Hexcel Corporation reported results for the second quarter of 2012. Net sales during the quarter were $399.2 million, 12.9% higher than the $353.7 million reported for the second quarter of 2011. Operating income for the period was $73.9 million, compared to $49.4 million last year. Net income for the second quarter of 2012 was $48.0 million, or $0.47 per diluted share, compared to $37.4 million or $0.37 per diluted share in 2011. Excluding the impact of items in Table C, adjusted diluted net income for the second quarter of 2012 was $0.42 per share compared to $0.32 per share in 2011.
Chief Executive Officer CommentsThis quarter's operating income included a net $9.5 million of other operating income (after tax of $0.06 per diluted share) as a result of three items. First, we settled our business interruption #
Mr. Berges commented, “This was another strong quarter for Hexcel, as solid execution combined with increased sales to yield excellent results. For the quarter, our adjusted diluted EPS of $0.42 was 31% higher than last year, on a 16% increase in constant currency sales. We are also particularly pleased that our adjusted operating income was 16.1% of net sales for the quarter, over 200 basis points better than last year.”
Looking ahead, Mr. Berges said, “Historically, seasonal effects result in slightly lower second half margins, but this strong first half of the year gives us confidence to reaffirm our 2012 guidance despite global economic concerns. While we were certainly helped by the revenue growth, our operational execution truly stands out in our first half as we delivered over 26% incremental operating income on the growth after excluding the benefits of the strong dollar.”
Commercial Aerospace sales of $233.5 million increased 12.4% (14.2% in constant currency) for the quarter as compared to the second quarter of 2011. Combined revenues attributed to new aircraft programs (A380, A350, B787, B747-8) increased over 30% versus the same period last year and now comprise about 30% of Commercial Aerospace sales.
Sales for Airbus and Boeing legacy aircraft were up modestly compared to the second quarter of 2011, but lower than the first quarter of 2012 as sales rates move in line with current aircraft production levels after a modest inventory restocking by our customers in the first quarter.
Sales to “Other Commercial Aerospace,” which include regional and business aircraft customers, were up over 10% compared to the same period last year, but down slightly from the robust level of the first quarter of 2012.
Space & Defense sales of $88.1 million were 7.8% higher (10.3% in constant currency) than the second quarter of 2011. We continue to benefit from rotorcraft growth.
Industrial
Total Industrial sales of $77.6 million for the second quarter of 2012 were 20.9% higher (28.3% in constant currency) than the second quarter of 2011. Wind sales were up significantly from the easy comparisons of last year's second quarter results, and have now grown sequentially for the last six quarters.
The tax provision was $22.1 million for the second quarter of 2012, bringing our year to date effective tax rate to 31.8%. Last year's second quarter tax provision was $9.3 million, an effective tax rate of 20.0%, but excluding one-time benefits taken in the quarter, we had an effective tax rate of 31.9% for the first half of 2011.
Free cash flow (defined as cash provided from operating activities less cash paid for capital expenditures) for the first half of 2012 was a use of $70.6 million versus a source of $9.5 million in the first half of 2011, reflecting increased capital expenditures for additional capacity. Cash paid for capital expenditures was $144.4 million in the first half of 2012 compared to $67.8 million in the first half of 2011. Total debt, net of cash as of June 30, 2012 was $267.3 million, an increase of $6.7 million from March 31, 2012.
Foreign exchange rates contributed about 30 basis points to the higher operating income percentage in the second quarter of 2012 as compared to 2011.
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