Hexcel Q1'14 diluted EPS augments 16%

Space & Defense

Space & defense sales of $95.6 million were just lower than the first quarter of 2013 and nearly 8% above the fourth quarter of 2013. Strong a 400m growth offset softness in other European and Asian programs.

Hexcel Corporation, reported results for the first quarter of 2014. Net sales during the quarter were $461.7 million, 10.9% higher than the $416.5 #

 

Industrial

Total industrial sales of $62.9 million for the first quarter of 2014 were 21.9% higher (18.7% in constant currency) than the weak first quarter of 2013. The increases were across the board, including wind sales which were up over 15% in constant currency as compared to the first quarter of 2013.

 

Operations

Sales volume and the continued improvement in operating performance resulted in gross margin of 28.0% of net sales for the quarter, as compared to 26.9% in the first quarter of 2013. Selling, general and administrative expenses were 7.9% higher than the first quarter of 2013. Research and technology (R&T) expenses in the first quarter of 2014 of $13.6 million were $2.6 million higher than the comparable 2013 period as we invested in several development programs for aerospace. We expect the first quarter R&T spend to be the peak for 2014.

 

Operating income in the 2014 first quarter was $74.6 million or 16.2% of sales as compared to $63.0 million or 15.1% of sales in 2013. Operating income leverage was nearly 26% on the incremental sales, including the $2.8 million increase in depreciation.

 

Cash and other

Our effective tax rate for the quarter was 31.3% as compared to 29.2% in 2013. The 2013 quarter benefitted from the full retroactive impact of the extension of the 2012 U.S. Research & development tax credits that were enacted in January 2013, which reduced the 2013 first quarter tax rate by one percent.

 

Free cash flow for the first quarter of 2014 was a use of $22 million versus a use of $15 million in 2013, as seasonal effects typically cause cash usage in the first quarter. Free cash flow is defined as cash provided from operating activities less cash paid for capital expenditures.

 

During the quarter, the company invested $48.3 million and bought back 1,151,218 shares, leaving $61.7 million remaining under its authorized share repurchase program.

 

Total debt, net of cash as of march 31, 2014 was $304.8 million, an increase of $75.3 million from December 31, 2013. As of march 31, 2014 we had $296 million in available borrowing capacity and cash on hand.

 

2014 outlook

Company reaffirms 2014 outlook:

-Sales of $1,800 million to $1,880 million

-Adjusted diluted earnings per share of $2.00 to $2.12