Investor Presentation. August 2014

Transcription

1 Investor Presentation August 2014

2 Forward-Looking Statements Disclaimer Risks, Uncertainties and Other Factors with Respect to Forward-Looking Statements Certain statements contained in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements that are not of historical fact constitute forward-looking statements and accordingly, involve estimates, assumptions, judgments and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking statements. Such factors are detailed in the Forward Looking Statements and Risk Factors sections of the Company s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its second quarter 2014 quarterly report on Form 10Q with the Securities and Exchange Commission. We do not undertake an obligation to update our forward-looking statements to reflect future events. 1

3 Hexcel Overview Hexcel Overview Leading advanced composites company over 65 years in the industry Focused on aerospace and wind LTM 2014 sales of $1.77 Billion Sales by region: ~46% US, ~39% Europe and ~15% Other About 5,500 Employees primarily split between Americas and Europe Investment Highlights Leading position in all of our key markets Technology leader, broad range of products/qualifications High barriers to entry Sustainable competitive advantage Excellent customer relationships Growing share of long term growth markets Cyclical and secular growth combined Demonstrated operational excellence Strong balance sheet (net debt/ebitda < 1x) 2

4 Hexcel Leader in Advanced Composites Carbon Fiber A350 Fuselage & Wings LEAP Fan Blades/Case F-35 Wings Reinforcements Aircraft Radomes 787 Fabric for Stringers BMW Roof Key properties Fatigue and corrosion resistant Light Weight (density) High Strength (tensile) Stiffness (modulus) Glass Prepregs Wind Blades Wing-to-body fairings in aero Honeycombs Helicopter Blades Aircraft Flooring Nacelle Structures Acousti-Cap Carbon Prepregs Aero Primary Structure A380 Central Wing Box GE90 Fan Blade Eurofighter Wings Engineered Products Structural Assemblies HexMC Materials Machined Core HexTool Tooling System Broad Range of Composite Materials and Applications 3

5 Technology Requirements and Focus Weight (density) 30% Lighter than aluminum Application: Long Range Aircraft - Fuel Burn Lighter Strength Carbon prepreg = 5x aluminum Application: Helicopter & Fan Blade Reliability Stiffness Carbon prepreg = 2x Glass Application: Composite wing, wind blade deflection Toughness Damage tolerance Application: Primary structure, Fan blades, Automotive Stronger Durability Up time / keep them flying Application: Aerospace Technology is a Key Driver for Future Growth 4 4

6 Sales by Market Space & Defense Commercial Aerospace Helicopters Military Aircraft Launch Vehicles Satellites Airbus Boeing Engines/Nacelles Regional/Business LTM Sales $1,771 Million Space & Defense Industrial Commercial Aerospace Industrial Wind Energy Recreation Transportation Other 21% 14% YoY Growth Rates % % 65% % % % % % % % LTM June % Growing Share of Long Term Growth Markets 5

7 14% Industrial Market Wind Energy Tooling Recreation Glass Prepreg Industrial Revenues $267 $280 $294 $313 $253 $249 $277 $218 $218 $243 Transportation Glass and Carbon Prepreg LTM 6/30 $ millions Broad Range of Performance Applications Wind Energy Drives Industrial Market Segment 6

8 21% Space & Defense Market Diverse Range of Applications Carbon Fiber Prepreg the standard since B-2 Over 100 Active Programs for Hexcel, includes: Helicopters Transport Aircraft Fighters Launch Vehicles Over a third of sales outside the U.S. Top 10 Programs: Represent a little more than 50% of Segment V22 is largest program but <15% of Segment A400M Space & Defense Revenues $ millions $376 $371 $357 $302 $299 $311 $319 $256 $220 $ LTM 6/30 Hexcel Positioning Hexcel Intermediate Modulus (IM) fiber the industry standard Rotorcraft ~60% of sales New composite blade designs providing retrofit opportunities More Hexcel value-added content A400M, JSF (F-35) growth ahead Space & Defense Revenues Well Diversified 7

9 65% Commercial Aerospace Market Strong Global Demand 11,000+ planes in Airbus & Boeing backlog or about 8 years based on est deliveries 2013 was, and 2014 is expected to be, another record year for deliveries Introduction of new composite-intensive aircraft provides Hexcel secular sales growth Hexcel content on the A350 is $5 million per aircraft Commercial Aerospace Revenues $ millions $1,085 $1,157 $547 $622 $710 $823 $944 $556 $645 $ LTM 6/30 Airbus and Boeing Business and Regional Jet A First Flight Commercial Aerospace Revenue by Sub Segment Regional & Business 15% Airbus 41% Boeing 44% LTM June 2014 Growth led by Increasing Buildrates and New Aircraft Programs 8

10 65% Commercial Aerospace Composites Penetration Composite Content by Weight $5M per A/C Will be Hexcel s largest program overall High 787 A % $1.5M per A/C Hexcel s best overall Boeing Program $1M per A/C on 777 And $0.9M on A330 A /600 A380 23% Over $3M per A/C A320 B777 A % A320neo Low A310 B % B737 MAX Glass Fiber Prepregs HS Carbon Fiber Prepregs IM Carbon Fiber Prepregs New Designs are more Composite Intensive Providing Hexcel Strong Secular Penetration 9

11 65% Airbus & Boeing Orders, Deliveries 4 Year Order Avg: 855/yr 4 Year Order Avg: 940/yr 4 Year Ave > 2000/yr Last 2.5 yrs Book/Bill >1.5x 10,000 10,000 Deliveries 8,000 6,000 4,000 Backlog Over 8 years in backlog! 8,000 6,000 4,000 Backlog 2,000 Total Airbus & Boeing Deliveries ~1,346 2, Hexcel Sales are Entirely to New Aircraft Build Backlog Provides Good Growth Visibility Source: Airbus & Boeing websites

12 Commercial Aerospace Hexcel s Participation Applying Hexcel s Secular Penetration to Program Backlogs tells the Story Hexcel content on New Programs up to 5 times the composites of older aircraft they replace Each bubble represents Hexcel s current $ per shipset x number of planes in Airbus and Boeing backlog $7 Relative Hexcel Content per Plane $M $6 $5 $4 $3 $2 $1 $0 -$1 -$2 Narrow Body ( A320, B737) Wtd Avg of Backlog Legacy $/Aircraft Legacy Wide Body A380 Super Jumbo New 787 & Wide Body New A350 Wide Body A320neo, B737 MAX New aircraft now represent over 35% of Hexcel Commercial Aerospace sales Wtd Avg of Backlog New Programs $/Aircraft Hexcel Content Gains + Airbus/Boeing Backlog = Double Digit Aerospace Growth for Years to Come 11

13 Hexcel Proven Performance $ millions Sales Adjusted Operating Income Adjusted Net Income $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $1,771 $1,678 $1,578 $1,392 $1,325 $1,171 $1,174 $837 $958 $1,050 $1,108 $350 $300 $250 $200 $150 $100 $50 $0 $135 $145 $102 $115 $111 $133 $65 $189 $292 $239 $271 $250 $200 $150 $100 $50 $0 $10 $46 $49 $70 $80 $62 $78 $125 $159 $189 $200 Return on Capital Net Debt / Adjusted EBITDA Stockholders Equity 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 14.1% 14.9%14.9% 14.3% 11.7%11.2% 12.5% 11.7% 10.9% 9.9% 9.4% 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x.5x.0x 3.9x 3.x 2.7x 1.8x 1.7x 1.7x 1.1x.8x.9x.7x.7x $1,300 $1,100 $900 $700 $500 $300 $100 ($100) ($24) $802 $659 $576 $509 $428 $302 $211 $1,160 $1,156 $994 Record Results and Well Positioned for Growth 12

14 Summary Outlook Build rates and new programs should result in double digit growth for years to come for Commercial Aerospace market Cost control, increased in-house carbon fiber and productivity initiatives target to deliver 23% incremental Operating Income leverage We expect to generate Free Cash Flow every year even through the Capital Expenditures ramp-up period Our Priorities for Cash Usage: 1. Organic Growth Investing in R&T and Capacity to support expected Demand 2. M&A opportunities Technology, adjacencies or bolt-on that fit Focus 3. Return to shareholders ($205 million share repurchase completed to date, including $115 million in 1 st Half 2014, $145 million authorization remains) We are a technology driven company focused on Advanced Composites, targeting markets with long term growth potential where we can establish a sustainable, competitive advantage Balance Sheet and Outlook to Deliver Growth (Organic + M&A) and Return to Shareholders 13

15 Investor Presentation: Exhibits

16 Exhibit A Q Results Second Quarter and YTD Results $ millions except EPS Q Q YoY % Change YTD 2014 YTD 2013 YoY % Change Net Sales $470.1 $ % $931.8 $ % Gross Margin% 27.5% 27.7% 27.7% 27.3% Adj. Operating Income $81.1 $ % $155.7 $ % Adj. OI% 17.3% 17.0% 16.7% 16.1% Adj. Diluted EPS $0.55 $ % $1.05 $ % YTD June 2014 Comments: Commercial Aero sales remain strong -- increased 12.8% in constant currency S&D sales stable -- decreased 3.6% in constant currency YOY; expect flat for the year Industrial sales (including wind) higher across the board, up 20% in constant currency GM% and OI% continue to improve. YTD 2014 incremental OI leverage up 25% (FX adjusted and including +$6.7 million more in depreciation) Growth with Continued Productivity Improvements 15

17 Exhibit B Adjusted Operating Income Reconciliation of GAAP and Non-GAAP Measures June YTD $ millions GAAP Operating Income $ $ $ $ $ $ $ Litigation Settlements/Legal Fees Gain on Sale of Land (1) (4.9) Other Operating Expense (2) (1.7) - (5.7) (9.6) Environmental Expense (3) Business Consol & Restructuring Exp Non-GAAP Operating Income $ $ $ $ $ $ $ Non-GAAP Operating Income % of sales 10.0% 11.4% 13.6% 15.2% 16.1% 16.7% 16.1% GAAP Operating Income % of sales 9.4% 11.1% 13.8% 15.8% 16.1% 16.1% 16.1% 1) 2012 includes gain of $4.9M from sales of land. 2) Other operating expenses include $9.6M from business interruption insurance settlement in 2012, $5.7M benefit from curtailment of a pension plan in Q2 2011, $1.7M adjustment to prior year gain on sale of operations in ) Environmental expenses reflect charges related to environmental remediation liabilities for sold facilities 16

18 Exhibit C Adjusted Net Income Reconciliation of GAAP and Non-GAAP Measures June YTD $ millions GAAP Net Income $ 56.3 $ 77.4 $ $ $ $ $ 92.1 Litigation Settlements/Legal Fees Gain on sale of assets (net of tax) (1) (3.1) Other Operating Expense (net of tax) (2) (1.1) - (4.1) (6.1) Environmental Expense (net of tax) (2) Acceleration of Deferred Financing Costs (3) Tax Adjustments (4) - (6.4) (11.3) Non-GAAP Net Income $ 61.9 $ 77.5 $ $ $ $ $ ) 2012 includes the after tax gain from sales of land. 2) Represents the after tax impact of the adjustments described on the preceding page 3) Represents after tax impact of the accelerated amortization of deferred financing costs related to various refinancings of credit facilities, term loans and subordinated notes 4) Represents tax benefits resulting from the reversal of valuation allowances or tax credits recorded that relate to activities from a prior year 17

19 Exhibit D - Hexcel Global Manufacturing Footprint Duxford, U.K. Burlington, WA Kent, WA Casa Grande, AZ Windsor, CO SLC, UT Seguin, TX Welkenraedt, Belgium Nantes, France Pottsville, PA Parla, Spain Decatur, AL Illescas, Spain Dagneux, France Stade, Germany Les Aveniéres, France Neumarkt, Austria Tianjin, China Malaysia Manufacturing sites (18) Joint Venture (1) Global Presence in a Global Market 18