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Hexcel Corporation has reported results for the fourth quarter and full year of 2003.
For the full year of 2003, net sales were $896.9 million. In constant currency, net sales were $857.3 million as compared to $850.8 million in 2002. Gross margin increased to $174.5 million from $161.3 million. Operating income of $57.8 million in 2003 was $2.4 million lower than the $60.2 million of operating income achieved in 2002. Improved operational performance in 2003 was offset by a $3.5 million year-over-year increase in business consolidation and restructuring expenses and a $5.0 million increase in depreciation expense compared to 2002. Net loss for 2003 was $11.1 million compared to a net loss of $13.6 million in 2002.
Commenting on Hexcel’s results, Mr. David E. Berges, Chairman, President and Chief Executive Officer, said, “”In 2003, we had our second year of success in achieving continuous productivity improvement, generating cash and reducing debt. During the 2003 fourth quarter, we reduced total debt, net of cash, by $16.7 million to $441.7 million, another five year low. With the benefit of our re-financing in March, asset sales, and the cash we generated from operations during 2003, we have reduced the Company’s leverage to more normal levels and generated liquidity to manage and grow our business.””
Mr. Berges continued, “”Gross margins for the quarter at 18.7% were slightly lower than last year due to the strength of our industrial revenues where margins tend to be lower than those from aerospace. Like many companies, we have been faced with increased pension expense due to the lower interest rate environment, higher insurance premiums, new regulatory compliance costs and currency fluctuations that are difficult to control, but our productivity improvements have offset these effects. A good indicator of cost control is our headcount, which despite sales growth, ended 2003 at 4,084, down for the tenth quarter in a row.””
Commenting on Hexcel’s strategy, Mr. Berges continued, “”In 2002, the focus was on quick cost take out to respond to the dramatic shift in our electronics and commercial aerospace markets. In 2003, the Company reduced and refinanced its near term debt obligations to appropriately align our capital structure with our view of the business cycles. Our focus going forward is to build for growth and return to consistent net income profitability.””
“”To build for growth, we are making strategic investments in R&T, sales and marketing organizations, and manufacturing assets. In addition, with significant shifts to carbon fiber composite designs in aerospace, wind energy and recreation we see the opportunity to move advanced composite materials from niche to mainstream by undertaking what we call “”industrialization”” initiatives. We continue to work on a number of rationalization efforts in Europe, and this month we announced our intent to consolidate the activities of our Livermore, California facility into other operations, principally our Salt Lake City, Utah plant. While these actions will produce long-term savings, the main objective is to position us for growth. We believe that our commitment to high volume process automation and the industrialization of our products and processes will drive growth, not just respond to it.””
Mr. Berges concluded, “”As for our focus on net income, growth and productivity will always be the biggest drivers of profitability, however, we are also focused on interest and tax expenses as well as equity in losses from our joint ventures. The reductions in total debt have and will continue to reduce interest expense going forward. We have exited two unprofitable joint ventures and our Asian joint venture companies are making steady progress toward profitability as their production volumes grow. In addition, we are taking actions to better balance the financial leverage of our foreign operations. All of this should drive us towards consistent generation of net income.””
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