HEXCEL CORP /DE/ (Form: 10-Q, Received: 10/21/2013 16:32:01)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 - Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2013

o	Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-8472

Hexcel Corporation

(Exact name of registrant as specified in its charter)

Delaware		94-1109521
(State of Incorporation)		(I.R.S. Employer Identification No.)

Two Stamford Plaza

281 Tresser Boulevard

Stamford, Connecticut 06901-3238

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (203) 969-0666

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class		Outstanding at October 16, 2013
COMMON STOCK		99,564,322

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HEXCEL CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)

	· Condensed Consolidated Balance Sheets — September 30, 2013 and December 31, 2012	3

	· Condensed Consolidated Statements of Operations — The Quarters and Nine Months Ended September 30, 2013 and 2012	4

	· Condensed Consolidated Statements of Comprehensive Income — The Quarters and Nine Months Ended September 30, 2013 and 2012	4

	· Condensed Consolidated Statements of Cash Flows — The Nine Months Ended September 30, 2013 and 2012	5

	· Notes to Condensed Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	22

ITEM 4.	Controls and Procedures	22

PART II.	OTHER INFORMATION	22

ITEM 1.	Legal Proceedings	22

ITEM 1A.	Risk Factors	22

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

ITEM 6.	Exhibits and Reports on Form 8-K	23

SIGNATURE		24

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PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)

Hexcel Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

	(Unaudited)
(In millions, except per share data)	September 30, 2013			December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	59.7		$	32.6
Accounts receivable, net	236.2			229.0
Inventories, net	260.3			232.8
Current deferred tax assets and other current assets	96.9			81.3
Total current assets	653.1			575.7

Property, plant and equipment	1,574.9			1,459.2
Less accumulated depreciation	(579.6		)	(544.8		)
Property, plant and equipment, net	995.3			914.4

Goodwill and intangible assets	60.9			57.8
Investments in affiliated companies	22.3			22.6
Deferred tax assets	14.0			15.4
Other assets	15.8			17.2

Total assets	$	1,761.4		$	1,603.1

Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of debt	$	4.8		$	16.6
Accounts payable	108.3			115.7
Accrued liabilities	130.2			103.0
Total current liabilities	243.3			235.3

Long-term debt	262.0			240.0
Other non-current liabilities	136.3			133.7
Total liabilities	641.6			609.0

Stockholders’ equity:
Common stock, $0.01 par value, 200.0 shares authorized, 103.9 and 102.4 shares issued at September 30, 2013 and December 31, 2012, respectively	1.0			1.0
Additional paid-in capital	644.9			617.0
Retained earnings	589.0			448.2
Accumulated other comprehensive loss	(17.5		)	(31.9		)
	1,217.4			1,034.3
Less — Treasury stock, at cost, 4.3 shares at September 30, 2013 and 2.5 shares at December 31, 2012	(97.6		)	(40.2		)
Total stockholders’ equity	1,119.8			994.1

Total liabilities and stockholders’ equity	$	1,761.4		$	1,603.1

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

	(Unaudited)
	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2013		2012		2013		2012

Net sales	$	412.3	$	391.6	$	1,251.4	$	1,190.9
Cost of sales	300.2		292.4		910.5		879.8
Gross margin	112.1		99.2		340.9		311.1

Selling, general and administrative expenses	32.9		30.3		105.7		99.4
Research and technology expenses	10.2		8.9		31.3		26.7
Other operating income	—		—		—		(9.5		)
Operating income	69.0		60.0		203.9		194.5

Interest expense, net	1.9		2.2		5.7		8.2
Non-operating expense	—		—		1.0		1.1
Income before income taxes and equity in earnings of affiliated companies	67.1		57.8		197.2		185.2
Provision for income taxes	18.7		18.0		57.2		58.5
Income before equity in earnings of affiliated companies	48.4		39.8		140.0		126.7
Equity in earnings of affiliated companies	0.3		—		0.8		0.7
Net income	$	48.7	$	39.8	$	140.8	$	127.4

Basic net income per common share:	$	0.49	$	0.40	$	1.41	$	1.27

Diluted net income per common share:	$	0.48	$	0.39	$	1.38	$	1.25

Weighted average common shares outstanding:
Basic	99.7		100.3		100.0		100.1
Diluted	101.7		102.1		102.1		102.0

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

	(Unaudited)
	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013		2012

Net income	$	48.7		$	39.8		$	140.8	$	127.4

Currency translation adjustments	19.2			7.5			8.8		0.4
Net unrealized pension and other benefit actuarial gains (losses) and prior service costs (credits)	(1.4		)	(0.5		)	1.2		(0.2		)
Net unrealized gains on financial instruments, net of tax	7.4			4.7			4.4		3.2
Total other comprehensive income	25.2			11.7			14.4		3.4
Comprehensive income	$	73.9		$	51.5		$	155.2	$	130.8

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

	(Unaudited)
	Nine Months Ended September 30,
(In millions)	2013			2012

Cash flows from operating activities
Net income	$	140.8		$	127.4
Reconciliation to net cash provided by operating activities:
Depreciation and amortization	42.8			43.0
Amortization of deferred financing costs and call premium expense	1.8			2.5
Deferred income taxes	18.1			21.3
Equity in earnings from affiliated companies	(0.8		)	(0.7		)
Stock-based compensation	14.7			13.1
Gain on sale of property	—			(4.9		)
Excess tax benefits on stock-based compensation	(5.0		)	(5.8		)

Changes in assets and liabilities:
Increase in accounts receivable	(0.1		)	(45.0		)
Increase in inventories	(25.2		)	(20.7		)
(Increase) decrease in prepaid expenses and other current assets	(2.0		)	1.5
Increase in accounts payable and accrued liabilities	12.9			26.9
Other-net	(2.1		)	(8.1		)
Net cash provided by operating activities	195.9			150.5

Cash flows from investing activities
Proceeds from sale of real estate	—			5.3
Capital expenditures	(133.1		)	(208.9		)
Net cash used for investing activities	(133.1		)	(203.6		)

Cash flows from financing activities
Proceeds from senior secured credit facility	309.0			122.0
Capital lease obligations and other debt, net	(1.9		)	1.8
Issuance costs related to senior secured credit facility	(2.4		)	(0.6		)
Repayment of senior secured credit facility - term loan	(85.0		)	(5.0		)
Repayment of previous senior secured revolving credit facility	(165.0		)	—
Repayment of senior secured revolving credit facility	(47.0		)	—
Purchase of stock	(50.0		)	—
Activity under stock plans	5.6			3.0
Repayment of 6.75% senior subordinated notes	—			(73.5		)
Call premium payment for 6.75% senior subordinated notes	—			(0.8		)
Net cash (used in) provided by financing activities	(36.7		)	46.9
Effect of exchange rate changes on cash and cash equivalents	1.0			(0.1		)
Net increase (decrease) in cash and cash equivalents	27.1			(6.3		)
Cash and cash equivalents at beginning of period	32.6			49.5
Cash and cash equivalents at end of period	$	59.7		$	43.2

Supplemental data:
Accrual basis additions to property, plant and equipment	$	121.9		$	174.7

The accompanying notes are an integral part of these condensed consolidated financial statements.

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HEXCEL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Significant Accounting Policies

In these notes, the terms “Hexcel”, “the Company”, “we”, “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying condensed consolidated financial statements are those of Hexcel Corporation. Refer to Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of our significant accounting policies.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC.

In the opinion of management, the Condensed Consolidated Financial Statements include all normal recurring adjustments as well as any non-recurring adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. The Condensed Consolidated Balance Sheet as of December 31, 2012 was derived from the audited 2012 consolidated balance sheet. Interim results are not necessarily indicative of results expected for any other interim period or for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 8, 2013.

Investments in Affiliated Companies

We have a 50% equity ownership investment in an Asian joint venture Asian Composites Manufacturing Sdn. Bhd. We have determined that this investment is not a variable interest entity. As such, we account for our share of the earnings of this affiliated company using the equity method of accounting.

Recently Adopted Accounting Pronouncements

In February 2013 the Financial Accounting Standards Board issued Accounting Standards Update 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. The Company adopted this update in the first quarter of 2013. The amounts reclassified out of accumulated other comprehensive income during the nine-month period were not material.

Note 2 — Net Income per Common Share

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2013		2012		2013		2012

*Basic net income per common share:*
Net income	$	48.7	$	39.8	$	140.8	$	127.4

Weighted average common shares outstanding	99.7		100.3		100.0		100.1

Basic net income per common share	$	0.49	$	0.40	$	1.41	$	1.27

*Diluted net income per common share:*
Net income	$	48.7	$	39.8	$	140.8	$	127.4

Weighted average common shares outstanding — Basic	99.7		100.3		100.0		100.1
Plus incremental shares from assumed conversions:
Restricted stock units	0.7		0.7		0.7		0.8
Stock options	1.3		1.1		1.4		1.1
Weighted average common shares outstanding — Dilutive	101.7		102.1		102.1		102.0

Diluted net income per common share	$	0.48	$	0.39	$	1.38	$	1.25

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There were no underlying stock options excluded from the computation of diluted net income per share for the quarter and nine months ended September 30, 2013, as all were dilutive. Total shares underlying stock options of 0.5 million were excluded from the computation of diluted net income per share for the quarter and nine months ended September 30, 2012, as they were anti-dilutive.

Note 3 — Inventories, net

(In millions)	September 30, 2013		December 31, 2012
Raw materials	$	100.0	$	95.0
Work in progress	60.1		51.2
Finished goods	100.2		86.6
Total inventories	$	260.3	$	232.8

Note 4 — Retirement and Other Postretirement Benefit Plans

We maintain qualified and nonqualified defined benefit retirement plans covering certain current and former U.S. and European employees, retirement savings plans covering eligible U.S. employees and certain postretirement health care and life insurance benefit plans covering eligible U.S. retirees. We also participate in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliations.

Defined Benefit Retirement Plans

Net Periodic Benefit Costs

Net periodic benefit costs of our defined benefit retirement plans for the quarters and nine months ended September 30, 2013 and 2012, were as follows:

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions)	2013		2012		2013		2012
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	—	$	0.4	$	1.4	$	1.1
Interest cost	0.1		0.3		0.5		0.8
Net amortization and deferral	1.7		0.6		3.0		1.7
Net periodic benefit cost	$	1.8	$	1.3	$	4.9	$	3.6

	September 30, 2013		December 31, 2012
Amounts recognized on the balance sheet:
Accrued liabilities	$	23.2	$	0.3
Other non-current liabilities	17.7		38.3
Total accrued benefit	$	40.9	$	38.6

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
European Defined Benefit Retirement Plans
Service cost	$	0.2		$	0.1		$	0.5		$	0.4
Interest cost	1.8			1.6			5.3			4.9
Expected return on plan assets	(2.1		)	(1.8		)	(6.2		)	(5.4		)
Net amortization and deferral	0.3			0.2			0.9			0.6
Net periodic benefit cost	$	0.2		$	0.1		$	0.5		$	0.5

	September 30, 2013		December 31, 2012
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.4	$	0.4
Other non-current liabilities	33.9		36.1
Total accrued benefit	$	34.3	$	36.5

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Contributions

We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred. Under the provisions of these non-qualified plans, we expect to contribute $0.3 million in 2013 to cover unfunded benefits. We contributed $0.3 million to our U.S. non-qualified defined benefit retirement plans during the 2012 fiscal year.

We contributed $1.5 million and $1.6 million to our European defined benefit retirement plans in the third quarters of 2013 and 2012, respectively. Contributions to the defined benefit retirement plans were $4.2 million and $4.6 million for the nine months ended September 30, 2013 and 2012. We plan to contribute approximately $5.8 million during 2013 to these European plans. We contributed $5.7 million to our European plans during the 2012 fiscal year.

Postretirement Health Care and Life Insurance Benefit Plans

Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarters and nine months ended September 30, 2013 and 2012 were immaterial.

	September 30, 2013		December 31, 2012
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.6	$	0.6
Other non-current liabilities	7.4		7.5
Total accrued benefit	$	8.0	$	8.1

In connection with our postretirement plans, we contributed $0.2 million and $0.2 million during the nine-month periods ended September 30, 2013 and 2012, respectively. Contributions during the third quarters of 2013 and 2012 were $0.1 million and $0.1 million, respectively. We periodically fund our postretirement plans to pay covered expenses as they are incurred. Based on nine months of activity, we expect to contribute approximately $0.3 million in 2013 to cover unfunded benefits. We contributed $0.3 million to our postretirement plans during the 2012 fiscal year.

Note 5 — Debt

(In millions)	September 30, 2013		December 31, 2012
Working capital line of credit — China	$	4.8	$	4.8
Current maturities of term loan	—		10.0
Current maturities of capital lease and other obligations	—		1.8
Notes payable and current maturities of long-term liabilities	4.8		16.6

Senior secured credit facility — term loan due 2015	—		75.0
Senior secured credit facility — revolving loan due 2015	—		165.0
Senior secured credit facility — revolving loan due 2018	262.0		—
Long-term notes payable	262.0		240.0
Total notes payable and capital lease obligations	$	266.8	$	256.6

As also discussed in Note 11, in June 2013 we entered into a new $600 million senior secured revolving credit facility which matures in June 2018. The new facility replaces the Company’s previous senior secured credit facility ($82.5 million term loan and a $360 million revolving loan) that would have expired in July 2015. The initial interest rate for the revolver is LIBOR + 1.50% through September 30, 2013, and then can range up or down depending upon our leverage ratio. The new initial interest rate is 50 basis points lower than the prior facility, and at the current leverage ratio the new rate is LIBOR + 1.25% beginning after covenant compliance reporting is completed for the period ending September 30, 2013. In addition to the lower interest rates and fees on undrawn balances, the new facility provides greater flexibility. The proceeds from the new facility were used to repay all amounts, and terminate all commitments outstanding under the Company’s credit agreement and to pay fees and expenses in connection with the refinancing. As a result of the refinancing, the Company accelerated certain unamortized financing costs of the credit facility being replaced and the deferred expense on related interest rate swaps incurring a pretax charge of $1.0 million in the second quarter of 2013.

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EBITDA) throughout the term of the new facility. In addition, the new facility contains other terms and conditions such as customary representations and warranties, additional covenants and customary events of default.

Note 6 — Derivative Financial Instruments

Interest Rate Swap Agreements

In June 2012 and in 2010, we entered into agreements to swap $75 million and $98 million, respectively, of floating rate obligations for fixed rate obligations at 0.6725% and 1.03% against LIBOR in U.S. dollars. Both swaps were scheduled to mature in March 2014, and were accounted for as cash flow hedges of our floating rate bank loans. With the June 2013 refinancing, the 1.03% interest rate swap totaling $98 million associated with our term loan was dedesignated and $0.4 million of deferred expenses were released from accumulated other comprehensive income. During the third quarter, this swap was marked to market through interest expense until it was finally terminated and settled in cash for $0.5 million. The principal terms of the remaining $75 million of floating rate swaps match the terms of the new revolving bank loans thereby allowing hedge accounting to continue on these swaps. During the third quarter of 2013, we entered into new swaps totaling $75 million for maturities in March and September 2016, at fixed rate obligations ranging from 0.81% to 1.034% against LIBOR in U.S. dollars. The new swaps are accounted for as cash flow hedges of our floating rate bank loans. The fair value of all interest rate swaps was a liability of $0.7 million at September 30, 2013 and a liability $1.0 million at December 31, 2012.

Foreign Currency Forward Exchange Contracts

A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British Pound Sterling. We entered into contracts to exchange U.S. dollars for Euros and British Pound Sterling through March 2016. The aggregate notional amount of these contracts was $208.5 million and $201.2 million at September 30, 2013 and December 31, 2012, respectively. The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. The effective portion of the hedges, gains of $9.1 million and $4.1 million, were recorded in other comprehensive income (“OCI”) for the three months and nine months ended September 30, 2013, respectively, and gains of $4.8 million and $1.7 million for the three- and nine-month periods ended September 30, 2012, respectively. The carrying amount of these contracts was $9.0 million classified in other assets and $0.6 million in other liabilities on the Condensed Consolidated Balance Sheets at September 30, 2013 and $3.6 million in other assets and $1.6 million classified in other liabilities at December 31, 2012. During the three months ended September 30, 2013 and 2012, we recognized net losses of $0.2 million and $1.4 million, respectively, which were recorded in gross margin. During the nine months ended September 30, 2013 and 2012, we recognized net losses of $0.9 million and $2.8 million, respectively, which were recorded in gross margin. For the quarters and nine-month periods ended September 30, 2013 and 2012, hedge ineffectiveness was immaterial.

In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the remeasurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the quarters ended September 30, 2013 and 2012, we recognized net foreign exchange gains of $6.8 million and foreign exchange gains of $1.4 million, respectively, in the Condensed Consolidated Statements of Operations. During the nine-month periods ended September 30, 2013 and 2012, we recognized net foreign exchange gains of $4.3 million and net foreign exchange losses of $1.5 million respectively, in the Consolidated Statements of Operations. The net foreign exchange impact recognized from these hedges offset the translation exposure of these transactions. The carrying amount of the contracts for asset and liability derivatives not designated as hedging instruments was $3.7 million classified in other assets and nothing in other liabilities and $3.1 million classified in other assets and $0.1 million in other liabilities on the September 30, 2013 and December 31, 2012 Condensed Consolidated Balance Sheets, respectively.

The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and nine months ended September 30, 2013 and 2012 was as follows:

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013		2012
Unrealized (losses) gains at beginning of period, net of tax	$	(0.9	)	$	(5.9	)	$	2.4	$	(4.5	)
Losses reclassified to net sales	0.1			0.8			0.7		1.7
Increase in fair value	7.5			3.6			3.6		1.3
Unrealized gains (losses) at end of period, net of tax	$	6.7		$	(1.5	)	$	6.7	$	(1.5	)

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We expect to reclassify $3.7 million of unrealized gains into earnings over the next twelve months as the hedged sales are recorded.

Note 7 — Income Taxes

The income tax provisions for the quarter and nine months ended September 30, 2013 were $18.7 million and $57.2 million, respectively. The effective tax rates for the periods were 27.9% and 29.0%, respectively. The third quarter of 2013 included a benefit of $1.8 million from favorable tax return to provision adjustments and the release of reserves for uncertain tax positions. The nine-month period in 2013 also benefitted from the extension of the 2012 and 2013 U.S. Research & Development tax credits that was enacted in January 2013. The full retroactive benefit from 2012 was taken in the first quarter of 2013 for a benefit of $0.6 million. The income tax provisions for the quarter and nine months ended September 30, 2012 were $18.0 million and $58.5 million, respectively. The effective tax rates for those periods were 31.1% and 31.6%, respectively.

Note 8 — Fair Value Measurements

The authoritative guidance for fair value measurements establishes a hierarchy for observable and unobservable inputs used to measure fair value, into three broad levels, which are described below:

· Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

· Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

· Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value.

We do not have any significant assets or liabilities that utilize Level 3 inputs. In addition, we have no assets or liabilities that utilize Level 1 inputs. For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value. The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). The fair value of these assets and liabilities was approximately $12.8 million and $1.3 million, respectively at September 30, 2013. Below is a summary of valuation techniques for all Level 2 financial assets and liabilities:

· Interest rate swap — valued using LIBOR yield curves at the reporting date. Fair value was a liability of $0.7 million at September 30, 2013.

· Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date. Fair value of assets and liabilities at September 30, 2013 was $12.8 million and $0.6 million, respectively.

Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in the three months ended September 30, 2013 that would reduce the receivable amount owed, if any, to the Company.

Note 9 — Segment Information

The financial results for our operating segments are prepared using a management approach, which is consistent with the basis and manner in which we internally segregate financial information for the purpose of assisting in making internal operating decisions. We evaluate the performance of our operating segments based on operating income, and generally account for intersegment sales based on arm’s length prices. Corporate and certain other expenses are not allocated to the operating segments, except to the extent that the expense can be directly attributable to the business segment.

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Financial information for our operating segments for the quarters and nine months ended September 30, 2013 and 2012 is as follows:

	(Unaudited)
(In millions)	Composite Materials (b)			Engineered Products		Corporate & Other (a)			Total
Third Quarter 2013
Net sales to external customers:
Commercial aerospace	$	191.2		$	70.8	$	—		$	262.0
Space and defense	67.6			26.8		—			94.4
Industrial	53.8			2.1		—			55.9
Net sales to external customers	312.6			99.7		—			412.3
Intersegment sales	17.1			0.1		(17.2		)	—
Total sales	329.7			99.8		(17.2		)	412.3

Operating income (a)	68.7			14.9		(14.6		)	69.0
Depreciation and amortization	13.4			1.2		0.1			14.7
Stock-based compensation expense	1.0			0.2		1.5			2.7
Accrual basis additions to capital expenditures	36.8			3.0		—			39.8

Third Quarter 2012
Net sales to external customers:
Commercial aerospace	$	164.3		$	69.8	$	—		$	234.1
Space and defense	68.7			21.9		—			90.6
Industrial	66.9			—		—			66.9
Net sales to external customers	299.9			91.7		—			391.6
Intersegment sales	14.0			0.9		(14.9		)	—
Total sales	313.9			92.6		(14.9		)	391.6

Operating income (a)	57.0			14.9		(11.9		)	60.0
Depreciation and amortization	13.4			1.2		0.1			14.7
Stock-based compensation expense	0.7			0.2		1.7			2.6
Accrual basis additions to capital expenditures	55.6			4.6		—			60.2

Nine Months Ended September 30, 2013
Net sales to external customers
Commercial aerospace	$	593.6		$	207.3	$	—		$	800.9
Space and defense	210.7			76.4		—			287.1
Industrial	157.8			5.6		—			163.4
Net sales to external customers	962.1			289.3		—			1,251.4
Intersegment sales	51.8			1.2		(53.0		)	—
Total sales	1,013.9			290.5		(53.0		)	1,251.4

Operating income (a)	207.8			43.4		(47.3		)	203.9
Depreciation and amortization	39.1			3.5		0.2			42.8
Stock-based compensation expense	4.3			0.9		9.5			14.7
Accrual basis additions to capital expenditures	113.2			8.7		—			121.9

Nine Months Ended September 30, 2012
Net sales to external customers
Commercial aerospace	$	516.2		$	193.7	$	—		$	709.9
Space and defense	199.8			63.8		—			263.6
Industrial	216.8			0.6		—			217.4
Net sales to external customers	932.8			258.1		—			1,190.9
Intersegment sales	44.8			1.2		(46.0		)	—
Total sales	977.6			259.3		(46.0		)	1,190.9

Operating income (a), (b)	203.7			38.4		(47.6		)	194.5
Depreciation and amortization	39.6			3.3		0.1			43.0
Stock-based compensation expense	3.7			0.7		8.7			13.1
Other operating (income) expense (b)	(14.5		)	—		5.0			(9.5		)
Accrual basis additions to capital expenditures	166.2			8.3		0.2			174.7

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(a) We do not allocate corporate expenses to the operating segments.

(b) In the nine months ended September 30, 2012, operating income for Composite Materials includes $9.6 million of insurance proceeds from a 2011 business interruption claim and a $4.9 million gain on the sale of land from a previously closed manufacturing facility. In addition, Corporate and other includes a $5.0 million charge for additional environmental reserves primarily for remediation of a manufacturing facility sold in 1986 (see note 10).

Goodwill and Intangible Assets

The carrying amount of gross goodwill and intangible assets by segment is as follows:

(In millions)	September 30, 2013		December 31, 2012
Composite Materials	$	44.9	$	41.7
Engineered Products	16.0		16.1
Goodwill and intangible assets	$	60.9	$	57.8

No impairments have been recorded against these amounts.

Note 10 — Other Operating (Income) Expense

In June 2012, the company settled a business interruption insurance claim resulting from tornado damage in 2011 and recorded operating income of $9.6 million. Also in June 2012, the Company recorded a pre-tax gain of $4.9 million on the sale of land from a previously closed manufacturing facility. In addition, in June 2012, the Company recorded $5.0 million of charges primarily for additional remediation of a manufacturing facility sold in 1986 (see Note 12).

Note 11 — Other Non-Operating Expense

In June 2013, the Company entered into new $600 million senior secured revolving credit facility that will mature in five years. The new facility replaces the Company’s previous senior secured credit facility ($82.5 million term loan and a $360 million revolving loan) that would have expired in July 2015. As a result of the refinancing, we accelerated certain unamortized financing costs of the credit facility being replaced and the deferred expense on related interest rate swaps incurring a pretax charge of $1.0 million in the second quarter of 2013.

In June 2012, we redeemed the remaining $73.5 million of our 6.75% senior subordinated notes at a call premium of 1.125%. As a result of the redemption, we accelerated the unamortized financing costs of the senior subordinated notes redeemed and expensed the call premium incurring a pretax charge of $1.1 million.

Note 12 — Commitments and Contingencies

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment, and health and safety matters. We estimate and accrue our liabilities when a loss becomes probable and estimable. These judgments take into consideration a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs. Such estimates are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

While it is impossible to ascertain the ultimate legal and financial liability with respect to certain contingent liabilities and claims, we believe, based upon our examination of currently available information, our experience to date, and advice from legal counsel, that the individual and aggregate liabilities resulting from the ultimate resolution of these contingent matters, after taking into consideration our existing insurance coverage and amounts already provided for, will not have a material adverse impact on our consolidated results of operations, financial position or cash flows.

Environmental Matters

We are subject to various U.S. and international federal, state and local environmental, and health and safety laws and regulations. We are also subject to liabilities arising under the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”), the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and similar state

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and international laws and regulations that impose responsibility for the control, remediation and abatement of air, water and soil pollutants and the manufacturing, storage, handling and disposal of hazardous substances and waste.

We have been named as a potentially responsible party (“PRP”) with respect to several hazardous waste disposal sites that we do not own or possess, which are included on, or proposed to be included on, the Superfund National Priority List of the U.S. Environmental Protection Agency (“EPA”) or on equivalent lists of various state governments. Because CERCLA allows for joint and several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs. We believe, based on the amount and nature of our waste, our existing insurance coverage, the amounts already provided for and the number of other financially viable PRPs, that our liability in connection with such matters will not be material.

Lodi, New Jersey Site

Pursuant to the New Jersey Industrial Site Recovery Act, Hexcel entered into an Administrative Consent Order for the environmental remediation of a manufacturing facility we own and formerly operated in Lodi, New Jersey. We have not operated this site since 1986. We have been remediating this site in accordance with a State approved plan and continue to do so under the New Jersey Licensed Site Remediation Professional program. The primary remediation activities have been completed and we are in the process of conducting testing to support a monitored natural attenuation (MNA) program. The accrual is $1.9 million at September 30, 2013.

Lower Passaic River Study Area

In October 2003, we received, along with 66 other entities, a directive from the New Jersey Department of Environmental Protection (“NJDEP”) that requires the entities to assess whether operations at various New Jersey sites, including our former manufacturing site in Lodi, New Jersey, caused damage to natural resources in the Lower Passaic River watershed. The NJDEP later dismissed us from the Directive. In February 2004, 42 entities including Hexcel, received a general notice letter from the EPA which requested that the entities consider helping to finance an estimated $10 million towards an EPA study of environmental conditions in the Lower Passaic River watershed. In May 2005, we voluntarily signed into an agreement with the EPA to participate (bringing the total number of participating entities to 43) in financing such a study up to $10 million, in the aggregate. Since May 2005, a number of additional PRPs have joined into the agreement with the EPA. In October 2005, we along with the other EPA notice recipients were advised by the EPA that the notice recipients’ share of the costs of the EPA study was expected to significantly exceed the earlier EPA estimate. While we and the other recipients were not obligated by our agreement to share in such excess, a Group of notice recipients (73 companies including Hexcel) negotiated an agreement with the EPA to assume responsibility for the study pursuant to an Administrative Order on Consent. We believe we have viable defenses to the EPA claims and expect that other as yet unnamed parties will also receive notices from the EPA. In June 2007, the EPA issued a draft Focused Feasibility Study (“FFS”) that considers interim remedial options for the lower eight miles of the river, in addition to a “no action” option. The estimated costs for the six options ranged from $900 million to $2.3 billion. The PRP Group provided comments to the EPA on the FFS; the EPA has not yet taken further action. The Administrative Order on Consent regarding the study does not cover work contemplated by the FFS. In June 2012, without admitting liability, we along with 69 other PRPs entered into a further agreement with EPA to remove and cap contaminated sediments near River Mile 10.9 of the Lower Passaic River at an approximate cost of $20 million. We accrued $0.5 million in the second quarter of 2012 for our expected allocation of these costs. Furthermore, the Federal Trustee for natural resources has indicated their intent to perform a natural resources damage assessment on the river and invited the PRPs to participate in the development and performance of this assessment. The PRP Group, including Hexcel, has not agreed to participate in the assessment at this time.

On February 4, 2009, Tierra Solutions (“Tierra”) and Maxus Energy Corporation (“Maxus”) filed a third party complaint in New Jersey Superior Court against us and over 300 other entities in an action brought against Tierra and Maxus (and other entities) by the State of New Jersey. New Jersey’s suit against Tierra and Maxus relates to alleged discharges of contaminants by Tierra and Maxus to the Passaic River and seeks payment of all past and future costs the State has and will incur regarding cleanup and removal of contaminants, investigation of the Passaic River and related water bodies, assessment of natural resource injuries and other specified injuries. The third party complaint seeks contribution from us for all or part of the damages that Tierra and Maxus may owe to the State. We filed our answer to the complaint and served our initial disclosures, and have produced initial documents to Tierra and Maxus, pursuant to an order of the court. The court’s trial plan and subsequent orders contemplated multiple trial tracks involving third-party defendants (including Hexcel) culminating with trials commencing as early as April 2013. However, at a case management conference held in March 2013, the Court announced that most third-party defendants had reached a tentative settlement with the State of New Jersey which, if approved by the Court, would end the state court litigation as to participating third-party defendants. We committed to join the settlement and if the settlement is approved by the Court, we would pay New Jersey $0.3 million. This amount was accrued in the first quarter of 2013. It is anticipated that the settlement will be brought to the Court for approval in the fourth quarter of 2013. The litigation presently has been stayed as to parties participating in the settlement. The scope of Hexcel’s continued involvement in the litigation depends on whether the Court approves the settlement and dismisses Hexcel from

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the case, which is uncertain at this time. Our ultimate liability for investigatory costs, remedial costs and/or natural resource damages in connection with the Lower Passaic River cannot be determined at this time.

Kent, Washington Site

We were party to a cost-sharing agreement regarding the operation of certain environmental remediation systems necessary to satisfy a post-closure care permit issued to a previous owner of our Kent, Washington site by the EPA. Under the terms of the cost-sharing agreement, we were obligated to reimburse the previous owner for a portion of the cost of the required remediation activities. The previous owner, who also continues to own an adjacent site, has installed certain remediation and isolation technologies and is operating those in accordance with an order agreed with the State of Washington. This isolation is expected to prevent further migration of contaminants to our site and enable us to perform a cleanup of our site. We and the Washington Department of Ecology have reached an agreed order to perform certain cleanup activities on our site by certain deadlines, and we are in full compliance with the order as modified. The total accrued liability related to this matter was $0.9 million at September 30, 2013.

Omega Chemical Corporation Superfund Site, Whittier, CA

We are a potentially responsible party at a former chemical waste site in Whittier, CA. The PRPs at Omega have established a PRP Group, the “Omega PRP Group”, and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. The Omega PRP Group has attributed approximately 1.07% of the waste tonnage sent to the site to Hexcel. In addition to the Omega site specifically, the EPA is investigating the scope of regional groundwater contamination in the vicinity of the Omega site and recently issued a Record of Decision; the Omega PRP Group members have been noticed by the EPA as PRP’s who will be required to be involved in the remediation of the regional groundwater contamination in that vicinity as well. As a member of the Omega PRP group, Hexcel will incur costs associated with the investigation and remediation of the Omega site and the regional groundwater remedy, although our ultimate liability, if any, in connection with this matter cannot be determined at this time, we have accrued $0.6 million relating to potential liability for both the Omega site and regional groundwater remedies.

Summary of Environmental Reserves

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lodi, New Jersey; Kent, Washington; and other sites are accrued in the consolidated balance sheets. As of September 30, 2013, our aggregate environmental related accruals were $4.2 million, of which $3.4 million was included in accrued liabilities with the remainder included in non-current liabilities. As related to certain environmental matters, except for the Lodi site, the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount. If we had accrued for these matters at the high end of the range of possible outcomes, our accrual would have been $1.5 million higher. These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required, changes in the apportionment of costs among responsible parties and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.

Environmental remediation spending charged to our reserve balance for the quarter ended September 30, 2013 and 2012 was $1.5 million and $0.7 million, respectively, and $3.3 million and $3.1 million for the nine months ended September 30, 2013 and 2012 . In addition, our operating costs relating to environmental compliance charged to expense were $3.4 million for both quarters ended September 30, 2013 and 2012, respectively and $10.0 million and $9.8 million for the nine-month periods ended September 30, 2013 and 2012, respectively. Capital expenditures for environmental matters were $1.3 million and $0.5 million for the quarters ended September 30, 2013 and 2012, respectively and $2.9 million and $1.3 million for the nine-month periods ended September 30, 2013 and 2012, respectively.

Product Warranty

We provide for an estimated amount of product warranty expense at the time revenue is recognized. This estimated amount is provided by product and based on historical warranty experience. In addition, we periodically review our warranty accrual and record any adjustments as deemed appropriate. Warranty expense for the quarter ended September 30, 2013, and accrued warranty cost, included in “accrued liabilities” in the condensed consolidated balance sheets at September 30, 2013 and December 31, 2012, was as follows:

(In millions)	Product Warranties
Balance as of December 31, 2012	$	5.1
Warranty expense	1.9
Deductions and other	(2.1		)
Balance as of June 30, 2013	4.9
Warranty expense	0.3
Deductions and other	—
Balance as of September 30, 2013	$	5.2

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Note 13 — Stock Repurchase Plan

In July 2013, our Board authorized us to repurchase an additional $150 million of our outstanding common stock. As of September 30, 2013 the Company has not repurchased any common stock under this authorization.

In December 2012, our Board authorized us to repurchase up to $50 million of our outstanding common stock (“Repurchase Plan”). During the six-month period ended June 30, 2013 the Company repurchased a total of 1,573,588 shares at a cost of $50 million and completed the December 2012 Repurchase Plan.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

We develop, manufacture, and market lightweight, high-performance composites, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials , adhesives, honeycomb, engineered honeycomb and composite structures, for use in Commercial Aerospace, Space & Defense and Industrial Applications. Our products are used in a wide variety of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive, recreational products and a variety of other industrial applications.

We serve international markets through manufacturing facilities, sales offices and representatives located in the Americas, Asia Pacific, Europe and Russia. We are also an investor in a joint venture in Malaysia, which manufactures composite structures for Commercial Aerospace applications.

Hexcel has two segments, Composite Materials and Engineered Products. The Composite Materials segment is comprised of our carbon fiber, specialty reinforcements, resins, prepregs and other fiber-reinforced matrix materials, and honeycomb core product lines. The Engineered Products segment is comprised of lightweight high strength composite structures, molded components and specialty machined honeycomb product lines.

Net sales for the quarter were $412.3 million, 5.3% higher (4.2% in constant currency) than the $391.6 million reported for the third quarter of 2012. Year to date net sales were 4.6% higher in constant currency. The growth was led by the commercial aerospace market, which accounts for 64% of our year to date sales.

Commercial aerospace sales of $262.0 million increased 11.9% for the quarter (11.5% in constant currency) as compared to the third quarter of 2012 and increased 12.8% (12.4% in constant currency) for the nine-month period as compared to 2012. Combined revenues attributed to new aircraft programs (A380, A350, B787, B747-8) increased over 20% for the quarter versus the same period last year. Sales for Airbus and Boeing legacy aircraft were up over 5% compared to the third quarter of 2012.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were up about 7% in the third quarter compared to the same period last year, and for the first nine months sales are about 2% lower than the same period last year.

Space and Defense sales of $94.4 million were 4.2% higher (2.9% in constant currency) than the third quarter of 2012 and year to date sales were 8.9% higher (8.2% higher in constant currency) than last year’s comparable period. We continue to benefit from participating in a wide range of programs, with rotorcraft sales comprising about 60% of Space & Defense sales for the quarter.

Total Industrial sales of $55.9 million for the third quarter of 2013 were 16.4% lower (19.0% in constant currency) than the third quarter of 2012, and just above the second quarter of 2013. As expected, wind sales were down about 25% in constant currency from the third quarter of 2012, but at the same level as the second quarter of 2013.

Gross margin was 27.2% of net sales for the quarter as compared to 25.3% in the same period last year on higher sales volume, favorable sales mix and continued improvement in operating performance. SG&A expenses were 7.6% higher than the comparable period in 2012 in constant currency, due to additional investment and staffing to support current and future growth. R&T expenses were $10.2 million for the quarter as compared to $8.9 million last year. The higher spending is in line with recent quarters and reflects increased efforts on new product and process developments. Operating income increased from 15.3% in the third quarter of 2012 to 16.7% in the third quarter of 2013, with foreign exchange rates having nominal impact.

Free cash flow (defined as cash provided by operating activities less capital expenditures) generated in the first nine months of 2013 was a source of $62.8 million as compared to a use of $58.4 million for the first nine months of 2012 reflecting lower capital expenditures, lower working capital usage and higher earnings. Cash spent on capital expenditures in the first nine months of 2013 was $133.1 million compared to $208.9 million in 2012. Accrual basis additions to capital expenditures were $121.9 million in the first nine months of 2013 as compared to $174.7 million during the first nine months of 2012. We expect accrual basis capital expenditures to be $180 million to $200 million in 2013, as we expect the pace of our spending to increase from the level of the first nine months.

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Financial Overview

Results of Operations

	Quarter Ended September 30,								Nine Months Ended September 30,
(In millions, except per share data)	2013			2012			% Change		2013			2012			% Change
Net sales	$	412.3		$	391.6		5.3	%	$	1,251.4		$	1,190.9		5.1	%
Net sales change in constant currency							4.2	%							4.4	%
Operating income	69.0			60.0			15.0	%	203.9			194.5			4.8	%
Net income	48.7			39.8			22.4	%	140.8			127.4			10.5	%
Diluted net income per common share	$	0.48		$	0.39				$	1.38		$	1.25

Non-GAAP measures:
Adjusted operating income	$	69.0		$	60.0		15.0	%	$	203.9		$	185.0		10.2	%
As a percentage of net sales	16.7		%	15.3		%			16.3		%	15.5		%
Adjusted net income	$	48.7		$	39.8		22.4	%	$	141.4		$	122.1		15.8	%
Adjusted diluted earnings per share	$	0.48		$	0.39				$	1.39		$	1.20

The Company’s performance measurements include operating and net income adjusted for special items, both of which are non-GAAP measures. Management believes these non-GAAP measurements are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results. Special items represent significant charges or credits that are important to understanding Hexcel’s overall operating results in the periods presented. Such non-GAAP measurements are not recognized in accordance with generally accepted accounting principles and should not be viewed as an alternative to GAAP measures of performance. The following is a reconciliation from GAAP to non-GAAP amounts.

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions)	2013		2012		2013		2012
Operating income	$	69.0	$	60.0	$	203.9	$	194.5
Other operating (income) (a)	—		—		—		(9.5		)
Adjusted operating income	$	69.0	$	60.0	$	203.9	$	185.0

Net income	$	48.7	$	39.8	$	140.8	$	127.4
Other operating (income), net of tax (a)	—		—		—		(6.0		)
Non-operating expense, net of tax (b)	—		—		0.6		0.7
Adjusted net income	$	48.7	$	39.8	$	141.4	$	122.1

(a) Other operating income for the nine months ended September 30, 2012 includes income from a $9.6 million business interruption insurance settlement related to a prior year claim, a $4.9 million gain on the sale of land from a previously closed manufacturing facility and a $5.0 million charge for additional environmental reserves primarily for remediation of a manufacturing facility sold in 1986.

(b) Non-operating expense in 2013 is the accelerated amortization of deferred financing costs related to our previous senior secured credit facility and the recognition of the deferred expense on related interest rate swaps. Non-operating expense in 2012 is the accelerated amortization of deferred financing costs and expensing of the call premium from redeeming $73.5 million in June 2012 of the Company’s 6.75% senior subordinated notes.

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Net Sales

The following table summarizes net sales to third-party customers by segment and end market for the quarters and nine months ended September 30, 2013 and 2012:

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2013		2012		% Change		2013		2012		% Change
Consolidated Net Sales	$	412.3	$	391.6	5.3	%	$	1,251.4	$	1,190.9	5.1	%
Commercial Aerospace	262.0		234.1		11.9	%	800.9		709.9		12.8	%
Space & Defense	94.4		90.6		4.2	%	287.1		263.6		8.9	%
Industrial	55.9		66.9		(16.4	)%	163.4		217.4		(24.8	)%

Composite Materials	$	312.6	$	299.9	4.2	%	$	962.1	$	932.8	3.1	%
Commercial Aerospace	191.2		164.3		16.4	%	593.6		516.2		15.0	%
Space & Defense	67.6		68.7		(1.6	)%	210.7		199.8		5.5	%
Industrial	53.8		66.9		(19.6	)%	157.8		216.8		(27.2	)%

Engineered Products	$	99.7	$	91.7	8.7	%	$	289.3	$	258.1	12.1	%
Commercial Aerospace	70.8		69.8		1.4	%	207.3		193.7		7.0	%
Space & Defense	26.8		21.9		22.4	%	76.4		63.8		19.7	%
Industrial	2.1		—		N/M	%	5.6		0.6		833.3	%

Commercial Aerospace : Net sales increased $27.9 million, or 11.9% (11.5% on a constant currency basis), to $262.0 million for the third quarter of 2013. Net sales for the nine months ended September 30, 2013 increased $91.0 million or 12.8% (12.4% on a constant currency basis) to $800.9 million. For the quarter, new aircraft programs (A380, A350, B787, B747-8) increased over 20% versus the same period last year. Airbus and Boeing legacy aircraft related sales for the quarter were up over 5% compared to the third quarter of 2012. Sales to other commercial aerospace, which includes regional and business aircraft customers, were up about 7% compared to the third quarter of 2012.

Space & Defense : Net sales increased $3.8 million, or 4.2% (2.9% on a constant currency basis), to $94.4 million for the third quarter of 2013 with rotorcraft sales comprising about 60% of Space and Defense sales for the quarter. Net sales of $287.1 million for the nine months ended September 30, 2013 increased $23.5 million or 8.9% (8.2% on a constant currency basis), above the prior year level as we continue to benefit from participating in a wide range of programs.

Industrial : Net sales for the third quarter of 2013 decreased $11.0 million, or 16.4% (19.0% on a constant currency basis) as compared to the third quarter of 2012. Net sales for the nine months ended September 30, 2013 decreased $54.0 million or 24.8% (26.0% on constant currency basis) to $163.4 million. Wind sales were down about 25% in constant currency from the third quarter of 2012.

Gross Margin

	Quarter Ended September 30,								Nine Months Ended September 30,
(In millions)	2013			2012			% Change		2013			2012			% Change
Gross margin	$	112.1		$	99.2		13.0	%	$	340.9		$	311.1		9.6	%
Percentage of sales	27.2		%	25.3		%			27.2		%	26.1		%

We achieved a gross margin percentage of 27.2% in both the third quarter and in the first nine months of 2013. The benefit of higher volume combined with favorable mix and good cost control led to the margin growth.

Operating Expenses

	Quarter Ended September 30,								Nine Months Ended September 30,
(In millions)	2013			2012			% Change		2013			2012			% Change
SG&A expense	$	32.9		$	30.3		8.6	%	$	105.7		$	99.4		6.3	%
Percentage of sales	8.0		%	7.7		%			8.4		%	8.3		%

R&T expense	$	10.2		$	8.9		14.6	%	$	31.3		$	26.7		17.2	%
Percentage of sales	2.5		%	2.3		%			2.5		%	2.2		%

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Selling, General and Administrative expenses for the quarter were $32.9 million or 7.6% higher than 2012 in constant currency reflecting added infrastructure to support our growth. Research and Technology expenses were $10.2 million for the quarter as compared to $8.9 million last year. The expected higher spending is in line recent quarters and reflects the increased efforts on new product and process developments. SG&A and R&T costs for the nine months ended 2013 increased 6.3% and 17.2%, respectively, because of the same factors as the quarter.

Operating Income

	Quarter Ended September 30,								Nine Months Ended September 30,
(In millions)	2013			2012			% Change		2013			2012			% Change
Consolidated operating income	$	69.0		$	60.0		15.0	%	$	203.9		$	194.5		4.8	%
Operating margin	16.7		%	15.3		%			16.3		%	16.3		%

Composite Materials	68.7			57.0			20.5	%	207.8			203.7			2.0	%
Operating margin	20.8		%	18.2		%			20.5		%	20.8		%
Engineered Products	14.9			14.9			—	%	43.4			38.4			13.0	%
Operating margin	14.9		%	16.1		%			14.9		%	14.8		%
Corporate & Other	(14.6		)	(11.9		)	(22.7	)%	(47.3		)	(47.6		)	0.6	%

Operating income of $69.0 million or 16.7% of sales for third quarter 2013 increased $9.0 million over the operating income of $60.0 million or 15.3% of sales in the third quarter of 2012. Operating income before adjustments in the nine months ended September 30, 2012 included $9.6 million of insurance proceeds from a 2011 business interruption claim and a $4.9 million gain on the sale of land from a previously closed manufacturing facility that were attributed to the Composites Materials segment. Excluding these items, operating margins for the Composite Materials segment would have been 19.4% for the nine month period in 2012. Operating income for this same period attributed to Corporate & Other included a $5.0 million charge for additional environmental reserves primarily for remediation of a manufacturing facility sold in 1986.

Interest Expense, Net

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2013		2012		% Change		2013		2012		% Change
Interest expense, net	$	1.9	$	2.2	(13.6	)%	$	5.7	$	8.2	(30.5	)%

The decrease in interest expense for the quarter and nine months ended September 30, 2013 was primarily due to lower average borrowing rates as a result of the repayment of the term loan and refinancing of the senior secured credit facility in June 2013.

Provision for Income Taxes

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
Income tax expense	$	18.7		$	18.0		$	57.2		$	58.5
Effective tax rate	27.9		%	31.1		%	29.0		%	31.6		%

The 29.0% effective tax rate for the nine months ended September 30, 2013 is slightly favorable to our expected rate for the year of 30.5%. The third quarter of 2013 included a benefit of $1.8 million from favorable tax return to provision adjustments and the release of reserves for uncertain tax positions. In addition, the nine-month period in 2013 benefitted from the extension of the 2012 and 2013 U.S. Research & Development tax credits that was enacted in January 2013. The full retroactive benefit from 2012 was taken in the first quarter of 2013 for a benefit of $0.6 million.

Financial Condition

Liquidity: As of September 30, 2013, we had cash and cash equivalents of $59.7 million. In June 2013, the Company entered into a new $600 million senior secured revolving credit facility that will mature in five years. The new facility replaces the Company’s previous senior secured credit facility ($82.5 million term loan and a $360 million revolving loan) that would have expired in July 2015. The Facility permits us to issue letters of credit up to an aggregate amount of $40.0 million. The initial interest rate for the revolver is LIBOR + 1.50% through September 30, 2013, and then can range up or down depending upon the leverage ratio. The new initial interest rate is 50 basis points lower than the prior facility, and at the current leverage ratio the new rate would be LIBOR +

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1.25% beginning after covenant compliance reporting is completed for the period ending September 30, 2013. Outstanding letters of credit reduce the amount available for borrowing under our revolving loan. As of September 30, 2013, we had issued letters of credit under the Facility totaling $4.4 million, resulting in undrawn availability under the Facility as of September 30, 2013 of $333.6 million. In addition, we borrowed $4.8 million from the credit line established in China associated with our operations there. Our total debt, net of cash, as of September 30, 2013 was $207.1 million. This represents a decrease of $16.9 million from December 31, 2012. The decrease in debt in the first nine months of 2013 primarily reflects the free cash flow generated of $62.8 million less the $50 million repurchase of stock.

The new facility contains financial and other covenants, including, but not limited to, restrictions on the incurrence of debt and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. In accordance with the terms of the new facility, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA, as defined in the credit agreement, to interest expense) and may not exceed a maximum leverage ratio of 3.50 (based on the ratio of total debt to EBITDA) throughout the term of the new facility. In addition, the new facility contains other terms and conditions such as customary representations and warranties, additional covenants and customary events of default. The new facility is less restrictive than the prior agreement. As of September 30, 2013, we were in compliance with all debt covenants and expect to remain in compliance.

We expect to meet our short-term liquidity requirements (including capital expenditures) through net cash from operating activities, cash on hand and our revolving credit facility. As of September 30, 2013, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until June 2018 when our revolving credit facility expires.

Operating Activities: Net cash provided by operating activities was $195.9 million in the first nine months of 2013, as compared to net cash provided by operating activities of $150.5 million in the first nine months of 2012. Higher net income combined with lower working capital usage were the primary drivers of the higher cash from operating activities. Working capital was a use of $14.4 million in the nine-month period of 2013 and a use of $37.3 million in comparable 2012 period principally reflecting improvement in accounts receivable and lower sales growth.

Investing Activities: Net cash used for investing activities of $133.1 million in the first nine months of 2013 was for capital expenditures as we continue to expand capacity to meet the planned needs of our customers. In 2012, capital expenditures of $208.9 million were partly offset by proceeds of $5.3 million from the sale of land.

Financing Activities: Financing activities used $36.7 million of net cash in the first nine months of 2013 compared with providing $46.9 million in the same period of 2012. In 2013, we borrowed a net $262.0 million from our new revolving credit facility and repaid $250.0 million of our previous credit facility and term loan and repurchased $50.0 million of the Company’s common stock. In 2012, we borrowed $122.0 million from our revolving credit facility which was partly used to redeem the remaining $73.5 million of our 6.75% senior subordinated notes at a call premium of 1.125%.

In June 2013, the Company entered into a new $600 million senior secured revolving credit facility that will mature in five years. As a result of the refinancing, we accelerated certain unamortized financing costs of the credit facility being replaced and the deferred expense on related interest rate swaps incurring a pretax charge of $1.0 million (after tax less than $0.01 per diluted share) in the second quarter of 2013. As a result of the redemption in 2012, we accelerated the unamortized financing costs of the senior subordinated notes being redeemed and expensed the call premium incurring a pretax charge of $1.1 million (after tax of $0.01 per diluted share) in June 2012.

In December 2012, our Board authorized us to repurchase up to $50 million of our outstanding common stock (“Repurchase Plan”). During the six-month period the Company repurchased a total of 1,573,588 shares at a cost of $50 million. On July 22, 2013, the Company’s Board of Directors authorized the repurchase of an additional $150 million of the Company’s common stock. Under the program, the Company may purchase its common stock from time to time in the open market or in privately negotiated transactions. The repurchases will be funded from cash from operating activities and, if needed, the existing credit facilities. The amount and timing of the purchases will depend on a number of factors including the price and availability of shares of common stock, trading volume and general market conditions. There have been no share repurchases under the $150 million authorization.

Fi nancial Obligations and Commitments: As of September 30, 2013, current debt maturities reflect our foreign credit line of $4.8 million. We do not have any other current maturities of debt due in 2013 and we do not have any capital lease obligations. Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

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Critical Accounting Estimates

Our Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors management believes to be relevant at the time our condensed consolidated financial statements are prepared. On a regular basis, management reviews accounting policies, assumptions, estimates and judgments to ensure our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results may differ from our assumptions and estimates, and such differences could be material.

We describe our significant accounting policies and critical accounting estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. There were no significant changes in our accounting policies and estimates since the end of fiscal 2012.

Forward-Looking Statements

Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to future prospects, developments and business strategies. These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “would”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “should”, “will”, and similar terms and phrases, including references to assumptions. Such statements are based on current expectations, are inherently uncertain, and are subject to changing assumptions.

Such forward-looking statements include, but are not limited to: (a) the estimates and expectations based on aircraft production rates made publicly available by Airbus and Boeing; (b) the revenues we may generate from an aircraft model or program; (c) the impact of the possible push-out in deliveries of the Airbus and Boeing backlog and the impact of delays in new aircraft programs or the final Hexcel composite material content once the design and material selection has been completed; (d) expectations of composite content on new commercial aircraft programs and our share of those requirements; (e) expectations of growth in revenues from space and defense applications, including whether certain programs might be curtailed or discontinued; (f) expectations regarding growth in sales for wind energy, recreation and other industrial applications, including whether certain programs might be curtailed or discontinued; (g) expectations regarding working capital trends and expenditures; (h) expectations as to the level of capital expenditures and when we will complete the construction and qualification of capacity expansions; (i) our ability to maintain and improve margins in light of the ramp-up of capacity and the current economic environment; (j) the outcome of legal matters; (k) our projections regarding the realizability of net operating loss and tax credit carryforwards; and (l) the impact of various market risks, including fluctuations in interest rates, currency exchange rates, environmental regulations and tax codes, commodity prices, and in the market price of our common stock; and the impact of the above factors on our expectations of 2013 financial results. In addition, actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to changing market conditions, increased competition, product mix, inability to achieve planned manufacturing improvements and cost reductions, supply chain disruptions and conditions in the financial markets.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. Such factors include, but are not limited to, the following: changes in general economic and business conditions; changes in current pricing and cost levels; changes in political, social and economic conditions and local regulations; foreign currency fluctuations; changes in aerospace delivery rates; reductions in sales to any significant customers, particularly Boeing, EADS or Vestas; changes in sales mix; changes in government defense procurement budgets; changes in military aerospace programs technology; industry capacity; competition; disruptions of established supply channels, particularly where raw materials are obtained from a single or limited number of sources and cannot be substituted by unqualified alternatives; manufacturing capacity constraints; and the availability, terms and deployment of capital.

If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. In addition to other factors that affect our operating results and financial position, neither past financial performance nor our expectations should be considered reliable indicators of future performance. Investors should not use historical trends to anticipate results or trends in future periods. Further, our stock price is subject to volatility. Any of the factors discussed above could have an adverse impact on our stock price. In addition, failure of sales or income in any quarter to meet the investment community’s expectations, as well as broader market trends, can have an adverse impact on our stock price. We do not undertake an obligation to update our forward-looking statements or risk factors to reflect future events or circumstances.

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

There are no material changes in market risk from the information provided in the Company’s 2012 Annual Report on Form 10-K.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of September 30, 2013 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our Chief Executive Officer and Chief Financial Officer have concluded that there have not been any changes in our internal control over financial reporting during the third quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The information required by Item 1 is contained within Note 12 on pages 12 through 14 of this Form 10-Q and is incorporated herein by reference.

ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, which could materially affect our business, financial condition or future results. In addition, future uncertainties may increase the magnitude of these adverse effects or give rise to additional material risks not now contemplated.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c)

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs

July 1 — July 31, 2013	0	$	N/A	0	(1)	$		150,000,000

August — August 31, 2013	0	N/A		0		150,000,000

September 1 — September 30, 2013	0	N/A		0		150,000,000

Total	0	$	N/A	0		$	150,000,000

(1) In July 2013, our Board authorized us to repurchase $150 million of our outstanding common stock. As of September 30, 2013 the Company has not repurchased any additional common stock.

ITEM 5. Other Information

Not applicable

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ITEM 6. Exhibits

Exhibit No.		Description

10.1		Employment and Consulting Agreement between Hexcel Corporation and David E. Berges dated July 30, 2013.

10.2		Offer of Employment between Hexcel Corporation and Nick L. Stanage dated July 22, 2013

10.3		Hexcel Corporation Executive Severance Policy

31.1		Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Hexcel Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related notes.

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Hexcel Corporation


October 21, 2013		/s/ Kimberly Hendricks
(Date)		Kimberly Hendricks
		Vice President, Corporate Controller and
		Chief Accounting Officer

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EXHIBIT INDEX

Exhibit No.		Description

10.1		Employment and Consulting Agreement between Hexcel Corporation and David E. Berges dated July 30, 2013.

10.2		Offer of Employment between Hexcel Corporation and Nick L. Stanage dated July 22, 2013

10.3		Hexcel Corporation Executive Severance Policy

31.1		Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Hexcel Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related notes.

Exhibit 10.1

EMPLOYMENT AND CONSULTING AGREEMENT

THIS AMENDED AND RESTATED AGREEMENT (this “ Agreement ”) between Hexcel Corporation, a Delaware corporation (the “ Company ”), and David E. Berges (the “ Executive ”), is dated July 30, 2013 (the “ Effective Date ”), and amends and restates the Amended and Restated Employment Agreement dated December 31, 2008 (the “ Previous Agreement ”).

WHEREAS, immediately prior to the Effective Date, the Executive was employed by the Company and served as Company’s Chief Executive Officer and the Chairman of the Company’s Board of Directors (the “ Board ”) under the Previous Agreement which expires on July 30, 2014;

WHEREAS, the Company and the Executive would like the Executive to transition to the role of Executive Chairman of the Board effective as of the Effective Date and to retire from his employment with the Company effective as of December 31, 2013 (the “ Retirement Date ”);

WHEREAS, the Company desires to facilitate an orderly transition of the Executive’s responsibilities, and to retain the benefit of the Executive’s knowledge, judgment, and expertise for a fixed consulting period from January 1 through December 31, 2014;

WHEREAS, in addition, the Company desires and the Executive agrees to extend the period of non-competition for an additional year; and

WHEREAS, in connection with the foregoing, the Company and the Executive wish to amend and restate the Previous Agreement;

NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

1. EMPLOYMENT. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to serve the Company as an employee, on the terms and conditions set forth in this Section 1.

(a) TERM; RETIREMENT. The Executive shall be employed by the Company hereunder through the Retirement Date, unless the Executive’s employment is early terminated by the Company or the Executive in accordance with Section 2 (the period commencing on the Effective Date and ending on the earlier of the Date of Termination (as defined in Section 2(f)) and the Retirement Date, the “ Employment Period ”). Effective as of the end of the Retirement Date, the Executive shall terminate his employment with the Company by reason of his retirement and resign from the Board and from his positions as a director or executive officer of any of the Company’s subsidiaries.

(b) POSITION AND DUTIES. During the Employment Period, the Executive shall serve as Executive Chairman of the Board and shall have such responsibilities, duties and authorities consistent with such position and as may from time to time be assigned to the Executive by the Board. The Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company; provided , however , that the Executive will be permitted to serve as a director to other for-profit and not-for-profit organizations and corporations so long as (a) such service does not materially interfere with the performance of his obligations hereunder and (b) such organizations and corporations are not competitive in

any business area in which the Company is engaged during the Employment Period as may be determined by the Company. The Executive has furnished to the Company a list of each such entity prior to the Effective Date and shall update such list as appropriate.

(c) PLACE OF PERFORMANCE. In connection with the Executive’s employment by the Company, the Executive shall perform his duties and conduct his business, and his principal place of employment shall be, at the principal executive offices of the Company, except for required travel on the Company’s business. COMPENSATION AND RELATED MATTERS.

(i) SALARY. During the Employment Period, the Company shall pay to the Executive an annual base salary at a rate of $1,023,750 (the “ Base Salary ”). The Base Salary shall be paid in substantially equal installments, no less frequently than monthly, in accordance with the Company’s standard payroll practices.

(ii) ANNUAL BONUS. In respect of calendar year 2013, the Executive shall participate in the Company’s Management Incentive Compensation Plan (the “ MICP ”) and shall have the target bonus opportunity and maximum bonus opportunity thereunder determined by the Compensation Committee of the Board (the “ Committee ”) and communicated to the Executive in January 2013.

(iii) TRANSITION BONUS. In consideration for the Executive’s continued employment by the Company as Executive Chairman of the Board and for the Executive’s assistance in facilitating an orderly transition of the duties and responsibilities of the Chief Executive Officer of the Company to the Executive’s successor (the “ Successor ”), the Executive will be eligible to receive a transition bonus (the “ Transition Bonus ”) equal to $1,000,000. The Executive will be entitled to receive the Transition Bonus only if (A) the Executive remains employed by the Company as Executive Chairman of the Board through the Retirement Date and (B) the Committee, acting reasonably and in good faith, determines at its regularly scheduled meeting in January 2014 that the Executive has used his best efforts to achieve the Transition Objectives (as defined below), and, if the foregoing conditions are met, the Transition Bonus will be paid to the Executive as soon as practicable but in no event later than ten (10) days following the date of the Committee’s first regularly scheduled meeting in January 2014. For purposes of this Agreement, “ Transition Objectives ” shall mean as requested by the successor CEO or the Board (1) supporting communication of the leadership transition throughout the Company, (2) transitioning key customer relationships, (3) transitioning relationships with investors and the financial community, (4) facilitating the Successor’s evolving relationship with the Board, (5) facilitating the Successor’s introduction to the specialized responsibilities of the Board committees, (6) advising with respect to organizational changes, (7) transitioning decision-making on key projects, including mergers and acquisitions, finance and capital investments, to the Successor and (8) transitioning the leadership role of the Hexcel Leadership Team to the Successor.

(iv) OTHER BENEFITS. During the employment Period, the Company and the Executive have entered into the Amended and Restated Supplemental Executive Retirement Agreement effective as of December 31, 2008 (the “ SERP ”). The Executive shall be entitled to participate in all other employee benefit plans and arrangements of the Company applicable to, and on a basis no less favorable than, senior level executives (including, without limitation, medical, dental, vision, hospitalization, life insurance, short- term disability, long-term disability, accidental death and dismemberment protection and travel accident insurance plans), except that the Executive shall not participate in the perquisites program for executives.

(v) VACATIONS. The Executive shall be entitled to six weeks of vacation in calendar year 2013, which shall be inclusive of all vacation taken by the Executive in calendar 2013 prior to the Effective Date. Executive shall forego any carryover vacation accruals as of the Retirement Date.

(vi) EXPENSES. During the term of the Executive’s employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all reasonable and customary expenses incurred by the Executive in performing services hereunder, including but not limited to all reasonable and customary expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

(d) DIRECTORSHIPS/OTHER OFFICES. The Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of any of the Company’s subsidiaries and in one or more executive offices of any of the Company’s subsidiaries, provided that the Executive is indemnified for serving in any and all such capacities on a basis no less favorable than is from time to time provided by the Company or any of its subsidiaries to its other directors and senior executive officers.

(e) INDEMNIFICATION. Notwithstanding any other provision of this Agreement to the contrary, during the Employment Period and upon the Executive’s termination of employment hereunder for any reason, the Company shall take such action necessary and appropriate to provide that the Executive’s rights to indemnification from the Company as provided by applicable law, by the Company’s charter and by-laws and by any agreement between the Company and the Executive shall not be affected in any manner adverse to the Executive and shall be continued in full force and effect for a period of at least six years following such termination of employment.

2. TERMINATION OF EMPLOYMENT. Unless earlier terminated in accordance with the provisions of this Section 2, the Executive’s employment hereunder shall terminate by reason of his retirement effective as of the Retirement Date. The Executive’s employment hereunder may be terminated prior to the Retirement Date without any breach of this Agreement only under the following circumstances:

(a) DEATH. The Executive’s employment hereunder shall terminate upon his death.

(b) DISABILITY. If the Executive is unable, due to physical or mental incapacity, to substantially perform his full time duties and responsibilities of employment under Section 1 of this Agreement for a period of three consecutive months (as determined by a medical doctor selected by Company and Executive) the Company may terminate the Executive’s employment hereunder for “ Disability ”. If the parties cannot agree on a medical doctor for purposes of such determination of Disability, each party shall select a medical doctor and the two doctors shall select a third who shall be the approved medical doctor for this purpose.

(c) TERMINATION BY THE COMPANY. The Company may terminate the Executive’s employment hereunder (i) without Cause or (ii) for Cause. For purposes of this Agreement, “ Cause ” shall mean (A) the willful and continued failure by the Executive to substantially perform his duties with the Company (other than any such failure resulting from the Executive’s incapability due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by the Executive for Good Reason), after demand

for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes that the Executive has not substantially performed his duties, or (B) the willful engaging by the Executive in misconduct which is demonstrably and materially injurious to the Company, monetarily or otherwise (including, but not limited to, conduct that constitutes a violation of Section 7 hereof). No act, or failure to act, on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause without (1) reasonable notice from the Board to Executive setting forth the reasons for the Company’s intention to terminate for Cause, (2) delivery to the Executive of a resolution duly adopted by the affirmative vote of two-thirds or more of the members of the Board then in office (excluding the Executive) at a meeting of the Board called and held for such purpose, finding that in the good faith opinion of the Board, the Executive was guilty of the conduct set forth in this section and specifying the particulars thereof in detail, (3) an opportunity for the Executive, together with his counsel, to be heard before the Board and (4) delivery to the Executive of a Notice of Termination from the Board specifying the particulars thereof in detail.

(d) TERMINATION BY THE EXECUTIVE. The Executive may terminate his employment hereunder for (i) Good Reason or (ii) upon no less than thirty (30) days’ notice, without Good Reason. For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of any of the following events without the Executive’s consent; provided , that if such occurrence has not resulted in a material negative change (within the meaning of Section 1.409A-1(n)(2)(i) of the Treasury Regulations or any successor provision) to the Executive in his service relationship with the Company then such occurrence shall not constitute Good Reason:

(A) a material diminution in the Executive’s position, duties, responsibilities or authority as Executive Chairman of the Board (except during periods when the Executive is unable to perform all or substantially all of his duties on account of illness (either physical or mental) or other incapacity);

(B) a material reduction in the Executive’s annual rate of Base Salary as set forth in Section 1(d)(i) of this Agreement or as the same may be increased from time to time;

(D) a change in the reporting structure so that the Executive reports to someone other than the Board;

(E) failure by the Company to continue in effect any compensation plan in which the Executive participates which is material to the Executive’s total compensation, unless an equitable arrangement (embodied in an ongoing substitute plan) has been made with respect to such plan, or failure by the Company to continue the Executive’s participation therein (or in such substitute plan) on a basis not materially less favorable to the Executive including, without limitation, his target and maximum annual bonus opportunities provided in Section 1(d)(ii);

(F) failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which the

Executive was participating (except for across-the-board changes similarly affecting all senior executives of Company and all senior executives of any Person in control of Company), or failure by the Company to provide the Executive with six weeks of paid vacation in calendar year 2013 (including for this purpose all vacation taken by the Executive in calendar year 2013 prior to the Effective Date);

(G) failure by the Company to provide facilities or services which are reasonably necessary for the performance of the Executive’s duties or responsibilities or the exercise of his authority;

(H) failure of any successor (whether direct or indirect, by purchase of stock or assets, merger, consolidation or otherwise) to the Company to assume the Company’s obligations hereunder or failure by the Company to remain liable to the Executive hereunder after such assumption;

(I) any termination by the Company of Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of a Notice of Termination contained in this Agreement; or

(J) the relocation of the Executive’s principal place of employment to a location more than fifty (50) miles from the Executive’s principal place of employment as of the date hereof.

There shall be no termination for Good Reason without written notice from the Executive within 30 days following his knowledge of the circumstances giving rise to Good Reason describing the basis for the termination and the Company’s having 30 days in which to cure. Notwithstanding the foregoing, there shall be no termination for Good Reason unless the Executive gives Notice of Termination within thirty days after the initial occurrence of the circumstances giving rise to Good Reason.

(e) NOTICE OF TERMINATION. Any termination of the Executive’s employment by the Company or by the Executive (other than a termination by reason of death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 9 hereof. For purposes of this Agreement, a “ Notice of Termination ” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

(f) DATE OF TERMINATION. “ Date of Termination ” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death, (ii) if the Executive’s employment is terminated pursuant to subsection (b) above, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30)-day period), (iii) if the Executive’s employment is terminated pursuant to subsection (c) above, the date specified in the Notice of Termination, (iv) if the Executive’s employment is terminated pursuant to subsection (d)(i) above, the date on which the Company’s cure period expires if the circumstances giving rise to Good Reason have not been cured as of such date, and (v) if the Executive’s employment is terminated pursuant to subsection (d)(ii) above, the date specified in the Notice of Termination, but in no event less than thirty (30) days after the Notice of Termination is given; provided , however , that if the date of the Executive’s “separation from service” (as that term is defined in Section 1.409A-1(h) of the Treasury Regulations or any successor provision) is different than the date as determined in

accordance with (i) through (v) above, as applicable, the date of the Executive’s “separation from service” shall be the “Date of Termination” for all purposes under this Agreement.

3. COMPENSATION UPON CERTAIN EVENTS. Upon the termination of the Executive’s employment with the Company on or prior to December 31, 2013, the Executive shall be entitled to the applicable payments and benefits set forth in this Section 3. Unless otherwise specified, all payments pursuant to this Section 3 shall be paid to the Executive, or the Executive’s legal representative in the event of his death, no later than ten (10) days following the Date of Termination or the Retirement Date, as applicable.

(a) ANY TERMINATION OF EMPLOYMENT. If the Executive’s employment with the Company is terminated for any reason, in addition to the amounts and benefits provided pursuant to the remainder of this Section 3, the Company shall pay or provide to the Executive (i) any fully earned but unpaid performance bonus for completed performance periods, subject to any deferral election that the Executive has made with respect to such amounts, (ii) any expense reimbursements owed to the Executive by the Company and (iii) all compensation and benefits that are due to the Executive under the terms of the Company’s compensation and benefit plans, programs and arrangements in accordance with the terms of such plans, programs and arrangements.

(b) DISABILITY. If the Executive’s employment with the Company is terminated by reason of the Executive’s Disability, then (i) the Executive shall receive disability benefits in accordance with the terms of the long-term disability program then in effect for senior executives of the Company, (ii) the Company shall pay to the Executive his Base Salary through the end of the month immediately preceding the month in which such disability benefits commence and (iii) the Company shall pay to the Executive a bonus for calendar year 2013 equal to the Executive’s bonus as determined under the MICP for such year multiplied by a fraction, the numerator of which is the number of days during such year that the Executive was employed by the Company and the denominator of which is 365 (the “ Pro Rata Bonus ”).

(c) DEATH. If the Executive’s employment with the Company is terminated by reason of the Executive’s death, then the Company shall pay to the Executive’s legal representative (i) the Executive’s accrued but unpaid Base Salary through the Date of Termination (the “ Earned Salary ”) and (ii) the Pro Rata Bonus.

(d) BY THE COMPANY FOR CAUSE; BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. If the Executive’s employment with the Company is terminated by the Company for Cause or by the Executive other than for Good Reason, then the Company shall pay the Executive the Earned Salary.

(e) BY THE COMPANY OTHER THAN FOR DISABILITY OR CAUSE; BY THE EXECUTIVE FOR GOOD REASON. If the Executive’s employment with the Company is terminated by the Company other than for Disability or Cause or by the Executive for Good Reason, then the Company shall pay the Executive:

(i) the Earned Salary;

(ii) the Pro Rata Bonus;

(iii) within two business days following the Date of Termination, a cash lump sum equal to the product of (A) two and (B) the sum of (1) the annual Base Salary rate in effect

for the Executive immediately preceding the Date of Termination, disregarding any reduction in annual Base Salary which constitutes Good Reason hereunder and (2) the average of the last three annual bonus amounts awarded to the Executive under the MICP; and

(iv) for the twenty-four (24) month period immediately following the Date of Termination, the Executive shall continue to participate in all medical, dental, hospitalization, life insurance and other welfare plans and programs, in each case in which he was participating on the Date of Termination (or, if any such plan or program does not permit his participation, the Company shall provide the Executive with the economic equivalent on an after-tax basis). Benefits or payments otherwise receivable by the Executive pursuant to this Section 3(e)(iv) shall be reduced to the extent benefits of the same type are received by or made available to the Executive by a subsequent employer during the twenty-four (24) month period following the Date of Termination (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive).

(f) BY REASON OF RETIREMENT. If the Executive’s employment with the Company is terminated effective as of the Retirement Date by reason of the Executive’s retirement, then the Company shall pay the Executive the Earned Salary and the Executive’s bonus as determined under the MICP for calendar year 2013.

(g) CHANGE IN CONTROL.

(i) IN GENERAL. If the Executive’s employment with the Company is terminated by the Company other than for Disability or Cause, or by the Executive for Good Reason, in either case within two years following a Change in Control, then the Executive shall receive the payments and benefits set forth in Section 3(e) above, except that the two times multiplier set forth in Section 3(e)(iii) shall be increased to three and the 24-month benefit continuation period set forth in Section 3(e)(iv) above shall be extended to 36 months.

(ii) POTENTIAL CHANGE IN CONTROL. If the Executive’s employment with the Company is terminated by the Company other than for Disability or Cause, or by the Executive for Good Reason, in either case, during the period of a Potential Change in Control or at the request of a Person who, directly or indirectly, takes any action designed to cause a Change in Control, then the Company shall make payments and provide benefits to the Executive under this Agreement as though a Change in Control had occurred immediately prior to such termination of employment. A “ Potential Change in Control ” shall exist during the period commencing at the time the Company enters into any agreement or arrangement which, if consummated, would result in a Change in Control and ending at the time such agreement or arrangement either (A) results in a Change in Control or (B) terminates, expires or otherwise becomes of no further force or effect.

(h) DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings:

(i) “ Change in Control ” shall mean the occurrence of any one of the following events:

(A) any Person is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of either (1) the combined fair market value of the then outstanding stock of the Company (the “ Total Fair Market Value ”) or (2) the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company

(the “ Total Voting Power ”); excluding, however, the following: (I) any acquisition by the Company or any of its Affiliates, (II) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Affiliates, (III) any Person who becomes such a Beneficial Owner in connection with a transaction described in the exclusion within paragraph (D) below and (IV) any acquisition of additional stock or securities by a Person who owns more than 50% of the Total Fair Market Value or Total Voting Power of the Company immediately prior to such acquisition; or

(B) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company that, together with any securities acquired directly or indirectly by such Person within the immediately preceding twelve-consecutive month period, represent 40% or more of the Total Voting Power of the Company; excluding, however, any acquisition described in subclauses (I) through (IV) of subsection (A) above; or

(C) a change in the composition of the Board such that the individuals who, as of the original effective date of this Agreement, constitute the Board (such individuals shall be hereinafter referred to as the “ Incumbent Directors ”) cease for any reason to constitute at least a majority of the Board; provided , however , for purposes of this definition, that any individual who becomes a director subsequent to such effective date, whose election, or nomination for election by the Company’s stockholders, was made or approved by a vote of at least a majority of the Incumbent Directors (or directors whose election or nomination for election was previously so approved) shall be considered an Incumbent Director; but, provided , further , that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person or legal entity other than the Board shall not be considered an Incumbent Director; provided finally , however, that, as of any time, any member of the Board who has been a director for at least twelve consecutive months immediately prior to such time shall be considered an Incumbent Director for purposes of this definition, other than for the purpose of the first proviso of this definition; or

(D) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company or a sale or other disposition of all or substantially all of the assets of the Company (“ Corporate Transaction ”); excluding, however, such a Corporate Transaction (A) pursuant to which all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the outstanding Common Stock of the Company and Total Voting Power immediately prior to such Corporate Transaction will Beneficially Own, directly or indirectly, more than 50%, respectively, of the outstanding common stock and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Corporate Transaction of the Outstanding Common Stock and Total Voting Power, as the case may be, and (B) immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries);

provided , however , that notwithstanding anything to the contrary in subsections (A) through (D)

above, an event which does not constitute a change in the ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Section 1.409A-3(i)(5) of the Treasury Regulations (or any successor provision), shall not be considered a Change in Control for purposes of this Agreement.

(ii) “ Affiliate ” of any Person shall mean any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

(iii) “ Beneficial Owner ” shall have the meaning used in Rule 13d-3 promulgated under the Exchange Act. “ Beneficially Own ” shall have a correlative meaning.

(iv) “ Control ” shall have the meaning specified in Rule 12b-2 under the Exchange Act as in effect on the date of this Agreement.

(v) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

(vi) “ Person ” shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and used in Section 13(d) and 14(d) of the Exchange Act.

4. EXCISE TAX.

(a) MODIFIED GROSS-UP. It shall be determined whether this Section 4(a) applies prior to any determination pursuant to Section 4(b) hereof. This Section 4(a) shall apply if “Total Payments” (as defined in Section 4(a)(i)) are equal to or exceed one-hundred-and-ten percent (110%) of the “Safe Harbor Amount”. The “ Safe Harbor Amount ” is the amount to which the Total Payments would hypothetically have to be reduced so that no portion of the Total Payments would be subject to the Excise Tax (as defined in Section 4(a)(i)).

(i) If any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive’s termination of employment in respect of a Change in Control, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person (all such payments and benefits, excluding the Gross-Up Payment, being hereinafter referred to as the “ Total Payments ”) will be subject to the excise tax (the “ Excise Tax ”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “ Code ”), the Company shall pay to the Executive an additional amount (the “ Gross-Up Payment ”) such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments.

(ii) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as “parachute payments” (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel (“ Tax Counsel ”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company’s independent auditor (the “ Auditor ”), such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the

Code, (ii) all “excess parachute payments” within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the base amount (within the meaning of Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. If the Auditor is prohibited by applicable law or regulation from performing the duties assigned to it hereunder, then a different auditor, acceptable to both the Company and the Executive, shall be selected. The fees and expenses of Tax Counsel and the Auditor shall be paid by the Company. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

(iii) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments.

(b) VALLEY. This Section 4(b) shall apply only if it has been previously determined that Section 4(a) hereof does not apply. This Section 4(b) shall then apply if the “Total Payments” (as defined in Section 4(b)(i)) would be subject (in whole or part) to the “Excise Tax” (as defined in Section 4(b)(i)) and the Total Payments are less than one-hundred-and-ten percent (110%) of the “Safe Harbor Amount” (as defined in Section 4(a)).

(i) Notwithstanding any other provisions of this Agreement, in the event that any payment, benefit, property or right received or to be received by the Executive in connection with a Change in Control or the Executive’s termination of employment in respect of a Change in Control (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments, benefits, properties and

rights being hereinafter referred to as the “ Total Payments ”) would be subject (in whole or part) to the tax (the “ Excise Tax ”) imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any successor provision (the “ Code ”), then the payments and benefits provided under Section 3(e) hereof (“ Severance Payments ”) which are cash shall first be reduced on a pro rata basis, and the noncash Severance Payments shall thereafter be reduced on a pro rata basis, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax, but only if (A) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payment without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments); provided , however , that the Executive may elect (by waiving the receipt or enjoyment of all or any portion of the noncash Severance Payments at such time and in such manner that the Severance Payments so waived shall not constitute a “payment” within the meaning of Section 280G(b) of the Code) to have the noncash Severance Payments reduced (or eliminated) prior to any reduction of the cash Severance Payments.

(ii) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of tax counsel (“ Tax Counsel ”) reasonably acceptable to the Executive and selected by the accounting firm (the “ Auditor ”) which was, immediately prior to the Change in Control, the Company’s Independent auditor, does not constitute a “parachute payment” within the meaning of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the written opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such reasonable compensation, and (iii) the value of any noncash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. If the Auditor is prohibited by applicable law or regulation from performing the duties assigned to it hereunder, then a different auditor, acceptable to both the Company and the Executive, shall be selected. The fees and expenses of Tax Counsel and the Auditor shall be paid by the Company.

(c) OTHER TERMS. At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions, or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and all such opinions or advice shall be in writing, shall be attached to the statement and shall expressly state that the Executive may rely thereon). If the Executive objects to the Company’s calculations, the Company shall pay to the Executive such portion of the payments as the Executive determines is necessary to result in the proper application of Section 4(a)(i) or 4(b)(i) above. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceeding concerning the existence or amount of liability for Excise Tax with respect to the Total Payments.

(d) PAYMENT TIMING. A Gross-Up Payment payable pursuant to Section 4(a)(i) shall be paid as soon as administratively practicable, but in any event no later than March 15 of the year following the year in which the Change of Control giving rise to such payment occurs.

Any additional Gross-Up Payment payable pursuant to Section 4(a)(iii) and which was not paid by March 15 of the year following the year in which the Change of Control giving rise to such payment occurs (a “ Non-Exempt Gross-Up Payment ”) shall be paid as soon as administratively practicable, but in any event no later than the last day of the Executive’s taxable year next following the taxable year in which the Executive remits the taxes to which such Gross-Up Payment or additional Gross-Up Payment relates.

5. NO MITIGATION. The Company agrees that, if the Executive’s employment with the Company terminates during the term of this Agreement, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company hereunder. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise, except as specifically provided in this Agreement.

6. CONSULTING SERVICES.

(a) CONSULTING PERIOD. If the Executive’s employment with the Company terminates by reason of the Executive’s retirement effective as of the Retirement Date, then the Executive shall serve as a consultant to the Company during the period commencing on January 1, 2014 and ending on December 31, 2014 or such earlier date as is determined by either the Company or the Executive pursuant to this Section 6(a) (the “ Consulting Period ”). The Executive’s service as a consultant may be terminated by either the Company or the Executive for any reason upon thirty (30) days’ prior written notice or by the Company without notice if the Company determines in its reasonable discretion that the Executive has committed the Specified Conduct (the date that the Executive’s service as a consultant actually terminates, the “ Consulting Termination Date ”). For purposes of this Agreement, “ Specified Conduct ” shall mean (i) the willful and repeated failure by the Executive to perform the Services (as defined below) reasonably requested by the Company or (ii) the willful engaging by the Executive in conduct that constitutes a violation of Section 7 hereof.

(b) SERVICES TO BE RENDERED; SUPPLIES, EQUIPMENT AND OPERATING COSTS.

(i) During the Consulting Period, the Executive shall provide services as a consultant to the Company (the “ Services ”), including by providing the Company, upon request, with strategic advice and guidance regarding matters of importance to the Company’s business and by participating in conference calls, reviewing relevant materials, and attending meetings.

(ii) During the Consulting Period, the Company shall not require the Executive to spend on average more than five (5) hours per work week performing the Services without the Executive’s consent and, in any event, the Company and the Executive anticipate that the level of services to be provided by the Executive during the Consulting Period will be no more than twenty percent (20%) of the average level of services performed by the Executive as Chief Executive Officer of the Company and Executive Chairman of the Board, as applicable, during the thirty-six (36) months immediately preceding the Retirement Date.

(iii) During the Consulting Period, the Company will reimburse the Executive for airfare, local transportation, meals and lodging expenses that the Executive reasonably incurs in the course of out-of-town travel specifically requested and approved in advance by the

Company, provided that such expenses are incurred and accounted for in accordance with the Travel and Entertainment Policy for Directors and Executive Officers in effect from time to time.

(iv) Except as otherwise provided in Section 6(b)(iii) or in this Section 6(b)(iv), as a self-employed independent contractor, the Executive (A) will retain control over the manner and means by which the Executive provides the Services, provided that the Company shall determine the objectives of the Services and timeframes for completion of particular projects, (B) will bear the cost of all operating and normal business expenses incurred by the Executive, including the cost of paying any staff, employees or others that the Executive may retain to assist him in the performance of the Services and (C) will provide, at his own cost, all equipment and supplies, computers, software, communications devices or any other supplies or equipment needed to render the Services, except that, for the convenience of the Company and to establish appropriate security of communications with the Company and its employees and affiliates, the Company will furnish the Executive with a Company configured computer and IPhone and technical support to maintain the level of access to Company files and security of communications necessary for the Executive to perform his consulting responsibilities. The Executive will not be required to work any fixed schedule and will set his own hours, subject to deadlines required by the Company. With the exception of in-person meetings that may be scheduled at times that are mutually convenient to the Company and the Executive, the Executive will not be required to work at any particular location.

(c) PAYMENT FOR SERVICES. In consideration for the Services, in lieu of pay, the Company shall grant to the Executive a performance share award (the ‘Award”) with a target grant date fair value of $1,100,000, subject to the terms and conditions of the Hexcel Corporation 2013 Incentive Stock Plan and an award agreement thereunder approved by the Committee. The Award shall be granted in 2014 at the same time as performance share awards are granted to executives of the Company (the “2014 Executive Awards”), and will be earned over a three-year performance period encompassing calendar years 2014, 2015 and 2016 with a payout grid based on achievement of one or more performance metrics determined by the Committee in its discretion as are applicable to the 2014 Executive Awards; provided, that the Executive shall be entitled to receive the shares earned pursuant to the Award (the “Earned Shares”) only if the Executive continues to serve as a consultant pursuant to the terms of this Agreement through December 31, 2014. Notwithstanding the foregoing, if the Executive’s service as a consultant is terminated prior to December 31, 2014 (i) due to the Executive’s death or (ii) by the Company other than by reason of the Executive’s commission of the Specified Conduct, then the Executive or the Executive’s estate as applicable shall be entitled to receive the Earned Shares at the time that such shares are scheduled to be delivered pursuant to the terms of the award agreement.

(d) INDEPENDENT CONTRACTOR RELATIONSHIP. At all times during the Consulting Period, the relationship of the Executive to the Company shall be that of an independent contractor, and nothing herein shall be construed to create or imply any relationship of employer-employee, principal-agent, partnership, joint venture, or other relationship between the Company and the Executive. The Executive shall hold no authority, express or implied, to obligate the Company or make representations on the Company’s behalf and shall make no representation to others to the contrary. Amounts paid to the Executive hereunder will be reported on IRS Form 1099-Misc. The Executive shall be solely responsible for payment of all taxes arising out of his activities in connection with the Services, including, without limitation, federal and state income taxes, self-employment taxes, and any other taxes or business license fees as required ; the Company shall not be responsible for paying any such taxes on the Executive’s behalf. No amount payable hereunder shall be counted for purposes

of calculating or accruing any benefit or service for purposes of any pension, retirement, health, welfare, or other benefit plan or program. The Executive’s performance of the Services will not count toward, and does not and will not make the Executive eligible to participate in, any benefit plan or program in which employees of the Company or its subsidiaries or affiliates participate.

7. NONCOMPETITION/CONFIDENTIAL INFORMATION/COMPANY MATERIALS.

(a) The Executive acknowledges that, as a senior management employee or senior advisor, the Executive has been and will be involved, on a high level, in the development, implementation and management of the Company’s global business plans, including those which involve the Company’s finances, research, marketing, planning, operations, and acquisition strategies. By virtue of the Executive’s position and knowledge of the Company, the Executive acknowledges that his employment by a competitor of the Company represents a serious competitive danger to the Company, and that the use of the Executive’s experience and knowledge about the Company’s business, strategies and plans by a competitor can and would constitute a valuable competitive advantage over the Company. In view of the foregoing, and in consideration of the payments made to the Executive under this Agreement, the Executive covenants and agrees that (i) while an employee of the Company and, if the Executive’s employment is terminated by a Notice of Termination, or by reason of retirement effective on the Retirement Date, and the Company has fulfilled its obligations under this Agreement, then for a period of two years (or three years if the Executive receives payments under Section 3(g) above) after the Date of Termination or the Retirement Date, as applicable, and (ii) during the Consulting Period and for a period of two years after the Consulting Termination Date (clause (i) and (ii) together, the “Restricted Period”), the Executive will not (1) engage, in any capacity, directly or indirectly, including but not limited as director, employee, agent, consultant, manager, executive, owner or stockholder (except as a passive investor holding less than a five percent (5%) equity interest in any enterprise) in any business entity engaged in competition with the business conducted by the Company on the Date of Termination or the Consultancy Termination Date, as applicable, anywhere in the world (the “ Business ”), provided , that these restrictions shall not apply so long as the Executive’s duties and responsibilities for any such business entity do not relate directly or indirectly to the business segment of such business entity which is actually or potentially competitive with the Business, or (2) directly or indirectly solicit any customer of the Company or any employee to terminate employment with the Company, or incite, assist or support any effort to effect a Change in Control of the Company, but this shall not prevent the Executive from voting shares in the Company beneficially owned by him in any transaction constituting a Change in Control. The Company and the Executive agree that, during the Restricted Period, if the Executive wishes to engage in an activity which is prohibited by this Section 7(a), the Executive may request that the Company waive the prohibition imposed by this Section 7(a) in respect of such activity and the Company shall consider such request and shall determine, in its sole discretion, whether to waive the prohibition.

(b) The Executive agrees that all processes, technologies, designs and inventions, including new contributions, improvements, ideas and discoveries, whether patentable or not (collectively “ Inventions ”), conceived, developed, invented or made by the Executive during the Executive’s employment with the Company and during the Consulting Period shall belong to the Company, provided that such Inventions grew out of the Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials. At the request of the Company, the Executive shall (i) promptly disclose such inventions to the Company, (ii)

assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries, (iii) sign all papers necessary to carry out the foregoing, and (iv) give testimony or otherwise take action in support of the Executive’s status as the inventor of such Inventions, in each case at the Company’s expense.

(c) In addition to any obligation regarding Inventions, the Executive acknowledges that the trade secrets and confidential and proprietary information of the Company, its subsidiaries and affiliates, including without limitation:

(i) unpublished information concerning (A) research activities and plans, (B) marketing or sales plans, (C) pricing or pricing strategies, (D) operational techniques, and (E) strategic plans;

(ii) Unpublished financial information, including information concerning revenues, profits and profit margins;

(iii) internal confidential manuals; and

(iv) any “material nonpublic information” as such phrase is used for purposes of the Exchange Act;

all constitute valuable, special and unique information of the Company, its subsidiaries and affiliates. In recognition of this fact, the Executive agrees that he will not disclose any such trade secrets or confidential or proprietary information (except (w) information which becomes publicly available without violation of this Agreement, (x) information of which the Executive, prior to disclosure by the Executive, did not know and should not have known was disclosed to the Executive by a third party in violation of any other person’s confidentiality or fiduciary obligation, (y) disclosure required in connection with any legal process (provided the Executive promptly gives the Company written notice of any legal process seeking to compel such disclosure and reasonably cooperates in the Company’s attempt to eliminate or limit the scope of such disclosure) and (z) disclosure while employed by the Company which the Executive reasonably and in good faith believes to be in or not opposed to the interests of the Company) to any person, firm, corporation, association or other entity, for any reason or purpose whatsoever, nor shall the Executive make use of any such information for the benefit of any person, firm, corporation or other entity except on behalf of the Company, its subsidiaries and affiliates.

8. SUCCESSORS; BINDING AGREEMENT.

(a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 8 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should

die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

9. NOTICE. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

David E. Berges

c/o Hexcel Corporation

Two Stamford Plaza

281 Tresser Blvd.

If to the Company:

Hexcel Corporation

Two Stamford Plaza

281 Tresser Blvd.

Stamford, CT 06902

Attn: Board of Directors

or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

10. CONSTRUCTION; GOVERNING LAW. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the Executive and such officer of the Company as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Connecticut without regard to its conflicts of law principles.

11. VALIDITY. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

12. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

13. DISPUTE RESOLUTION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Stamford, Connecticut, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided , however , that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 7 hereof. The Company shall advance to the Executive all legal fees and expenses incurred by the Executive in seeking to obtain or enforce any right under this Agreement as a result of his termination of employment, including all such fees and expenses incurred in contesting, arbitrating or disputing any action or failure to act by the Company, provided that the Executive shall be required to repay all such amounts to the Company unless the Executive obtains a final determination supporting at least part of his claim and there has been no determination that the balance of his claim was made in bad faith.

14. ENTIRE AGREEMENT; REPRESENTATIONS.

(a) This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled. In the event of any inconsistency between any provision of this Agreement and any provision applicable to the Executive in any plan, program, policy or other agreement of the Company, the provisions of this Agreement shall control to the extent that such provisions of this Agreement are more favorable to the Executive.

(b) The Company represents and warrants that (i) it is fully authorized by its Board or the Committee (and by any person or body whose action is required) to enter into this Agreement and to perform its obligations under it, (ii) the execution, delivery and performance of this Agreement by the Company does not violate any applicable law, regulation, order, judgment or decree or any agreement, plan or corporate governance document of the Company or any agreement among holders of its shares and (iii) upon execution and delivery of this Agreement by the Company and the Executive, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by the inapplicability of equitable remedies in certain circumstances.

(c) The Executive represents and warrants that he is not a party to any agreement or instrument which would prevent him from entering into or performing his duties in any way under this Agreement.

15. SECTION 409A.

(a) The parties intend that each payment and benefit provided under this Agreement shall be exempt from, or in compliance with, Section 409A and the Treasury Regulations thereunder such that there shall be no adverse tax consequences, interest, or penalties as a

result of the payments and benefits, and the parties shall interpret and perform the Agreement in accordance with such intent. The parties agree to modify this Agreement or the timing (but not the amount) of any payment to the extent necessary to comply with Section 409A of the Code and avoid application of any taxes, penalties, or interest thereunder. However, in the event that the amounts payable under this Agreement are subject to any taxes, penalties or interest under Section 409A, the Executive shall be solely liable for the payment of any such taxes, penalties or interest.

(b) The amount of any reimbursements of eligible expenses or in-kind benefits provided to the Executive under this Agreement in one taxable year shall not affect the amount of any reimbursements or in-kind benefits that the Executive may be eligible to receive under this Agreement in any other taxable year, the right to such reimbursements or in-kind benefits shall not be subject to liquidation or exchange for any other benefit, and the reimbursement of an expense incurred by the Executive shall be made on or before the last day of the Executive’s taxable year following the year in which the expense was incurred. The Executive shall be responsible for submitting claims for reimbursement in a timely manner to enable payment within the timeframe provided herein.

(c) The Executive shall be a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code as of the Date of Termination or the Retirement Date, as applicable, and therefore any payments or benefits (i) that constitute “deferred compensation” under Section 409A and the Treasury Regulations, (ii) for which there is no applicable exemption, (iii) that are payable as a result of the Executive’s separation from service and (iv) that would otherwise have been paid or provided to the Executive during the first six (6) months following the Executive’s separation from service shall instead be paid or provided instead to the Executive in a lump sum on the earlier of (x) the date which is six (6) months following the Executive’s separation from service and (y) the date of the Executive’s death, and not before.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

	HEXCEL CORPORATION

	by

	Rob G. Hennemuth


	EXECUTIVE



	David E. Berges

Exhibit 10.2

OFFER OF EMPLOYMENT

Mr. Nickie Lee Stanage

20807 Decatur Street

Cassopolis, Michigan 49031

July 22, 2013

Dear Nick:

With the announced retirement of Mr. David Berges at the end of this year and his stepping down as Chief Executive Officer July 31, 2013, the Board of Directors is pleased to offer you the position as successor Chief Executive Officer, effective August 1, 2013, on new terms of employment as outlined in this offer letter. If the arrangements contemplated in this letter are acceptable to you—and the entire board hopes that you will find it so—please sign and return a copy of this letter to Mr. Rob Hennemuth.

Terms of Employment

(A) Effective August 1, 2013, you shall serve as Chief Executive Officer of the Company and shall have such duties, responsibilities and authority consistent with such position as may, from time to time, be assigned to you by the Board of Directors of the Company. You shall devote substantially all your working time and effort to the business and affairs of the Company, and shall sit on boards or like bodies of other entities only with the consent of the Company’s Board of Directors. Your principal location for performance shall be the Company’s headquarters in Stamford Connecticut.

(B) Your initial base salary will be $775,000 annually, payable in accordance with the Company’s normal payroll cycle. Starting in January 2015, your salary will be reviewed periodically, but not less than annually, and will be subject to change by the Compensation Committee of the Board of Directors.

(C) Your cash bonus target award under the Company’s Management Incentive Compensation Plan (“MICP”) for 2013 and 2014 will be 100% of base salary of $775,000 prorated for the period from the effective date through December 31, 2013 (the target award for the period in 2013 prior to the effective date will be prorated at 85% of your current base salary of $630,284. Your target award after 2014 is subject to the discretion of the Compensation Committee.

(D) Your equity target award in 2014 will be 220% of base salary in value, and thereafter, the target award will be determined by the Company’s Compensation Committee. These and future equity awards will be valued and made in such forms as determined in the discretion of the Compensation Committee.

(E) You shall be entitled to participate in all employee benefit plans and arrangements of the Company applicable to, and on a basis no less favorable than, senior level executives for medical, dental, vision, hospitalization, life insurance, short-term disability, long-term disability, accidental death and dismemberment protection and travel accident insurance plans. You shall not be entitled to participate in any executive perquisites program.

(F) Commencing in 2014, you shall be entitled to six weeks of paid vacation in each calendar year in accordance with the Company’s vacation policy.

(G) The Compensation Committee has designated you an “Executive” pursuant to the Hexcel Corporation Severance Policy adopted and effective August 1, 2013, and the Policy, including its provisions for amending or terminating any benefits conferred thereunder, shall solely govern the terms and conditions applicable to a termination of your employment from the Company, and the following additional provisions applicable to you are hereby incorporated into and made subject to the Policy:

(1) Within ten days following the date of your death while employed by the Company, the Company shall make a lump sum payment in an amount by which (A) the total amount received or to be received by your beneficiary or estate as payment under the basic insurance and any supplementary insurance provided by and at the expense of the Company on the your life is less than (B) the lesser of (I) $1,500,000 and (II) twice the sum of (x) the your annual base salary in effect as of the Date of Termination (as defined in the Policy) and (y) the average of the last three annual bonus amounts awarded to you under the MICP or any successor plan for the last three plan years completed prior to the Date of Termination (however, any bonus award for the plan year during which the Date of Termination occurs shall not be used in computing the average).

(2) A “Good Reason” termination of employment by you shall also include

(i) The relocation of your principal place of employment to a location more than fifty (50) miles from the Company’s Headquarters in Stamford, CT unless part of a relocation of the Company’s Headquarters;

(ii) Failure to elect or reelect you to the position of Chief Executive Officer or removal from such position; or

(iii) A change in reporting such that you no longer report to the Board of Directors.

(3) The multiples that are applicable to determine your severance payments and period of post-employment participation under Sections 4(e)(iii) and (iv) of the Policy shall be a multiple of 2.5 (Change of Control), or a multiple of 1.5 (other than Change of Control).

(H) You acknowledge that, as a senior management employee, you will be involved, on a high level, in the development, implementation and management of the Company’s global business plans, including those which involve the Company’s finances,

research, marketing, planning, operations, and acquisition strategies. By virtue of your position and knowledge of the Company, you acknowledge that your employment by a competitor of the Company represents a serious competitive danger to the Company and that the use of your experience and knowledge about the Company’s business, strategies and plans by a competitor can and would constitute a valuable competitive advantage over the Company. In view of the foregoing, and in consideration of your employment, you covenant and agree that, if your employment is terminated and the Company has fulfilled its obligations under the Policy, for a period of one and one-half years (or two and one-half years if you receive payments under clause (B)(x) of Section 4(e)(iii) of the Policy, you will not (A) engage, in any capacity, directly or indirectly, including but not limited to, director, employee, agent, consultant, manager, executive, owner or stockholder (except as a passive investor holding less than a 5% equity interest in any enterprise) in any business entity engaged in competition with the Business conducted by the Company on the Date of Termination anywhere in the world, or (B) solicit a customer of the Business in violation of clause (A) or solicit any employee to terminate employment with the Company; provided, that you may be employed by a competitor of the Company so long as your duties and responsibilities do not relate directly or indirectly to the business segment of the new employer which is actually or potentially competitive with the Business. The Company (for itself and its officers and directors) and you mutually agree and covenant not to disparage the reputation or character of the other.

(I) You agree that all processes, technologies, designs and inventions, including new contributions, improvements, ideas and discoveries, whether patentable or not (collectively “Inventions”), conceived, developed, invented or made by you prior to the Date of Termination shall belong to the Company, provided that such Inventions grew out of the your work with the Company or any of its subsidiaries or affiliates, are related in any manner to the Business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials. At the request of the Company, you shall (i) promptly disclose such Inventions to the Company, (ii) assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries, (iii) sign all papers necessary to carry out the foregoing, and (iv) give testimony or otherwise take action in support of your status as the inventor of such Inventions, in each case at the Company’s expense.

(J) In addition to any obligation regarding Inventions, you acknowledge that the trade secrets and confidential and proprietary information of the Company, its subsidiaries and affiliates, including without limitation:

(1) unpublished information concerning:

(iv) research activities and plans

(v) marketing or sales plans

(vi) pricing or pricing strategies

(vii) operational techniques, and

(viii) strategic plans;

(2) unpublished financial information, including information concerning revenues, profits and profit margins;

(3) internal confidential manuals; and

(4) any “material inside information” as such phrase is used for purposes of the Securities Exchange Act of 1934, as amended;

all constitute valuable, special and unique information of the Company, its subsidiaries and affiliates. In recognition of this fact, you agrees that you will not disclose any such trade secrets or confidential or proprietary information (except (i) information which becomes publicly available without violation of this offer letter, (ii) information of which you, prior to disclosure by you, did not know and should not have known, was disclosed to you by a third party in violation of any other person’s confidentiality or fiduciary obligation, (iii) disclosure required in connection with any legal process (provided you promptly give the Company written notice of any legal process seeking to compel such disclosure and reasonably cooperate in the Company’s attempt to eliminate or limit the scope of such disclosure) and (iv) disclosure while employed by the Company which you reasonably and in good faith believe to be in or not opposed to the interests of the Company) to any person, firm, corporation, association or other entity, for any reason or purpose whatsoever, nor shall you make use of any such information for the benefit of any person, firm, corporation or other entity except on behalf of the Company, its subsidiaries and affiliates.

(K) You represent and warrant that:

(1) you have not been subject to any suspension or debarment proceedings, or related investigations, conducted in connection with any actual or suspected violations of any United States Government procurement laws or regulations, and you are not for any other reason ineligible to participate in the discussion, negotiation and entering into of contracts with respect to United States government procurement.

(2) Any misrepresentation by you under this Paragraph K shall be grounds for a “Cause” termination (as defined in the Policy) by the Company, and any equity or cash incentive award granted or payable to you after commencement of employment shall be forfeited and, if previously received by or paid to you, shall be repaid or returned by you (or your legal representatives if applicable) to the Company promptly upon request by the Company.

(L) Notices, demands and all other communications provided for in this offer letter or the Policy shall be in writing and shall be deemed to have been duly given when delivered, if delivered personally, or mailed by United States certified or registered mail, return receipt requested, postage prepaid, and when received if delivered otherwise, addressed as follows:

If to you:

Mr. Nickie Lee Stanage

20807 Decatur Street

Cassopolis, Michigan 49031

If to the Company:

Hexcel Corporation

281 Tresser Blvd.

Stamford, CT 06901-3238

Attn: General Counsel

or to such other address as each may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

(M) By signing this offer letter, you and the Company hereby terminate the Employment and Severance Agreement dated October 28, 2009 (the “Employment Agreement”) except that

(1) The provisions of Section 4(h)(1) of the Employment Agreement (“Modified Gross Up”) shall survive such termination, and references therein to Section 4(h)(2) of the Employment Agreement (“Valley” ) shall be deemed instead to reference Section 4(h) of the Policy (“Valley”), and

(2)Section 4(h) of the Policy (“Valley”) shall apply only if it has previously been determined that Section 4(h)(1) of the Employment Agreement (“Modified Gross Up”) does not apply. Then Section 4(h) (“Valley”) of the Policy shall apply if (A) the “Total Payments” (as defined in Section 4(h)(1) of the Policy) would be subject (in whole or part) to the “Excise Tax” (as defined in Section 4(h)(1) of the Policy), and (B) either (x) the Change in Control with respect to which the Total Payments become subject to the Excise Tax occurs on or before the fifth anniversary of the Effective Date of the Employment Agreement and the Parachute Payments are less than one-hundred-and-ten percent (110%) of the “Safe Harbor Amount” (as defined in Section 4(h)(1) of the Employment Agreement), or (y) the Change in Control with respect to which the Total Payments become subject to the Excise Tax occurs after the fifth anniversary of the Effective Date of the Employment Agreement.

This Paragraph M is intended to provide you with the same benefits that you would have received under Section 4(h) of the Employment Agreement if it had not been terminated, disregarding any contrary terms of the Policy, but after giving effect to the multiples set forth in Paragraph G(3) of this letter.

(N) The validity, interpretation, construction and performance of this offer letter shall be governed by the laws of the State of Connecticut without regard to its conflicts of law principles. It is the desire and intent of the parties that the provisions of Paragraphs H, I and J hereof shall be enforceable to the fullest extent permitted by applicable law or public policy. If any such provision or the application thereof to any person or circumstance shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such provision shall be construed in a manner so as to permit its enforceability to the fullest extent permitted by applicable law or public policy. In any case, the remaining provisions or the application thereof to any person or circumstance other than those to which they have been held invalid or unenforceable shall remain in full force and effect.

(O) Arbitration . Any dispute or controversy arising under or in connection with this offer letter shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in the State of Connecticut, constituting an Employment Dispute Tribunal in accordance with the rules of the American Arbitration Association then in effect. Judgment

may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Paragraphs H, I or J hereof.

Sincerely

HEXCEL CORPORATION

by

Mr. Joel Beckman
On Behalf of the Compensation Committee


EXECUTIVE



Mr. Nickie Lee Stanage

Exhibit 10.3

Adopted by the Board of Directors

July 22, 2013

HEXCEL CORPORATION

EXECUTIVE SEVERANCE POLICY

DATED AUGUST 1, 2013

1. Purpose . This Executive Severance Policy (the “Policy”) has been adopted by the Compensation Committee (the “Committee”) of Hexcel Corporation (the “Company”) effective August 1, 2013. The purpose of the policy is to establish the terms and conditions applicable to a termination of employment of an executive employee who has received an offer letter of employment from the Company that expressly extends the provisions of the Policy to such executive (the “Executive”). The Committee shall have full discretionary authority to interpret and construe the provisions of the Policy and to make determinations pursuant to the Policy. The Committee shall have the authority, in its discretion, to amend or terminate the Policy, but no amendment or termination shall adversely affect any rights that have become vested in the Executive by virtue of the application of the Policy. The Company in writing shall notify the Executive of any such amendment of termination but in no event shall any such amendment or termination be effective as to the Executive earlier than (i) one year after the notice or (ii) two years after the occurrence of a Change in Control (as defined below). The Committee may apply the Policy in a non-uniform manner among Executives and all other Persons affected hereunder.

2. Termination . The Executive’s employment with the Company may be terminated under the following circumstances:

(a) Death . The Executive’s employment shall automatically terminate upon death.

(b) Disability . The Company may terminate the Executive’s employment due to the Executive’s inability, due to physical or mental incapacity, to substantially perform the Executive’s full time duties and responsibilities for a period of ninety out of any consecutive one-hundred eighty days (as determined by a medical doctor selected by Company and Executive) (“Disability”). If the Company and the Executive cannot agree on a medical doctor for purposes of such determination of Disability, each party shall select a medical doctor and the two doctors shall select a third who shall be the approved medical doctor for this purpose.

(c) Cause . The Company may terminate the Executive’s employment hereunder for Cause. The following shall constitute Cause:

(i) the willful and continued failure by the Executive to substantially perform his duties with the Company (other than any such failure resulting from the Executive’s incapability due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by the Executive for Good Reason) after demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes the Executive has not substantially performed his duties; or

(ii) the willful engaging by the Executive in misconduct that is demonstrably and materially injurious to the Company, monetarily or otherwise including, but not limited to, conduct that violates the terms of any non -compete or confidentiality obligations applicable to the Executive. No act, or failure to act, on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause without (A) reasonable notice from the Board of directors of the Company (the “Board”) to the Executive setting forth the reasons for the Company’s intention to terminate for Cause, (B) delivery to the Executive of a resolution duly adopted by the affirmative vote of two-thirds or more of the Board then in office (excluding the Executive if he/she is then a member of the Board) at a meeting of the Board called and held for such purpose, finding that in the good faith opinion of the Board, the Executive was guilty of the conduct herein set forth and specifying the particulars thereof in detail, (C) an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board, and (D) delivery to the Executive of a Notice of Termination from the Board specifying the particulars thereof in detail; or

(iii) a material breach of the terms of the Executive’s employment which the Executive has not cured within 20 days after receipt of notice from the Company that specifically identifies the manner in which the Company believes the Executive has caused such breach.

(d) Good Reason . The Executive may terminate his employment hereunder for Good Reason. For purposes of this Policy, “Good Reason” shall mean termination by the Executive of employment after the initial occurrence of any of the following events without the Executive’s consent, unless such occurrence has not resulted in a material negative change (within the meaning of Section 1.409A-1(n)(2)(i) of the Treasury Regulations or any successor provision) to the Executive in his/her service relationship with the Company:

(i) A material diminution in the Executive’s position, duties, responsibilities or authority (except during periods when the Executive is unable to perform all or substantially all of his duties or responsibilities on account of illness (either physical or mental) or other incapacity);

(ii) A reduction of more than 10% in the Executive’s annual rate of base salary as in effect on the date this Policy becomes applicable to the Executive or as the same may be increased from time to time (except for across-the-board reductions in salary similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company);

(iii) Failure by the Company to continue in effect any compensation plan in which the Executive participates which is material to the Executive’s total compensation, unless an equitable arrangement (embodied in an ongoing substitute plan) has been made with respect to such plan, or failure by the Company to continue the Executive’s participation therein (or in such substitute plan) on a basis not materially less favorable to the Executive;

(iv) Failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company’s retirement, pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating (except for across-the-board changes similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company), or failure by the Company to continue to provide the Executive with the number of weeks of paid vacation each calendar year in accordance with the offer of employment;

(v) Failure by the Company to provide facilities or services which are reasonably necessary for the performance of the Executive’s duties or responsibilities or the exercise of the Executive’s authority;

(vi) Failure of any successor (whether direct or indirect, by purchase of stock or assets, merger, consolidation or otherwise) to the Company to assume the Company’s obligations hereunder or failure by the Company to remain liable to the Executive hereunder after such assumption;

(vii) Any termination by the Company of the Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of a Notice of Termination contained in this Policy; or

(viii) Willful failure to pay the Executive any portion of current or deferred compensation within thirty (30) days of the date such compensation is due.

The Executive’s continued employment shall not constitute consent to, or waiver of rights with respect to, any circumstance constituting Good Reason; provided, however, that the Executive shall be deemed to have waived the Executive’s rights regarding circumstances constituting Good Reason if he shall not have provided the Company a Notice of Termination within ninety (90) days following the Executive’s knowledge of the occurrence of circumstances constituting Good Reason; and provided further, that the Executive shall have no rights with respect to any circumstances constituting Good Reason upon the Company’s remedy of such circumstances within thirty (30) days after its receipt of such notice from the Executive or if the circumstances are based on Cause. Notwithstanding the foregoing, there shall be no termination for Good Reason unless the Executive gives Notice of Termination within two years after the initial occurrence of the circumstances giving rise to Good Reason.

(e) Other Than Death, Disability, Cause or Good Reason . (i) The Company may terminate the Executive’s employment, other than as provided in

Sections (2)(a), (b) or (c) hereof, upon written notice to the Executive and (ii) the Executive may terminate employment with the Company, other than as provided in Section 3(d) hereof, upon written notice to the Company.

(f) Notice of Termination; Date of Termination . Any termin-ation of the Executive’s employment by the Company or by the Executive (other than a termination pursuant to Section 2(a) hereof) shall be communicated by written Notice of Termination to the other party in accordance with Section 7. For purposes of this Policy:

(i) “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Policy relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and

(ii) “Date of Termination” shall mean (A) if the Executive’s employment is terminated pursuant to Section 2(a), the date of death, (B) if the Executive’s employment is terminated pursuant to Section 2(b), thirty days after Notice of Termination is given (provided that the Executive shall not have returned substantially to full-time performance of the Executive’s duties during such thirty day period), (C) if the Executive’s employment is terminated pursuant to Sections 3(c), (d) or (e), the date specified in the Notice of Termination (provided that such date shall not be more than thirty days from the date Notice of Termination is given and, in the case of a termination for Cause, shall not be less than fifteen days from the date Notice of Termination is given), or (D) if the Executive terminates employment and fails to provide written notice to the Company of such termination, the date of such termination; provided, however, that if the date of the Executive’s “separation from service” (as that term is defined in Section 1.409A-1(h) of the Treasury Regulations or any successor provision) is different than the date as determined in accordance with (A) through (D) above, as applicable, the date of the Executive’s “separation from service” shall be the “Date of Termination” for all purposes under this Policy.

4. Compensation Upon Death, Disability or Termination.

(a) If the Executive’s employment with the Company is terminated for any reason, in addition to the amounts and benefits provided pursuant to the remainder of this Section 4, the Company shall pay or provide to the Executive (i) any expense reimbursements owed to the Executive by the Company and (ii) all benefits that are due to the Executive under the terms of the Company’s broad-based benefit plans, programs and arrangements in accordance with the terms of such plans, programs and arrangements.

(b) If the Executive’s employment is terminated by death, the Company shall pay the Executive’s legal representative (i) at the time such payments are due, the Executive’s full base salary through the Date of Termination at the rate in effect at the Date of Termination; and (ii) a bonus for the year in which such termination of employment occurs equal to the Executive’s bonus as determined under the Company’s MICP, or any successor, alternate or supplemental plan (the “Bonus Plan”) for such year multiplied by a fraction, the numerator of which is the number of days during such year that the Executive was

employed by the Company and the denominator of which is 365 (the “Pro-Rata Bonus”), at the time bonuses are customarily paid to senior level executives

(c) If the Executive’s employment with the Company is terminated by reason of the Executive’s Disability, then (i) the Executive shall receive disability benefits in accordance with the terms of the long-term disability program then in effect for senior executives of the Company, and (ii) the Company shall pay to the Executive the Base Salary through the end of the month immediately preceding the month in which such disability benefits commence, and (iii) the Company shall pay the Pro-Rata Bonus to the Executive at the time bonuses are customarily paid to senior level executives.

(d) If the Executive’s employment is terminated by the Company for Cause or by the Executive for other than Good Reason, the Company shall at the time such payments are due pay the Executive the full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given.

(e) If (1) the Company shall terminate the Executive’s employment other than for Disability and other than for Cause or (2) the Executive shall terminate employment for Good Reason, then

(i) the Company shall pay the Executive on the Date of Termination, by wire transfer to the bank account designated by the Executive, the Executive’s full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given (disregarding any reduction in salary rate which would constitute a Good Reason);

(ii) notwithstanding any provision of the Bonus Plan to the contrary, the Company shall pay to the Executive the Pro-Rata Bonus at the time bonuses are customarily paid to senior level executives;

(iii) in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay to the Executive on the Date of Termination, by wire transfer to the bank account designated by the Executive, a cash lump sum equal to the product of (A) the sum of (1) the Executive’s annual base salary in effect at the time the Notice of Termination is given (disregarding any reduction in salary rate which would constitute a Good Reason) and (2) the average of the last three annual bonus amounts awarded to the Executive under the Bonus Plan for the last three plan years completed prior to the Date of Termination (the “Average Annual Bonus,” and (B) (x) if the Date of Termination is within two years after the occurrence of a Change in Control, the number[_#_], or (y) if the termination is not governed by the preceding clause (x), the number [_# ], where the applicable multiples are set forth in the offer letter by reference hereto; and

(iv) the Company shall continue the participation of the Executive for a period of [ # ] years (except if the Date of Termination is within two years after the occurrence of a Change in Control, such period shall be [ # ] years) in all medical, dental, hospitalization, life insurance and other welfare and plans and programs, in each case in which the Executive participated immediately prior to the

Date of Termination, provided that the Executive’s continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Executive’s participation in any such plan or program is barred, the Company shall by other means provide the Executive with benefits equivalent to those which the Executive would otherwise have been entitled to receive under such plans and programs from which the Executive’s continued participation is barred. Any benefits or payments to which the Executive is otherwise entitled under this Section 4(e)(iv) shall be reduced to the extent benefits of the same type are received by, or made available to, the Executive by a subsequent employer during the applicable benefit continuation period following the Date of Termination (and the Executive shall be obligated to notify the Company in writing within ten days after such time as the Executive receives any such benefits, or such time as any such benefits are made available to the Executive). Notwithstanding anything in this Section 4(e)(iv) to the contrary, if and to the extent that any benefits or payments receivable by the Executive under any such plan or program (or in lieu of participation in any such plan or program in which participation is barred) would not be excludible from the Executive’s gross income, and if such non-excludible amounts (other than non-excludible benefits or payments receivable by the Executive under the Company’s medical or health plan during the period of time during which the Executive would be entitled to COBRA continuation coverage under the Company’s medical or health plan if the Executive elected such coverage and paid the applicable premiums (hereinafter “Exempt Medical Benefits”)), in the aggregate, could exceed the applicable dollar limit under Section 402(g)(1)(B) of the Internal Revenue Code of 1986, as amended (the “Code”), for the year in which the Executive’s Date of Termination occurs, and if any such amounts are not otherwise exempt from Section 409A of the Code, then:

(A) if the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code as of the Date of Termination, then any such non-excludible amounts (other than Exempt Medical Benefits) that would otherwise have been paid or provided to the Executive during the first six months following the Date of Termination shall be paid or provided instead to the Executive in a lump sum on the earlier of (x) the date which is six months following the Date of Termination and (y) the date of the Executive’s death, and not before; and

(B) the amount of such benefits or payments (other than Exempt Medical Benefits) receivable by the Executive under any such plan or program in one taxable year shall not affect the amount of benefits or payments Executive may be eligible to receive in any other taxable year, the right to such benefits or payments under any such plan or program shall not be subject to liquidation or exchange for any other benefit, and the reimbursement under any such plan or program of an expense incurred by the Executive shall be made on or before the last day of the Executive’s taxable year following the year in which the expense was incurred. The Executive shall be responsible for submitting claims for reimbursement in a timely manner to enable payment within the timeframe provided herein.

(f) If the Company shall terminate the Executive’s employment other than for Cause, or the Executive shall terminate employment for Good Reason, in either case during the period of a Potential Change in Control or at the

request of a person who, directly or indirectly, takes any action designed to cause a Change in Control, then the Company shall make payments and provide benefits to the Executive under this Policy as though a Change in Control had occurred immediately prior to such termination. A “Potential Change in Control” shall exist during the period commencing at the time the Company enters into any agreement or arrangement which, if consummated, would result in a Change in Control and ending at the time such agreement or arrangement either (i) results in a Change in Control or (ii) terminates, expires or otherwise becomes of no further force or effect.

(g) For purposes of this Policy, a “Change in Control” shall mean the first to occur of the following events:

(1) any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as modified and used in Sections 13(d) and 14(d) of the Exchange Act) (a “Person”) is or becomes the Beneficial Owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of more than 50% of either (A) the combined fair market value of the then outstanding stock of the Company (the “Total Fair Market Value”) or (B) the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company (the “Total Voting Power”); excluding, however, the following: (I) any acquisition by the Company or any of its affiliates, (II) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates, (III) any Person who becomes such a Beneficial Owner in connection with a transaction described in the exclusion within paragraph (4) below and (IV) any acquisition of additional stock or securities by a Person who owns more than 50% of the Total Fair Market Value or Total Voting Power of the Company immediately prior to such acquisition; or

(2) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company that, together with any securities acquired directly or indirectly by such Person within the immediately preceding twelve-consecutive month period, represent 40% or more of the Total Voting Power of the Company; excluding, however, any acquisition described in subclauses (I) through (IV) of subsection (1) above; or

(3) a change in the composition of the Board such that the individuals who, as of the original effective date of this Policy, constitute the Board (such individuals shall be hereinafter referred to as the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a director subsequent to such effective date, whose election, or nomination for election by the Company’s stockholders, was made or approved by a vote of at least a majority of the Incumbent Directors (or directors whose election or nomination for election was previously so approved) shall be considered an Incumbent Director; but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person or legal entity other than the Board shall not be considered an Incumbent Director; provided finally, however, that, as of any time, any member of the Board who has been a

director for at least twelve consecutive months immediately prior to such time shall be considered an Incumbent Director for purposes of this definition, other than for the purpose of the first proviso of this definition; or

(4) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company or a sale or other disposition of all or substantially all of the assets of the Company (“Corporate Transaction”); excluding, however, such a Corporate Transaction (A) pursuant to which all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the outstanding Common Stock of the Company and Total Voting Power immediately prior to such Corporate Transaction will Beneficially Own, directly or indirectly, more than 50%, respectively, of the outstanding common stock and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Corporate Transaction of the Outstanding Common Stock and Total Voting Power, as the case may be, and (B) immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries); provided, however, that notwithstanding anything to the contrary in subsections (1) through (4) above, an event which does not constitute a change in the ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Section 1.409A-3(i)(5) of the Treasury Regulations (or any successor provision), shall not be considered a Change in Control for purposes of this Policy.

(h) Excise Tax .

(1) Valley .

Notwithstanding any other provisions of this Policy, in the event that any payment, benefit, property or right received or to be received by the Executive in connection with a Change in Control or the Executive’s termination of employment in respect of a Change in Control (whether pursuant to the terms of this Policy or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments, benefits, properties and rights being hereinafter referred to as the “ Total Payments ”) would be subject (in whole or part) to the tax (the “ Excise Tax ”) imposed by Section 4999 of the Code, then the payments and benefits provided under Section 4(e) or 4(f) hereof (“ Severance Payments ”) which are cash shall first be reduced on a pro rata basis, and the non-cash Severance Payments shall thereafter be reduced on a pro rata basis, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax, but only if (A) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payment without such reduction

(but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments); provided, however, that the Executive may elect (by waiving the receipt or enjoyment of all or any portion of the noncash Severance Payments at such time and in such manner that the Severance Payments so waived shall not constitute a “payment” within the meaning of Section 280G(b) of the Code) to have the noncash Severance Payments reduced (or eliminated) prior to any reduction of the cash Severance Payments.

(ii) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax (A) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (B) no portion of the Total Payments shall be taken into account which, in the written opinion of tax counsel (“ Tax Counsel ”) reasonably acceptable to the Executive and selected by the accounting firm (the “ Auditor ”) which was, immediately prior to the Change in Control, the Company’s Independent auditor, does not constitute a “parachute payment” within the meaning of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the written opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such reasonable compensation, and (C) the value of any noncash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. If the Auditor is prohibited by applicable law or regulation from performing the duties assigned to it hereunder, then a different auditor, acceptable to both the Company and the Executive, shall be selected. The fees and expenses of Tax Counsel and the Auditor shall be paid by the Company.

(2) Other Terms . At the time that payments are made under this Policy, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions, or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and all such opinions or advice shall be in writing, shall be attached to the statement and shall expressly state that the Executive may rely thereon). If the Executive objects to the Company’s calculations, the Company shall pay to the Executive such portion of the payments as the Executive determines is necessary to result in the proper application of Section 4(h)(1)(i). The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceeding concerning the existence or amount of liability for Excise Tax with respect to the Total Payments.

5. No Mitigation . The Executive shall not be required to mitigate the amount of any payment provided for in this Policy by seeking other employment or otherwise. Except as provided in the third sentence of Section 4(e)(iv) with respect to benefits received by, or made available to, the Executive by a subsequent employer, the amount of any payment or benefit provided for in this Policy shall not be reduced by any compensation earned by the Executive as the result of

employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

6. Binding Policy. This Policy and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided in this Policy, shall be paid to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

7. Notices . Notices, demands and all other communications provided for in this Policy shall be in writing and shall be deemed to have been duly given as provided for in the offer letter.

8. General Provisions . Except as provided in Section 1, no provision of this Policy may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive (or, if applicable, the Executive’s legal representative) and the Company. No waiver by either the Executive or the Company at any time of any breach by the other party of, or compliance with, any condition or provision of this Policy to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Policy or the offer letter. The validity, interpretation, construction and performance of this Policy shall be governed by the laws of the State of Connecticut without regard to its conflicts of law principles.

9. Validity and Enforceability . The invalidity or unenforceability of any provision of this Policy shall not affect the validity or enforceability of any other provision of this Policy, which shall remain in full force and effect.

10. Arbitration . Any dispute or controversy arising under or in connection with this Policy shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in the State of Connecticut, constituting an Employment Dispute Tribunal in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

11. Entire Policy . This Policy and the offer letter is the entire agreement or understanding between the Company and the Executive regarding the subject matter hereof.

12. Remedies . In the event the Company fails to make any payment to the Executive when due, the Executive, in addition to any other remedy available at law or in equity, shall be entitled to interest on such unpaid amounts from the date such payment was due to the date actual payment is received by the Executive, at the legal rate applicable to unpaid judgments. The Company shall pay

to the Executive all legal, audit, and actuarial fees and expenses incurred by the Executive during his lifetime as a result of the termination of employment, including all such fees and expenses incurred in contesting, arbitrating or disputing any action or failure to act by the Company or in seeking to obtain or enforce any right under this Policy or any other plan, arrangement or agreement with the Company, provided that the Executive has obtained a final determination supporting at least part of the Executive’s claim and there has been no determination that the balance of the Executive’s claim was made in bad faith. Notwithstanding the preceding sentence, to the extent the payment of such fees and expenses would constitute compensation or wages for Federal tax purposes, then:

(a) if the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code as of the Date of Termination, then any such fees or expenses that would otherwise have been paid to Executive during the first six months following the Date of Termination shall be paid instead to the Executive in a lump sum on the earlier of (i) the date which is six months following the Date of Termination and (ii) the date of the Executive’s death, and not before; and

(b) the amount of any such fees or expenses paid to the Executive in one taxable year shall not affect the amount of such fees or expenses the Executive may be eligible to receive in any other taxable year, the Executive’s right to any such fees or expenses shall not be subject to liquidation or exchange for any other benefit, and the reimbursement of any such fees or expenses incurred by the Executive shall be made on or before the last day of the Executive’s taxable year following the year in which the fee or expense was incurred. The Executive shall be responsible for submitting claims for reimbursement in a timely manner to enable payment within the timeframe provided herein.

13. Consent to Jurisdiction and Forum . The Executive hereby expressly and irrevocably agrees that any action, whether at law or in equity, permitted to be brought by the Company under this Policy may be brought in the State of Connecticut or in any federal court therein. The Executive hereby irrevocably consents to personal jurisdiction in such court and to accept service of process in accordance with the provisions of the laws of the State of Connecticut. In the event the Company commences any such action in the State of Connecticut or in any Federal court therein, the Company shall reimburse the Executive for the reasonable expenses incurred by the Executive in the appearance in such forum which are in addition to the expenses the Executive would have incurred by appearing in the forum of the Executive’s residence at that time, including but not limited to additional legal fees; provided, however, that to the extent such reimbursement would constitute compensation or wages for Federal tax purposes, such reimbursement shall be subject to the requirements set forth in Sections 12(a) and (b) above.

14. Code Section 409A . The Executive and the Company intend that any payment under this Policy shall, to the extent subject to Section 409A of the Code, be paid in compliance with Section 409A and the Treasury Regulations thereunder such that there shall be no adverse tax consequences, interest, or penalties as a result of the payments, and the Company shall interpret the Policy in accordance with Section 409A and the Treasury Regulations thereunder. The

Executive and the Company agree to modify this Policy or the timing (but not the amount) of any payment to the extent necessary to comply with Section 409A of the Code and avoid application of any taxes, penalties, or interest thereunder. However, in the event that the amounts payable under this Policy are subject to any taxes, penalties or interest under Section 409A, the Executive shall be solely liable for the payment of any such taxes, penalties or interest.

* * * * * *

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Nick L. Stanage, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hexcel Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4. The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

October 21, 2013		/s/ Nick L. Stanage
(Date)		Nick L. Stanage
		President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Wayne Pensky, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hexcel Corporation;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

October 21, 2013		/s/ Wayne Pensky
(Date)		Wayne Pensky
		Senior Vice President and
		Chief Financial Officer

Exhibit 32

CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hexcel Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nick L. Stanage, President and Chief Executive Officer of the Company, and Wayne Pensky, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 21, 2013		/s/ Nick L. Stanage
(Date)		Nick L. Stanage
		President and Chief Executive Officer


October 21, 2013		/s/ Wayne Pensky
(Date)		Wayne Pensky
		Senior Vice President and
		Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Hexcel Corporation and will be retained by Hexcel Corporation and furnished to the Securities and Exchange Commission or its staff upon request.