UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
or
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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
Hexcel Corporation
(Exact name of registrant as specified in its charter)
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(State of Incorporation) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 ☒ |
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company |
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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 by Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
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Outstanding at October 15, 2019 |
COMMON STOCK |
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HEXCEL CORPORATION AND SUBSIDIARIES
INDEX
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PART I. |
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ITEM 1. |
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Condensed Consolidated Balance Sheets — September 30, 2019 and December 31, 2018 |
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Condensed Consolidated Statements of Cash Flows — The nine months ended September 30, 2019 and 2018 |
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ITEM 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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ITEM 3. |
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ITEM 4. |
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PART II. |
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25 |
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ITEM 1. |
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25 |
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ITEM 1A. |
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ITEM 2. |
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26 |
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ITEM 6. |
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27 |
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28 |
2
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
Hexcel Corporation and Subsidiaries |
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Condensed Consolidated Balance Sheets |
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(Unaudited) |
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September 30, |
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December 31, |
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(In millions) |
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2019 |
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2018 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Contract assets |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment |
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Less accumulated depreciation |
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Net property, plant and equipment |
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Goodwill and other intangible assets |
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Investments in affiliated companies |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Short-term borrowings |
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$ |
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$ |
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Accounts payable |
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Accrued compensation and benefits |
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Accrued liabilities |
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Total current liabilities |
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Commitments and contingencies (see Note 14) |
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Long-term debt |
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Retirement obligations |
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Other non-current liabilities |
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Total liabilities |
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Stockholders' equity: |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Less – Treasury stock, at cost, at December 31, 2018, respectively. |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
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(Unaudited) |
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(Unaudited) |
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Quarter Ended September 30, |
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Nine Months Ended September 30, |
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(In millions, except per share data) |
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2019 |
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2018 |
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2019 |
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2018 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross margin |
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Selling, general and administrative expenses |
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Research and technology expenses |
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Operating income |
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Interest expense, net |
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Income before income taxes, and equity in earnings/(loss) from affiliated companies |
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Provision for income taxes |
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Income before equity in earnings/(loss) from affiliated companies |
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Equity in earnings/(loss) from affiliated companies |
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( |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Basic net income per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted net income per common share |
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$ |
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$ |
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$ |
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$ |
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Dividends per share |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares: |
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Basic |
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Diluted |
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Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
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(Unaudited) |
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(Unaudited) |
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Quarter Ended September 30, |
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Nine Months Ended September 30, |
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(In millions) |
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2019 |
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2018 |
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2019 |
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2018 |
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Net Income |
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$ |
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$ |
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$ |
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$ |
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Currency translation adjustments |
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( |
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( |
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( |
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( |
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Net unrealized pension and other benefit actuarial gains (losses) and prior service credits (net of tax) |
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( |
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― |
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( |
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Net unrealized (losses) gains on financial instruments (net of tax) |
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( |
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( |
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( |
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Total other comprehensive income |
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( |
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( |
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( |
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( |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
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(Unaudited) |
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Nine Months Ended September 30, |
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(In millions) |
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2019 |
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2018 |
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Cash flows from operating activities |
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Net income |
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$ |
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$ |
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Reconciliation to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization related to financing |
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Deferred income taxes |
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Equity in earnings from affiliated companies |
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( |
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( |
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Stock-based compensation |
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Changes in assets and liabilities: |
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Increase in accounts receivable |
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( |
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( |
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Increase in inventories |
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( |
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( |
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Increase in prepaid expenses and other current assets |
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( |
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( |
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Increase in accounts payable/accrued liabilities |
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Other – net |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Capital expenditures |
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( |
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( |
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Acquisition of business |
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( |
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( |
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Net cash used for investing activities |
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( |
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( |
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Cash flows from financing activities |
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Repayments of Euro term loan |
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( |
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( |
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Borrowing from senior unsecured credit facility - 2024 |
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― |
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Repayment of senior unsecured credit facility - 2024 |
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( |
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― |
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Borrowing from senior unsecured credit facility - 2021 |
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Repayment of senior unsecured credit facility - 2021 |
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( |
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( |
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Repayment of finance lease obligation and other debt, net |
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( |
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Issuance costs related to senior credit facility |
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( |
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― |
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Dividends paid |
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( |
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( |
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Repurchase of stock |
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( |
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( |
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Activity under stock plans |
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Net cash provided by (used in) financing activities |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental data: |
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Accrual basis additions to plant, property and equipment |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the Nine Months Ended September 30, 2019 and 2018
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Additional |
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Accumulated |
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Other |
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Total |
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Paid-In |
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Retained |
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Comprehensive |
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Treasury |
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Stockholders’ |
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(In millions) |
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Par |
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Capital |
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Earnings |
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Income (Loss) |
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Stock |
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Equity |
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Balance, December 31, 2017 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Dividends paid on common stock |
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— |
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— |
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( |
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— |
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— |
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( |
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Impact of new accounting pronouncements |
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— |
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— |
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Change in other comprehensive income – net of tax |
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— |
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— |
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— |
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— |
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Stock based compensation |
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— |
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— |
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— |
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( |
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Acquisition of treasury stock |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance, March 31, 2018 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Dividends paid on common stock |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Change in other comprehensive income – net of tax |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Stock based compensation |
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— |
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— |
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— |
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( |
) |
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Acquisition of treasury stock |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
||||
Balance, June 30, 2018 |
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$ |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Dividends paid on common stock |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Change in other comprehensive income – net of tax |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Stock based compensation |
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— |
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— |
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— |
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( |
) |
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Acquisition of treasury stock |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
||||
Balance, September 30, 2018 |
|
$ |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
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$ |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
Other |
|
|
|
|
|
|
Total |
|
||||
|
|
|
|
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury |
|
|
Stockholders’ |
|
|||||
(In millions) |
|
Par |
|
|
Capital |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Stock |
|
|
Equity |
|
||||||
Balance, December 31, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
||||
Dividends paid on common stock |
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
— |
|
|
|
( |
) |
||||
Change in other comprehensive income – net of tax |
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
|
( |
) |
||||
Stock based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|||
Acquisition of treasury stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
||||
Balance, March 31, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
||||
Dividends paid on common stock |
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
— |
|
|
|
( |
) |
||||
Change in other comprehensive income – net of tax |
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
|
( |
) |
||||
Stock based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||||
Balance, June 30, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
||||
Dividends paid on common stock |
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
— |
|
|
|
( |
) |
||||
Change in other comprehensive income – net of tax |
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
|
( |
) |
||||
Stock based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|||
Acquisition of treasury stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
||||
Balance, September 30, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
HEXCEL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Significant Accounting Policies
In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying Condensed Consolidated Financial Statements are those of Hexcel Corporation. Refer to Note 1 to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of our significant accounting policies. Significant changes to our accounting policies subsequent to the filing of our Form 10-K, relate solely to the adoption of Accounting Standard Codification (“ASC”) Topic 842, Leases, (“ASC 842”) are discussed below in Recent Accounting Pronouncements as well as in Note 4.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC. In the opinion of management, the Condensed Consolidated Financial Statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholder’s equity for the interim periods presented. The Condensed Consolidated Balance Sheet as of December 31, 2018 was derived from the audited 2018 Consolidated Balance Sheet. Interim results are not necessarily indicative of results expected for any other interim period or for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2018 Annual Report on Form 10-K. Within the Unaudited Condensed Consolidated Balance Sheets as of December 31, 2018, property, plant and equipment and the related accumulated depreciation have been grossed up to conform to the current year presentation.
Investments in Affiliated Companies
We have a
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). This standard requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of leases with a duration of one year or less. We adopted the provisions of this standard on January 1, 2019, using the modified transition method which allows companies to recognize existing leases at the adoption date without requiring comparable presentation. As a result of the adoption of this standard we recognized approximately $
In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU 2018-14), Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We do not expect this new standard to have a significant impact to our disclosures.
7
Note 2 — Net Income per Common Share
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(In millions, except per share data) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Basic net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding — Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus incremental shares from assumed conversions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding — Dilutive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total shares underlying stock options of
Note 3 — Inventories
|
|
|
|
|
|
|
|
|
(In millions) |
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
Raw materials |
|
$ |
|
|
|
$ |
|
|
Work in progress |
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
Total Inventory |
|
$ |
|
|
|
$ |
|
|
Note 4 — Leases
The Company regularly enters into operating leases for certain buildings, equipment, parcels of land, and vehicles. As of January 1, 2019, we adopted the provisions of ASC 842, accounting for leases. Accordingly, we capitalized all agreements with terms for more than one year, where a right of use asset was identified. In connection with the adoption of ASC 842 on January 1, 2019 we elected certain practical expedients available under ASC 842-10-65-1 that provide certain concessions to ease the burden of transition, such as the treatment of indirect lease costs, and service contracts which may contain embedded leases. In addition, we elected certain expedients not related to the transition, such as the election to capitalize lease and non-lease components of an agreement as a single component for purposes of simplicity, with the exception of those related to equipment and machinery.
Generally, amounts capitalized represent the present value of minimum lease payments over the term, and the duration is equivalent to the base agreement, however, management used certain assumptions when determining the value and duration of leases. These assumptions include, but are not limited to, the probability of renewing a lease term, certain future events impacting lease payments, as well as fair values not explicit in an agreement. Such assumptions impacted the duration of many of our building leases, as well as certain of our equipment leases.
8
In determining the lease renewal, management considered the need and ability to substitute a given asset, as well as certain conditions such as related contractual obligations to our customers (i.e. a contractual obligation of a customer requiring certain manufacturing proximities). In determining fair value, management considered the stand alone value of an asset in an ordinary market as well as incurring certain costs to terminate an agreement. Most of our leases do not include variable payments but contain scheduled escalations. Any lease payments tied to certain future indexes are adjusted on a go forward basis as those indexes become known.
At September 30, 2019, we had approximately $
We discount the future lease payments of our leases using the prevailing rates extended to us by our lenders relevant to the period of inception. These rates are comprised of LIBOR plus a stated spread less a component related to collateralization. The rates are relative to the duration of the lease at inception and the country to which the lease agreement pertains to. The weighted average interest rate used in calculating the fair values listed above was
The following table lists the schedule of cash payments related to right of use assets by year:
(In millions) |
|
|
|
|
Remainder of 2019 |
|
$ |
|
|
2020 |
|
|
|
|
2021 |
|
|
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Operating lease expense recognized during the quarter and nine months ending September 30, 2019, relating to right of use assets, was $
Note 5 — Retirement and Other Postretirement Benefit Plans
We maintain qualified and nonqualified defined benefit retirement plans covering certain current and former U.S. and European employees, retirement savings plans covering eligible U.S. and U.K. employees and certain postretirement health care and life insurance benefit plans covering eligible U.S. retirees. We also participate in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliations.
Defined Benefit Retirement Plans
Net Periodic Benefit Costs
Net periodic benefit costs of our defined benefit retirement plans for the three and nine months ended September 30, 2019 and 2018 were as follows:
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
U.S. Nonqualified Defined Benefit Retirement Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
||
Net periodic benefit cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
(In millions) |
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
Amounts recognized on the balance sheet for U.S. nonqualified defined benefit retirement plans: |
|
|
|
|
|
|
|
|
Accrued liabilities |
|
$ |
|
|
|
$ |
|
|
Other non-current liabilities |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
European Defined Benefit Retirement Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net amortization and deferral |
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||
Net periodic benefit credit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
Amounts recognized on the balance sheet for European defined benefit retirement plans: |
|
|
|
|
|
|
|
|
Other assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities |
|
|
|
|
|
|
|
|
Other non-current liabilities |
|
|
|
|
|
|
|
|
Total accrued benefit |
|
$ |
|
|
|
$ |
|
|
All costs related to our pensions are included as a component of operating income in our Condensed Consolidated Statements of Operations. For the three month periods ended September 30, 2019 and 2018, amounts unrelated to service costs were a benefit of $
Contributions
We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred. We have contributed approximately $
We contributed $
Postretirement Health Care and Life Insurance Benefit Plans
We recorded $
(In millions) |
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
Amounts recognized on the balance sheet: |
|
|
|
|
|
|
|
|
Accrued liabilities |
|
$ |
|
|
|
$ |
|
|
Other non-current liabilities |
|
|
|
|
|
|
||
Total accrued benefit |
|
$ |
|
|
|
$ |
|
|
10
Amounts contributed in connection with our postretirement plans were immaterial for both the nine months ended September 30, 2019 and September 30, 2018. We periodically fund our postretirement plans to pay covered expenses as they are incurred. We expect to contribute less than $
Note 6 –– Debt
(In millions) |
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
Current portion of finance lease |
|
$ |
|
|
|
$ |
|
|
Current portion of Euro term loan |
|
|
|
|
|
|
|
|
Current portion of debt |
|
|
|
|
|
|
|
|
Non-current portion of Euro term loan |
|
|
|
|
|
|
|
|
Senior unsecured credit facility |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes --- original issue discount |
|
|
( |
) |
|
|
( |
) |
Senior notes --- deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Non-current portion of finance lease and other debt |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
Total debt |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
In June 2019, the Company refinanced its senior unsecured credit facility (“the Facility”), increasing borrowing capacity from $
The Facility agreement contains financial and other covenants, including, but not limited to customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio.
In 2017, the Company issued $
In 2016, we entered into a €
In 2015, the Company issued $
11
Note 7 — Derivative Financial Instruments
Interest Rate Swap and Interest Lock Agreements
At September 30, 2019 the Company had interest rate swaps related to European debt obligations which had a combined notional value of approximately €
The Company had treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our
Foreign Currency Forward Exchange Contracts
A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British Pound sterling. We entered into contracts to exchange U.S. dollars for Euros and British Pound sterling through March 2022, which we account for as cash flow hedges. The aggregate notional amount of these contracts was $
In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the re-measurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are
The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and nine months ended September 30, 2019 and September 30, 2018 was as follows:
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Unrealized (losses) gains at beginning of period, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Losses (gains) reclassified to net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Decrease in fair value |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Unrealized losses at end of period, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
12
Unrealized losses of $
Commodity Swap Agreements
On occasion we enter into commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile). As of September 30, 2019, we had commodity swap agreements with a notional value of $
Note 8 — Income Taxes
The effective tax rate was
Note 9 — Fair Value Measurements
The authoritative guidance for fair value measurements establishes a hierarchy for observable and unobservable inputs used to measure fair value, into three broad levels, which are described below:
|
• |
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
|
• |
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. |
|
• |
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value.
We have
For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value. The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). The fair value of these assets and liabilities was approximately $
Below is a summary of valuation techniques for all Level 2 financial assets and liabilities:
• |
Interest rate swaps — valued using LIBOR yield curves at the reporting date. Fair value was a liability of $ |
• |
Foreign exchange derivative assets and liabilities — valued using quoted forward prices at the reporting date. Fair value of assets and liabilities at September 30, 2019 was $ |
• |
Commodity raw materials — valued using quoted forward prices at the reporting date. Fair value of liabilities at September 30, 2019 was $ |
Counterparties to the above contracts are highly rated financial institutions,
13
Liabilities classified as Level 3 — we have a liability for $
Note 10 — Revenue
Our revenue is primarily derived from the sale of inventory under long-term agreements with our customers. We have determined that individual purchase orders (“PO”), whose terms and conditions taken with a master agreement, create the ASC 606 contracts which are generally short-term in nature. For those sales, which are not tied to a long-term agreement, we generate a PO that is subject to our standard terms and conditions. In instances where our customers acquire our goods related to government contracts, the contracts are typically subject to terms similar, or equal to, the Federal Acquisition Regulation Part 52.249-2. This regulation contains a termination for convenience clause (“T for C”), which requires that the customer pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit.
We recognize revenue over time for those agreements that have T for C, and where the products being produced have no alternative use.
We disaggregate our revenue based on market for analytical purposes.
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Consolidated Net Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial Aerospace |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Space & Defense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled. Contract assets are included in our Condensed Consolidated Balance Sheets as a component of current assets.
` |
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Composite Material |
|
|
Engineered Products |
|
|
Total |
|
|||
Balance at December 31, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net revenue billed |
|
|
( |
) |
|
|
|
|
|
|
|
|
Balance at March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue billed |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue billed |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional.
Note 11 — Segment Information
The financial results for our operating segments are prepared using a management approach, which is consistent with the basis and manner in which we internally segregate financial information for the purpose of assisting in making internal operating decisions. We evaluate the performance of our operating segments based on operating income, and generally account for intersegment sales based on arm’s length prices. Corporate and certain other expenses are not allocated to the operating segments, except to the extent that the expense can be directly attributable to the business segment.
14
Financial information for our operating segments for the quarter and nine months ended September 30, 2019 and 2018 were as follows:
|
|
(Unaudited) |
|
|||||||||||||
|
|
Composite |
|
|
Engineered |
|
|
Corporate & |
|
|
|
|
|
|||
(In millions) |
|
Materials |
|
|
Products |
|
|
Other (a) |
|
|
Total |
|
||||
Third Quarter 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Intersegment sales |
|
|
|
|
|
— |
|
|
|
(23.3 |
) |
|
|
— |
|
|
Total sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
572.5 |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual basis additions to capital expenditures |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Intersegment sales |
|
|
|
|
|
|
— |
|
|
|
(17.2 |
) |
|
|
— |
|
Total sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
540.5 |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual basis additions to capital expenditures |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
(64.1 |
) |
|
|
— |
|
Total sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
1,791.4 |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual basis additions to capital expenditures |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Intersegment sales |
|
|
|
|
|
|
— |
|
|
|
(56.7 |
) |
|
|
— |
|
Total sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
1,628.1 |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual basis additions to capital expenditures |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
(a) |
We do not allocate corporate expenses to the operating segments. |
Goodwill and Intangible Assets |
|
Composite |
|
|
Engineered |
|
|
|
|
|
||
(In millions) |
|
Materials |
|
|
Products |
|
|
Total |
|
|||
Balance at December 31, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Amortization Expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Additions |
|
|
— |
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
( |
) |
|
— |
|
|
|
( |
) |
|
Balance at September 30, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The addition to goodwill and intangible assets is due to the acquisition of ARC Technologies LLC, discussed in Note 13. At September 30, 2019, the balance of goodwill and intangible assets was $
15
Note 12 — Accumulated Other Comprehensive Loss
Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the Condensed Consolidated Statements of Operations.
(In millions) |
|
Unrecognized Net Defined Benefit and Postretirement Plan Costs |
|
|
Change in Fair Value of Derivatives Products (1) |
|
|
Foreign Currency Translation |
|
|
Total |
|
||||
Balance at December 31, 2018 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive loss before reclassifications |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
Other comprehensive loss |
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at September 30, 2019 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
(1) |
|
The amounts of net gains reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs component of accumulated other comprehensive loss for the three and nine months ended September 30, 2019, were $
Note 13 — Acquisitions
During the first quarter of 2019, we acquired all of the outstanding equity interests in ARC Technologies LLC, a leading supplier of customer RF/EMI and microwave absorbing composite materials for military, aerospace and industrial applications, for $
In connection with the acquisition, the Company recognized $
Note 14 — Commitments and Contingencies
We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. While it is impossible to predict the ultimate resolution of litigation, investigations and claims asserted against us, we believe, based upon our examination of currently available information, our experience to date, and advice from legal counsel, that, after taking into account our existing insurance coverage and amounts already provided for, the currently pending legal proceedings against us will not have a material adverse impact on our Condensed Consolidated Statements of Operations, Balance Sheets or Cash Flows.
16
Environmental Matters
We have been named as a potentially responsible party (“PRP”) with respect to the below hazardous waste disposal sites that we do not own or possess, which are included on, or proposed to be included on, the Superfund National Priority List of the U.S. Environmental Protection Agency (“EPA”) or on equivalent lists of various state governments. Because the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) allows for joint and several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs. We believe, based on the amount and nature of our waste, and the number of other financially viable PRPs, that our liability in connection with such environmental matters will not be material.
Lower Passaic River Study Area
Hexcel together with approximately
In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower eight miles of the Lower Passaic River at an expected cost ranging from $
In October 2016, pursuant to a settlement agreement with the EPA, Occidental Chemical Corporation (“OCC”), one of the PRPs, commenced performance of the remedial design required by the ROD, reserving its right of cost contribution from all other PRPs. In June 2018, OCC filed suit against approximately
The accrual was $
Omega Chemical Corporation Superfund Site, Whittier, California
We are a PRP at a former chemical waste site in Whittier, California. The PRPs at Omega have established The Omega Chemical Site PRP Organized Group, (the “OPOG”), and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. OPOG has attributed to Hexcel either
Summary of Environmental Reserves
Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lower Passaic River and other sites are accrued in the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, our aggregate environmental related accruals were $
17
These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required, changes in the apportionment of costs among responsible parties and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.
Product Warranty
We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the nine months ended September 30, 2019, and accrued warranty cost, included in “accrued liabilities” in the Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018, were as follows:
|
|
Product |
|
|
(In millions) |
|
Warranties |
|
|
Balance as of December 31, 2018 |
|
$ |
|
|
Warranty expense |
|
|
|
|
Deductions and other |
|
|
( |
) |
Balance as of March 31, 2019 |
|
|
|
|
Warranty expense |
|
|
|
|
Deductions and other |
|
|
( |
) |
Balance as of June 30, 2019 |
|
|
|
|
Warranty expense |
|
|
( |
) |
Deductions and other |
|
|
|
|
Balance as of September 30, 2019 |
|
$ |
|
|
18
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, RF/EMI and microwave absorbing materials, engineered honeycomb and composite structures, for use in Commercial Aerospace, Space & Defense and Industrial markets. Our products are used in a wide variety of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive, recreational products and other industrial applications.
We serve international markets through manufacturing facilities, sales offices and representatives located in the Americas, Asia Pacific, Europe, Russia, India and Africa. We are also a partner in a joint venture in Malaysia, which manufactures composite structures for Commercial Aerospace applications.
On January 3, 2019, we acquired ARC Technologies, LLC (“ARC”), a leading supplier of custom RF/EMI and microwave absorbing composite materials for military, aerospace and industrial applications. The acquisition strengthens our existing advanced materials portfolio in structural composites and thermoplastics.
We have two segments, Composite Materials and Engineered Products. The Composite Materials segment is comprised of our carbon fiber, specialty reinforcements, resins, prepregs and other fiber-reinforced matrix materials, honeycomb core product lines and pultruded profiles. The Engineered Products segment is comprised of lightweight high strength composite structures, RF/EMI and microwave absorbing materials, engineered core and specialty machined honeycomb products with added functionality.
Net sales for the quarter were $572.5 million, 5.9% greater (6.6% in constant currency) than the $540.5 million reported for the third quarter of 2018. The increase in sales for the quarter was driven by strong growth in Space & Defense including sales attributable to the ARC acquisition.
Commercial Aerospace sales of $385.9 million increased 3.4% (3.6% in constant currency) for the quarter as compared to the third quarter of 2018. The third quarter benefited from increased growth for most programs with particularly strong performance for the A320neo and the B787 tempered by reduced demand from the Boeing 737 MAX program.
Sales to other commercial aerospace, which includes regional and business aircraft customers, were up 16.8% for the third quarter of 2019 as compared to 2018 driven by strong business jet sales.
Space & Defense sales of $109.8 million increased 21.5% (22.7% in constant currency) for the quarter as compared to the third quarter of 2018 including sales attributable to the ARC acquisition. Growth in the F-35 Joint Strike Fighter (“JSF”) was the primary driver.
Total Industrial sales of $76.8 million for the third quarter of 2019 were in line with the third quarter of 2018 (an increase of 2.7% in constant currency). Wind energy sales improved 6.9% (10.2% in constant currency) compared to the prior year period.
Gross margin for the third quarter of 2019 was 27.6% as compared to 26.5% for the third quarter of 2018, as 2018 was negatively impacted by several headwinds including acrylonitrile (AN) and wind energy resin pricing.
Selling, general and administrative expenses for the third quarter of 2019 were comparable as a percentage of sales to the prior year period as we maintained tight cost control. Research and technology expenses for the third quarter of 2019 were about 2% higher than the comparable 2018 period, as we continued to invest in advance composite technology and innovation.
Operating cash flow for the first nine months of 2019 was $277.3 million compared to $278.4 million in 2018. Working capital increased resulting in a cash use of $83.7 million in 2019 as compared to a use of $64.6 million in 2018 reflecting growth in the underlying business. For the first nine months of 2019, capital expenditures were $162.7 million as compared to $150.2 million in the first nine months of 2018. Free cash flow (defined as cash provided by operating activities less capital expenditures) for the nine months ended September 30, 2019 was $114.6 million versus $128.2 million in the comparable period of 2018.
Accrual basis additions to capital expenditures were $160.9 million for the first nine months of 2019 and $133.5 million in 2018. We expect accrual basis capital expenditures to be in the $170 million to $190 million range for 2019.
19
Financial Overview
Results of Operations
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
(In millions, except per share data) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
Net sales |
|
$ |
572.5 |
|
|
$ |
540.5 |
|
|
|
5.9 |
% |
|
$ |
1,791.4 |
|
|
$ |
1,628.1 |
|
|
|
10.0 |
% |
Net sales change in constant currency |
|
|
|
|
|
|
|
|
|
|
6.6 |
% |
|
|
|
|
|
|
|
|
|
|
11.2 |
% |
Operating income |
|
$ |
109.9 |
|
|
$ |
96.5 |
|
|
|
13.9 |
% |
|
$ |
327.8 |
|
|
$ |
275.4 |
|
|
|
19.0 |
% |
As a percentage of net sales |
|
|
19.2 |
% |
|
|
17.9 |
% |
|
|
|
|
|
|
18.3 |
% |
|
|
16.9 |
% |
|
|
|
|
Net income |
|
|
80.3 |
|
|
80.1 |
|
|
|
0.2 |
% |
|
233.4 |
|
|
210.5 |
|
|
|
10.9 |
% |
|||
Diluted net income per common share |
|
$ |
0.93 |
|
|
$ |
0.91 |
|
|
|
2.2 |
% |
|
$ |
2.71 |
|
|
$ |
2.35 |
|
|
|
15.3 |
% |
The Company’s performance measurements include net income adjusted for special items and free cash flow, which are non-GAAP measures. Management believes these non-GAAP measurements are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results. These non-GAAP measurements are not recognized in accordance with generally accepted accounting principles and should not be viewed as an alternative to a GAAP measure of performance. The following is a reconciliation from GAAP to non-GAAP amounts.
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||||||||||||||||||||
(In millions, except per diluted share data) |
|
Net Income |
|
|
Tax Rate % |
|
|
Net Income |
|
|
Tax Rate % |
|
|
Net Income |
|
|
Tax Rate % |
|
|
Net Income |
|
|
Tax Rate % |
|
||||||||||
GAAP net income |
|
|
$ |
80.3 |
|
|
|
|
18.4 |
|
|
$ |
80.1 |
|
|
|
9.1 |
|
|
$ |
233.4 |
|
|
|
21.3 |
|
|
$ |
210.5 |
|
|
|
16.9 |
|
Discrete tax benefits (a) |
|
|
|
(3.0 |
) |
|
|
|
3.0 |
|
|
|
(9.6 |
) |
|
|
11.2 |
|
|
|
(3.0 |
) |
|
|
1.0 |
|
|
|
(10.9 |
) |
|
|
4.4 |
|
Adjusted net income (non-GAAP) |
|
|
$ |
77.3 |
|
|
|
|
21.4 |
|
|
$ |
70.5 |
|
|
|
20.3 |
|
|
$ |
230.4 |
|
|
|
22.3 |
|
|
$ |
199.6 |
|
|
|
21.3 |
|
Adjusted diluted net income per share (non-GAAP) |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
$ |
0.80 |
|
|
|
|
|
|
$ |
2.68 |
|
|
|
|
|
|
$ |
2.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The quarter ended September 30, 2019 benefited primarily from tax credits identified during the quarter of $3.0 million. The third quarter of 2018 included discrete benefits of $9.6 million primarily related to a change in accounting method and release of a valuation allowance in a foreign jurisdiction. The nine months ended September 30, 2018 also included a discrete benefit of $1.3 million from the release of reserves for uncertain tax positions. |
|
|
|
Nine Months Ended September 30, |
|
|||||
(In millions) |
|
2019 |
|
|
2018 |
|
||
Net cash provided by operating activities |
|
$ |
277.3 |
|
|
$ |
278.4 |
|
Less: Capital expenditures |
|
|
(162.7 |
) |
|
|
(150.2 |
) |
Free cash flow (non-GAAP) |
|
$ |
114.6 |
|
|
$ |
128.2 |
|
20
Net Sales
The following table summarizes net sales to third-party customers by segment and end market for the three and nine months ended September 30, 2019 and 2018:
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
Consolidated Net Sales |
|
$ |
572.5 |
|
|
$ |
540.5 |
|
|
|
5.9 |
% |
|
$ |
1,791.4 |
|
|
$ |
1,628.1 |
|
|
|
10.0 |
% |
Commercial Aerospace |
|
|
385.9 |
|
|
|
373.1 |
|
|
|
3.4 |
% |
|
|
1,217.9 |
|
|
|
1,139.6 |
|
|
|
6.9 |
% |
Space & Defense |
|
|
109.8 |
|
|
|
90.4 |
|
|
|
21.5 |
% |
|
|
329.4 |
|
|
|
272.2 |
|
|
|
21.0 |
% |
Industrial |
|
76.8 |
|
|
|
77.0 |
|
|
|
(0.3 |
)% |
|
|
244.1 |
|
|
216.3 |
|
|
|
12.9 |
% |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composite Materials |
|
$ |
448.0 |
|
|
$ |
432.8 |
|
|
|
3.5 |
% |
|
$ |
1,419.7 |
|
|
$ |
1,323.2 |
|
|
|
7.3 |
% |
Commercial Aerospace |
|
|
294.5 |
|
|
|
285.7 |
|
|
|
3.1 |
% |
|
|
941.6 |
|
|
|
889.5 |
|
|
|
5.9 |
% |
Space & Defense |
|
|
78.9 |
|
|
|
70.1 |
|
|
|
12.6 |
% |
|
|
236.2 |
|
|
|
217.4 |
|
|
|
8.6 |
% |
Industrial |
|
74.6 |
|
|
|
77.0 |
|
|
|
(3.1 |
)% |
|
|
241.9 |
|
|
216.3 |
|
|
|
11.8 |
% |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Products |
|
$ |
124.5 |
|
|
$ |
107.7 |
|
|
|
15.6 |
% |
|
$ |
371.7 |
|
|
$ |
304.9 |
|
|
|
21.9 |
% |
Commercial Aerospace |
|
91.4 |
|
|
87.4 |
|
|
|
4.6 |
% |
|
276.3 |
|
|
250.1 |
|
|
|
10.5 |
% |
||||
Space & Defense |
|
|
30.9 |
|
|
|
20.3 |
|
|
|
52.2 |
% |
|
|
93.2 |
|
|
|
54.8 |
|
|
|
70.1 |
% |
Industrial |
|
|
2.2 |
|
|
|
— |
|
|
N/M |
|
|
|
2.2 |
|
|
|
— |
|
|
N/M |
|
Sales by Segment
Composite Materials: Net sales of $448.0 million in the third quarter of 2019 increased $15.2 million from the $432.8 million in sales for the prior year quarter, driven by strong growth in Space & Defense from the JSF program. Net sales of $1,419.7 million for the nine months ended September 30, 2019 increased 7.3% compared to the same period last year. Commercial Aerospace sales during 2019 benefited from increased production rates and higher composite content on the new narrow-body planes, as well as the A350 and B787 programs. Space & Defense sales primarily benefited from growth in the JSF program. Wind energy sales were up in 2019 as the transition to new generation blades that are longer with a higher composite content started in mid-2018.
Engineered Products: Net sales of $124.5 million in the third quarter of 2019 increased $16.8 million from the $107.7 million for 2018. Net sales of $371.7 million for the first nine months of 2019 increased 21.9% primarily reflecting the ARC acquisition and growth from the A320neo.
Sales by Market
Commercial Aerospace sales of $385.9 million increased 3.4% (3.6% in constant currency) for the quarter as compared to the third quarter of 2018. The third quarter benefited from increased growth for most programs with particularly strong performance for the A320neo and B787 tempered by reduced demand from the 737MAX. The 6.9% growth for the first nine months of 2019 was driven by narrow-body build rate increases and the completion of the transition to the Neo and MAX configurations, as well as the A350 and B787 programs.
Sales to other commercial aerospace, which includes regional and business aircraft customers, were up 16.8% for the third quarter and 9.9% for the first nine months of 2019 as compared to 2018 driven by strong business jet sales.
Space & Defense sales of $109.8 million increased 21.5% (22.7% in constant currency) for the quarter as compared to the third quarter of 2018 and of $329.4 million increased 21.0% (22.6% in constant currency) for the first nine months of 2019 including sales attributable to the ARC acquisition. Growth in the JSF was the primary driver along with other fixed-wing programs.
Total Industrial sales of $76.8 million for the third quarter of 2019 were in line with the third quarter of 2018 (an increase of 2.7% in constant currency). Wind energy sales improved 6.9% (10.2% in constant currency) compared to the prior year period, a slower rate of growth than recent quarters, as the transition to the new generation of composite blades started in mid-2018. Industrial sales for the nine months ended September 30, 2019 were $244.1 million, which were 18.0% higher in constant currency than the sales in the first nine months of 2018 driven by an almost 40% increase in wind energy sales.
21
Gross Margin
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
Gross margin |
|
$ |
157.9 |
|
|
$ |
143.0 |
|
|
|
10.4 |
% |
|
$ |
493.9 |
|
|
$ |
430.4 |
|
|
|
14.8 |
% |
Percentage of sales |
|
|
27.6 |
% |
|
|
26.5 |
% |
|
|
|
|
|
|
27.6 |
% |
|
|
26.4 |
% |
|
|
|
|
Gross margin for the third quarter was 27.6% compared to 26.5% in the third quarter of 2018 and 27.6% and 26.4% for the first nine months of 2019 and 2018, respectively. The 2018 periods were negatively impacted by several headwinds including AN and wind energy resin pricing.
Operating Expenses
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
SG&A expense |
|
$ |
33.8 |
|
|
$ |
32.6 |
|
|
|
3.7 |
% |
|
$ |
122.8 |
|
|
$ |
114.3 |
|
|
|
7.4 |
% |
Percentage of sales |
|
|
5.9 |
% |
|
|
6.0 |
% |
|
|
|
|
|
|
6.9 |
% |
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R&T expense |
|
$ |
14.2 |
|
|
$ |
13.9 |
|
|
|
2.2 |
% |
|
$ |
43.3 |
|
|
$ |
40.7 |
|
|
|
6.4 |
% |
Percentage of sales |
|
|
2.5 |
% |
|
|
2.6 |
% |
|
|
|
|
|
|
2.4 |
% |
|
|
2.5 |
% |
|
|
|
|
Selling, general and administrative expenses for the third quarter and first nine months of 2019, as a percentage of sales, were comparable to the 2018 levels as we maintained tight cost control. Research and technology expense increased for the third quarter and first nine months of 2019 as we continue to invest in innovative composite products and solutions to support our customers and next-generation products.
Operating Income
|
|
Quarter Ended September 30 |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
Consolidated operating income |
|
$ |
109.9 |
|
|
$ |
96.5 |
|
|
|
13.9 |
% |
|
$ |
327.8 |
|
|
$ |
275.4 |
|
|
|
19.0 |
% |
Operating margin |
|
|
19.2 |
% |
|
|
17.9 |
% |
|
|
|
|
|
|
18.3 |
% |
|
|
16.9 |
% |
|
|
|
|
Composite Materials |
|
|
100.1 |
|
|
|
92.5 |
|
|
|
8.2 |
% |
|
|
324.4 |
|
|
276.6 |
|
|
|
17.3 |
% |
|
Operating margin |
|
|
21.2 |
% |
|
|
20.6 |
% |
|
|
|
|
|
|
21.9 |
% |
|
|
20.0 |
% |
|
|
|
|
Engineered Products |
|
|
20.3 |
|
|
15.5 |
|
|
|
31.0 |
% |
|
|
51.4 |
|
|
41.3 |
|
|
|
24.5 |
% |
||
Operating margin |
|
|
16.3 |
% |
|
|
14.4 |
% |
|
|
|
|
|
|
13.8 |
% |
|
|
13.5 |
% |
|
|
|
|
Corporate & Other |
|
|
(10.5 |
) |
|
|
(11.5 |
) |
|
|
(8.7 |
)% |
|
|
(48.0 |
) |
|
|
(42.5 |
) |
|
|
12.9 |
% |
Operating income for the third quarters of 2019 and 2018 was $109.9 million and $96.5 million, respectively. Operating income for the first nine months of 2019 and 2018 was $327.8 million and $275.4 million, respectively. Exchange rates favorably impacted the third quarter of 2019 by approximately 10 basis points and the first nine months of 2019 by approximately 35 basis points as compared to 2018. Depreciation and amortization expense for the first nine months of 2019 was $16.3 million higher than the comparable period for 2018.
Interest Expense, Net
|
|
Quarter Ended September 30 |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
Interest expense, net |
|
$ |
11.0 |
|
|
$ |
10.6 |
|
|
|
3.8 |
% |
|
$ |
34.9 |
|
|
$ |
27.3 |
|
|
|
27.8 |
% |
Interest expense for the third quarter and nine months ended September 30, 2019 increased as compared to the same period last year primarily due to higher debt levels as a result of the ARC acquisition.
22
Provision for Income Taxes
|
|
Quarter Ended September 30 |
|
|
Nine Months Ended September 30, |
|
||||||||||
(In millions) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Income tax expense |
|
$ |
18.2 |
|
|
$ |
7.8 |
|
|
$ |
62.4 |
|
|
$ |
41.9 |
|
Effective tax rate |
|
|
18.4 |
% |
|
|
9.1 |
% |
|
|
21.3 |
% |
|
|
16.9 |
% |
The effective tax rate for the current quarter was 18.4% compared to 9.1% for the quarter ended September 30, 2018 and 21.3% for the first nine months of 2019 compared to 16.9% for the first nine months of 2018. The three months ended September 30, 2019 included a $3.0 million benefit primarily due to tax credits identified in the quarter. The quarter ended September 30, 2018 included discrete benefits of $9.6 million primarily related to a change in tax accounting method and the release of a valuation allowance in a foreign jurisdiction. The nine months ended September 30, 2018 also included a discrete benefit of $1.3 million related to the release of a reserve for uncertain tax positions. All periods benefited from deductions associated with share based compensation payments. Our underlying estimated effective income tax rate is expected to remain at 24%.
Financial Condition
Liquidity: As of September 30, 2019, our total debt, net of cash, was $1,077.5 million, as compared to $924.1 million at December 31, 2018. The increase in debt in the first nine months of 2019 primarily reflects the ARC acquisition. At September 30, 2019, total borrowings under our $1 billion Senior Unsecured Revolving Credit Facility (“the Facility”) were $379 million. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50.0 million. Any outstanding letters of credit reduce the amount available for borrowing under the Facility. As of September 30, 2019, we had not issued any letters of credit under the Facility, resulting in undrawn availability under the Facility of $621 million.
The Facility agreement contains financial and other covenants, including, but not limited customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default.
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 September 30, 2019, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until June 2024 when the Facility expires.
Operating Activities: Net cash provided by operating activities was $277.3 million for the first nine months of 2019 and $278.4 million for the comparable 2018 period. The change in working capital was a use of $83.7 million in 2019 as compared to $64.6 million in 2018, driven by growth in the underlying business.
Investing Activities: Net cash used for investing activities was $325.9 million and $150.9 million in the first nine months of 2019 and 2018, respectively. The 2019 period included $163.2 million for the ARC acquisition. Capital expenditures were $162.7 million and $150.2 million in 2019 and 2018, respectively.
Financing Activities: Financing activities provided $64.8 million of cash in the first nine months of 2019, and were a use of $136.8 million in the same period in 2018. This increase in cash provided was primarily due to amounts borrowed from our Facility to fund the ARC acquisition. We returned $106.8 million to stockholders from stock repurchases and dividends in 2019 compared to $318.3 million in 2018.
Financial Obligations and Commitments: As of September 30, 2019, the current portion of debt included $8.7 million related to the Euro term loan. The next significant scheduled debt maturity will not occur until 2024, when the Facility matures. Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.
Critical Accounting Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors management believes to be relevant at the time our condensed consolidated financial statements are prepared. On a regular basis, management reviews accounting policies, assumptions, estimates and judgments
23
to ensure our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results may differ from our assumptions and estimates, and such differences could be material.
We describe our significant accounting policies and critical accounting estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Significant changes to our accounting policies subsequent to the filing of our Form 10-K, relate to the adoption of Topic 842, Leases, as discussed in Notes 1 and 4 to our financial statements.
Commitments and Contingencies
We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. We estimate and accrue our liabilities resulting from such matters based upon a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs. We believe we have adequately accrued for these potential liabilities; however, facts and circumstances may change, such as new developments, or a change in approach, including a change in settlement strategy or in an environmental remediation plan, that could cause the actual liability to exceed the estimates, or may require adjustments to the recorded liability balances in the future.
Our estimate of liability as a potentially responsible party and our remaining costs associated with our responsibility to remediate the Lower Passaic River in New Jersey and other sites are accrued in the Condensed Consolidated Balance Sheets. As of September 30, 2019, our aggregate environmental related accruals were $2.5 million, of which $0.6 million was included in accrued liabilities, with the remainder included in non-current liabilities. As related to certain environmental matters, the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount. If we had accrued at the high end of the range of possible outcomes, for those sites where we are able to estimate our liability, our accrual would have been approximately $16 million higher. These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required changes in the apportionment of costs among responsible parties, the amount of insurance coverage and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to future prospects, developments and business strategies. These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “should”, “would”, “will” and similar terms and phrases, including references to assumptions. Such statements are based on current expectations, are inherently uncertain, and are subject to changing assumptions.
Such forward-looking statements include, but are not limited to: (a) the estimates and expectations based on aircraft production rates made publicly available by Airbus, Boeing and others; (b) the revenues we may generate from an aircraft model or program; (c) the impact of the possible push-out in deliveries of the Airbus and Boeing backlog and the impact of delays in the startup or ramp-up of new aircraft programs or the final Hexcel composite material content once the design and material selection have been completed; (d) expectations of composite content on new commercial aircraft programs and our share of those requirements; (e) expectations of growth in revenues from space and defense applications, including whether certain programs might be curtailed or discontinued; (f) expectations regarding growth in sales for wind energy, recreation, automotive and other industrial applications; (g) expectations regarding working capital trends and expenditures; (h) expectations as to the level of capital expenditures and when we will complete the construction of capacity expansions and qualification of new products; (i) expectations regarding our ability to maintain and improve margins as we add new facilities and in view of the current economic environment; (j) expectations regarding the outcome of legal matters or the impact of changes in laws or regulations; (k) our projections regarding our income tax rate and the realizability of net operating loss and tax credit carryforwards; and (l) the anticipated impact of the above factors and various market risks on our expectations of financial results for 2019 and beyond.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. Such factors include, but are not limited to, the following: reductions in sales to any significant customers, particularly Airbus, Boeing or Vestas, including any reduction in sales to Boeing related to a decrease in production volume of the 737 MAX; changes in sales mix; changes in current pricing and cost levels; changes in aerospace delivery rates; changes in government defense procurement budgets; changes in military aerospace program technology; timely new product development or introduction; industry capacity; increased competition; availability and cost of raw materials; supply chain disruptions; inability to install, staff and
24
qualify necessary capacity or achievement of planned manufacturing improvements; cybersecurity breaches or intrusions; currency exchange rate fluctuations; changes in political, social and economic conditions, including but not limited to, the effect of change in global trade policies and the exit of the U.K. from the European Union; work stoppages or other labor disruptions; and the unexpected outcome of legal matters or impact of changes in laws or regulations.
Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. As a result, the foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with the Securities and Exchange Commission. For additional information regarding certain factors that may cause our actual results to differ from those expected or anticipated see the information under the caption “Risk Factors” which is located in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. We do not undertake an obligation to update our forward-looking statements or risk factors to reflect future events or circumstances, except as otherwise required by law.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There are no material changes in market risk from the information provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of September 30, 2019, and with the participation of the Company's management have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit, is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and Chief Financial Officer have concluded that there have not been any changes in our internal control over financial reporting during the three months ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The information required by Item 1 is contained within Note 14 on pages 16 through 18 of this Form 10-Q and is incorporated herein by reference.
ITEM 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect our business, financial condition or future results. With the exception of the below risk factor, there were no material changes in the Company’s risk factors from the aforementioned 10-K. In addition, future uncertainties may increase the magnitude of these adverse effects or give rise to additional material risks not now contemplated.
If we fail to comply with government procurement laws and regulations, we could lose business and be liable for various penalties or sanctions.
We must comply with laws and regulations relating to the formation, administration, and performance of U.S. government contracts, including the government security requirements and government export control laws and regulations. In complying with these laws and regulations, we may incur significant costs, and non-compliance may result in the imposition of fines and penalties, including contractual damages. If we fail to comply with these laws and regulations or if a government audit, review, or investigation uncovers improper or illegal activities, we may be subject to civil penalties, criminal penalties, or administrative sanctions, including suspension or debarment from contracting with the U.S. government.
25
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Period |
|
|
(a) |
|
|
|
(b) |
|
|
|
(c) |
|
|
(d) Yet Be Purchased Under the Plans or Programs |
|
|
July 1 – July 31, 2019 |
|
|
22,050 |
|
|
$ |
83.34 |
|
|
|
22,050 |
|
$ |
371,757,269 |
|
|
August 1 – August 31, 2019 |
|
|
410,804 |
|
|
|
80.52 |
|
|
|
410,804 |
|
|
338,677,974 |
|
|
September 1 – September 30, 2019 |
|
|
251,449 |
|
|
|
82.87 |
|
|
|
251,449 |
|
|
317,841,050 |
|
|
Total |
|
|
684,303 |
|
|
$ |
81.48 |
|
|
|
684,303 |
|
$ |
317,841,050 (1) |
|
|
(1) |
On May 7, 2018, we announced that our Board authorized us to repurchase an additional $500 million of our outstanding common stock of which $317.8 million was still available at September 30, 2019. |
ITEMS 3, 4, and 5 are not applicable, and therefore have been omitted.
26
ITEM 6. Exhibits
EXHIBIT INDEX
Exhibit No. |
|
Description |
|
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32 |
|
|
|
|
|
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104 |
|
XBRL Instance Document: The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101. |
27
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Hexcel Corporation |
|
|
|
October 21, 2019 |
|
/s/ Kimberly Hendricks |
(Date) |
|
Kimberly Hendricks |
|
|
Senior Vice President, Corporate Controller and |
|
|
Chief Accounting Officer |
28