Hexcel(HXL) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the six months ended June 30, 2025, show a decrease in net income and operating cash flow compared to the prior year Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $2,843.3 million, an increase from $2,725.6 million at year-end 2024 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,843.3 | $2,725.6 | | Cash and cash equivalents | $77.2 | $125.4 | | Inventories, net | $375.4 | $356.2 | | Net property, plant and equipment | $1,629.0 | $1,596.7 | | Total Liabilities | $1,289.4 | $1,197.7 | | Long-term debt | $827.7 | $700.6 | | Total Stockholders' Equity | $1,553.9 | $1,527.9 | Condensed Consolidated Statements of Operations For the second quarter of 2025, net sales decreased to $489.9 million and net income fell sharply to $13.5 million Statement of Operations Summary (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $489.9 | $500.4 | $946.4 | $972.7 | | Gross Margin | $111.5 | $126.6 | $213.9 | $244.8 | | Operating Income | $30.0 | $71.8 | $74.2 | $124.7 | | Net Income | $13.5 | $50.0 | $42.4 | $86.5 | | Diluted EPS | $0.17 | $0.60 | $0.52 | $1.03 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used for operating activities was $5.2 million, a significant decrease from the prior year Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(5.2) | $37.2 | | Net cash used for investing activities | $(42.5) | $(51.6) | | Net cash used for financing activities | $(4.1) | $(136.0) | | Net decrease in cash and cash equivalents | $(48.2) | $(151.6) | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies, debt refinancing, revenue reporting changes, and restructuring charges - The company is exploring strategic options for its Austrian operations, which have been classified as held for sale[20][21] - In Q1 2025, the company issued $300 million of 5.875% Senior Unsecured Notes due 2035 and redeemed its notes due 2025[37][38] - Beginning in Q1 2025, revenue is reported under two new market categories: Commercial Aerospace and Defense, Space & Other[59] - A restructuring charge of $24.2 million was recognized in Q2 2025 for the closure of the Welkenraedt facility in Belgium[79] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the decline in sales and operating income to weakness in the Commercial Aerospace market and restructuring charges Business Overview Hexcel is a global leader in advanced lightweight composites, facing ongoing challenges from supply chain issues and inflation - The company operates in a single industry, Advanced Composites, with two reportable segments: Composite Materials and Engineered Products[86] - Post-pandemic recovery faces challenges including delays in aircraft production, supply chain issues, and inflation, which may negatively impact financial results[87] Results of Operations Q2 2025 results showed a decline in net sales and operating income, driven by a fall in Commercial Aerospace sales Financial Performance Summary (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $489.9 | $500.4 | (2.1)% | | Operating Income | $30.0 | $71.8 | (58.2)% | | Net Income | $13.5 | $50.0 | (73.0)% | Net Sales by Market - Q2 (in millions) | Market | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Commercial Aerospace | $293.1 | $320.7 | (8.6)% | | Defense, Space & Other | $196.8 | $179.7 | 9.5% | - Gross margin for Q2 2025 was 22.8%, down from 25.3% in Q2 2024, due to lower sales and inventory reduction actions[99] - Other operating expenses in Q2 2025 included $24.2 million in restructuring charges related to a facility closure in Belgium[102] Financial Condition The company's liquidity remains strong with significant undrawn credit, despite a decrease in cash and a reversal in operating cash flow - Cash on hand decreased to $77.2 million at June 30, 2025, from $125.4 million at December 31, 2024[110] - The company has $620 million in undrawn availability under its credit facility as of June 30, 2025[111] - Net cash used for operating activities was $5.2 million for the first six months of 2025, compared to cash provided of $37.2 million in the prior year period[114] - During the first six months of 2025, the company repurchased $100.9 million of common stock and paid $27.5 million in dividends[116] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the company's market risk from the information provided in its 2024 Annual Report - There have been no material changes in market risk since the 2024 Form 10-K[131] Controls and Procedures Management evaluated disclosure controls and procedures and concluded they were effective as of the end of the quarter - Management concluded that disclosure controls and procedures were effective as of June 30, 2025[132][133] - No material changes to internal control over financial reporting were identified during the quarter ended June 30, 2025[134] PART II. OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference from the notes to the financial statements - Details on legal proceedings are provided in Note 11 (Commitments and Contingencies) on pages 16-17[135] Risk Factors The company reports no material changes to the risk factors previously disclosed in its 2024 Annual Report - There have been no material changes in the Company's risk factors from the 2024 Form 10-K[136] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased over 939,000 shares of its common stock for a total cost of $50.5 million Share Repurchase Activity for Q2 2025 | Period | Shares Purchased | Average Price Paid | Total Cost (Millions) | | :--- | :--- | :--- | :--- | | May 1 – May 31, 2025 | 939,012 | $53.24 | $50.5 | - As of June 30, 2025, approximately $134.0 million remained available for repurchases under the 2024 Share Repurchase Plan[138] Exhibits This section lists the exhibits filed with the Form 10-Q, including required CEO and CFO certifications - Filed exhibits include CEO/CFO certifications (Exhibits 31.1, 31.2, 32) and financial statements in Inline XBRL format (Exhibit 101)[141]