Hexcel Corp. (HXL, Financial) filed Quarterly Report for the period ended 2009-06-30.
HEXCEL CORP. is an international developer and manufacturer of lightweight high-performance composite materials parts and structures for use in the commercial aerospace space and defense recreation and general industrial markets. Hexcel Corp. has a market cap of $939.3 million; its shares were traded at around $9.73 with a P/E ratio of 10.8 and P/S ratio of 0.7.
We have also prudently moderated the pace of our capital spending plans to maintain alignment with changes to prior growth assumptions for us and our customers. We expect to spend less than $100 million on capital expenditures in 2009, and currently expect to spend less than $125 million in 2010. As anticipated, we had cash usage in the first quarter, but after generating $47 million of free cash flow (cash provided by operating activities less capital expenditures) in the second quarter, we achieved $22 million of positive free cash flow for the first six months of 2009, as compared to negative free cash flow of $92 million for the first half of 2008. There were significant working capital changes as the lower sales volumes combined with concerted efforts to reduce accounts receivable and inventories resulted in $37.4 million of cash from lower receivables and inventories in 2009 as compared to a $63.8 million use of cash in the first half of 2008. These sources of cash were partially offset by additional usage of cash for accounts payable and accruals of $26.9 million in the first half of 2009 as compared to the first half of 2008. We are now targeting over $40 million of free cash flow for the full year period. Capital expenditures were $47.9 million in the first six months of 2009, as compared to $86.2 million during the first six months of 2008.
Despite the much lower sales volume, we improved our operating margins for the quarter and six months ended June 30, 2009 over the prior year primarily reflecting good product mix, factory productivity initiatives, incremental improvements at our new European facilities, lower commodity and freight costs, overall good cost control and the benefits from a stronger Dollar. The strengthening of the Dollar against the Euro and the British pound over the last year creates mixed effects on our results. The Dollar movement against the two currencies resulted in a decrease in sales of $18.3 million in the quarter and $37.6 million in the six month period on a year over year basis. However, the operating income line was slightly favorably impacted by these same currency movements for the first half of 2009 as compared to same period in 2008 as many European commercial aerospace sales are generally in US Dollars with related costs in Euros and British pound.
(b) The second quarter of 2008 tax adjustments include $11.1 million in net benefit primarily related to the reinstatement of U.S. deferred tax assets which had been previously written off. The six months ended June 30, 2008 includes a total of $13.6 million.
Read the The complete ReportHXL is in the portfolios of John Keeley of Keeley Fund Management.
HEXCEL CORP. is an international developer and manufacturer of lightweight high-performance composite materials parts and structures for use in the commercial aerospace space and defense recreation and general industrial markets. Hexcel Corp. has a market cap of $939.3 million; its shares were traded at around $9.73 with a P/E ratio of 10.8 and P/S ratio of 0.7.
Highlight of Business Operations:
Net sales for the quarter were $277.3 million, 22.9% lower (18.7% lower in constant currency) than the $359.5 million reported for the second quarter of 2008. Year to date, net sales are 12.3% lower than last year in constant currency. The drop in sales is related to significant supply chain inventory adjustments, the rapid decline in the regional and business aircraft market and new program delays. The wind energy market is also now experiencing lower levels of demand as financing issues facing wind generator customers have begun to delay previously announced projects.We have also prudently moderated the pace of our capital spending plans to maintain alignment with changes to prior growth assumptions for us and our customers. We expect to spend less than $100 million on capital expenditures in 2009, and currently expect to spend less than $125 million in 2010. As anticipated, we had cash usage in the first quarter, but after generating $47 million of free cash flow (cash provided by operating activities less capital expenditures) in the second quarter, we achieved $22 million of positive free cash flow for the first six months of 2009, as compared to negative free cash flow of $92 million for the first half of 2008. There were significant working capital changes as the lower sales volumes combined with concerted efforts to reduce accounts receivable and inventories resulted in $37.4 million of cash from lower receivables and inventories in 2009 as compared to a $63.8 million use of cash in the first half of 2008. These sources of cash were partially offset by additional usage of cash for accounts payable and accruals of $26.9 million in the first half of 2009 as compared to the first half of 2008. We are now targeting over $40 million of free cash flow for the full year period. Capital expenditures were $47.9 million in the first six months of 2009, as compared to $86.2 million during the first six months of 2008.
Despite the much lower sales volume, we improved our operating margins for the quarter and six months ended June 30, 2009 over the prior year primarily reflecting good product mix, factory productivity initiatives, incremental improvements at our new European facilities, lower commodity and freight costs, overall good cost control and the benefits from a stronger Dollar. The strengthening of the Dollar against the Euro and the British pound over the last year creates mixed effects on our results. The Dollar movement against the two currencies resulted in a decrease in sales of $18.3 million in the quarter and $37.6 million in the six month period on a year over year basis. However, the operating income line was slightly favorably impacted by these same currency movements for the first half of 2009 as compared to same period in 2008 as many European commercial aerospace sales are generally in US Dollars with related costs in Euros and British pound.
(b) The second quarter of 2008 tax adjustments include $11.1 million in net benefit primarily related to the reinstatement of U.S. deferred tax assets which had been previously written off. The six months ended June 30, 2008 includes a total of $13.6 million.
Read the The complete ReportHXL is in the portfolios of John Keeley of Keeley Fund Management.
