%
Effect (b)
2022
%
Commercial Aerospace
$
284.5
$
218.9
30.0
$
(0.1
)
$
218.8
30.0
Space & Defense
126.2
118.2
6.8
(0.9
)
117.3
7.6
Industrial
47.0
53.5
(12.1
)
(1.8
)
51.7
(9.1
)
Consolidated Total
$
457.7
$
390.6
17.2
$
(2.8
)
$
387.8
18.0
Consolidated % of Net Sales
%
%
%
Commercial Aerospace
62.2
56.0
56.4
Space & Defense
27.6
30.3
30.2
Industrial
10.2
13.7
13.4
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 March 31, 2022 have been estimated using the same
U.S. dollar, British pound and Euro exchange rates as applied for
the respective period in 2023 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
First Quarter 2023
Net sales to external customers
$
378.2
$
79.5
$
-
$
457.7
Intersegment sales
19.3
1.0
(20.3
)
-
Total sales
397.5
80.5
(20.3
)
457.7
Other operating expense
0.2
-
-
0.2
Operating income (loss)
73.2
12.0
(22.4
)
62.8
% Operating margin
18.4
%
14.9
%
13.7
%
Depreciation and amortization
27.2
3.5
-
30.7
Stock-based compensation expense
3.1
0.8
9.0
12.9
Accrual based additions to capital
expenditures
13.1
3.7
-
16.8
First Quarter 2022
Net sales to external customers
$
313.8
$
76.8
$
-
$
390.6
Intersegment sales
16.5
0.3
(16.8
)
-
Total sales
330.3
77.1
(16.8
)
390.6
Other operating expense
0.9
0.1
-
1.0
Operating income
42.6
10.6
(23.1
)
30.1
% Operating margin
12.9
%
13.7
%
7.7
%
Depreciation and amortization
28.6
3.6
-
32.2
Stock-based compensation expense
2.6
0.7
7.1
10.4
Accrual based additions to capital
expenditures
10.1
1.0
-
11.1
(a)
Hexcel does not allocate corporate
expenses to the operating segments.
Hexcel Corporation and
Subsidiaries
Reconciliation of GAAP to Non-GAAP
Operating Income Net Income, EPS and Operating Cash Flow to Free
Cash Flow
Table C
Unaudited
Quarters Ended
March 31,
(In millions)
2023
2022
GAAP operating income
$
62.8
$
30.1
Other operating expense (a)
0.2
1.0
Non-GAAP operating income
$
63.0
$
31.1
Unaudited
Quarters Ended March 31,
2023
2022
(In millions, except per diluted share
data)
Net Income
EPS
Net Income
EPS
GAAP
$
42.7
$
0.50
$
17.8
$
0.21
Other operating expense, net of tax
(a)
0.2
0.00
0.8
0.01
Non-GAAP
$
42.9
$
0.50
$
18.6
$
0.22
Unaudited
Quarters Ended March 31,
(In millions)
2023
2022
Net cash used for operating activities
$
(23.4
)
$
(19.0
)
Less: Capital expenditures
(18.1
)
(20.9
)
Free cash flow (non-GAAP)
$
(41.5
)
$
(39.9
)
(a)
The quarters ended March 31, 2023 and 2022
included restructuring costs.
NOTE: Management believes that
adjusted operating income, adjusted net income, adjusted diluted
net income per share and free cash flow, which are non-GAAP
measures, are meaningful to investors because they provide a view
of Hexcel with respect to the underlying 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
March 31,
December 31,
March 31,
(In millions)
2023
2022
2022
Current portion finance lease
$
0.2
$
0.2
$
0.7
Total current debt
0.2
0.2
0.7
Senior unsecured credit facility
70.0
25.0
160.0
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
(0.9
)
(0.9
)
(1.1
)
Senior notes deferred financing costs
(2.0
)
(2.2
)
(2.7
)
Other debt
1.4
1.4
1.3
Total long-term debt
768.5
723.3
857.5
Total Debt
768.7
723.5
858.2
Less: Cash and cash equivalents
(105.7
)
(112.0
)
(112.8
)
Total debt, net of cash
$
663.0
$
611.5
$
745.4
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230424005720/en/
Kurt Goddard | Vice President Investor Relations |
Kurt.Goddard@Hexcel.com | +1 (203)-352-6826
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