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Hexcel Corporation (HXL)
Q4 2009 Earnings Call Transcript
January 28, 2010 12:00 pm ET
Wayne Pensky – SVP and CFO
Dave Berges – Chairman and CEO
Michael Bacal – Communications & IR Manager.
Howard Rubel – Jefferies & Company
John McNulty – Credit Suisse
Steve Levenson – Stifel Nicolaus
Mike Sison – KeyBanc
Nigel Coe – Deutsche Bank
Al Kaschalk – Wedbush Securities
Lucy Guo – Macquarie Research
Avinash Kant – DA Davidson & Company
Previous Statements by HXL
» Hexcel Corporation Q3 2009 Earnings Call Transcript
» Hexcel Q2 2009 Earnings Transcript
» Hexcel Corporation Q1 2009 Earnings Call Transcript
Great, thank you. Good day, everyone. Welcome to Hexcel Corporation’s 2009 fourth quarter and full year earnings conference call on January 28, 2010. Before beginning, let me cover the formalities. First, I want to remind everyone about the Safe Harbor provisions related to any forward-looking statements we may make during the course of this call. Certain statements contained in this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They involve estimates, assumptions, judgments and uncertainties caused by a variety of factors that could cause future actual results or outcomes to differ materially from our forward-looking statements today. Such factors are detailed in the Company’s SEC filings including our 2008 10-K and last night's press release.
Lastly, this call is being recorded by Hexcel Corporation and is copyrighted material. It cannot be recorded or rebroadcast without our express permission. Your participation on this call constitutes your consent to that request.
With me today are Dave Berges, Hexcel’s Chairman and CEO, and Michael Bacal, our Communications and Investors Relations Manager. The purpose of the call is to review our 2009 fourth quarter and full year results detailed in our press release issued yesterday.
First, Dave will cover the markets, then I will cover the financials, and Dave will provide our outlook and then we'll turn over to questions.
Thanks, Wayne. Fourth quarter revenues of $267 million were down about 8% from 2008, 12% lower if you just to a constant currency comparison, somewhat better than the full year of 14% FX adjusted decline.
Well, it’s true that last year’s Boeing strike made for an easier comparison, sales were up about 3% sequentially from the third quarter, as we saw signs of life in the commercial aerospace market, our biggest. After adjusting for the previously disclosed legal settlement, operating margins of 8.3% were better than the third quarter, but below last year’s operation – as operational improvements did not fully recover the impact of the sales decline. I’ll have the emphasis in all elements of cash, resulted in another strong quarter of almost $17 million of free cash flow. For the year, that makes it 74 million of 153 million improvement over free cash in 2008.
Now, let me cover the markets using constant dollars to describe sales trends. Remember in 2008, the dollar was extremely weak for the first three quarters than strengthened significantly at the end of the year. In 2009, it has steadily weakened. In the fourth quarter for the first time in the year, the dollar is again weaker than the prior year, exaggerating our sales by compressing our operating income. Commercial aerospace sales were about $137 million for the quarter, down 7.2% from last year’s strike affected sales.
Well, it’s difficult to gauge the exact impact of last year’s strike in our Boeing’s sales, it is worth noting that we had a 10% sequential revenue growth for the quarter for Boeing programs. Sales to Airbus also had modest sequential growth, and while they were down almost 25% for the year, the fourth quarter moderated to a 17% from the comparable period in 2008. Our regional and business jet submarkets and sales remained at the low levels of the prior two quarters and were down more than 40% year-on-year. This submarket now represents about 20% of our commercial aerospace sales and continues to run at about the $100 million run rate that had become evident after the first quarter of 2009.
Sales for new Airbus and Boeing programs A380, 787, 747-8 and A350 were up for the quarter as compared to both the prior year and the third quarter. These new programs made up more than 15% of our commercial aerospace sales for the first time since we began tracking this ratio.
Sales to space and defense markets were $73 million for the quarter, down 7% on a constant currency basis. The end of the F22 program has began to impact us, but were other gains and losses in the period. For the full year, space and defense sales were just higher than 2008 on a constant currency basis.
In industrial markets, while the quarter’s as reported sales of $56.5 million were down 18%, the FX adjusted drop was almost 26% for the quarter versus 15% for the year. Sadly, our sales to wind markets after a five year run with compound annual growth over 30% fell victim to the global credit crisis and also ended the full year down 15% in constant currency despite a strong first quarter.
Now let me turn the call back to Wayne for some additional comments and then I will come back and talk about the outlook.