Net income is $37.9 million, or $0.87 per share on a fully diluted basis;
excluding non-recurring items, fully diluted EPS is $0.36 per share
STAMFORD, CT, October 22, 1997 - Hexcel Corporation (NYSE/PCX: HXL) today
reported net income for the third quarter ended September 30, 1997 of $37.9
million, or $0.87 per share on a fully diluted basis, compared to net income
of $0.3 million, or $0.01 per share on a fully diluted basis, for the third
quarter of 1996. The 1997 results include a non-recurring credit resulting
from a $39 million non-cash reduction to the income tax provision and $15.4
million of business acquisition and consolidation expenses, $13.0 million
of which relates to the company's acquisition of the satellite business
and rights to certain technologies from Fiberite, Inc. on September 30,
1997. Excluding these items, Hexcel's earnings for the third quarter of
1997 would have been $0.36 per share on a fully diluted basis, compared
with $0.05 per share for the third quarter of 1996.
Hexcel's net sales for the third quarter of 1997 were $226.6 million,
a 19.6% increase over 1996 third quarter sales of $189.5 million. The increase
was primarily due to strong sales of composite materials to the commercial
aerospace market in both the US and Europe and sales of engineered products
to The Boeing Company. These gains were partially offset by the translation
effects of a strengthening US dollar on European revenues. On a constant
currency basis, revenues for the third quarter of 1997 would have been about
$12 million higher, reflecting a 25.9% increase over the third quarter of
1996. Hexcel's second quarter 1997 sales were $241.6 million, as the second
quarter is traditionally the company's strongest and the third quarter reflects
plant closings by Hexcel and its customers for the European summer holidays.
Hexcel's gross margin percentage for the third quarter of 1997 was 24.3%
of sales, compared with 18.9% for the third quarter of 1996 and 23.9% in
the second quarter of 1997. The improvement over the third quarter of 1996
reflects higher sales volume, the capacity expansion of our Fibers business
and continued advances in manufacturing productivity resulting from the
company's consolidation and restructuring programs.
Earnings before business acquisition and consolidation expenses, other
income, interest, taxes, depreciation and amortization ("adjusted EBITDA")
were $34.4 million for the third quarter of 1997, compared to $18.2 million
for the third quarter of 1996.
$39 Million Reserve Released
Based on Hexcel's improved operating results and its current business
plans, the company believes it will generate sufficient future US taxable
income to realize its entire US net deferred tax assets. Accordingly, the
company released its remaining $39 million reserve, resulting in a credit
to the income tax provision and an increase to net income. Going forward,
the effective US income tax rate will now approximate the statutory rate.
This credit does not change the company's cash flows.
John J. Lee, Hexcel's chairman, president and chief executive officer,
said, "It is gratifying to report that Hexcel continues to make strong
progress in its operating results, even during what is traditionally our
slowest quarter of the year. Our revenues and net income have significantly
improved over the last year and our gross margin percentage has increased
for four consecutive quarters. While the primary factor in the improvement
is the great surge in commercial aerospace, our business consolidation program,
which will be completed in 1998, is providing some real benefits."
Mr. Lee added, "Our decision to remove our US tax valuation allowance
reserve reflects this progress, as well as our conviction that Hexcel is
well positioned to deliver continued long-term growth and profitability."
Results for the third quarter of 1997 also reflect a $5 million write-off
of acquisition and financing costs related to the downsized Fiberite acquisition,
as well as an $8 million expense for acquired in-process research and technology
purchased from Fiberite.
Year-to-Date Results
For the year to date, Hexcel's net income was $61.3 million, or $1.47
per share on a fully diluted basis. This compares with a pro forma net
loss of $24.9 million, or $0.68 per share, for the comparable period of
1996. (Pro forma results include full nine-month results from the composites
businesses acquired from Ciba-Geigy on February 29, 1996 and Hercules on
June 27, 1996.) Excluding the $39 million reduction to the income tax provision
and $21.2 million of business acquisition and consolidation expenses, 1997
nine month earnings would have been $1.07 per share on a fully diluted basis.
Pro forma earnings for the comparable 1996 period would have been $0.12
per share, excluding business acquisition and consolidation expenses of
$35.8 million.
Net sales for the first nine months of 1997 were $682.2 million, compared
with $482.7 million for the comparable period of 1996. On a pro forma basis,
sales for the nine months ended September 30, 1996 were $586.0 million.
The 16.4% increase from pro forma 1996 sales to 1997 sales is also due to
the strong sales of composite materials to the commercial aerospace market
and sales of engineered products to Boeing, partially offset by the translation
effect of the strengthening US dollar. On a constant currency basis, sales
for the first nine months of 1997 would have been about $28 million higher,
or a 21.2% increase over the comparable period in 1996. The gross margin
percentage for the first nine months of 1997 was 23.4% of sales, compared
with 20.3% of sales for the same period of 1996.
Hexcel Corporation manufactures lightweight, high performance carbon
fibers, structural fabrics, composite materials and engineered parts and
structures. It sells these products to customers in the commercial aerospace,
space and defense, recreation and general industrial markets.
Forward Looking Statements
This news release contains forward looking statements, including statements
relating to future profits and financial goals. These statements are not
projections or assured results. Actual results may differ materially from
the results anticipated in the statements made due to a variety of factors,
including adverse market conditions and increased competition. Additional
risk factors are described in the company's filings with the SEC. The company
does not undertake an obligation to update its forward looking statements to
reflect future events or circumstances.