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Hexcel Management Discusses Q2 2012 Results - Earnings Call Transcript

Sales for legacy platforms at Airbus and Boeing were up modestly from the second quarter of 2011, but lower sequentially as sales rates moved back in line with aircraft production levels.

Sales to other commercial aerospace, which includes regional and business aircraft, were up over 10% compared to the prior year, but also slightly down sequentially.

Space & defense revenues were $88.1 million, up about 10% on a constant currency basis versus the second quarter of 2011 and up almost 4% from the first quarter. Growth in rotorcraft continues to be the primary driver.

In industrial markets, sales for the quarter were $77.6 million, up about 28% year-over-year in constant currency. Wind sales were up significantly over an easy comparison to last year's second quarter, and they have now grown sequentially for the last 6 quarters. While we're encouraged by this growth and the large backlog of turbines on order with our largest customer, our guidance for the year assumes a second half similar to the second half of 2011 due to economic and policy uncertainties.

Now let me turn it back over to Wayne for some additional comments on the financials.

Wayne C. Pensky

Thanks, Dave. Gross margin of $105.5 million for the quarter was 26.4% of sales as compared to 24.6% in the second quarter of 2011, due to good leverage on the strong sales volume and favorable impact of exchange rates.

SG&A and R&T cost grew less than revenues, and that's improved to 10.3% of sales. Our foreign exchange rates contributed about 30 basis points to the high operating income percentage in the quarter as compared to last year and about 40 basis points to the year-to-date operating income percentage. Our operating leverage continues to be strong. After adjusting for exchange rates, we delivered 28% incremental operating income on the sales growth for the quarter and 26% for the first half of the year.

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