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img129083765_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, 2022

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, 2022

COMMON STOCK

 

84,171,313

 

 


 

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 2022, and December 31, 2021

 

3

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations — The quarter and nine months ended September 30, 2022 and 2021

 

4

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss — The quarter and nine months ended September 30, 2022 and 2021

 

4

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows — The nine months ended September 30, 2022 and 2021

 

5

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity — The quarter and nine months ended September 30, 2022 and 2021

 

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 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)

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

90.9

 

 

$

127.7

 

Accounts receivable, net

 

 

202.7

 

 

 

160.3

 

Inventories, net

 

 

303.1

 

 

 

245.7

 

Contract assets

 

 

32.9

 

 

 

30.5

 

Prepaid expenses and other current assets

 

 

43.0

 

 

 

39.5

 

Assets held for sale

 

 

12.6

 

 

 

12.6

 

Total current assets

 

 

685.2

 

 

 

616.3

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

3,004.6

 

 

 

3,110.0

 

Less accumulated depreciation

 

 

(1,375.3

)

 

 

(1,363.9

)

Net property, plant and equipment

 

 

1,629.3

 

 

 

1,746.1

 

 

 

 

 

 

 

 

Goodwill and other intangible assets, net

 

 

253.1

 

 

 

267.5

 

Investments in affiliated companies

 

 

47.0

 

 

 

44.6

 

Other assets

 

 

161.1

 

 

 

144.9

 

Total assets

 

$

2,775.7

 

 

$

2,819.4

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term borrowings

 

$

0.3

 

 

$

0.9

 

Accounts payable

 

 

113.2

 

 

 

113.2

 

Accrued compensation and benefits

 

 

69.4

 

 

 

54.4

 

Financial instruments

 

 

39.9

 

 

 

5.7

 

Accrued liabilities

 

 

60.9

 

 

 

73.4

 

Total current liabilities

 

 

283.7

 

 

 

247.6

 

 

 

 

 

 

 

 

Long-term debt

 

 

797.0

 

 

 

822.4

 

Retirement obligations

 

 

47.4

 

 

 

52.6

 

Deferred income taxes

 

 

121.2

 

 

 

140.0

 

Other non-current liabilities

 

 

81.4

 

 

 

71.3

 

Total liabilities

 

 

1,330.7

 

 

 

1,333.9

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 200.0 shares authorized, 110.3 shares and 110.1 shares issued at September 30, 2022 and December 31, 2021, respectively

 

 

1.1

 

 

 

1.1

 

Additional paid-in capital

 

 

898.9

 

 

 

878.6

 

Retained earnings

 

 

2,076.4

 

 

 

2,012.5

 

Accumulated other comprehensive loss

 

 

(249.1

)

 

 

(126.5

)

 

 

 

2,727.3

 

 

 

2,765.7

 

Less – Treasury stock, at cost, 26.2 shares at September 30, 2022 and 26.1 shares
at December 31, 2021

 

 

(1,282.3

)

 

 

(1,280.2

)

Total stockholders' equity

 

 

1,445.0

 

 

 

1,485.5

 

Total liabilities and stockholders' equity

 

$

2,775.7

 

 

$

2,819.4

 

 

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)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

364.7

 

 

$

333.8

 

 

$

1,148.3

 

 

$

964.4

 

Cost of sales

 

 

282.9

 

 

 

267.8

 

 

 

890.3

 

 

 

783.4

 

Gross margin

 

 

81.8

 

 

 

66.0

 

 

 

258.0

 

 

 

181.0

 

Selling, general and administrative expenses

 

 

29.0

 

 

 

32.0

 

 

 

107.2

 

 

 

102.7

 

Research and technology expenses

 

 

11.6

 

 

 

10.4

 

 

 

33.8

 

 

 

33.5

 

Other operating expense (income)

 

 

0.4

 

 

 

0.8

 

 

 

(17.7

)

 

 

16.0

 

Operating income

 

 

40.8

 

 

 

22.8

 

 

 

134.7

 

 

 

28.8

 

Interest expense, net

 

 

9.0

 

 

 

9.5

 

 

 

27.0

 

 

 

29.1

 

Other income

 

 

-

 

 

 

-

 

 

 

(0.3

)

 

 

-

 

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

 

 

31.8

 

 

 

13.3

 

 

 

108.0

 

 

 

(0.3

)

Income tax expense

 

 

6.8

 

 

 

5.1

 

 

 

24.2

 

 

 

1.6

 

Income (loss) before equity in earnings from affiliated companies

 

 

25.0

 

 

 

8.2

 

 

 

83.8

 

 

 

(1.9

)

Equity in earnings (losses) from affiliated companies

 

 

1.8

 

 

 

0.8

 

 

 

5.5

 

 

 

(0.9

)

Net income (loss)

 

$

26.8

 

 

$

9.0

 

 

$

89.3

 

 

$

(2.8

)

Basic net income (loss) per common share

 

$

0.32

 

 

$

0.11

 

 

$

1.06

 

 

$

(0.03

)

Diluted net income (loss) per common share

 

$

0.31

 

 

$

0.11

 

 

$

1.05

 

 

$

(0.03

)

Weighted-average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

84.4

 

 

 

84.1

 

 

 

84.4

 

 

 

84.1

 

Diluted

 

 

85.1

 

 

 

84.7

 

 

 

85.0

 

 

 

84.1

 

 

 

Hexcel Corporation and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

(In millions)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

26.8

 

 

$

9.0

 

 

$

89.3

 

 

$

(2.8

)

Currency translation adjustments

 

 

(38.2

)

 

 

(14.5

)

 

 

(88.7

)

 

 

(22.3

)

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

 

 

4.7

 

 

 

1.0

 

 

 

12.4

 

 

 

(0.9

)

Net unrealized losses on financial instruments (net of tax)

 

 

(24.3

)

 

 

(7.1

)

 

 

(46.3

)

 

 

(11.0

)

Total other comprehensive loss

 

 

(57.8

)

 

 

(20.6

)

 

 

(122.6

)

 

 

(34.2

)

Comprehensive loss

 

$

(31.0

)

 

$

(11.6

)

 

$

(33.3

)

 

$

(37.0

)

 

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)

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

89.3

 

 

$

(2.8

)

Reconciliation to net cash used by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

94.9

 

 

 

102.4

 

Amortization related to financing

 

 

0.6

 

 

 

2.7

 

Deferred income taxes

 

 

(8.5

)

 

 

(3.2

)

Equity in (earnings) losses from affiliated companies

 

 

(5.5

)

 

 

0.9

 

Stock-based compensation

 

 

15.2

 

 

 

16.2

 

Merger and restructuring expenses, net of payments

 

 

(6.1

)

 

 

(4.4

)

Gain on sale of asset

 

 

(19.4

)

 

 

-

 

Gain on sale of investment

 

 

(0.3

)

 

 

-

 

Changes in assets and liabilities:

 

 

 

 

 

 

Increase in accounts receivable

 

 

(53.1

)

 

 

(55.6

)

Increase in inventories

 

 

(82.0

)

 

 

(37.3

)

(Increase) decrease in prepaid expenses and other current assets

 

 

(11.6

)

 

 

3.6

 

Increase in accounts payable/accrued liabilities

 

 

31.7

 

 

 

43.3

 

Other  net

 

 

11.2

 

 

 

(1.6

)

Net cash provided by operating activities

 

 

56.4

 

 

 

64.2

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Capital expenditures

 

 

(58.3

)

 

 

(15.0

)

Proceeds from sale of asset

 

 

21.2

 

 

 

-

 

Proceeds from sale of investments

 

 

0.5

 

 

 

-

 

Net cash used for investing activities

 

 

(36.6

)

 

 

(15.0

)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Borrowing from senior unsecured credit facility - 2024

 

 

35.0

 

 

 

-

 

Repayment of senior unsecured credit facility - 2024

 

 

(61.0

)

 

 

(49.0

)

Repayment of finance lease obligation and other debt, net

 

 

(0.4

)

 

 

(0.7

)

Dividends paid

 

 

(25.3

)

 

 

-

 

Activity under stock plans

 

 

3.1

 

 

 

4.9

 

Net cash used for financing activities

 

 

(48.6

)

 

 

(44.8

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(8.0

)

 

 

(1.9

)

Net (decrease) increase in cash and cash equivalents

 

 

(36.8

)

 

 

2.5

 

Cash and cash equivalents at beginning of period

 

 

127.7

 

 

 

103.3

 

Cash and cash equivalents at end of period

 

$

90.9

 

 

$

105.8

 

Supplemental data:

 

 

 

 

 

 

Accrual basis additions to plant, property and equipment

 

$

49.1

 

 

$

14.3

 

 

 

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, 2022, and September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

 

 

Total

 

 

 

 

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

Stockholders’

 

(In millions)

 

Par

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Equity

 

Balance, December 31, 2020

 

$

1.1

 

 

$

849.7

 

 

$

1,996.4

 

 

$

(59.6

)

 

$

(1,277.4

)

 

$

1,510.2

 

Net loss

 

 

 

 

 

 

(14.0

)

 

 

 

 

 

 

(14.0

)

Change in other comprehensive loss– net of tax