HEXCEL CORP DE
For the period ended Sep 30, 2024. Filed Oct 21, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 21, 2024
HXL$80.40-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-18.
0000950170-24-084437
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-21.
0000950170-24-115969
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 49 previous paragraphs and 52 current paragraphs.
28 unchanged; 18 reworded; 6 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report
For the third quarter of 2024, Commercial Aerospace sales of $295.9 million increased 17.5% (17.0% in constant currency) compared to the third quarter of 2023. Airbus programs drove the sales growth including the A350 and A320neo. Boeing 787 sales also increased. Other Commercial Aerospace sales for the third quarter of 2024 increased 9.1% compared to the third quarter of 2023 with growth led by the latest-generation business jet sales. Sales of $915.9 million increased 14.4% (14.3% in constant currency) for the first nine months of 2024 compared to the first nine months of 2023. Growth was led by the A350, 787, and A320neo. Other Commercial Aerospace increased 5.8% for the first nine months of 2024 compared to the same period in 2023 supported by the latest-generation business jets.
Current report
Space & Defense sales of $128.2 million were relatively flat (0.9% lower in constant currency) for the third quarter of 2024 as compared to the third quarter of 2023. Strength in the CH-53K and Black Hawk was offset by lower V-22 and Space sales, as well as, softer launcher, satellite and rocket motor sales. For the first nine months of 2024, Space & Defense sales of $406.2 million increased 3.5% (3.4% in constant currency) as compared to the first nine months of 2023. Key program growth including the F-35, CH-53K, Black Hawk and European military helicopter programs were partially offset by the wind down of V-22 production, and lower civilian helicopter and satellite sales.
Current report
Tax expense for the quarter ended September 30, 2024 was $4.2 million as compared to a tax benefit of $0.7 million for the quarter ended September 30, 2023. Tax expense for the nine months ended September 30, 2024 was $27.8 million compared to $22.5 million for the comparative period in 2023. The quarters and nine months ended September 30, 2024 and 2023 included discrete tax benefits of $1.8 million and $5.6 million, respectively, primarily related to adjustments based on the finalization of prior year tax returns.
Current report
(b)
Current report
The quarters and nine months ended September 30, 2024 and 2023 included discrete tax benefits of $1.8 million and $5.6 million, respectively, primarily related to adjustments based on the finalization of prior year tax returns.
Removed paragraphs (3)
Previous report
For the second quarter of 2024, Commercial Aerospace sales of $320.7 million increased 21.3% (21.6% in constant currency) as compared to the second quarter of 2023. Both widebody and narrowbody sales increased by double digit percentages. Other Commercial Aerospace increased 15.4% for the second quarter of 2024 compared to the second quarter of 2023 reflecting growth in business and regional jets. Sales of $620.0 million increased 13.0% (13.1% in constant currency) for the first six months of 2024 compared to the first six months of 2023 led by growth in widebodies. Other Commercial Aerospace increased 4.1% for the first six months of 2024 compared to the same period in 2023 reflecting growth in regional jets and turbo-props.
Previous report
Space & Defense sales of $138.9 million increased 1.0% (1.4% in constant currency) in the second quarter of 2024 as compared to the second quarter of 2023. Military helicopters globally were strong including the CH-53K and Apache, partially offset by declining V-22 sales as the program winds down. Sales of $278.0 million increased 5.4% (5.5% in constant currency) for the first six months of 2024 as compared to the first six months of 2023. Growth was led by the F-35 and a number of domestic and international military helicopter programs, partially offset by significantly lower V-22 sales.
Previous report
Tax expense for the quarter and six months ended June 30, 2024 was $13.7 million and $23.6 million, respectively, as compared to $11.5 million and $23.2 million for the comparative periods in 2023 due to higher income before income tax.
Reworded paragraphs (18)
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 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.
Current wording
Our business is continuing to recover from the impacts of the COVID-19 pandemic, 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, including delays in aircraft production rates, related to, among other impacts, global logistics, supply chain issues, 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 and six months ended June 30, 2024 and 2023:
Current wording
The following table summarizes net sales to third-party customers by segment and end market for the quarters and nine months ended September 30, 2024 and 2023:
Previous wording
Composite Materials: Net sales of $408.6 million in the second quarter of 2024 increased by $30.1 million or 8.0% from the prior year quarter. Commercial Aerospace sales increased $43.7 million or 19.1% in the second quarter of 2024 as compared to the prior year quarter. Space & Defense net sales in the second quarter of 2024 decreased $1.9 million or 1.9% and Industrial sales decreased 22.7% or $11.7 million as compared to the second quarter of 2023. Net sales for the segment in the first half of 2024 of $788.1 million increased 4.1% compared to the same period last year driven by strong sales in Commercial Aerospace.
Current wording
Composite Materials: Net sales of $367.6 million in the third quarter of 2024 increased by $27.1 million or 8.0% from the prior year quarter driven by Commercial Aerospace sales which increased $37.6 million or 17.7%. Net sales of $1,155.7 million for the first nine months of 2024 increased 5.3% compared to the same period last year also driven by strong sales in Commercial Aerospace.
Previous 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.
Current wording
Engineered Products: For the third quarter of 2024, net sales of $88.9 million increased $9.9 million or 12.5% as compared to the prior year quarter. Net sales of $273.5 million for the first nine months of 2024 increased 16.7%compared to the same period last year. The increase for both the third quarter and nine months ended September 30, 2024 over the respective periods in the prior year was driven by higher Commercial Aerospace and Space & Defense sales.
Previous wording
Total Industrial sales of $40.8 million in the second quarter of 2024 decreased 22.3% (21.8% in constant currency) compared to the second quarter of 2023 as growth in Automotive was more than offset by declines in the other sub-markets. Total Industrial sales of $74.7 million in the first six months of 2024 decreased 24.9% (25.0% in constant currency) compared to the first six months of 2023 due to declines in all sub-markets.
Current wording
Total Industrial sales of $32.4 million in the third quarter of 2024 decreased 16.5% (17.3% in constant currency) compared to the third quarter of 2023. Total Industrial sales of $107.1 million in the first nine months of 2024 decreased 22.6% (22.8% in constant currency) compared to the first nine months of 2023. The decreases for both the third quarter and nine months ended September 30, 2024 as compared to the same periods in 2023 was due to declines in all sub-markets.
Previous wording
Gross margin for the second quarter of 2024 was 25.3% compared to 24.4% in the second quarter of 2023 and 25.2% and 26.2% for the first six months of 2024 and 2023, respectively. The second quarter 2024 improvement in gross margin as compared to the prior year quarter was primarily due to favorable cost leverage from higher sales. Gross margin for the first half of 2024 was 25.2% compared to 26.2% in the prior year period. The higher margin in the first half of 2023 benefited from favorable margin absorption and sales mix in the initial three months of the year.
Current wording
Gross margin for the third quarter of 2024 was 23.3% compared to 21.8% in the third quarter of 2023 and 24.6% and 24.8% for the first nine months of 2024 and 2023, respectively. The third quarter 2024 improvement in gross margin as compared to the prior year quarter was primarily due to favorable cost leverage from higher sales. The higher gross margin percentage in the first nine months of 2023 benefitted from favorable margin absorption and sales mix in the initial three months of the year.
Previous wording
Selling, general and administrative expenses were higher for the second quarter of 2024 as well as for the first six months of 2024. As a percentage of net sales, the second quarter of 2024 was relatively flat and the first six months of 2024 was lower than the comparable periods for the prior year. The increase in selling, general and administrative expenses for both the second quarter and first six months of 2024 was primarily driven by higher employee-related expenses. Research and technology expenses for the second quarter and first six months of 2024 increased $1.4 million and $2.6 million, respectively, compared to the same periods of 2023. The increases in both periods were due primarily to higher employee-related costs as well as expenses related to development projects.
Current wording
Selling, general and administrative expenses were higher for the third quarter and first nine months of 2024 as compared to the respective periods in 2023. The increase in selling, general and administrative expenses for both the third quarter and first nine months of 2024 was primarily driven by higher employee-related expenses. Research and technology expenses for the third quarter and first nine months of 2024 increased slightly compared to the same periods in 2023. The increases in both periods were due primarily to higher employee-related costs as well as expenses related to development projects.
Previous wording
Operating income for the second quarters of 2024 and 2023 was $71.8 million and $61.3 million, respectively. Operating income for the first six months of 2024 was $124.7 million compared to $124.1 million for the same period last year. Overall, operating income for both the second quarter and six months of 2024 benefited from higher sales as compared to the prior year periods.
Current wording
Operating income for the third quarters of 2024 and 2023 was $52.5 million and $43.6 million, respectively. Operating income for the first nine months of 2024 was $177.2 million compared to $167.7 million for the same period last year. Overall, operating income for both the third quarter and nine months of 2024 benefited from higher sales, as compared to the prior year periods.
Previous 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.
Current wording
Interest expense for the third quarter of 2024 was higher compared to the prior year period primarily due to higher average borrowings under the Facility, as well as, higher average interest rates. Interest expense for the nine months ended September 30, 2024 was lower compared to the prior year period due to lower average debt levels, partially offset by higher average interest rates.
Previous 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.
Current wording
Liquidity: Cash on hand at September 30, 2024 was $98.2 million as compared to $227.0 million at December 31, 2023. As of September 30, 2024, total debt was $805.2 million as compared to $699.5 million at December 31, 2023.
Previous 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.
Current wording
Under the Facility, total borrowings at September 30, 2024 were $105.0 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 September 30, 2024, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $645.0 million. The weighted average interest rate for the Facility was 6.5% for the nine months ended September 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 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.
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 well as access to capital markets. As of September 30, 2024, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations.
Previous 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.
Current wording
The remaining authorization under the share repurchase program at September 30, 2024 was $234.9 million. On October 21, 2024, our Board of Directors declared a quarterly dividend of $0.15 per share payable to stockholders of record as of November 1, 2024, with a payment date of November 8, 2024.
Previous 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.
Current wording
Operating Activities: Net cash provided by operating activities for the first nine months of 2024 was $127.3 million compared to $98.1 million for the same period last year. Working capital was a cash use of $93.1 million for the first nine months of 2024 as compared to a use of $112.1 million in the same period in 2023 with the variance primarily attributable to higher payables and accruals in 2024.
Previous wording
Investing Activities: Net cash used for investing activities was $51.6 million and $72.3 million in the first six months of 2024 and 2023, respectively. Capital expenditures for the first six months of 2024 were $51.6 million as compared to $74.8 million for the same period last year, which also included $38.0 million for the acquisition of the land and building at our Amesbury, Massachusetts facility.
Current wording
Investing Activities: Net cash used for investing activities was $68.4 million and $81.6 million in the first nine months of 2024 and 2023, respectively. Capital expenditures for the first nine months of 2024 were $68.4 million as compared to $94.4 million for the same period last year, which also included approximately $38.0 million for the acquisition of the land and building at our Amesbury, Massachusetts facility. The nine months ended September 30, 2023, also included proceeds of $10.3 million from the sale of the Windsor facility.
Previous 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.
Current wording
Financing Activities: Net cash used for financing activities was $187.8 million for first nine months of 2024 compared to a net cash use of $29.7 million in the same period in 2023. Borrowings under the credit facilities during the first nine months of 2024 were $160.0 million compared to $163.0 million in the prior year period. Repayments were $55.0 million during the first nine months of 2024 compared to $133.0 million in the prior year period. Quarterly dividend payments to shareholders were $37.2 million during the first nine months of 2024 compared to $31.7 million in the prior year period. During the nine months ended September 30, 2024, repurchases of common stock totaled $252.2 million compared to $30.1 million in the same period in 2023.
Previous 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.
Current wording
Financial Obligations and Commitments: The next significant scheduled debt maturity will occur in August 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 quarters and six months ended June 30, 2024 and 2023 included restructuring costs primarily related to severance.
Current wording
The quarters and nine months ended September 30, 2024 and 2023 included restructuring costs primarily related to severance. The quarter and nine months ended September 30, 2023 also included the net gain of $0.8 million from the sale of the Windsor facility.