-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HetHPO1//n8NtnQ1VgROFCwZ3iNTjPQVlT+G4xtxrfQ/ykrPHHkcOrkF1tFlvrM7 bruFPml01Dr1pko8oPU0OA== 0001047469-98-035385.txt : 19980925 0001047469-98-035385.hdr.sgml : 19980925 ACCESSION NUMBER: 0001047469-98-035385 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980924 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980924 SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEXCEL CORP /DE/ CENTRAL INDEX KEY: 0000717605 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 941109521 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08472 FILM NUMBER: 98714293 BUSINESS ADDRESS: STREET 1: 281 TRESSER BOULEVARD STREET 2: C/O TWO STAMFORD PLZ CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2039690666 MAIL ADDRESS: STREET 1: 5794 W LAS POSITAS BLVD CITY: PLEASANTON STATE: CA ZIP: 945888781 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 September 24, 1998 (September 15, 1998) ---------------------------------------------------- Date of report (Date of earliest event reported) Hexcel Corporation -------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-8472 94-1109521 -------------- --------------------- ------------------- (State of (Commission File No.) (IRS Employer Incorporation) Identification No.) Two Stamford Plaza 281 Tresser Boulevard Stamford, Connecticut 06901-3238 ------------------------------------------------------------------- (Address of Principal Executive Offices and Zip Code) (203) 969-0666 -------------------------------------------------------- (Registrant's telephone number, including area code) N/A ------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 5. OTHER EVENTS. BUSINESS ACQUISITION On September 15, 1998, Hexcel Corporation ("Hexcel" or the "Company") acquired from Clark-Schwebel, Inc. and its subsidiaries (collectively, the "Seller") certain assets and operating liabilities of its industrial fabrics business (the "Acquired Fabrics Business"). This acquisition was completed pursuant to an Asset Purchase Agreement dated July 25, 1998, as amended, by and among Hexcel, Stamford CS Acquisition Corp., Clark-Schwebel Holdings, Inc., and Clark-Schwebel, Inc., a copy of which has been previously filed by the Company in a Current Report on Form 8-K dated July 30, 1998. In exchange for the net assets of the Acquired Fabrics Business and in partial payment for a related ownership interest in a European fabrics joint venture (the "European Joint Venture Interest"), Hexcel paid the Seller approximately $444 million in cash, subject to certain potential adjustments. The Company also agreed to pay an additional $19 million to complete the acquisition of the European Joint Venture Interest, which is comprised of 43.6% of the outstanding common stock of the venture and options to purchase up to an additional 40% of such stock. Consummation of the acquisition of the European Joint Venture Interest is subject to the receipt of certain regulatory approvals. If such approvals are not received on or before January 24, 1999, either the Company or the Seller may terminate the Company's obligation to acquire the European Joint Venture Interest, in which case the Company's commitment to pay the additional $19 million will be extinguished and the Company will be entitled to receive a share of the sales proceeds resulting from the disposition of the European Joint Venture Interest by the Seller. The Company will account for the acquisition of the Acquired Fabrics Business and the European Joint Venture Interest using the purchase method of accounting. In connection with the acquisition of the Acquired Fabrics Business, Hexcel also agreed to lease $50 million of property, plant and equipment used in the Acquired Fabrics Business from an affiliate of the Seller, pursuant to a long-term lease with purchase options. Furthermore, the Company obtained a new global credit facility (the "Senior Credit Facility") that provides for up to $910 million of borrowing capacity. Borrowings under the Senior Credit Facility were used to fund the cash purchase price of approximately $444 million and to refinance the Company's previous bank debt. The Senior Credit Facility is also available to provide for ongoing working capital requirements and general corporate purposes. Following the transactions of September 15, 1998, outstanding borrowings and letter of credit commitments under the Senior Credit Facility totaled approximately $615 million. 1 Hexcel's consolidated results of operations for the third quarter of 1998 will include the results of the Acquired Fabrics Business for the 15 day period that it was owned by the Company. The Company's 1998 third and fourth quarter results will also reflect certain non-recurring charges resulting from this acquisition. The aggregate total of these non-recurring charges is estimated at approximately $3.1 million on a pre-tax basis, or 4 cents per diluted share on an after-tax basis. In addition to these non-recurring charges, the Acquired Fabrics Business is currently expected to reduce Hexcel's 1998 fourth quarter earnings in the range of 1 to 3 cents per diluted share. During July and August of 1998, the Acquired Fabrics Business experienced a reduction in sales volumes resulting from a period of inventory adjustment in the printed circuit board segment of the electronics industry. However, the volume of sales orders has recently begun to increase, suggesting that this period of inventory adjustment is now coming to an end. If the level of sales orders continues to strengthen, then the dilutive impact of the Acquired Fabrics Business on the Company's fourth quarter earnings may be less than anticipated. The Acquired Fabrics Business is expected to be accretive to the Company's earnings beginning in 1999. BUSINESS CONSOLIDATION In addition to the non-recurring charges directly resulting from the acquisition of the Acquired Fabrics Business, Hexcel expects to record a charge during the fourth quarter of 1998 for certain costs necessary to consolidate the Acquired Fabrics Business with the Company's existing fabrics operations. The final amount of this charge cannot be determined until the Company's business consolidation plan has been finalized over the next six to eight weeks. Once such plans are completed, the Company will announce details of its consolidation program and estimates of the anticipated costs and savings. FORWARD-LOOKING STATEMENTS AND RISK FACTORS Certain statements contained in this Current Report on Form 8-K constitute "forward-looking statements." Such forward-looking statements include, but are not limited to, estimates of the impact of the Acquired Fabrics Business on Hexcel's future earnings, estimates of certain costs necessary to consolidate the Acquired Fabrics Business with the Company's existing fabrics operations, and expectations regarding the volume of sales orders of the Acquired Fabrics Business. Such forward-looking statements also include estimates involving the acquisition of the net assets of the Acquired Fabrics Business, including the European Joint Venture Interest and leased property, plant and equipment, such as the following estimates contained in the accompanying unaudited pro forma information: (a) the final purchase price for the assets and operating liabilities of the Acquired Fabrics Business, including certain potential adjustments; (b) the final allocation of the purchase price to the net assets acquired; (c) net borrowings and interest expense under the new Senior Credit Facility; (d) the cost of consolidating the Acquired Fabrics 2 Business with Hexcel, and the potential synergistic benefits that may result from this consolidation; and (e) the non-recurring charges to be recorded in connection with these transactions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF THE ACQUIRED FABRICS BUSINESS. Financial statements of the Acquired Fabrics Business are not included in this Current Report on Form 8-K. Hexcel will file such financial statements as soon as practicable after the date hereof. (b) PRO FORMA FINANCIAL INFORMATION. The required pro forma financial information is contained in Exhibit 99.2. (c) EXHIBITS. 2.1 Amendment No. 1 to the Asset Purchase Agreement by and among Hexcel, Stamford CS Acquisition Corp., Clark-Schwebel Holdings, Inc. and Clark-Schwebel, Inc., dated September 15, 1998. 99.1 Press release dated September 16, 1998, relating to the closing of the acquisition by Hexcel of certain assets of Clark-Schwebel, Inc. and its subsidiaries. 99.2 Unaudited Pro Forma Financial Information. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: September 24, 1998 HEXCEL CORPORATION By: /s/ WAYNE C. PENSKY Name: Wayne C. Pensky Title: Corporate Controller; Chief Accounting Officer 4 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1 Amendment No. 1 to the Asset Purchase Agreement by and among Hexcel, Stamford CS Acquisition Corp., Clark-Schwebel Holdings, Inc. and Clark-Schwebel, Inc., dated September 15, 1998. 99.1 Press release dated September 16, 1998, relating to the closing of the acquisition by Hexcel of certain assets of Clark-Schwebel, Inc. and its subsidiaries. 99.2 Unaudited Pro Forma Financial Information.
5 EX-2.1 2 EXHIBIT 2.1 EXHIBIT 2.1 AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT This AMENDMENT NO. 1, dated as of September 14, 1998 (this "Amendment") by and among Stamford CS Acquisition Corp., a Delaware corporation ("Stamford"), Hexcel Corporation, a Delaware corporation ("Buyer"), and, as of the Effective Date, Clark-Schwebel Holdings, Inc., a Delaware corporation ("CSH"), and Clark-Schwebel, Inc., a Delaware corporation ("CS Inc."), amends the Asset Purchase Agreement dated as of July 25, 1998 (the "Asset Purchase Agreement"), by and among Stamford, Buyer, and, as of the Effective Date, CSH and CS Inc. RECITALS WHEREAS, Stamford and Buyer are currently parties to the Asset Purchase Agreement; WHEREAS, on the Effective Date, CSH, as successor in interest to Stamford, will become a party to the Asset Purchase Agreement by operation of law, and, as the parent of CS Inc., shall cause CS Inc. to become a party to the Asset Purchase Agreement; and WHEREAS, the parties hereto wish to amend the Asset Purchase Agreement as herein provided; NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINED TERMS. Capitalized terms which are used but not defined herein shall have the meaning ascribed to such terms in the Asset Purchase Agreement. 2. AMENDMENTS TO ASSET PURCHASE AGREEMENT. (A) Section 1.1(a) of the Asset Purchase Agreement is hereby amended by adding the following language immediately after "Closing" in the second line thereof: "or the Deferred Closing with respect to the Interglas Assets, as applicable (it being understood that the Interglas Assets will be retained by CSI Inc. or its subsidiaries until the Deferred Closing and in no event shall any of the Interglas Assets be sold, conveyed, assigned, transferred or delivered to Buyer until the Deferred Closing)," (B) Section 1.1(a)(xiii) of the Asset Purchase Agreement is hereby amended by adding the following language immediately before "and all related documents and instruments": ", all dividends and other distributions paid or declared in respect of the Interglas Shares from the closing of the Merger through and including the Deferred Closing, provided there is a Deferred Closing" (C) Section 1.1(a)(xv) of the Asset Purchase Agreement is hereby amended by deleting from the third line thereof the following: ", the Tech-Fab License Agreement." (D) Section 1.1(a)(xviii) of the Asset Purchase Agreement is hereby amended by adding the following language at the end thereof: "other than the Retained Cash (the "Acquired Cash")" (E) Section 1.1(a) of the Asset Purchase Agreement is hereby amended by adding the following language at the end thereof: "For avoidance of doubt, the parties agree that Buyer is purchasing the capital stock of all of the non-Domestic Subsidiaries of CS Inc. (other than as provided in Section 1.1(c)(ii) ) (the "Purchased Subsidiaries") and is not purchasing the assets of the Purchased Subsidiaries." (F) Section 1.1(c) of the Asset Purchase Agreement is hereby amended by deleting Section 1.1(c)(ii) in its entirety and replacing such section with the following: "(ii) all capital stock of Domestic Subsidiaries held by CS Inc., Stamford or any of their subsidiaries and all capital stock and all of the assets of Clark-Schwebel Foreign Sales Corporation, a Virgin Islands corporation"; (G) Section 1.1(c) of the Asset Purchase Agreement is hereby amended by adding a new Section 1.1(c)(v) which read as follows: "(v) cash and cash equivalents of CSH, CS Inc. and any of their subsidiaries in an amount equal to $10,129,935.03 (the "Retained Cash.")" (H) Section 1.1(d)(vi) of the Asset Purchase Agreement is hereby amended by deleting "and 11.9" and replacing such words with ", 11.9 and 11.21". (I) Section 1.1(d) of the Asset Purchase Agreement is hereby amended by adding a new Section 1.1(d)(vii) which shall read as follows: "(vii) any and all obligations and liabilities of CSH or CS Inc. and its subsidiaries arising from or relating to the assets that are leased to Buyer or one of its affiliates pursuant to the Lease" (J) Section 1.1(e)(i) is hereby amended by adding the following language immediately after the reference to "Section 1.1(d)(iv)": "and Section 1.1(d)(vii)" (K) Section 1.1(e)(i) is hereby further amended by adding the following language immediately after the reference to "the Lease": "or as expressly set forth in any of the Operative Documents (as defined in the Participation Agreement)" (L) Section 1.1(e)(iii) of the Asset Purchase Agreement is hereby amended by deleting from the second and third lines thereof the following: "and Employee Bonuses (as defined in the Merger Agreement)" (M) Section 1.2 of the Asset Purchase Agreement is hereby amended by deleting Section 1.2(a) and 1.2(b) in their entirety and replacing such sections with the following: "(a) $449,075,951.20 (the "Purchase Price") (of which $11,000,000 of the Purchase Price is a pre-payment for the Interglas Assets (the "Interglas Pre-Payment")) payable to CS Inc. at the Closing, by wire transfer of immediately available funds to such bank account as shall be designated by CS Inc. at least two business day prior to Closing. (b) Reserved." (N) Section 1.2(d) of the Asset Purchase Agreement is hereby amended by deleting reference to "$22 million" and replacing such reference with the following: "$30,000,000 less the Interglas Pre-Payment less the amount of the fees paid to Credit Suisse First Boston in connection with the Cap Agreement which have not been previously refunded and paid, directly or indirectly, to Buyer pursuant to Section 4.21 hereof (the "Cap Refund") plus the CS International Expenses, if any (as defined in Section 4.22(b))" (O) Section 1.5 of the Asset Purchase Agreement is hereby amended by adding a new Section 1.5(f) which shall read as follows: "(f) all dividends and other distributions paid in respect of the Interglas Shares from the closing of the Merger through and including the Deferred Closing." (P) Section 4.8 of the Asset Purchase Agreement is hereby amended by changing the phrase "loss payee" to "named insured' in both places where it appears therein and by inserting the phrase "as Buyer shall designate on or prior to the Closing Date" between the words "under such policies" and "with respect to the Prior Occurrences" in both places where such words appear therein. (Q) Article IV of the Asset Purchase Agreement is hereby amended by adding a new Section 4.20, 4.21 and 4.22 which shall read as follows: "Section 4.20 MAINTENANCE OF SUBSIDIARIES. (a) From and after the Effective Date through the earlier to occur of the Deferred Closing or the termination of this Agreement pursuant to Article VII hereof, CSH and CS Inc. agree to, and agree to cause their affiliates to, preserve and maintain the status of Clark-Schwebel International, Inc. as a Delaware investment holding company; (b) From and after the Effective Date through and includ- ing the Closing, CSH and CS Inc. agree to, and agree to cause their affiliates to, not remove Jack Schwebel, Risuke Tanimura and Alfred Kwok as directors of Clark-Schwebel Group Hong Kong, Ltd., a Hong Kong company, PROVIDED that CSH and CS Inc. may remove, or cause the removal of, such directors upon receipt of the prior written consent of Buyer, such consent not to be unreasonably withheld. (c) From and after the Effective Date through and includ- ing the Deferred Closing, CSH and CS Inc. agree to, and agree to cause their affiliates to, not remove the current directors of CS Interglas AG that were designated by CS International, PROVIDED that CSH and CS Inc. may remove, or cause the removal of, such directors upon receipt of the prior written consent of Buyer, such consent not to be unreasonably withheld. Section 4.21. CAP AGREEMENT REFUNDS. CSH and CS Inc. agree to pay Buyer, immediately upon receipt thereof, any refund of the fees paid to Credit Suisse First Boston in connection with the Cap Agreement, provided that Buyer shall not be entitled to such refund after the Deferred Closing if the Deferred Purchase Price was reduced pursuant to Section 1.2(d) to take into account the Cap Agreement. CS Inc. agrees to take all necessary action to cause the Trust to distribute to CS Inc. pursuant to Section 5.3 of the Trust Agreement all refunds of fees, costs, expenses or other amounts paid by or on behalf of the Trust in connection with the Cap Agreement or Cap Refund. Section 4.22 TERMINATION OF LETTER AGREEMENT AND AGREEMENT REGARDING THE INTERGLAS ASSETS. (a) The certain letter agreement, dated July 25, 1998 from Stamford CS Acquisition Corp to Hexcel Corporation relating to the matters set forth in Section 4.22(b) is hereby terminated. (b) In the event that this Agreement is terminated pursuant to Article VII hereof prior to the consummation of the transactions contemplated by the Deferred Closing but subsequent to the Closing Date, then CS Inc. shall use its commercially reasonably efforts to sell, transfer and assign all of the Interglas Assets and all dividends or other distributions paid or declared in respect of the Interglas Shares from the Effective Date to a bona fide, unrelated third party at a fair market, arms-length negotiated cash purchase price (a "Third Party Sale"). In connection with any such Third Party Sale, Buyer and CS Inc. agree to cooperate in good faith to maximize the purchase price to be paid for the Interglas Assets and all dividends or other distributions paid or declared in respect of the Interglas Shares from the Effective Date. With respect to any such Third Party Sale, CS Inc. and Buyer hereby agree to share the proceeds of such Third Party Sale (net of reasonable expenses incurred in connection with such Third Party Sale) (the "Net Sale Proceeds") in the following manner: (i) first, Net Sale Proceeds shall be used for the reimbursement of expenses actually incurred by CS International in respect of its ownership of the Interglas Assets during the period from the Closing up to but not including the closing date of the Third Party Sale (the "CS International Expenses"), (ii) second, Net-Sale Proceeds for the next $3 million shall be remitted solely to Buyer, (iii) third, Net-Sale Proceeds for the next $31.67 million shall be remitted 60% to CS Inc. and 40% to Buyer; and (iv) fourth, all remaining Net Sale Proceeds shall be remitted solely to Buyer." (R) Section 8.3 of the Asset Purchase Agreement is hereby amended by adding the following new clauses (iii), (iv), (v) and (vi) immediately following the end of clause (ii): "(iii) the representations and warranties of CS Inc. set forth in (A) the following sections of the Participation Agreement: Section 3.4(b)(iv) to the extent of references to "material agreements" or "other instruments", Section 3.4(b)(v), Section 3.4(e), Section 3.4(f), Section 3.4(g), Section 3.4(h), Section 3.4(i), and Section 3.4(k) and (B) the bill of sale and deeds contemplated by Section 4.1(f) of the Participation Agreement, (iv) any representations and warranties of the CS Inc. in the Trust Agreement and indemnification obligations of CS Inc. under Section 8.1 of the Trust Agreement, (v) any Lessor Lien (as defined in the Lease) other than any Lessor Lien that arises exclusively as a result of the action or inaction of CS Inc. or its affiliates after the Closing of the transactions contemplated by the Lease and (vi) affidavits, deeds, bills of sale, gap indemnities, certificates and instruments of transfer executed on the Closing Date by CS Inc. in connection with the Lease, the Participation Agreement, the Trust Agreement and the transactions contemplated thereby. (S) Article VIII of the Asset Purchase Agreement is hereby amended by adding a new Section 8.6 which shall read as follows: "Section 8.6. OTHER INDEMNIFICATION. The indemnification obligations of Buyer under Section 8.3 shall be in addition to the indemnification obligations of Lessee (as defined under the Lease) in the Participation Agreement, provided however, that a Seller Indemnitee shall not be indemnified more than once for any Losses." (T) Article X of the Asset Purchase Agreement is hereby amended by adding the following definitions which shall appear in alphabetical order in Article X: ""Acquired Cash" shall have the meaning set forth in Section 1.1(a)(xviii) hereof." ""Cap Agreement" shall mean the interest rate cap agreement entered into in connection with and as contemplated by the Participation Agreement with a Cap Strike equal to current three-year Treasury yield and an underlying index of USD-LIBOR-BBA for the period from September 17, 1998 through September 17, 2001." ""Cap Refund" shall have the meaning set forth in Section 1.2(d) hereof." ""CS International Expenses" shall have the meaning set forth in Section 4.22(b)." ""Interglas Pre-Payment" shall have the meaning set forth in Section 1.2(a) hereof." ""Net Sale Proceeds" shall have the meaning set forth in Section 4.22(b) hereof." ""Participation Agreement" shall mean the Participation Agreement among Hexcel CS Corporation, CSI Leasing Trust, Wilmington Trust Company, Clark-Schwebel, Inc., Buyer and Credit Suisse First Boston to be dated on or about the Closing Date." ""Purchased Subsidiaries" shall have the meaning set forth in Section 1.1(a) hereof." ""Retained Cash" shall have the meaning set forth in Section 1.1(a)(v). ""Tech-Fab Partnership Agreement" means that certain Partnership Agreement, dated as of December 18, 1984, between Clark-Schwebel Holding Corporation and Vabobel B.V. , as amended from time to time." ""Third Party Sale" shall have the meaning set forth in Section 4.21(b) hereof." ""Trust" shall mean CSI Leasing Trust, a Delaware business trust, or other similar entity which is the lessor under the Lease." ""Trust Agreement" shall mean the Business Trust Agreement, dated as of September 14, 1998, between CS Inc. and Wilmington Trust Company, as owner trustee." (U) Article X of the Asset Purchase Agreement is amended by deleting the definition of "Tech-Fab Distribution Agreement" appearing therein. (V) Article X of the Asset Purchase Agreement is amended by deleting the words "and Tech-Fab" appearing at the end of the definition of the term "Tech-Fab Cross Distributorship Agreement" and adding in place thereof, the words "and Clark-Schwebel Fiber Glass Corporation". 3. EFFECTIVE DATE. This Amendment shall be deemed an agreement between Stamford and Buyer until executed by CSH and CS Inc., at which time it shall be deemed to be an agreement among Buyer, CSH (as successor to Stamford) and CS Inc. Stamford shall cause CSH and CS Inc. to execute this Amendment immediately following the Effective Date. 4. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. 5. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. * * * IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment as of the date first above written. STAMFORD CS ACQUISITION CORP. By: -------------------------------- Title: CLARK-SCHWEBEL HOLDINGS, INC. By: -------------------------------- Title: CLARK-SCHWEBEL, INC. By: -------------------------------- Title: HEXCEL CORPORATION By: -------------------------------- Title: EX-99.1 3 EXHIBIT 99.1 EXHIBIT 99.1 CONTACT: MEDIA: RONALD S. ZIEMBA 203-969-0666 EXT. 405 RON.ZIEMBA@HEXCEL.COM INVESTORS: STEPHEN C. FORSYTH 203-969-0666 EXT. 425 STEPHEN.FORSYTH@HEXCEL.COM ACQUISITION ESTABLISHES HEXCEL AS MATERIALS SUPPLIER TO ELECTRONICS AND TELECOMMUNICATIONS INDUSTRIES PURCHASE OF CERTAIN CLARK-SCHWEBEL ASSETS COMPLETED STAMFORD, CT, September 16, 1998 -- Hexcel Corporation (NYSE/PCX: HXL) announced today that it had completed its previously announced acquisition of certain assets of Clark-Schwebel, Inc. Hexcel said the acquisition positions the company as a global leader in supplying high-quality materials for the electronics and telecommunications industries. Assets acquired to date include Clark-Schwebel's wholly owned US operations as well as Clark-Schwebel's interests in two joint ventures, Asahi-Schwebel Co., Ltd. and Clark-Schwebel Tech-Fab. Hexcel's acquisition of Clark-Schwebel's interest in CS-Interglas AG is pending European regulatory approval and is expected to close in the fourth quarter. The purchase price for the entire transaction, including the wholly owned US operations and the three joint venture interests, is $463 million. In addition, Hexcel will lease $50 million of property, plant and equipment under a long term lease with purchase options. Clark-Schwebel is the world's sales and technology leader in the production of high-quality glass fiber fabrics used to make printed circuit boards for electronics and telecommunications equipment such as computers, cellular telephones, televisions and automotive components. Clark-Schwebel fabrics are also used in reinforced composite materials, ballistic protection and other applications that demand the strength, chemical resistance and other high-performance capabilities of glass and other specialty fibers. "This is an important strategic transaction for Hexcel," said John J. Lee, the company's chairman and chief executive officer. "It establishes Hexcel as a leading global supplier to the electronics and telecommunications industries, both of which have strong long term growth potential. This will be an excellent complement to Hexcel's existing leadership positions in commercial aerospace, space and defense. On a pro forma basis, the acquisition increases our non-commercial-aerospace sales to about 50% of total sales, from about 35% currently." Mr. Lee added, "The acquisition also globalizes our fabrics operations, which now will have worldwide leadership positions in glass, carbon and Kevlar reinforcement fabrics. Now that the transaction is closed, our objective is to build a single, global business that combines the best of Hexcel's and Clark-Schwebel's capabilities." Clark-Schwebel has about 1,300 full-time employees and operates manufacturing facilities in Anderson, SC; Washington, GA; Cleveland, GA; and Statesville, NC. In 1997 Clark-Schwebel's wholly owned operations in the United States had $240 million of sales and $49 million of EBITDA. In addition, Clark-Schwebel's Asahi-Schwebel and CS Tech-Fab joint ventures had about $173 million in combined 1997 sales. The company's CS-Interglas joint venture had about $155 million in sales in 1997. With its existing operations in Lyon, France and Sequin, TX, Hexcel is the world's largest producer of carbon fiber reinforcement fabrics. In addition, Hexcel has attractive niche positions in fiberglass and other specialty fabrics. These products are used for a range of aerospace, electronic, decorative and other applications. The acquisition was funded by borrowings under a new $910 million global credit facility arranged by Credit Suisse First Boston. The new credit facility was also used to refinance Hexcel's existing bank debt. Donaldson, Lufkin & Jenrette served as Hexcel's financial advisor for the transaction. Hexcel Corporation is the world's leading advanced structural materials company. It manufactures lightweight, high performance carbon fibers, structural fabrics, composite materials and engineered products for use in commercial aerospace, space and defense, recreation and general industrial applications. Hexcel's 1997 revenues were $937 million. # - -------------------------------------------------------------------------------- DISCLAIMER ON FORWARD LOOKING STATEMENTS This news release contains statements that are forward looking, including statements relating to strategic acquisitions, diversification, sales, growth prospects, medium term goals, production efficiencies and costs, profitability, regulatory approvals and other subjects. These statements are not projections or assured results. Actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to, changing market conditions, increased competition, product mix and currency. 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. Accordingly, individuals should not place undue reliance on such statements. - -------------------------------------------------------------------------------- EX-99.2 4 EXHIBIT 99.2 EXHIBIT 99.2 UNAUDITED PRO FORMA FINANCIAL INFORMATION On September 15, 1998, Hexcel Corporation ("Hexcel" or the "Company") acquired from Clark-Schwebel, Inc. and its subsidiaries (collectively, "Clark-Schwebel" or the "Seller") certain assets and operating liabilities of its industrial fabrics business (the "Acquired Fabrics Business"). This acquisition was completed pursuant to an Asset Purchase Agreement dated July 25, 1998, as amended, by and among Hexcel, Stamford CS Acquisition Corp., Clark-Schwebel Holdings, Inc. and Clark-Schwebel, Inc. In exchange for the net assets of the Acquired Fabrics Business and in partial payment for a related ownership interest in a European fabrics joint venture (the "European Joint Venture Interest"), Hexcel paid the Seller approximately $444 million in cash, subject to certain potential adjustments. The Company also agreed to pay an additional $19 million to complete the acquisition of the European Joint Venture Interest, which is comprised of 43.6% of the outstanding common stock of the venture and options to purchase up to an additional 40% of such stock. Consummation of the acquisition of the European Joint Venture Interest is subject to the receipt of certain regulatory approvals. If such approvals are not received on or before January 24, 1999, either the Company or the Seller may terminate the Company's obligation to acquire the European Joint Venture Interest, in which case the Company's commitment to pay the additional $19 million will be extinguished and the Company will be entitled to receive a share of the sales proceeds resulting from the disposition of the European Joint Venture Interest by the Seller. In connection with the acquisition of the Acquired Fabrics Business, Hexcel also agreed to lease $50 million of property, plant and equipment used in the Acquired Fabrics Business from an affiliate of the Seller, pursuant to a long-term lease with purchase options. Furthermore, the Company obtained a new global credit facility (the "Senior Credit Facility") that provides for up to $910 million of borrowing capacity. Borrowings under the Senior Credit Facility were used to fund the cash purchase price of approximately $444 million and to refinance the Company's previous bank debt. The Senior Credit Facility is also available to provide for ongoing working capital requirements and general corporate purposes. The following unaudited pro forma condensed combined balance sheet as of June 30, 1998 was prepared to illustrate the effects of (a) the acquisition of certain assets and operating liabilities of the Acquired Fabrics Business from the Seller, (b) the acquisition of the European Joint Venture Interest; (c) the lease of $50 million in property, plant and equipment used in the Acquired Fabrics Business from an affiliate of the Seller, and (d) initial borrowings under the new Senior Credit Facility to finance the acquisition of the Acquired Fabrics Business and the European Joint Venture Interest and to refinance Hexcel's previous bank debt (collectively, the "Pro Forma Transactions"), as if these transactions had occurred on June 30, 1998. The following unaudited pro forma condensed combined statements of operations for the six months ended June 30, 1998 and for the year ended December 31, 1997 have been prepared to illustrate the estimated effects of the Pro Forma Transactions as if they had occurred at the beginning of the periods presented. The unaudited pro forma financial information presented below is derived from the audited financial statements of Hexcel and Clark-Schwebel as of and for the years ended December 31, 1997 and January 3, 1998, respectively, and from the unaudited financial statements of Hexcel and Clark-Schwebel as of and for the six month periods ended June 30, 1998 and July 4, 1998, respectively. The acquisition of certain assets and operating liabilities has been accounted for using the purchase method of accounting. Accordingly, the estimated purchase price has been allocated to the assets acquired and liabilities assumed based upon preliminary estimates of fair market values, subject to revision when additional information concerning asset and liability valuations is obtained. The following unaudited pro forma financial information is not necessarily indicative of the results of operations or financial condition that would have been reported had the events assumed therein occurred on the dates indicated, nor is it necessarily indicative of results of operations or financial position that may be achieved in the future. This pro forma financial information is based on a number of assumptions and estimates made by management using available information, and does not give effect to certain changes in the operating results of the combined pro forma business that may result from the Pro Forma Transactions. Among other things, this pro forma financial information does not reflect any operating cost reductions or other synergistic benefits that management expects to achieve as a result of combining the Acquired Fabrics Business with Hexcel, or the associated costs necessary to achieve such benefits. In addition, the pro forma results of operations presented below exclude certain pre-tax non-recurring charges that result directly from the acquisition, including: (a) an approximately $2 million increase in cost of sales during the first three months following the acquisition, resulting from the adjustment of acquired inventories to estimated fair value, and (b) the write-off of approximately $1.1 million in capitalized debt issuance costs in connection with the refinancing of the Company's previous bank debt with the new Senior Credit Facility. PRELIMINARY PURCHASE PRICE ALLOCATION For purposes of preparing the accompanying unaudited pro forma financial information, the aggregate purchase price of $463 million, which includes the commitment to pay $19 million to complete the acquisition of the European Joint Venture Interest, has been allocated to the net assets being acquired on the basis of preliminary estimates of fair market values as of June 30, 1998. These preliminary estimates of fair market values are as follows: (AMOUNTS IN THOUSANDS OF US DOLLARS) Accounts receivable $ 22,153 Inventories 39,799 Prepaid expenses and other assets 615 Property, plant and equipment 20,000 Investments in joint ventures, intangibles and other assets (including the European Joint Venture Interest) 420,775 Accounts payable (22,994) Accrued liabilities (13,231) Other non-current liabilities (4,117) --------------- Estimated fair value of net assets acquired, excluding transaction costs 463,000 Estimated transaction costs incurred and capitalized by Hexcel 13,500 --------------- Estimated fair value of net assets acquired, including transaction costs $ 476,500 ------------------------------------------------------------------------------------------------------
In connection with the acquisition of the Acquired Fabrics Business, Hexcel also agreed to lease $50 million of property, plant and equipment used in the Acquired Fabrics Business from an affiliate of the Seller, pursuant to a long-term lease with purchase options. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 1998 (IN THOUSANDS)
--------------------------------------------------------- HISTORICAL PRO FORMA ----------------------- --------------------------- CLARK- HEXCEL SCHWEBEL ADJUSTMENTS COMBINED --------- --------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 6,969 $ 14,175 $ (14,175)(a) $ 6,969 Accounts receivable 197,388 22,153 -- 219,541 Inventories 183,257 35,799 4,000 (b) 223,056 Prepaid expenses and other assets 23,623 615 -- 24,238 --------- --------- ----------- ----------- Total current assets 411,237 72,742 (10,175) 473,804 Net property, plant and equipment 340,789 57,942 12,058 (c) 410,789 Investments in joint ventures, intangibles and other assets 92,587 113,309 319,860 (d) 525,756 --------- --------- ----------- ----------- Total assets $ 844,613 $ 243,993 $ 321,743 $ 1,410,349 --------- --------- ----------- ----------- --------- --------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of long-term liabilities $ 16,055 $ -- $ -- $ 16,055 Accounts payable 70,225 22,994 -- 93,219 Accrued liabilities 95,291 17,631 (4,400)(e) 108,522 --------- --------- ----------- ----------- Total current liabilities 181,571 40,625 (4,400) 217,796 Long-term notes payable and capital lease obligations 301,819 155,994 370,506 (f) 828,319 Indebtedness to related parties 35,459 -- -- 35,459 Other non-current liabilities 36,759 23,717 (19,600)(g) 40,876 --------- --------- ----------- ----------- Total liabilities 555,608 220,336 346,506 1,122,450 Total shareholders' equity 289,005 23,657 (24,763)(h) 287,899 --------- --------- ----------- ----------- Total liabilities and shareholders' equity $ 844,613 $ 243,993 $ 321,743 $ 1,410,349 --------- --------- ----------- ----------- --------- --------- ----------- -----------
PRO FORMA ADJUSTMENTS -- UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, (AMOUNTS IN THOUSANDS OF US DOLLARS) 1998 ----------------- (a) Adjustment to eliminate the cash and cash equivalents of the Acquired Fabrics Business which were not acquired by Hexcel. (14,175) ----------------------------------------------------------------------------------------------------------------- (b) Adjustment to increase the basis of acquired inventories to an estimated fair value of $39,799. 4,000 ----------------------------------------------------------------------------------------------------------------- (c) Adjustment to increase the basis of acquired property, plant and equipment to estimated fair value, and to recognize the estimated fair value of property, plant and equipment to be leased pursuant to a long-term lease with purchase options. 12,058 ----------------------------------------------------------------------------------------------------------------- (d) Adjustment to reflect the following: Increase in the basis of acquired investments in joint ventures, intangibles and other assets to an estimated aggregate fair value of $420,775. 307,466 Capitalization of certain transaction costs incurred in connection with completing the acquisition and obtaining the new Senior Credit Facility. 13,500 Write-off of the unamortized balance of capitalized debt issuance costs for Hexcel's previous bank debt, in connection with the refinancing of such debt. (1,106) ----------------- Net adjustment 319,860 ----------------------------------------------------------------------------------------------------------------- (e) Adjustment to eliminate certain current liabilities of the Acquired Fabrics Business which were not assumed by Hexcel. (4,400) -----------------------------------------------------------------------------------------------------------------
JUNE 30, (AMOUNTS IN THOUSANDS OF US DOLLARS) 1998 ----------------- (f) Adjustment to reflect the following: Net borrowings under the new Senior Credit Facility to finance the acquisition of certain assets and operating liabilities of the Acquired Fabrics Business. 444,000 Obligation arising from the commitment to pay an additional $19,000 for the European Joint Venture Interest, subject to the receipt of certain regulatory approvals. 19,000 Obligation arising from the lease of property, plant and equipment from an affiliate of the Seller. 50,000 Borrowings under the new Senior Credit Facility to finance certain transaction costs. 13,500 Elimination of the debt obligations of the Acquired Fabrics Business which were not assumed by Hexcel. (155,994) ----------------- Net adjustment 370,506 ----------------------------------------------------------------------------------------------------------------- (g) Adjustment to eliminate certain non-current liabilities of the Acquired Fabrics Business which were not assumed by Hexcel. (19,600) ----------------------------------------------------------------------------------------------------------------- (h) Adjustment to reflect the following: Elimination of the net shareholders' equity of the Acquired Fabrics Business. (23,657) Recognition of the write-off of the unamortized balance of capitalized debt issuance costs relating to Hexcel's previous bank debt. (1,106) ----------------- Net adjustment (24,763) -----------------------------------------------------------------------------------------------------------------
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS THE SIX MONTHS ENDED JUNE 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
------------------------------------------------------------ HISTORICAL PRO FORMA --------------------------- --------------------------- CLARK- HEXCEL SCHWEBEL ADJUSTMENTS COMBINED ---------- ------------ ----------- --------- Net sales $ 530,278 $ 111,664 $ -- $ 641,942 Cost of sales (392,961) (84,546) (500)(a) (478,007) ---------- ------------ ----------- --------- Gross margin 137,317 27,118 (500) 163,935 Selling, general and administrative expenses (54,359) (6,854) (4,700)(b) (65,913) Research and technology expenses (11,066) (1,162) -- (12,228) Business acquisition and consolidation expenses -- -- -- -- ---------- ------------ ----------- --------- Operating income 71,892 19,102 (5,200) 85,794 Interest expense (13,711) (8,885) (9,800)(c) (32,396) Other expense -- (2) -- (2) ---------- ------------ ----------- --------- Income before income taxes 58,181 10,215 (15,000) 53,396 Benefit (provision) for income taxes (21,133) (4,090) 5,813 (d) (19,410) Equity in earnings of joint ventures, net - 2,521 1,220 (e) 3,741 ---------- ------------ ----------- --------- Net income $ 37,048 $ 8,646 $ (7,967) $ 37,727 ---------- ------------ ----------- --------- ---------- ------------ ----------- --------- Net income per share: Basic $ 1.00 $ 1.02 Diluted 0.86 0.88 ---------- --------- ---------- --------- Weighted average shares: Basic 36,867 36,867 Diluted 46,419 46,419 ---------- --------- ---------- ---------
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------- HISTORICAL PRO FORMA ---------------------------- ---------------------------- CLARK- HEXCEL SCHWEBEL ADJUSTMENTS COMBINED ----------- ----------- ----------- ----------- Net sales $ 936,855 $ 240,204 $ -- $ 1,177,059 Cost of sales (714,223) (184,901) (1,000)(a) (900,124) ----------- ----------- ----------- ----------- Gross margin 222,632 55,303 (1,000) 276,935 Selling, general and administrative expenses (102,449) (13,713) (8,915)(b) (125,077) Research and technology expenses (18,383) (2,274) -- (20,657) Business acquisition and consolidation expenses (25,343) -- -- (25,343) ----------- ----------- ----------- ----------- Operating income 76,457 39,316 (9,915) 105,858 Interest expense (25,705) (15,176) (23,043)(c) (63,924) Other income -- 35 -- 35 ----------- ----------- ----------- ----------- Income before income taxes 50,752 24,175 (32,958) 41,969 Benefit (provision) for income taxes 22,878 (9,657) 12,819 (d) 26,040 Equity in earnings of joint ventures, net -- 3,997 2,755 (e) 6,752 ----------- ----------- ----------- ----------- Net income $ 73,630 $ 18,515 $ (17,384) $ 74,761 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income per share: Basic $ 2.00 $ 2.03 Diluted 1.74 1.76 ----------- ----------- ----------- ----------- Weighted average shares: Basic 36,748 36,748 Diluted 45,997 45,997 ----------- ----------- ----------- -----------
PRO FORMA ADJUSTMENTS -- UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
THE SIX MONTHS THE YEAR ENDED ENDED (AMOUNTS IN THOUSANDS OF US DOLLARS) 6/30/98 12/31/97 --------------- --------------- (a) Adjustment to reflect the increase in depreciation costs resulting from the adjustment to fair value of acquired property, plant and equipment, and from the recognition at fair value of property, plant and equipment to be leased pursuant to a long-term lease with purchase options. (500) (1,000) ----------------------------------------------------------------------------------------------------------------- (b) Adjustment to reflect the following: Elimination of management fees and other expenses paid by the Acquired Fabrics Business to the selling shareholders. 500 1,485 Amortization of the excess of purchase price over the net assets acquired (using a 30-year weighted average amortization period, based on asset lives ranging from 3 to 40 years). (5,200) (10,400) ----------------------------------- Net adjustment (4,700) (8,915) ----------------------------------------------------------------------------------------------------------------- (c) Adjustment to reflect the following: Elimination of interest expense on debt obligations of the Acquired Fabrics Business which were not assumed by Hexcel. 8,885 15,176 Net increase in interest expense attributable to borrowings under the new Senior Credit Facility to finance the acquisition and to refinance Hexcel's previous bank debt. (16,885) (34,619) (Interest on outstanding borrowings under the Senior Credit Facility is computed at variable rates based on the London interbank rate or, at the option of Hexcel, the base rate of the administrative agent for the lenders. For purposes of estimating pro forma adjustments, a weighted average interest rate of approximately 7.5% has been used.) Estimated interest expense under a long-term lease for $50,000 of property, plant and equipment. (1,800) (3,600) ----------------------------------- Net adjustment (9,800) (23,043) ----------------------------------------------------------------------------------------------------------------- (d) Adjustment to reflect an average income tax rate of 36% on the Acquired Fabrics Business and on related transaction costs. 5,813 12,819 ----------------------------------------------------------------------------------------------------------------- (e) Adjustment to reflect Hexcel's ability to utilize certain tax attributes to reduce aggregate tax expense on the equity in earnings of the Acquired Fabrics Business joint ventures. 1,220 2,755 -----------------------------------------------------------------------------------------------------------------
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