Hexcel Corp. (HXL, Financial) filed Quarterly Report for the period ended 2010-06-30.
Hexcel Corp. has a market cap of $1.79 billion; its shares were traded at around $18.45 with a P/E ratio of 33.55 and P/S ratio of 1.62. HXL is in the portfolios of Chuck Royce of Royce& Associates, Pioneer Investments, Manning & Napier Advisors, Inc, George Soros of Soros Fund Management LLC.
We continue to moderate our pace of capital spending to maintain alignment with current growth assumptions for us and our customers and are committed to achieving factory efficiencies and yields to both reduce cost and capital requirements going forward. Accrual basis additions to capital expenditures were $13.7 million in the first six months of 2010 as compared to $35.4 million during the first six months of 2009. We do expect the pace of capital expenditures to increase in the second half of the year but to be less than $75 million for the year. We have resumed construction of the remaining lines of our previously announced carbon fiber capacity additions. We expect to have these additions completed by the end of 2011 and we will then be at 16 million pounds of nameplate capacity.
The free cash flow (defined as cash provided by operating activities less capital expenditures) for the first six months was $11.6 million as compared to $22.0 million for the first six months of 2009. With the return of sales growth, the use of cash for accounts receivable was $52 million for the first half of 2010. We also continue to expect to be free cash flow positive for the year.
Commercial Aerospace: Net sales increased $23.2 million, or 16.8% (18.1% on a constant currency basis), to $161.0 million for the second quarter of 2010. Net sales for the six months ended June 30, 2010 increased $21.4 million or 7.3% (6.8% on a constant currency basis) to $313.0 million over the six months ended June 30, 2009. For the quarter, Airbus and Boeing related sales were up about 20%, led by new program sales. Revenues attributed to new aircraft programs (A380, A350, B787, B747-8) represented more than 20% of commercial aerospace sales. Sales to other commercial aerospace, which includes regional and business aircraft customers, were just above the run rate for the last four quarters.
Space & Defense: Net sales increased $4.7 million, or 6.3% (7.7% on a constant currency basis), to $79.4 million for the second quarter of 2010. Net sales of $151.9 million for the six months ended June 30, 2010 were essentially flat with the prior year level as sales from rotorcraft, including the V22 tilt rotor program, offset the lower F22 sales due to the impending end of the program.
Industrial: Net sales were essentially flat for the second quarter of 2010 (an increase of 3.9% on a constant currency basis). Net sales for the six months ended June 30, 2010 decreased $37.8 million or 26.8% (a decrease of 27.1% on constant currency basis) to $103.2 million. Net sales increased from $38.5 million in the first quarter of 2010 to $64.7 million in the second quarter of 2010. The improvement in the second quarter was driven by higher wind energy sales. Wind energy sales benefited from a quick recovery by our largest wind energy customer, from their significant inventory correction during the first quarter of 2010. As a result, wind energy sales were more than $20 million higher this quarter than the first quarter and were just higher than the run rate of the last three quarters of 2009. Industrial sales excluding wind energy were flat in constant currency compared to the second quarter of 2009, but were higher than each of the prior three quarters.
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Hexcel Corp. has a market cap of $1.79 billion; its shares were traded at around $18.45 with a P/E ratio of 33.55 and P/S ratio of 1.62. HXL is in the portfolios of Chuck Royce of Royce& Associates, Pioneer Investments, Manning & Napier Advisors, Inc, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:
Gross margin was 25.7% of net sales for the quarter as compared to 22.8% in the same period last year. The improved gross margin percentage over last year reflects the higher volume, factory productivity and cost reduction initiatives and favorable product mix. These more than offset the increase in depreciation expense included in cost of sales of $1.5 million versus last year. Exchange rates resulted in almost a 50 basis points improvement in gross margin compared to last year. Our adjusted operating income was 13.3% of sales as compared to 11.3% for the second quarter of 2009. SG&A expenses were $29.6 million versus $25.3 million in 2009, primarily reflecting higher incentive and stock based compensation expense from our improved outlook versus 2009.We continue to moderate our pace of capital spending to maintain alignment with current growth assumptions for us and our customers and are committed to achieving factory efficiencies and yields to both reduce cost and capital requirements going forward. Accrual basis additions to capital expenditures were $13.7 million in the first six months of 2010 as compared to $35.4 million during the first six months of 2009. We do expect the pace of capital expenditures to increase in the second half of the year but to be less than $75 million for the year. We have resumed construction of the remaining lines of our previously announced carbon fiber capacity additions. We expect to have these additions completed by the end of 2011 and we will then be at 16 million pounds of nameplate capacity.
The free cash flow (defined as cash provided by operating activities less capital expenditures) for the first six months was $11.6 million as compared to $22.0 million for the first six months of 2009. With the return of sales growth, the use of cash for accounts receivable was $52 million for the first half of 2010. We also continue to expect to be free cash flow positive for the year.
Commercial Aerospace: Net sales increased $23.2 million, or 16.8% (18.1% on a constant currency basis), to $161.0 million for the second quarter of 2010. Net sales for the six months ended June 30, 2010 increased $21.4 million or 7.3% (6.8% on a constant currency basis) to $313.0 million over the six months ended June 30, 2009. For the quarter, Airbus and Boeing related sales were up about 20%, led by new program sales. Revenues attributed to new aircraft programs (A380, A350, B787, B747-8) represented more than 20% of commercial aerospace sales. Sales to other commercial aerospace, which includes regional and business aircraft customers, were just above the run rate for the last four quarters.
Space & Defense: Net sales increased $4.7 million, or 6.3% (7.7% on a constant currency basis), to $79.4 million for the second quarter of 2010. Net sales of $151.9 million for the six months ended June 30, 2010 were essentially flat with the prior year level as sales from rotorcraft, including the V22 tilt rotor program, offset the lower F22 sales due to the impending end of the program.
Industrial: Net sales were essentially flat for the second quarter of 2010 (an increase of 3.9% on a constant currency basis). Net sales for the six months ended June 30, 2010 decreased $37.8 million or 26.8% (a decrease of 27.1% on constant currency basis) to $103.2 million. Net sales increased from $38.5 million in the first quarter of 2010 to $64.7 million in the second quarter of 2010. The improvement in the second quarter was driven by higher wind energy sales. Wind energy sales benefited from a quick recovery by our largest wind energy customer, from their significant inventory correction during the first quarter of 2010. As a result, wind energy sales were more than $20 million higher this quarter than the first quarter and were just higher than the run rate of the last three quarters of 2009. Industrial sales excluding wind energy were flat in constant currency compared to the second quarter of 2009, but were higher than each of the prior three quarters.
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