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Hexcel Corporation is undertaking a series of actions it is taking to restructure its business operations to its current business outlook.
These actions are necessary in light of anticipated reductions in commercial aircraft production in both 2002 and 2003, the continued depressed business conditions in the electronics market and the weakness in the general economy. Mr. David E. Berges, Chairman and CEO of Hexcel Corporation described the program: “”Prior to the tragic events of September 11, Hexcel was successfully capturing growth from expanding markets for its products and technologies. With production of commercial aircraft now projected to decline, our focus has switched to cost reduction and cash flow. Anticipating lower revenues in 2002, we are targeting a reduction of the company’s cash fixed overhead costs by 20% or $60 million on an annualized basis compared to 2001 year-to-date spending rates. These reductions are to be achieved primarily through companywide reductions in Hexcel’s managerial, professional, indirect manufacturing and administrative employees combined with organizational rationalization. We have already commenced these reductions and plan to complete the majority of these actions to reduce fixed cost by the end of this year.””
Mr. Berges continued: “”These actions are intended to size the company’s cost structure now in anticipation of lower revenues. The company will also reduce its direct manufacturing costs as customer requirements change in response to reduced demand. We anticipate that by the end of 2002, Hexcel will have less than 4,500 employees worldwide compared to almost 6,000 today. We deeply regret having to make such major reductions to our workforce, but the unprecedented combination of events affecting the company’s revenue outlook make these actions absolutely necessary.””
Concluding, Mr. Berges noted: “”Even with these actions, the next six months will be a difficult period for Hexcel. We expect that in addition to the impact of lower aircraft build rates, we will also see the impact of supply chain inventory corrections, which could be particularly acute towards the end of this quarter and in the first quarter of 2002. In addition to reducing costs, we are also focused on improving our operational cash flow. To that end, we are tightly controlling capital spending as capacity expansion plans are deferred and expect that 2002 capital expenditures will not exceed $25 million compared to approximately $40 million in 2001. Further, we anticipate generating cash from reducing working capital as revenues decline.””
Hexcel estimates that the cash costs of these restructuring actions will be the range of $35-40 million. The company will record the expenses related to these programs in its fourth quarter, 2001 financial results.
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