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img130007286_0.jpg 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2023

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-8472

Hexcel Corporation

(Exact name of registrant as specified in its charter)

Delaware

94-1109521

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

Two Stamford Plaza

281 Tresser Boulevard

Stamford, Connecticut 06901-3238

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (203) 969-0666

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01

 

HXL

 

New York Stock Exchange

 

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Outstanding at October 20, 2023

COMMON STOCK

84,111,294

 

 


 

HEXCEL CORPORATION AND SUBSIDIARIES

INDEX

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

3

 

 

 

 

 

ITEM 1.

Condensed Consolidated Financial Statements (Unaudited)

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets — September 30 2023, and December 31, 2022

3

 

 

 

 

 

 

Condensed Consolidated Statements of Operations — The quarters and nine months ended September 30, 2023 and 2022

 

4

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) — The quarters and nine months ended September 30, 2023 and 2022

 

4

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows — The nine months ended September 30, 2023 and 2022

 

5

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity — The quarters and nine months ended September 30, 2023 and 2022

 

6

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

 

 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

24

 

 

 

 

 

ITEM 4.

Controls and Procedures

24

 

 

 

 

 

PART II.

OTHER INFORMATION

25

 

 

 

 

 

ITEM 1.

Legal Proceedings

25

 

 

 

 

 

ITEM 1A.

Risk Factors

25

 

 

 

 

 

ITEM 2.

 

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

 

25

 

 

 

 

 

ITEM 5.

 

Other Information

 

25

 

 

 

 

 

ITEM 6.

Exhibits

26

 

 

 

 

 

 

 

SIGNATURE

 

27

 

2


 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Condensed Consolidated Financial Statements

Hexcel Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

 

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

(In millions)

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

97.7

 

 

$

112.0

 

Accounts receivable, net

 

 

236.8

 

 

 

222.7

 

Inventories, net

 

 

350.8

 

 

 

319.3

 

Contract assets

 

 

31.4

 

 

 

32.0

 

Prepaid expenses and other current assets

 

 

48.7

 

 

 

38.9

 

Assets held for sale

 

 

-

 

 

 

9.5

 

Total current assets

 

 

765.4

 

 

 

734.4

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

3,144.7

 

 

 

3,087.9

 

Less accumulated depreciation

 

 

(1,491.7

)

 

 

(1,430.1

)

Net property, plant and equipment

 

 

1,653.0

 

 

 

1,657.8

 

 

 

 

 

 

 

 

Goodwill and other intangible assets, net

 

 

250.6

 

 

 

256.0

 

Investments in affiliated companies

 

 

51.5

 

 

 

47.6

 

Other assets

 

 

125.8

 

 

 

141.5

 

Total assets

 

$

2,846.3

 

 

$

2,837.3

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term borrowings

 

$

0.1

 

 

$

0.2

 

Accounts payable

 

 

97.8

 

 

 

155.5

 

Accrued compensation and benefits

 

 

70.2

 

 

 

69.6

 

Financial instruments

 

 

14.0

 

 

 

22.0

 

Accrued liabilities

 

 

70.8

 

 

 

82.5

 

Total current liabilities

 

 

252.9

 

 

 

329.8

 

 

 

 

 

 

 

 

Long-term debt

 

 

754.1

 

 

 

723.3

 

Retirement obligations

 

 

44.9

 

 

 

42.7

 

Deferred income taxes

 

 

111.8

 

 

 

126.4

 

Other non-current liabilities

 

 

36.3

 

 

 

60.9

 

Total liabilities

 

 

1,200.0

 

 

 

1,283.1

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 200.0 shares authorized, 110.7 shares and 110.4 shares issued at September 30, 2023 and December 31, 2022, respectively

 

 

1.1

 

 

 

1.1

 

Additional paid-in capital

 

 

931.5

 

 

 

905.0

 

Retained earnings

 

 

2,197.3

 

 

 

2,104.9

 

Accumulated other comprehensive loss

 

 

(167.7

)

 

 

(174.4

)

 

 

2,962.2

 

 

 

2,836.6

 

Less – Treasury stock, at cost, 26.6 shares at September 30, 2023 and 26.2 shares
at December 31, 2022

 

 

(1,315.9

)

 

 

(1,282.4

)

Total stockholders' equity

 

 

1,646.3

 

 

 

1,554.2

 

Total liabilities and stockholders' equity

 

$

2,846.3

 

 

$

2,837.3

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

 

Hexcel Corporation and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

(In millions, except per share data)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

419.5

 

 

$

364.7

 

 

$

1,331.5

 

 

$

1,148.3

 

Cost of sales

 

 

327.9

 

 

 

282.9

 

 

 

1,001.4

 

 

 

890.3

 

Gross margin

 

 

91.6

 

 

 

81.8

 

 

 

330.1

 

 

 

258.0

 

Selling, general and administrative expenses

 

 

35.4

 

 

 

29.0

 

 

 

121.9

 

 

 

107.2

 

Research and technology expenses

 

 

13.4

 

 

 

11.6

 

 

 

40.6

 

 

 

33.8

 

Other operating (income) expense

 

 

(0.8

)

 

 

0.4

 

 

 

(0.1

)

 

 

(17.7

)

Operating income

 

 

43.6

 

 

 

40.8

 

 

 

167.7

 

 

 

134.7

 

Interest expense, net

 

 

7.8

 

 

 

9.0

 

 

 

26.4

 

 

 

27.0

 

Other income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(0.3

)

    Income before income taxes, and equity in earnings from affiliated companies

 

 

35.8

 

 

 

31.8

 

 

 

141.3

 

 

 

108.0

 

Income tax (benefit) expense

 

 

(0.7

)

 

 

6.8

 

 

 

22.5

 

 

 

24.2

 

    Income before equity in earnings from affiliated companies

 

 

36.5

 

 

 

25.0

 

 

 

118.8

 

 

 

83.8

 

Equity in earnings from affiliated companies

 

 

2.2

 

 

 

1.8

 

 

 

5.1

 

 

 

5.5

 

     Net income

 

$

38.7

 

 

$

26.8

 

 

$

123.9

 

 

$

89.3

 

Basic net income per common share

 

$

0.46

 

 

$

0.32

 

 

$

1.46

 

 

$

1.06

 

Diluted net income per common share

 

$

0.45

 

 

$

0.31

 

 

$

1.45

 

 

$

1.05

 

Weighted-average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

 

84.6

 

 

 

84.4

 

 

 

84.6

 

 

 

84.4

 

     Diluted

 

 

85.6

 

 

 

85.1

 

 

 

85.5

 

 

 

85.0

 

 

 

Hexcel Corporation and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

(In millions)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

38.7

 

 

$

26.8

 

 

$

123.9

 

 

$

89.3

 

Currency translation adjustments

 

 

(19.5

)

 

 

(38.2

)

 

 

(1.4

)

 

 

(88.7

)

Net unrealized pension and other benefit actuarial gains and prior service credits (net of tax)

 

 

3.0

 

 

 

4.7

 

 

 

2.0

 

 

 

12.4

 

Net unrealized (losses) gains on financial instruments (net of tax)

 

 

(6.0

)

 

 

(24.3

)

 

 

6.1

 

 

 

(46.3

)

Total other comprehensive (loss) income

 

 

(22.5

)

 

 

(57.8

)

 

 

6.7

 

 

 

(122.6

)

Comprehensive income (loss)

 

$

16.2

 

 

$

(31.0

)

 

$

130.6

 

 

$

(33.3

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

4


 

 

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

 

 

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

(In millions)

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

123.9

 

 

$

89.3

 

Reconciliation to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

93.2

 

 

 

94.9

 

Amortization related to financing

 

 

0.5

 

 

 

0.6

 

Deferred income taxes

 

 

(12.3

)

 

 

(8.5

)

Equity in earnings from affiliated companies

 

 

(5.1

)

 

 

(5.5

)

Stock-based compensation

 

 

18.3

 

 

 

15.2

 

Restructuring expenses, net of payments

 

 

(4.1

)

 

 

(6.1

)

Impairment of assets

 

 

1.7

 

 

 

-

 

Gain on sale of asset

 

 

(0.8

)

 

 

(19.4

)

Gain on sale of investment

 

 

-

 

 

 

(0.3

)

Changes in assets and liabilities:

 

 

 

 

 

 

Increase in accounts receivable

 

 

(15.8

)

 

 

(53.1

)

Increase in inventories

 

 

(33.2

)

 

 

(82.0

)

Increase in prepaid expenses and other current assets

 

 

(9.4

)

 

 

(11.6

)

(Decrease) increase in accounts payable/accrued liabilities

 

 

(53.7

)

 

 

31.7

 

Other  net

 

 

(5.1

)

 

 

11.2

 

Net cash provided by operating activities

 

 

98.1

 

 

 

56.4

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Capital expenditures

 

 

(94.4

)

 

 

(58.3

)

Proceeds from sale of asset

 

 

10.3

 

 

 

21.2

 

Proceeds from sale of investments

 

 

2.5

 

 

 

0.5

 

Net cash used for investing activities

 

 

(81.6

)

 

 

(36.6

)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Borrowing from senior unsecured credit facility - 2028

 

 

98.0

 

 

 

-

 

Repayment of senior unsecured credit facility - 2028

 

 

(43.0

)

 

 

-

 

Borrowing from senior unsecured credit facility - 2024

 

 

65.0

 

 

 

35.0

 

Repayment of senior unsecured credit facility - 2024

 

 

(90.0

)

 

 

(61.0

)

Repurchases of common stock

 

 

(30.1

)

 

 

-

 

Issuance costs related to senior unsecured credit facilities

 

 

(2.5

)

 

 

-

 

Repayment of finance lease obligation and other debt, net

 

 

(0.1

)

 

 

(0.4

)

Dividends paid

 

 

(31.7

)

 

 

(25.3

)

Activity under stock plans

 

 

4.7

 

 

 

3.1

 

Net cash used for financing activities

 

 

(29.7

)

 

 

(48.6

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1.1

)

 

 

(8.0

)

Net decrease in cash and cash equivalents

 

 

(14.3

)

 

 

(36.8

)

Cash and cash equivalents at beginning of period

 

 

112.0

 

 

 

127.7

 

Cash and cash equivalents at end of period

 

$

97.7

 

 

$

90.9

 

Supplemental data:

 

 

 

 

 

 

Accrual basis additions to plant, property and equipment

 

$

88.7

 

 

$

49.1

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the Quarter and nine months ended September 30, 2023, and September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

 

 

Total

 

 

 

 

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

Stockholders’

 

(In millions)

 

Par

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Equity

 

Balance, December 31, 2021

 

$

1.1

 

 

$

878.6

 

 

$

2,012.5

 

 

$

(126.5

)

 

$

(1,280.2

)

 

$

1,485.5

 

Net income

 

 

 

 

 

 

17.8

 

 

 

 

 

 

 

17.8

 

Dividends on common stock ($0.10 per share)

 

 

 

 

 

 

(8.5

)

 

 

 

 

 

 

(8.5

)

Change in other comprehensive loss – net of tax

 

 

 

 

 

 

 

 

(17.6

)

 

 

 

 

(17.6

)

Stock-based activity

 

 

 

 

11.3

 

 

 

 

 

 

 

(1.4

)

 

 

9.9

 

Balance, March 31, 2022

 

$

1.1

 

 

$

889.9

 

 

$

2,021.8

 

 

$

(144.1

)

 

$

(1,281.6

)

 

$

1,487.1

 

Net income

 

 

 

 

 

 

44.7

 

 

 

 

 

 

 

44.7

 

Dividends on common stock ($0.10 per share)

 

 

 

 

 

 

(8.5

)

 

 

 

 

 

 

(8.5

)

Change in other comprehensive loss – net of tax

 

 

 

 

 

 

 

 

(47.2

)

 

 

 

 

(47.2

)

Stock-based activity

 

 

 

 

4.2

 

 

 

 

 

 

 

 

 

4.2

 

Balance, June 30, 2022

 

$

1.1

 

 

$

894.1

 

 

$

2,058.0

 

 

$

(191.3

)

 

$

(1,281.6

)

 

$

1,480.3

 

Net income

 

 

 

 

 

 

26.8

 

 

 

 

 

 

 

26.8

 

Dividends on common stock ($0.10 per share)

 

 

 

 

 

 

 

 

(8.4

)

 

 

 

 

 

 

 

 

(8.4

)

Change in other comprehensive loss– net of tax

 

 

 

 

 

 

 

 

(57.8

)

 

 

 

 

(57.8

)

Stock-based activity

 

 

 

 

4.8

 

 

 

 

 

 

 

(0.7

)

 

 

4.1

 

Balance, September 30, 2022