HEXCEL CORP DE

Previous wording

We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fiber, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, resins, engineered core and composite structures, for use in Commercial Aerospace, Space & Defense, and Industrial markets. 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.

Current wording

We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fiber, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, resins, engineered core and composite structures, for use in Commercial Aerospace, Space & Defense, and Industrial markets. 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.

Previous wording

The Commercial Aerospace market has recovered strongly following the severe negative economic impacts on this industry resulting from the COVID-19 pandemic that began in 2020. Our business is continuing to recover driven by growth in air travel and an increase in aircraft build rates. The recovery has created many challenges across the markets Hexcel operates in, related to global logistics, supply chains, inflationary pressures and has also been impacted by the effects of geopolitical issues and conflicts. These challenges have had and may continue to have further negative impacts on our operations, supply chain, transportation networks and customers, all of which have and may continue to compress our financial results.

Current wording

The Commercial Aerospace market has recovered strongly following the severe negative economic impacts on this industry resulting from the COVID-19 pandemic that began in 2020. Our business is continuing to recover driven by growth in air travel and an increase in aircraft build rates. The post-recovery period continues to have many challenges across the markets Hexcel operates in, related to global logistics, supply chains, inflationary pressures, and effects from geopolitical issues and conflicts. These challenges have had and may continue to have further negative impacts on our operations, supply chain, transportation networks and customers, all of which have and may continue to compress our financial results.

Previous wording

The following table summarizes net sales to third-party customers by segment and end market for the quarters ended March 31, 2024 and 2023:

Current wording

The following table summarizes net sales to third-party customers by segment and end market for the quarters and six months ended June 30, 2024 and 2023:

Previous wording

Engineered Products: For the first quarter of 2024, net sales of $92.8 million increased $13.3 million or 16.7% as compared to the prior year quarter. The increase was driven by higher Commercial Aerospace sales, which were up $6.5 million or 15.7% in the first quarter of 2024 as compared to the same period in 2023, as well as higher Space & Defense sales of $7.0 million, or 18.7%.

Current wording

Engineered Products: For the second quarter of 2024, net sales of $91.8 million increased $16.0 million or 21.1% as compared to the prior year quarter. The increase was driven by higher Commercial Aerospace Sales which increased $12.7 million or 35.8% in the second quarter of 2024 as compared to the prior year quarter. Net sales of $184.6 million for the first six months of 2024 increased 18.9%compared to the same period last year driven by strength in Commercial Aerospace and Space & Defense.

Previous wording

Net interest expense for the first quarter ended March 31, 2024 was lower compared to the first quarter of 2023 due to lower average borrowings and higher interest income.

Current wording

Interest expense for both the quarter and six months ended June 30, 2024 was lower compared to the prior year periods due to lower average debt levels.

Previous wording

Liquidity: Cash on hand at March 31, 2024 was $85.9 million as compared to $227.0 million at December 31, 2023. As of March 31, 2024, total debt was $714.7 million as compared to $699.5 million at December 31, 2023.

Current wording

Liquidity: Cash on hand at June 30, 2024 was $75.4 million as compared to $227.0 million at December 31, 2023. As of June 30, 2024, total debt was $795.0 million as compared to $699.5 million at December 31, 2023.

Previous wording

Under the senior unsecured credit facility (the "Facility"), total borrowings at March 31, 2024 were $15.0 million, which approximated fair value. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50.0 million. As of March 31, 2024, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $735.0 million. The weighted average interest rate for the Facility was 8.6% for the three months ended March 31, 2024. For further information regarding our Facility, see Note 5, Debt, to the accompanying condensed consolidated financial statements of this Form 10-Q.

Current wording

Under the senior unsecured credit facility (the "Facility"), total borrowings at June 30, 2024 were $95.0 million, which approximated fair value. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50.0 million. As of June 30, 2024, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $655.0 million. The weighted average interest rate for the Facility was 6.7% for the six months ended June 30, 2024. For further information regarding our Facility, see Note 5, Debt, to the accompanying condensed consolidated financial statements of this Form 10-Q.

Previous wording

We expect to meet our short-term liquidity requirements (including capital expenditures) through net cash from operating activities, cash on hand and the Facility. As of March 31, 2024, long-term liquidity requirements consisted primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until August 2025 when our 4.7% Senior Unsecured Notes are due.

Current wording

We expect to meet our short-term liquidity requirements (including capital expenditures) through net cash from operating activities, cash on hand and the Facility. As of June 30, 2024, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until August 2025 when our 4.7% Senior Unsecured Notes are due.

Previous wording

The remaining authorization under the Share Repurchase Program at March 31, 2024 was $386.4 million. On April 22, 2024, our Board of Directors declared a quarterly dividend of $0.15 per share payable to stockholders of record as of May 3, 2024, with a payment date of May 10, 2024.

Current wording

The remaining authorization under the share repurchase program at June 30, 2024 was $285.3 million. On July 17, 2024, our Board of Directors declared a quarterly dividend of $0.15 per share payable to stockholders of record as of August 2, 2024, with a payment date of August 9 2024.

Previous wording

Operating Activities: Net cash used for operating activities for the first three months of 2024 was $7.0 million compared to $23.4 million for the same period last year. Working capital was a cash use of $84.5 million for the first three months of 2024 compared to a use of $104.0 million in the same period in 2023. The improvement in the current year was primarily driven by lower payments of payables and lower increases in inventory levels.

Current wording

Operating Activities: Net cash provided by operating activities for the first six months of 2024 was $37.2 million compared to $30.1 million for the same period last year. Working capital was a cash use of $118.3 million for the first six months of 2024 as compared to a use of $113.9 million in the same period in 2023.

Previous wording

Financing Activities: Net cash used for financing activities was $104.3 million for first three months of 2024 compared to net cash provided of $34.8 million in the same period in 2023. Borrowings under the Facility during the first quarter of 2024 were $15.0 million compared to $65.0 million in borrowings and repayments of $20.0 million for the same period in the prior year. Quarterly dividend payments to shareholders were $12.6 million during the first quarter of 2024 compared to $10.5 million in the first quarter of 2023. During the three months ended March 31, 2024, repurchases of common stock totaled $100.7 million.

Current wording

Financing Activities: Net cash used for financing activities was $136.0 million for first six months of 2024 compared to net cash provided of $34.0 million in the same period in 2023. Borrowings under the credit facilities during the first six months of 2024 were $95.0 million compared to $163.0 million in the prior year period. Repayments during the first six months of 2023 were $108.0 million. Quarterly dividend payments to shareholders were $25.0 million during the first six months of 2024 compared to $21.1 million in the prior year period. During the six months ended June 30, 2024, repurchases of common stock totaled $201.8 million.

Previous wording

Financial Obligations and Commitments: The next significant scheduled debt maturity will not occur until 2025, when the 4.7% Senior Unsecured Notes mature. Certain sales and administrative offices, data processing equipment, vehicles and manufacturing equipment, and facilities are leased under operating leases.

Current wording

Financial Obligations and Commitments: The next significant scheduled debt maturity will not occur until 2025 when our 4.7% Senior Unsecured Notes are due. Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

Previous wording

The Company uses non-GAAP financial measures, including sales and expenses measured in constant dollars (prior year sales and expenses measured at current year exchange rates); operating income, net income and earnings per share adjusted for items included in operating expense and non-operating expenses; and free cash flow. Management believes these non-GAAP measures are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results and comparisons to prior periods. These adjustments can represent significant charges or credits that we believe are important to an understanding of Hexcel’s overall operating results in the periods presented. Such non-GAAP measures are not determined in accordance with generally accepted accounting principles and should not be viewed in isolation or as an alternative to or substitutes for GAAP measures of performance. Our calculation of these measures may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating our performance. Reconciliations to adjusted operating income, adjusted net income, adjusted diluted net income per share and free cash flow are provided below.

Current wording

The Company uses non-GAAP financial measures, including sales and expenses measured in constant dollars (prior year sales and expenses measured at current year exchange rates); operating income, net income and diluted earnings per share adjusted for items included in operating expense and non-operating expenses; and free cash flow. Management believes these non-GAAP measures are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results and comparisons to prior periods. These adjustments can represent significant charges or credits that we believe are important to an understanding of Hexcel’s overall operating results in the periods presented. Such non-GAAP measures are not determined in accordance with generally accepted accounting principles and should not be viewed in isolation or as an alternative to or substitutes for GAAP measures of performance. Our calculation of these measures may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating our performance. Reconciliations to adjusted operating income, adjusted net income, adjusted diluted net income per share and free cash flow are provided below.

Previous wording

The quarters ended March 31, 2024 and 2023 included restructuring costs primarily related to severance.

Current wording

The quarters and six months ended June 30, 2024 and 2023 included restructuring costs primarily related to severance.