It has been about a month since the last earnings report for Hexcel (HXL) . Shares have added about 10.8% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Hexcel due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Hexcel's Q1 Earnings Match Estimates, Sales Miss Hexcel ...

Financial Data and Key Metrics Changes - First quarter sales exceeded $472 million, representing a 3% increase compared to Q1 2023 [51] - Adjusted diluted EPS for the first quarter was $0.44, down year-over-year but up sequentially [51] - Gross margin for Q1 2024 was 25%, compared to 27.9% in Q1 2023, with a sequential improvement of 250 basis points from Q4 2023 [83][84] - Adjusted operating income was $54.1 million, or 11.5% of sales, down from $63 million or 13.8% in the prior year [86] Business Line Data and Key Metrics Changes - Commercial Aerospace sales were approximately $299.3 million, a 5.2% increase compared to Q1 2023, driven by growth in wide-body programs [81] - Space & Defense sales totaled $139 million, a 10% increase in constant currency compared to Q1 2023, led by programs like the Lockheed Martin F-35 [52][54] - Industrial sales were about $34 million, representing a decline of over 28% year-over-year due to reduced consumer spending [74] Market Data and Key Metrics Changes - The commercial aerospace market saw a recovery in global passenger traffic, surpassing 2019 levels, which positively impacted sales [66] - Narrow-body sales showed sequential improvement, although challenges remain in the supply chain [68] - The industrial market faced softness as global consumers pulled back on spending, affecting sales across various submarkets [74] Company Strategy and Development Direction - The company aims to drive operating income margins back to mid-teens and beyond, targeting a return to 17%-18% levels [42] - Focus on innovation and advancing technologies in lightweight composites to meet growing demand in aerospace and defense sectors [78] - The transition in leadership to Tom Gentile is expected to maintain momentum and focus on execution and operational excellence [100][102] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the recovery in the aerospace sector, particularly in wide-body production, despite challenges in narrow-body supply chains [67][108] - The geopolitical situation is expected to stimulate investment in defense systems, potentially leading to increased demand for Space & Defense products [112] - Management remains confident in achieving full-year guidance and mid-term growth targets, supported by strong customer relationships and market demand [78][124] Other Important Information - The company repurchased $101 million of stock during the first quarter and declared a quarterly dividend of $0.15 per share [89] - The company is focused on tightly managing working capital, with cash used in operating activities decreasing compared to the previous year [87] Q&A Session Summary Question: Visibility into industrial revenue guidance - Management acknowledged challenges in the European market affecting industrial revenue but noted strong order activity and customer engagement [7][8] Question: Margin implications of industrial revenue decline - Management indicated that the decline in industrial sales has a small margin impact, with expectations for improvement over time [9][10] Question: Destocking in the narrow-body segment - Management clarified that destocking was minimal, with some signs of restocking, particularly in wide-body programs [18][116] Question: Share repurchase and diluted shares - Management explained that the increase in diluted shares was due to normal Q1 stock issues, with the impact of share buybacks expected to be seen in subsequent quarters [118] Question: Expectations for A350 and Airbus - Management expressed confidence in the A350 program, noting strong orders and visibility into customer demand for wide-body aircraft [125]

Hexcel Corporation (HXL) reported first-quarter 2024 adjusted earnings of 44 cents per share, which came in line with the Zacks Consensus Estimate.In the first quarter, Hexcel posted GAAP earnings of 43 cents per share compared to the prior-year quarter’s earnings of 50 cents.Total SalesIn the first quarter, the company’s net sales totaled $472.3 million, which missed the Zacks Consensus Estimate of $475 million by 0.6%. However, the top line witnessed an improvement of 3.2% from the year-ago quarter’s repo ...

For the quarter ended March 2024, Hexcel (HXL) reported revenue of $472.3 million, up 3.2% over the same period last year. EPS came in at $0.44, compared to $0.50 in the year-ago quarter.The reported revenue represents a surprise of -0.56% over the Zacks Consensus Estimate of $474.94 million. With the consensus EPS estimate being $0.44, the company has not delivered EPS surprise.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall S ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's unaudited financial statements and management's discussion for the first quarter of 2024 [Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Hexcel's unaudited Q1 2024 financial statements show increased net sales but decreased operating and net income year-over-year [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, total assets decreased to **$2,821.2 million**, primarily due to reduced cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $85.9 | $227.0 | | Total current assets | $789.7 | $864.2 | | Total assets | $2,821.2 | $2,918.5 | | **Liabilities & Equity** | | | | Total current liabilities | $288.6 | $315.9 | | Long-term debt | $714.6 | $699.4 | | Total liabilities | $1,189.1 | $1,202.0 | | Total stockholders' equity | $1,632.1 | $1,716.5 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2024 net sales increased to **$472.3 million**, but operating income decreased to **$52.9 million** due to lower gross margin Q1 2024 vs. Q1 2023 Statement of Operations (in millions, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $472.3 | $457.7 | | Gross margin | $118.2 | $127.7 | | Operating income | $52.9 | $62.8 | | Net income | $36.5 | $42.7 | | Diluted net income per common share | $0.43 | $0.50 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used for operating activities improved to **$7.0 million** in Q1 2024, but significant share repurchases led to a **$141.1 million** net cash decrease Cash Flow Summary for Three Months Ended March 31 (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used for operating activities | $(7.0) | $(23.4) | | Net cash used for investing activities | $(28.7) | $(18.1) | | Net cash (used for) provided by financing activities | $(104.3) | $34.8 | | **Net decrease in cash and cash equivalents** | **$(141.1)** | **$(6.3)** | - The company repurchased **$100.7 million** of common stock in Q1 2024, compared to none in Q1 2023[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, segment performance, debt, derivatives, contingencies, and share repurchase programs Total Debt Composition (in millions) | Debt Component | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Senior unsecured credit facility | $15.0 | - | | 4.7% senior notes due 2025 | $300.0 | $300.0 | | 3.95% senior notes due 2027 | $400.0 | $400.0 | | **Total debt** | **$714.7** | **$699.5** | - As of March 31, 2024, the company had **$735.0 million** in undrawn availability under its **$750 million** senior unsecured credit facility[32](index=32&type=chunk) - In February 2024, the Board approved a new **$300 million** share repurchase plan, supplementing the existing 2018 plan During Q1 2024, the company repurchased **1,397,755 shares** for **$100.7 million**[69](index=69&type=chunk)[70](index=70&type=chunk) - The company is involved in environmental litigation related to the Lower Passaic River A Consent Decree for a **$150 million** settlement involving Hexcel and 83 other parties was lodged with the court in December 2022, but approval is pending[60](index=60&type=chunk)[63](index=63&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 financial results, noting increased net sales driven by aerospace, but a decline in operating income due to lower gross margin [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q1 2024 net sales increased **3.2%** to **$472.3 million**, driven by aerospace, but operating income declined **15.8%** due to lower gross margin Q1 2024 Financial Highlights vs. Q1 2023 (in millions) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $472.3 | $457.7 | 3.2% | | Operating income | $52.9 | $62.8 | (15.8)% | | Net income | $36.5 | $42.7 | (14.5)% | Net Sales by Market (in millions) | Market | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Commercial Aerospace | $299.3 | $284.5 | 5.2% | | Space & Defense | $139.1 | $126.2 | 10.2% | | Industrial | $33.9 | $47.0 | (27.9)% | - Commercial Aerospace growth was driven by strong **Boeing 787** sales, while Space & Defense strength came from the **F-35** and **A400M** programs The Industrial sales decline was broad-based across all sub-markets[84](index=84&type=chunk)[85](index=85&type=chunk) - Gross margin fell to **25.0%** in Q1 2024 from **27.9%** in Q1 2023, as the prior year benefited from a more favorable sales mix and absorption[87](index=87&type=chunk) [Financial Condition and Liquidity](index=28&type=section&id=Financial%20Condition%20and%20Liquidity) Q1 2024 saw a significant decrease in cash to **$85.9 million** due to share repurchases, though liquidity is supported by credit facility availability - Cash on hand was **$85.9 million** at March 31, 2024, down from **$227.0 million** at December 31, 2023[96](index=96&type=chunk) - Net cash used for operating activities was **$7.0 million**, an improvement from a **$23.4 million** use in Q1 2023, primarily due to better working capital management[100](index=100&type=chunk) - Financing activities used **$104.3 million**, dominated by **$100.7 million** in share repurchases and **$12.6 million** in dividend payments[102](index=102&type=chunk) - The company has no significant required debt repayments until August 2025 The Board declared a quarterly dividend of **$0.15 per share** in April 2024[98](index=98&type=chunk)[99](index=99&type=chunk) [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures for Q1 2024 show adjusted operating income of **$54.1 million** and negative free cash flow of **$(35.7) million** Reconciliation of GAAP to Adjusted Net Income (in millions, except per share) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | GAAP net income | $36.5 | $42.7 | | Other operating expense, net of tax | $0.9 | $0.2 | | **Adjusted net income (non-GAAP)** | **$37.4** | **$42.9** | | GAAP diluted net income per share | $0.43 | $0.50 | | **Adjusted diluted net income per share (non-GAAP)** | **$0.44** | **$0.50** | Free Cash Flow (non-GAAP, in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used for operating activities | $(7.0) | $(23.4) | | Less: Capital expenditures | $(28.7) | $(18.1) | | **Free cash flow (non-GAAP)** | **$(35.7)** | **$(41.5)** | [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk have occurred since the 2023 Annual Report on Form 10-K - There were no material changes in market risk since the 2023 year-end report[115](index=115&type=chunk) [Controls and Procedures](index=34&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2024[116](index=116&type=chunk) - No changes in internal control over financial reporting occurred in Q1 2024 that have materially affected, or are reasonably likely to materially affect, internal controls[117](index=117&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information on legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=34&type=section&id=ITEM%201.%20Legal%20Proceedings) Information on legal proceedings, including the Lower Passaic River matter, is incorporated by reference from Note 11 of the financial statements - Information regarding legal proceedings is incorporated by reference from Note 11 of the financial statements[118](index=118&type=chunk) [Risk Factors](index=34&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since the 2023 Annual Report on Form 10-K - There have been no material changes in the Company's risk factors from the 2023 Form 10-K[119](index=119&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2024, Hexcel repurchased **1,397,755 shares** for **$100.7 million** under its augmented share repurchase programs - On February 19, 2024, the Board approved a new **$300 million** share repurchase plan[120](index=120&type=chunk) Share Repurchase Activity for Q1 2024 | Period | Total Shares Purchased | Average Price Paid per share | Total Cost (Millions) | | :--- | :--- | :--- | :--- | | Feb 1 - Feb 29, 2024 | 1,233,912 | $71.10 | ~$87.7 | | Mar 1 - Mar 31, 2024 | 163,843 | $74.86 | ~$12.3 | | **Total Q1 2024** | **1,397,755** | **$71.54** | **$100.7** | - As of March 31, 2024, approximately **$386.4 million** remained available for repurchases under the company's Share Repurchase Program[121](index=121&type=chunk) [Exhibits](index=36&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including executive agreements, SOX certifications, and Inline XBRL financial data - Exhibits filed include transition and employment agreements for executive officers, Sarbanes-Oxley certifications, and Inline XBRL data files[125](index=125&type=chunk)

[First Quarter 2024 Financial Highlights](index=1&type=section&id=HEXCEL%20REPORTS%202024%20FIRST%20QUARTER%20RESULTS) Hexcel reported increased net sales but decreased profitability in Q1 2024, while reaffirming full-year guidance and returning capital to shareholders [Summary of Q1 2024 Results](index=1&type=section&id=Summary%20of%20Results%20from%20Operations) Hexcel reported Q1 2024 net sales of $472.3 million, a 3.2% increase year-over-year. However, profitability declined, with GAAP net income falling 14.5% to $36.5 million and adjusted diluted EPS decreasing 12.0% to $0.44. The company returned $113 million to shareholders and reaffirmed its full-year 2024 guidance Q1 2024 vs. Q1 2023 Key Financial Metrics | (In millions, except per share data) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $472.3 | $457.7 | 3.2% | | **Operating Income** | $52.9 | $62.8 | (15.8)% | | **Net Income** | $36.5 | $42.7 | (14.5)% | | **Adjusted Operating Income** | $54.1 | $63.0 | (14.1)% | | **Adjusted Diluted EPS** | $0.44 | $0.50 | (12.0)% | - The company returned **$113 million** to stockholders in Q1 2024 through a combination of share repurchases and dividends[5](index=5&type=chunk) - Full-year 2024 guidance has been reaffirmed[5](index=5&type=chunk) [Management Commentary and Market Performance](index=2&type=section&id=Management%20Commentary%20and%20Market%20Performance) Management highlights strong commercial aerospace momentum and market recovery, while detailing varied performance across key segments [Management Commentary](index=2&type=section&id=Management%20Commentary) CEO Nick Stanage highlighted building momentum in the commercial aerospace market, with sequential sales growth from Q4 2023 driven by both widebody and narrowbody programs. He noted that global air passenger traffic has surpassed pre-pandemic levels, fueling demand for new, composite-intensive aircraft. The company remains confident in its full-year and mid-term guidance - Commercial aerospace sales grew sequentially from Q4 2023, with growth in both widebody and narrowbody programs[7](index=7&type=chunk) - Management is encouraged by reports that global air passenger traffic has exceeded pre-pandemic levels, which supports demand for new aircraft[7](index=7&type=chunk) - The company is pleased with recent large orders for new widebody aircraft, where Hexcel has significant content[7](index=7&type=chunk) [Market Segment Performance](index=2&type=section&id=Markets) In Q1 2024, Commercial Aerospace, the largest segment, grew 5.2% driven by higher widebody sales. Space & Defense sales increased by a strong 10.2%, led by programs like the F-35 and A400M. In contrast, the Industrial segment experienced a significant decline of 27.9% due to lower sales across all its sub-markets Q1 2024 Sales by Market Segment (vs. Q1 2023) | Market Segment | Q1 2024 Sales (millions) | % of YTD Sales | YoY Growth (Constant Currency) | | :--- | :--- | :--- | :--- | | Commercial Aerospace | $299.3 | 63% | 5.2% | | Space & Defense | $139.1 | 30% | 10.0% | | Industrial | $33.9 | 7% | (28.5)% | - The increase in Space & Defense sales was led by fixed-wing aircraft programs, including the Lockheed F-35 and Airbus A400M, as well as classified programs[10](index=10&type=chunk) [Consolidated Operations and Cash Flow](index=2&type=section&id=Consolidated%20Operations%20and%20Cash%20Flow) The company experienced improved cash flow from operations despite lower margins, actively returning capital to shareholders through repurchases and dividends [Consolidated Operations](index=2&type=section&id=Consolidated%20Operations) Gross margin for Q1 2024 was 25.0%, a sequential improvement but a decrease from 27.9% in Q1 2023, which benefited from favorable absorption and sales mix. Adjusted operating margin was 11.5%, down from 13.8% in the prior-year quarter. Exchange rates had a favorable impact of approximately 30 basis points on the operating margin Q1 Operating Metrics Comparison | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Gross Margin | 25.0% | 27.9% | | SG&A and R&T (% of sales) | 13.6% | 14.1% | | Adjusted Operating Margin | 11.5% | 13.8% | [Cash Flow and Capital Allocation](index=3&type=section&id=Cash%20and%20other) The company reported a free cash outflow of $35.7 million, an improvement from an outflow of $41.5 million in Q1 2023. This was driven by a lower cash use for working capital. Hexcel actively returned capital to shareholders, repurchasing $100.7 million of its common stock and declaring a quarterly dividend of $0.15 per share. The share repurchase authorization was increased by $300 million in February 2024 Q1 Cash Flow Summary (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Cash Used for Operating Activities | $(7.0) | $(23.4) | | Capital Expenditures (Cash Basis) | $(28.7) | $(18.1) | | **Free Cash Flow** | **$(35.7)** | **$(41.5)** | - The company used approximately **$100.7 million** to repurchase common stock in Q1 2024[15](index=15&type=chunk) - The Board of Directors declared a quarterly dividend of **$0.15 per share**[15](index=15&type=chunk) [2024 Guidance](index=3&type=section&id=2024%20Guidance%20%28unchanged%29) Hexcel reaffirms its full-year 2024 financial guidance, anticipating sales growth across all market segments [Full Year 2024 Guidance (Unchanged)](index=3&type=section&id=Full%20Year%202024%20Guidance) Hexcel has reaffirmed its full-year 2024 guidance. The company expects sales between $1.925 billion and $2.025 billion, with adjusted diluted EPS in the range of $2.10 to $2.30. Free cash flow is projected to be greater than $200 million. Growth is anticipated across all market segments, led by a mid-teens increase in Commercial Aerospace Full Year 2024 Financial Guidance | Metric | Guidance | | :--- | :--- | | Sales | $1.925B - $2.025B | | Adjusted Diluted EPS | $2.10 - $2.30 | | Free Cash Flow | > $200 million | | Capital Expenditures | < $100 million | | Effective Tax Rate | 22.0% | Full Year 2024 Market-Specific Sales Outlook | Market Segment | Expected Growth | | :--- | :--- | | Commercial Aerospace | Up **mid-teens** | | Space & Defense | Up **mid-single digits** | | Industrial | Up **low to mid-single digits** | [Financial Statements and Supplemental Data](index=5&type=section&id=Financial%20Statements%20and%20Supplemental%20Data) Detailed financial statements and supplemental data provide a comprehensive overview of the company's Q1 2024 performance, balance sheet, cash flows, and segment information [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2024, net sales increased to $472.3 million from $457.7 million in Q1 2023. However, higher cost of sales led to a lower gross margin of 25.0% compared to 27.9%. Operating income decreased to $52.9 million from $62.8 million, and net income fell to $36.5 million from $42.7 million year-over-year Q1 2024 Income Statement Highlights (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $472.3 | $457.7 | | Gross margin | $118.2 | $127.7 | | Operating income | $52.9 | $62.8 | | Net income | $36.5 | $42.7 | | Diluted EPS | $0.43 | $0.50 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, Hexcel's total assets were $2.82 billion, down from $2.92 billion at year-end 2023, primarily due to a decrease in cash and cash equivalents. Total liabilities remained relatively stable at $1.19 billion. Total stockholders' equity decreased to $1.63 billion from $1.72 billion, reflecting share repurchase activity Balance Sheet Summary (in millions) | Metric | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $85.9 | $227.0 | | Total current assets | $789.7 | $864.2 | | Total assets | $2,821.2 | $2,918.5 | | Total liabilities | $1,189.1 | $1,202.0 | | Total stockholders' equity | $1,632.1 | $1,716.5 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2024, net cash used for operating activities was $7.0 million, an improvement from a $23.4 million use in Q1 2023. Investing activities used $28.7 million, mainly for capital expenditures. Financing activities used $104.3 million, driven by $100.7 million in common stock repurchases. This resulted in a net decrease in cash of $141.1 million for the quarter Q1 Cash Flow Highlights (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used for operating activities | $(7.0) | $(23.4) | | Net cash used for investing activities | $(28.7) | $(18.1) | | Net cash (used for) provided by financing activities | $(104.3) | $34.8 | | Net decrease in cash and cash equivalents | $(141.1) | $(6.3) | [Supplemental Data](index=8&type=section&id=Supplemental%20Data) This section provides detailed breakdowns of company performance, including sales by market and segment, a reconciliation of GAAP to non-GAAP financial measures, and a schedule of total debt [Net Sales by Market (Table A)](index=8&type=section&id=Table%20A) Table A details net sales by market for Q1 2024 versus Q1 2023, both as reported and in constant currency. Commercial Aerospace sales grew 5.2% to $299.3 million, Space & Defense grew 10.2% to $139.1 million, while Industrial sales fell 27.9% to $33.9 million. The total consolidated sales grew 3.2% to $472.3 million Q1 2024 Net Sales by Market (in millions) | Market | 2024 Sales | 2023 Sales | % Change (As Reported) | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Commercial Aerospace | $299.3 | $284.5 | 5.2% | 5.2% | | Space & Defense | $139.1 | $126.2 | 10.2% | 10.0% | | Industrial | $33.9 | $47.0 | (27.9)% | (28.5)% | | **Consolidated Total** | **$472.3** | **$457.7** | **3.2%** | **3.1%** | [Segment Information (Table B)](index=8&type=section&id=Table%20B) Table B presents financial data by operating segment. In Q1 2024, the Composite Materials segment generated $379.5 million in external sales and $63.7 million in operating income (15.8% margin). The Engineered Products segment had $92.8 million in external sales and $12.9 million in operating income (13.9% margin). Both segments saw a decline in operating margin compared to Q1 2023 Q1 2024 Segment Performance (in millions) | Segment | External Sales | Operating Income | Operating Margin | | :--- | :--- | :--- | :--- | | Composite Materials | $379.5 | $63.7 | 15.8% | | Engineered Products | $92.8 | $12.9 | 13.9% | [Reconciliation of GAAP to Non-GAAP Measures (Table C)](index=10&type=section&id=Table%20C) Table C reconciles GAAP results to non-GAAP measures by excluding special items, primarily restructuring costs. For Q1 2024, adjusted operating income was $54.1 million, adjusted net income was $37.4 million, and adjusted diluted EPS was $0.44. It also shows the calculation for free cash flow, which was an outflow of $35.7 million Q1 2024 GAAP to Non-GAAP Reconciliation (in millions, except EPS) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating Income | $52.9 | $1.2 | $54.1 | | Net Income | $36.5 | $0.9 | $37.4 | | Diluted EPS | $0.43 | $0.01 | $0.44 | [Schedule of Total Debt (Table D)](index=11&type=section&id=Table%20D) Table D provides a detailed schedule of the company's debt. As of March 31, 2024, total debt was $714.7 million. After subtracting cash and cash equivalents of $85.9 million, the total debt, net of cash, stood at $628.8 million, an increase from $472.5 million at the end of 2023 Total Debt, Net of Cash (in millions) | Metric | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Debt | $714.7 | $699.5 | | Less: Cash & cash equivalents | $(85.9) | $(227.0) | | **Total debt, net of cash** | **$628.8** | **$472.5** |

Wall Street analysts forecast that Hexcel (HXL) will report quarterly earnings of $0.44 per share in its upcoming release, pointing to a year-over-year decline of 12%. It is anticipated that revenues will amount to $476.89 million, exhibiting an increase of 4.2% compared to the year-ago quarter.The consensus EPS estimate for the quarter has undergone an upward revision of 1.5% in the past 30 days, bringing it to its present level. This represents how the covering analysts, as a whole, have reassessed their ...

The market expects Hexcel (HXL) to deliver a year-over-year decline in earnings on higher revenues when it reports results for the quarter ended March 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on April 22, 2024, might help the stock move higher if these key numbers are better t ...

An imminent change at the top caught investors off guardAerospace component manufacturer Hexcel (HXL -12.26%) has revealed it's getting a new CEO, initiating a leadership transition that caught investors off guard. The market generally hates surprises, and pushed shares of Hexcel down by 11% at the opening of Wednesday's trading session on the news.A surprise change in the cockpitHexcel manufactures lightweight composite technologies that have become popular in aerospace, transportation, and energy markets. ...

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) Hexcel Corporation is a global leader in advanced lightweight composites, operating through two segments and serving commercial aerospace, space & defense, and industrial markets, with significant revenue concentration in Airbus and Boeing, while emphasizing vertical integration and R&D - Hexcel operates as a global leader in advanced lightweight composites technology, with products including carbon fiber, prepregs, honeycomb, and engineered structures[12](index=12&type=chunk) - The company is organized into two reportable segments: Composite Materials and Engineered Products[14](index=14&type=chunk) 2023 Net Sales by Market | Market | Percentage of 2023 Net Sales | | :--- | :--- | | Commercial Aerospace | 60% | | Space & Defense | 30% | | Industrial | 10% | Significant Customer Sales Concentration (2023) | Customer (and subcontractors) | Percentage of 2023 Net Sales | | :--- | :--- | | Airbus | 39% | | Boeing | 15% | - In December 2023, Hexcel sold its 50% interest in its Malaysian joint venture, Aerospace Composites Malaysia Sdn. Bhd. (ACM), to Boeing for net proceeds of **$44.7 million**[34](index=34&type=chunk) - As of December 31, 2023, the company employed **5,590** full-time employees and contract workers, an increase from **5,328** in 2022[75](index=75&type=chunk)[76](index=76&type=chunk) [Composite Materials Segment](index=4&type=section&id=Composite%20Materials) The Composite Materials segment, accounting for approximately 80% of net sales, manufactures carbon fibers, prepregs, and honeycomb core for aerospace, defense, and industrial applications, with 2023 net sales of **$1,474.2 million** - This segment produces carbon fibers, specialty reinforcements, prepregs, structural adhesives, and honeycomb core for aerospace, defense, and industrial applications[17](index=17&type=chunk) Composite Materials Segment Net Sales | Year | Net Sales (in millions) | | :--- | :--- | | 2023 | $1,474.2 | | 2022 | $1,279.7 | | 2021 | $1,019.4 | - Key customers for this segment include Airbus, Boeing, Safran, Spirit Aerosystems, and Vestas[29](index=29&type=chunk) [Engineered Products Segment](index=8&type=section&id=Engineered%20Products) The Engineered Products segment, accounting for about 20% of net sales, manufactures composite structures and precision machined honeycomb parts primarily for the aerospace industry, with 2023 net sales of **$314.8 million** - This segment manufactures composite structures, precision machined honeycomb parts, and advanced interference control materials, primarily for the aerospace industry[32](index=32&type=chunk) Engineered Products Segment Net Sales | Year | Net Sales (in millions) | | :--- | :--- | | 2023 | $314.8 | | 2022 | $298.0 | | 2021 | $305.3 | - Key customers include The Boeing Company, Lockheed Martin, Sikorsky, and Spirit Aerosystems[37](index=37&type=chunk) [Raw Materials and Production Activities](index=11&type=section&id=Raw%20Materials%20and%20Production%20Activities) Hexcel maintains vertical integration by producing its own PAN precursor for carbon fiber, with ongoing capacity expansion and reliance on a limited number of key raw material suppliers - The company is vertically integrated, producing its own PAN precursor for carbon fiber. In 2023, it used **60-65%** of its carbon fiber production internally[53](index=53&type=chunk)[54](index=54&type=chunk) - Construction resumed on a new carbon fiber line in Decatur, AL, expected to be qualified for aerospace markets in late 2025 or early 2026[55](index=55&type=chunk) - The company completed the expansion of its Engineered Products facility in Casablanca, Morocco, doubling its size to meet growing demand[55](index=55&type=chunk) - Hexcel is highly dependent on a limited number of qualified suppliers for certain key raw materials, which could disrupt production if supply is interrupted[57](index=57&type=chunk)[58](index=58&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A%3A%20Risk%20Factors) The company faces strategic risks from cyclical markets and customer concentration, operational risks from macroeconomic factors and supply chain, and international, regulatory, and cybersecurity risks - **Strategic Risks:** The business is subject to cyclical markets, particularly Commercial Aerospace, which accounted for **60%** of 2023 sales. A significant decline in business with major customers Airbus (**39%** of 2023 sales) or Boeing (**15%** of 2023 sales) could materially impact results[84](index=84&type=chunk)[87](index=87&type=chunk) - **Operational Risks:** The global macroeconomic environment, including inflation, supply chain disruptions, and labor shortages, poses a significant risk. The company's profitability is dependent on the price and supply of raw materials, some of which have limited sources[94](index=94&type=chunk)[99](index=99&type=chunk) - **International Operations Risk:** In 2023, **50%** of production and **59%** of customer sales occurred outside the U.S., exposing the company to geopolitical instability, currency fluctuations (primarily U.S. dollar vs. Euro and British pound), and complex international trade laws[101](index=101&type=chunk)[102](index=102&type=chunk) - **Regulatory and Compliance Risks:** The company must comply with extensive environmental laws, which could require significant capital expenditures. Failure to comply with U.S. government procurement and export control laws could result in fines, penalties, or debarment[90](index=90&type=chunk)[104](index=104&type=chunk) - **Cybersecurity Risk:** The company depends heavily on IT systems and stores sensitive data, making it a target for increasingly sophisticated cyberattacks. A breach could lead to data loss, operational disruptions, and financial penalties[111](index=111&type=chunk)[112](index=112&type=chunk) - **Human Capital Risk:** The business depends on a highly trained workforce. An inability to attract and retain qualified employees, or work stoppages due to failure in negotiating collective bargaining agreements, could adversely affect operations[95](index=95&type=chunk)[96](index=96&type=chunk) [Unresolved Staff Comments](index=25&type=section&id=Item%201B%3A%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[128](index=128&type=chunk) [Cybersecurity](index=25&type=section&id=Item%201C%3A%20Cybersecurity) Hexcel's cybersecurity program, managed by the CIO with board oversight, uses a NIST-based risk management approach, including third-party testing and an incident response team - The cybersecurity program is led by the Chief Information Officer (CIO) and receives regular oversight from the board of directors and its audit committee[129](index=129&type=chunk)[130](index=130&type=chunk) - The company's risk management approach is based on the National Institute of Standards and Technology (NIST) framework and includes periodic intrusion and penetration testing by third parties[131](index=131&type=chunk)[132](index=132&type=chunk) - An Executive Cyber Response Team, including the CIO, General Counsel, and Chief Accounting Officer, manages incident response and regularly practices through tabletop exercises[133](index=133&type=chunk) - As of the report date, the company is not aware of any cybersecurity risks that have materially affected or are reasonably likely to materially affect the business[134](index=134&type=chunk) [Properties](index=27&type=section&id=Item%202%3A%20Properties) Hexcel operates numerous owned and leased manufacturing facilities and offices globally, including major sites in the U.S. and Europe, supporting its composite material and engineered product segments Major Manufacturing Facilities | Location | Segment | Principal Products | Total Square Footage | | :--- | :--- | :--- | :--- | | Salt Lake City, Utah | Composite Materials | Carbon Fibers; Prepregs | 1,194,070 | | Decatur, Alabama | Composite Materials | PAN Precursor | 819,863 | | Kent, Washington | Engineered Products | Composite structures | 486,400 | | Les Avenières, France | Composite Materials | Fabrics; Specialty Reinforcements | 490,000 | | Duxford, England | Composite Materials | Prepregs; Adhesives; Honeycomb | 417,109 | | Casablanca, Morocco | Engineered Products | Engineered Honeycomb Parts | 260,875 | [Legal Proceedings](index=27&type=section&id=Item%203%3A%20Legal%20Proceedings) The company is involved in various legal proceedings, notably the Lower Passaic River environmental cleanup, with a **$150 million** settlement pending court approval and **$0.7 million** in environmental accruals - Hexcel is a Potentially Responsible Party (PRP) in the environmental remediation of the Lower Passaic River in New Jersey[401](index=401&type=chunk) - In December 2022, the EPA lodged a Consent Decree for a **$150 million** settlement involving Hexcel and 83 other PRPs for cleanup costs. The settlement is pending court approval[404](index=404&type=chunk) - Aggregate environmental related accruals were **$0.7 million** as of December 31, 2023, down from **$0.8 million** in 2022[406](index=406&type=chunk) [Mine Safety Disclosures](index=27&type=section&id=Item%204%3A%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[139](index=139&type=chunk) Part II [Common Stock Market and Shareholder Matters](index=28&type=section&id=Item%205%3A%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Hexcel's common stock trades on the NYSE under HXL, with **423,292 shares** repurchased for **$30.1 million** in 2023, leaving **$187 million** available for future repurchases - Hexcel common stock is traded on the NYSE under the symbol HXL[141](index=141&type=chunk) - During 2023, the company repurchased **423,292** shares of common stock for a total cost of **$30.1 million**[142](index=142&type=chunk) - Approximately **$187 million** remained available for repurchases under the 2018 Share Repurchase Plan at the end of 2023[142](index=142&type=chunk) [Management's Discussion and Analysis (MD&A)](index=39&type=section&id=Item%207%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Hexcel's 2023 net sales increased to **$1,789.0 million** driven by aerospace growth, while net income decreased to **$105.7 million** due to a **$70.5 million** UK pension plan settlement charge, generating **$148.9 million** in free cash flow Key Financial Results (2023 vs. 2022) | Metric (in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net Sales | $1,789.0 | $1,577.7 | | Gross Margin % | 24.2% | 22.6% | | Operating Income | $215.3 | $175.2 | | Operating Income % | 12.0% | 11.1% | | Net Income | $105.7 | $126.3 | - The increase in 2023 sales was driven by a **17.2%** rise in Commercial Aerospace and a **17.1%** increase in Space & Defense, while Industrial sales decreased by **12.3%**[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) - Net income in 2023 was significantly impacted by a non-cash settlement charge of **$70.5 million** related to the buy-out of the UK pension plan[195](index=195&type=chunk)[198](index=198&type=chunk) - The company generated **$257.1 million** in cash from operations and had free cash flow of **$148.9 million** in 2023[199](index=199&type=chunk) - In April 2023, the company refinanced its credit facility, maintaining a borrowing capacity of **$750 million**, which matures in April 2028[202](index=202&type=chunk) [Market Risk Disclosures](index=46&type=section&id=Item%207A%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Hexcel manages market risks from foreign currency, interest rates, and commodity prices using derivative instruments, with a hypothetical 10% adverse currency movement impacting 2023 operating income by **$26.1 million** without hedges - The company's primary market risks are fluctuations in currency exchange rates (USD vs. EUR/GBP), interest rates, and certain commodity prices[232](index=232&type=chunk) - To mitigate risks, Hexcel uses financial instruments including foreign currency forward contracts, commodity swaps, and interest rate agreements for hedging purposes, not for speculation[233](index=233&type=chunk) - As of December 31, 2023, the company had foreign currency forward exchange contracts with an aggregate notional amount of **$393.3 million** to hedge forecasted transactions through June 2026[240](index=240&type=chunk)[392](index=392&type=chunk) - A sensitivity analysis showed that a hypothetical **10%** adverse movement in foreign currency exchange rates would have reduced 2023 operating income by approximately **$26.1 million** if no hedges were in place[239](index=239&type=chunk) [Financial Statements and Supplementary Data](index=48&type=section&id=Item%208%3A%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Hexcel's audited consolidated financial statements for 2023, including balance sheets, income statements, cash flows, and notes detailing segment performance, debt, and pension obligations [Note 6: Debt](index=63&type=section&id=Note%206%E2%80%93%20Debt) As of December 31, 2023, Hexcel's total debt was **$699.5 million**, comprising senior notes and an undrawn **$750 million** credit facility, with the company in compliance with all covenants Total Debt Composition as of Dec 31, 2023 | Debt Instrument | Amount (in millions) | | :--- | :--- | | 4.7% senior notes due 2025 | $300.0 | | 3.95% senior notes due 2027 | $400.0 | | Other (finance leases, discounts, etc.) | ($0.5) | | **Total Debt** | **$699.5** | - In April 2023, the company entered into a new credit agreement, refinancing its facility with a borrowing capacity of **$750 million**, maturing in April 2028[312](index=312&type=chunk)[313](index=313&type=chunk) - As of December 31, 2023, there were no outstanding borrowings under the **$750 million** facility, and the company was in compliance with all debt covenants[315](index=315&type=chunk)[316](index=316&type=chunk) [Note 8: Retirement and Benefit Plans](index=66&type=section&id=Note%208%20%E2%80%94%20Retirement%20and%20Other%20Postretirement%20Benefit%20Plans) Hexcel finalized a buy-out of its U.K. pension plan in 2023, resulting in a **$70.5 million** non-cash settlement charge, with total net periodic pension expense at **$27.3 million** - In the fourth quarter of 2023, the company finalized a buy-out of its U.K. pension plan, transferring all obligations to an insurer[336](index=336&type=chunk) - The U.K. plan buy-out resulted in a pre-tax non-cash settlement charge of approximately **$70.5 million** and a gain of **$1.9 million** from reverted excess assets[336](index=336&type=chunk) Total Net Periodic Pension Expense | (In millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Defined benefit retirement plans | $5.7 | $5.7 | $2.6 | | Union sponsored multi-employer plan | $1.5 | $1.3 | $1.8 | | Retirement savings plans (matching & profit sharing) | $20.1 | $14.9 | $13.4 | | **Total Net Periodic Expense** | **$27.3** | **$21.9** | **$17.8** | [Note 18: Segment Information](index=92&type=section&id=Note%2018%20%E2%80%94%20Segment%20Information) In 2023, Composite Materials generated **$1,474.2 million** in sales and Engineered Products **$314.8 million**, with 50% of total net sales from international locations and significant concentration in Airbus and Boeing Segment Financial Performance (2023) | (In millions) | Composite Materials | Engineered Products | Corporate & Other | Total | | :--- | :--- | :--- | :--- | :--- | | Third-party sales | $1,474.2 | $314.8 | $— | $1,789.0 | | Operating income (loss) | $237.9 | $32.8 | $(55.4) | $215.3 | | Segment assets | $2,309.3 | $543.1 | $66.1 | $2,918.5 | Net Sales by Geography (Manufacturing Location, 2023) | Geography | Net Sales (in millions) | % of Total | | :--- | :--- | :--- | | United States | $888.2 | 49.7% | | International | $900.8 | 50.3% | | **Total** | **$1,789.0** | **100.0%** | - Sales to Airbus and its subcontractors were **39%** of net sales in 2023, while sales to Boeing and its subcontractors were **15%**[419](index=419&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%209A%3A%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2023, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that as of December 31, 2023, the company's disclosure controls and procedures were effective[148](index=148&type=chunk) - No material changes to internal control over financial reporting were identified in the fourth quarter of 2023[149](index=149&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=29&type=section&id=Item%2010%3A%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the company's definitive proxy statement[157](index=157&type=chunk) [Executive Compensation](index=29&type=section&id=Item%2011%3A%20Executive%20Compensation) Information regarding executive compensation will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the company's definitive proxy statement[158](index=158&type=chunk) [Security Ownership and Related Stockholder Matters](index=29&type=section&id=Item%2012%3A%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the company's definitive proxy statement[159](index=159&type=chunk) [Certain Relationships, Related Transactions, and Director Independence](index=29&type=section&id=Item%2013%3A%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information regarding related party transactions and director independence will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the company's definitive proxy statement[160](index=160&type=chunk) [Principal Accountant Fees and Services](index=29&type=section&id=Item%2014%3A%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the company's definitive proxy statement[161](index=161&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=30&type=section&id=Item%2015%3A%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, including corporate governance and debt agreements - This section lists all financial statements and exhibits filed with the Form 10-K[162](index=162&type=chunk) [Form 10-K Summary](index=36&type=section&id=Item%2016%3A%2010-K%20Summary) The company did not provide a summary for this item - None[168](index=168&type=chunk)