10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2011

Or

oTransition 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
(Do not check if a smaller reporting company)

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 July 20, 2011
COMMON STOCK	98,353,680

HEXCEL CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)
	·  Condensed Consolidated Balance Sheets — June 30, 2011 and December 31, 2010	3
	·  Condensed Consolidated Statements of Operations — The Quarters and Six Months Ended June 30, 2011 and 2010	4
	·  Condensed Consolidated Statements of Cash Flows — The Six Months Ended June 30, 2011 and 2010	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)	June 30, 2011			December 31, 2010
Assets
Current assets:
Cash and cash equivalents	$	55.9		$	117.2
Accounts receivable, net	207.8			173.9
Inventories, net	207.9			169.9
Prepaid expenses and other current assets	50.8			36.7
Total current assets	522.4			497.7
Property, plant and equipment	1,139.8			1,063.9
Less accumulated depreciation	(502.4		)	(465.6		)
Property, plant and equipment, net	637.4			598.3
Goodwill and intangible assets	56.8			56.2
Investments in affiliated companies	21.6			19.9
Deferred tax assets	62.9			63.6
Other assets	18.3			22.4
Total assets	$	1,319.4		$	1,258.1
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of debt	$	9.3		$	27.6
Accounts payable	108.7			83.0
Accrued liabilities	109.1			95.3
Total current liabilities	227.1			205.9
Long-term debt	242.1			304.6
Other non-current liabilities	73.7			88.2
Total liabilities	542.9			598.7
Stockholders’ equity:
Common stock, $0.01 par value, 200.0 shares authorized, 100.3 and 99.5 shares issued at June 30, 2011 and December 31, 2010, respectively	1.0			1.0
Additional paid-in capital	573.7			552.3
Retained earnings	212.2			148.4
Accumulated other comprehensive income (loss)	14.4			(15.1		)
	801.3			686.6
Less — Treasury stock, at cost, 2.0 and 2.2 shares at June 30, 2011 and December 31, 2010, respectively	(24.8		)	(27.2		)
Total stockholders’ equity	776.5			659.4
Total liabilities and stockholders’ equity	$	1,319.4		$	1,258.1

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 June 30,				Six Months Ended June 30,
(In millions, except per share data)	2011		2010		2011			2010
Net sales	$	353.7	$	305.1	$	685.3		$	568.1
Cost of sales	266.7		226.7		515.3			423.6
Gross margin	87.0		78.4		170.0			144.5
Selling, general and administrative expenses	29.7		29.6		62.6			61.0
Research and technology expenses	7.9		8.3		16.5			15.7
Other operating (income) expense	—		—		(5.7		)	3.5
Operating income	49.4		40.5		96.6			64.3
Interest expense, net	2.9		7.1		7.1			13.7
Non-operating expense	—		—		4.9			—
Income before income taxes and equity in earnings of affiliated companies	46.5		33.4		84.6			50.6
Provision for income taxes	9.3		10.6		21.5			12.1
Income before equity in earnings of affiliated companies	37.2		22.8		63.1			38.5
Equity in earnings of affiliated companies	0.2		0.3		0.7			0.4
Net income	$	37.4	$	23.1	$	63.8		$	38.9
Basic net income per common share:	$	0.38	$	0.24	$	0.65		$	0.40
Diluted net income per common share:	$	0.37	$	0.23	$	0.63		$	0.39
Weighted average common shares outstanding:
Basic	98.6		97.5		98.4			97.4
Diluted	100.7		99.7		100.5			99.6

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)
	Six Months Ended June 30,
(In millions)	2011			2010
Cash flows from operating activities
Net income	$	63.8		$	38.9
Reconciliation to net cash provided by operating activities:
Depreciation and amortization	27.9			25.6
Amortization of debt discount and deferred financing costs and call premium expense	5.9			2.4
Deferred income taxes	6.7			4.2
Equity in earnings from affiliated companies	(0.7		)	(0.4		)
Stock-based compensation	8.8			8.3
Pension curtailment gain	(5.7		)	—
Excess tax benefits on stock-based compensation	(3.6		)	(0.7		)
Changes in assets and liabilities:
Increase in accounts receivable	(25.4		)	(52.3		)
Increase in inventories	(31.5		)	(28.9		)
(Increase) decrease in prepaid expenses and other current assets	(3.1		)	0.4
Increase in accounts payable and accrued liabilities	36.0			36.9
Other-net	(1.8		)	(2.7		)
Net cash provided by operating activities	77.3			31.7
Cash flows from investing activities
Capital expenditures	(67.8		)	(20.1		)
Net cash used for investing activities	(67.8		)	(20.1		)
Cash flows from financing activities
Borrowings from senior secured credit facility	135.0			—
Repayment of 6.75% senior subordinated notes	(150.0		)	—
Repayment of senior secured credit facility	(60.0		)	—
Call premium payment for 6.75% senior subordinated notes	(3.4		)	—
(Repayments) borrowings from credit line	(3.3		)	1.7
Repayment of senior secured credit facility - term loan	(2.5		)	(30.0		)
Capital lease obligations and other debt, net	(0.2		)	(0.2		)
Activity under stock plans	7.4			0.6
Net cash used for financing activities	(77.0		)	(27.9		)
Effect of exchange rate changes on cash and cash equivalents	6.2			(9.8		)
Net decrease in cash and cash equivalents	(61.3		)	(26.1		)
Cash and cash equivalents at beginning of period	117.2			110.1
Cash and cash equivalents at end of period	$	55.9		$	84.0
Supplemental data:
Accrual basis additions to property, plant and equipment	$	55.1		$	13.7

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, 2010 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, 2010 was derived from the audited 2010 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 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 10, 2011.

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.

Note 2 — Net Income per Common Share

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2011		2010		2011		2010
Basic net income per common share:
Net income	$	37.4	$	23.1	$	63.8	$	38.9
Weighted average common shares outstanding	98.6		97.5		98.4		97.4
Basic net income per common share	$	0.38	$	0.24	$	0.65	$	0.40
Diluted net income per common share:
Net income	$	37.4	$	23.1	$	63.8	$	38.9
Weighted average common shares outstanding — Basic	98.6		97.5		98.4		97.4
Plus incremental shares from assumed conversions:
Restricted stock units	0.7		0.9		0.8		1.0
Stock options	1.4		1.3		1.3		1.2
Weighted average common shares outstanding — Dilutive	100.7		99.7		100.5		99.6
Diluted net income per common share	$	0.37	$	0.23	$	0.63	$	0.39

Total shares underlying stock options of 1.1 million for the quarter and six months were excluded from the computation of diluted net income per share for the periods ended June 30, 2011, as they were anti-dilutive. Total shares underlying stock options of 0.9 million for the quarter and 1.2 million for the six months were excluded from the computation of diluted net income per share for the periods ended June 30, 2010, as they were anti-dilutive.

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Note 3 — Other Operating (Income) Expense

Effective January 31, 2011, credited service for the participants in our U.K. plan was frozen.  This resulted in recognizing $5.7 million of prior unrecognized service credits as a curtailment gain and also reduced the projected plan obligation by $1.6 million. The six-month period ended June 30, 2010 included a pre-tax charge of $3.5 million for additional environmental reserves primarily to remediate our former Lodi, New Jersey manufacturing facility that was sold in 1986 (see note 13).

Note 4 — Non-Operating Expense

In February 2011, we redeemed $150 million of our $225 million 6.75% senior subordinated notes at a call premium of 2.25%.  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 $4.9 million.

Note 5 — Inventories, net

(In millions)	June 30, 2011			December 31, 2010
Raw materials	$	83.3		$	71.6
Work in progress	52.3			40.7
Finished goods	96.0			80.4
Total inventories, gross	$	231.6		$	192.7
Inventory allowances	(23.7		)	(22.8		)
Total inventories, net	$	207.9		$	169.9

Note 6 — 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 six months ended June 30, 2011 and 2010 were as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2011		2010		2011		2010
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.3	$	0.5	$	0.6
Interest cost	0.2		0.2		0.5		0.5
Net amortization and deferral	0.3		0.3		0.6		0.4
Net periodic benefit cost	$	0.8	$	0.8	$	1.6	$	1.5

	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.9	$	0.9
Other non-current liabilities	27.7		26.9
Total accrued benefit	$	28.6	$	27.8

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011			2010
European Defined Benefit Retirement Plans
Service cost	$	0.2		$	0.9		$	0.9		$	1.9
Interest cost	1.8			1.9			3.6			3.8
Expected return on plan assets	(2.0		)	(1.6		)	(3.9		)	(3.2		)
Net amortization and deferral	0.1			0.3			0.3			0.6
Curtailment gain	—			—			(5.7		)	—
Net periodic benefit cost	$	0.1		$	1.5		$	(4.8	)	$	3.1

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	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	3.2	$	0.5
Other non-current liabilities	17.8		26.7
Total accrued benefit	$	21.0	$	27.2

As discussed in Note 3, effective January 31, 2011 credited service for the participants in our U.K. defined benefit plan was frozen.  This change reduced the projected plan obligation by $1.6 million and also resulted in recognizing $5.7 million of prior unrecognized service credits as a curtailment gain.  The defined benefit plan was replaced by a defined contribution plan.

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 $0.9 million in 2011 to cover unfunded benefits.  We contributed $0.6 million to our U.S. non-qualified defined benefit retirement plans during the 2010 fiscal year.

We contributed $2.5 million and $1.9 million to our European defined benefit retirement plans in the second quarters of 2011 and 2010, respectively.  Contributions were $3.9 million and $2.7 million for the six months ended June 30, 2011 and 2010, respectively.  We plan to contribute approximately $7.4 million during 2011 to our European plans.  We contributed $9.0 million to our European plans during the 2010 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 six months ended June 30, 2011 and 2010 were immaterial.

(In millions)	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.8	$	0.8
Other non-current liabilities	8.7		8.6
Total accrued benefit	$	9.5	$	9.4

In connection with our postretirement plans, we contributed $0.1 million during each of the second quarters of 2011 and 2010, respectively, and $0.1 million and $0.2 million during the six-month periods ended June 30, 2011 and 2010, respectively.  We periodically fund our postretirement plans to pay covered expenses as they are incurred.  Under the provisions of these postretirement plans, we expect to contribute approximately $0.8 million in 2011 to cover unfunded benefits.  We contributed $0.4 million to our postretirement plans during the 2010 fiscal year.

Note 7 — Debt

(In millions)	June 30, 2011		December 31, 2010
Working capital line of credit — China	$	3.8	$	7.1
Current maturities of capital lease and other obligations	0.5		0.5
Current maturities of term loan	5.0		5.0
Current maturities of 6.75% senior subordinated notes due 2015	—		15.0
Short-term borrowings and current maturities of long-term liabilities	9.3		27.6
Senior secured credit facility — term loan due 2015	90.0		92.5
Senior secured credit facility — revolving loan due 2015	75.0		—
6.75% senior subordinated notes due 2015	75.0		210.0
Capital lease and other obligations	2.1		2.1
Long-term debt	242.1		304.6
Total debt	$	251.4	$	332.2

8

Estimated Fair Values of Notes Payable

The approximate, aggregate fair values of our notes payable as of June 30, 2011 and December 31, 2010 were as follows:

(In millions)	June 30,2011		December 31, 2010
6.75% senior subordinated notes, due 2015	$	77	$	226
Senior secured credit facility — term loan due 2015	95		98

The aggregate fair values of the notes payable were estimated on the basis of quoted market prices.

Note 8 — Derivative Financial Instruments

Interest Rate Swap Agreements

In the fourth quarter 2010, we entered into an agreement to swap $98 million of a floating rate obligation for a fixed rate obligation at an average of 1.03% against LIBOR in U.S. dollars.  The swap is scheduled to mature on March 31, 2014, and was accounted for as a cash flow hedge of our floating rate bank loan. To ensure the swap was highly effective, all the principal terms of the swap matched the terms of the bank loan.  The fair value of the interest rate swap was a liability of $0.2 million at June 30, 2011 and an asset of $0.7 million at December 31, 2010.

Cross — Currency Interest Rate Swap Agreement

In September 2006, we entered into a cross-currency interest rate swap agreement to hedge a portion of our net Euro investment in Hexcel SASU (France).  This agreement is accounted for as a hedge of the foreign currency exposure of a net investment in a foreign operation and to the extent it is effective, gains and losses are recorded as an offset in the cumulative translation account (“CTA”), the same account in which translation gains and losses on the investment in Hexcel SASU are recorded.  All other changes, including any difference in current interest, are excluded from the assessment of effectiveness and are included in operating income as a component of interest expense.  The agreement has a notional value of $63.4 million, a term of five years, and is scheduled to mature on September 20, 2011.  We receive interest in U.S. dollars quarterly and pay interest in Euros on the same day.  U.S. interest is based on the three month LIBOR.  Euro interest is based on the three month EURIBOR.  The fair value of the swap at June 30, 2011 and December 31, 2010 was a liability of $8.5 million and $3.0 million, respectively.  Net credits to interest expense of $0.2 million related to the excluded portion of the derivative were recorded in the second quarter of 2011.  A net credit to interest expense of $0.2 million and a net charge to interest expense of $0.3 million related to the excluded portion of the derivative were recorded in the first six months of 2011 and 2010, respectively.  Net charges to interest expense of $0.2 million and $0.1 million related to the interest coupons were recorded during the second quarters of 2011 and 2010, respectively.  Net charges to interest expense of $0.3 million and $0.2 million related to the interest coupons were recorded during the first six months of 2011 and 2010, respectively.  The net amount of losses included in the CTA adjustment during the second quarter and six-month period of 2011 was $1.5 million and $6.8 million, respectively.  The net amount of gains included in the CTA adjustment during the second quarter and six-month period of 2010 were $6.2 million and $10.6 million, respectively.  The impact of applying prescribed credit risk adjustments was immaterial.

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 December 2013.  The aggregate notional amount of these contracts was $122.0 million and $124.2 million at June 30, 2011 and December 31, 2010, 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 by currency, thereby reducing our exposure to fluctuations in currency exchange rates.  These forward contracts are designated as cash flow hedges of forecasted revenues.  The effective portion of the hedges, gains of $2.7 million and $7.5 million, were recorded in other comprehensive income (“OCI”) for the three months and six months ended June 30, 2011, respectively, and losses of $5.2 million and $10.9 million for the three- and six-month periods ended June 30, 2010, respectively.  We excluded the forward points from the effectiveness assessment and recorded them as a reduction to interest expense of $0.3 million for the quarter and an increase to interest expense of $0.2 million for the six months ended June 30, 2011, and a reduction to interest expense of $0.3 million for the six months ended June 30, 2010. The carrying amount of these contracts was $5.9 million classified as other assets and $0.2 million classified in other liabilities on the Consolidated Balance Sheet at June 30, 2011 and $2.3 million in other assets and $2.6 million classified in other liabilities at December 31, 2010. 

9

During the three months ended June 30, 2011 and 2010, we recognized net gains of $1.8 million and net losses of $2.6 million, respectively, recorded in sales and cost of sales.  During the six months ended June 30, 2011 and 2010, we recognized net gains of $1.3 million and net losses of $4.1 million, respectively, recorded in sales and cost of sales.

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 June 30, 2011 and 2010, we recognized net foreign exchange gains of $2.7 million and net foreign exchange losses of $4.8 million, respectively, in the Consolidated Statements of Operations.  During the six-month periods ended June 30, 2011 and 2010, we recognized net foreign exchange gains of $7.7 million and net foreign exchange losses of $7.7 million respectively, in the Consolidated Statements of Operations.  Asset and liability derivatives not designated as hedging instruments were not material.

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 six months ended June 30, 2011 and 2010 was as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011			2010
Unrealized gains (losses) at beginning of period, net of tax	$	3.8		$	(4.5	)	$	(0.2	)	$	(1.4	)
(Gains) losses reclassified to net sales	(1.5		)	2.0			(1.1		)	3.1
Increase (decrease) in fair value	2.4			(4.2		)	6.0			(8.4		)
Unrealized gains (losses) at end of period, net of tax	$	4.7		$	(6.7	)	$	4.7		$	(6.7	)

As of June 30, 2011, unrealized gains recorded in “accumulated other comprehensive income,” net of tax, were $4.7 million, of which $3.4 million are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.

Note 9 — Income Taxes

The income tax provisions for the quarter and six months ended June 30, 2011 were $9.3 million and $21.5 million, respectively.  The effective tax rate for the quarter and six months ended June 30, 2011 was 20.0% and 25.4%, respectively.  The effective tax rates for the quarter and six months of 2011 reflects the release of $5.5 million of reserves primarily for uncertain tax positions as a result of an audit settlement.  Excluding this benefit, the effective tax rates would have been 31.8% and 31.9% for the current quarter and six-month periods.  The effective tax rate for the quarter and six months ended June 30, 2010 was 31.7% and 23.9%, respectively.  The lower effective rate in the six months of 2010 reflects $3.5 million of New Clean Energy Manufacturing Tax Credits awarded to us in January 2010 for qualifying capital investments incurred at our Colorado facility in 2009.  Excluding this credit, our effective tax rate would have been 30.8%.

Note 10 — Comprehensive Income

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the condensed consolidated statements of operations. The components of comprehensive income for the quarters and six months ended June 30, 2011 and 2010 were as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011		2010
Net income	$	37.4		$	23.1		$	63.8	$	38.9
Currency translation adjustments	6.6			(19.3		)	24.4		(36.5		)
Pension and other postretirement obligations	0.2			0.1			0.9		1.5
Net unrealized (losses) gains on financial instruments	(1.1		)	(2.2		)	4.2		(5.2		)
Comprehensive income (loss)	$	43.1		$	1.7		$	93.3	$	(1.3	)

Note 11 — 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.

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·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 the credit standing of Hexcel when the derivative is in a net liability position.  The fair values of these assets and liabilities were approximately $7.5 million and $9.3 million, respectively, at June 30, 2011.  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 of liability was $0.2 million at June 30, 2011.

·Cross-currency interest rate swap derivative liabilities — valued using LIBOR and EURIBOR yield curves and quoted forward foreign exchange prices at the reporting date. Fair value at June 30, 2011 was a liability of $8.5 million.

·Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date. Fair value of assets and liabilities at June 30, 2011 was $7.5 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 six months ended June 30, 2011 that would reduce the receivable amount owed, if any, to the Company.

·Money market funds — considered available-for-sale, and classified as cash equivalents. Fair value at June 30, 2011 was $10.6 million, the same as book value.

Note 12 — 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.

Financial information for our business segments for the quarters and six months ended June 30, 2011 and 2010 is as follows:

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	(Unaudited)
(In millions)	Composite Materials (a)			Engineered Products		Corporate & Other (b)			Total
Second Quarter 2011
Net sales to external customers:
Commercial aerospace	$	150.9		$	56.9	$	—		$	207.8
Space and defense	62.5			19.2		—			81.7
Industrial	63.4			0.8		—			64.2
Net sales to external customers	276.8			76.9		—			353.7
Intersegment sales	13.9			0.2		(14.1		)	—
Total sales	290.7			77.1		(14.1		)	353.7
Operating income	48.5			11.9		(11.0		)	49.4
Depreciation and amortization	12.8			1.0		—			13.8
Stock-based compensation expense	0.9			0.1		1.4			2.4
Accrual basis additions to capital expenditures	28.4			1.5		—			29.9
Second Quarter 2010
Net sales to external customers:
Commercial aerospace	$	113.9		$	47.1	$	—		$	161.0
Space and defense	60.7			18.7		—			79.4
Industrial	64.3			0.4		—			64.7
Net sales to external customers	238.9			66.2		—			305.1
Intersegment sales	11.5			0.3		(11.8		)	—
Total sales	250.4			66.5		(11.8		)	305.1
Operating income	42.8			10.7		(13.0		)	40.5
Depreciation and amortization	12.7			0.9		—			13.6
Stock-based compensation expense	1.1			0.2		1.3			2.6
Accrual basis additions to capital expenditures	6.2			0.5		0.1			6.8
Six Months Ended June 30, 2011
Net sales to external customers
Commercial aerospace	$	294.1		$	111.3	$	—		$	405.4
Space and defense	122.4			39.0		—			161.4
Industrial	116.6			1.9		—			118.5
Net sales to external customers	533.1			152.2		—			685.3
Intersegment sales	27.8			0.5		(28.3		)	—
Total sales	560.9			152.7		(28.3		)	685.3
Operating income (a)	98.3			24.4		(26.1		)	96.6
Depreciation and amortization	25.7			2.1		0.1			27.9
Stock-based compensation expense	2.5			0.4		5.9			8.8
Other operating (income) expense	(5.7		)	—		—			(5.7		)
Accrual basis additions to capital expenditures	52.7			2.4		—			55.1
Six Months Ended June 30, 2010
Net sales to external customers
Commercial aerospace	$	223.2		$	89.8	$	—		$	313.0
Space and defense	113.8			38.1		—			151.9
Industrial	102.3			0.9		—			103.2
Net sales to external customers	439.3			128.8		—			568.1
Intersegment sales	20.4			0.3		(20.7		)	—
Total sales	459.7			129.1		(20.7		)	568.1
Operating income (b)	73.3			22.1		(31.1		)	64.3
Depreciation and amortization	23.6			1.9		0.1			25.6
Stock-based compensation expense	2.7			0.5		5.1			8.3
Other operating (income) expense	—			—		3.5			3.5
Accrual basis additions to capital expenditures	13.0			0.6		0.1			13.7

(a)First six months 2011 operating income for Composite Materials includes a $5.7 million gain resulting from the curtailment of our U.K. pension plan.

(b)First six months 2010 operating income for Corporate & Other includes a $3.5 million charge to the environmental reserves primarily for remediation at a manufacturing facility sold in 1986.

Goodwill and Intangible Assets

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

(In millions)	June 30, 2011		December 31, 2010
Composite Materials	$	40.8	$	40.1
Engineered Products	16.0		16.1
Goodwill and intangible assets	$	56.8	$	56.2

No impairments have been recorded against these amounts.

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Note 13 — 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 (“RCRA”), and the Toxic Substances Control Act ( “TSCA”) and similar state, federal,  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.  For a number of such sites, we do not currently possess sufficient information to reasonably estimate the amount of liabilities to be recorded.  However, we believe, based on the amount and the nature of our waste, 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 commenced remediation of this site in accordance with an approved plan.  In the first quarter of 2010, we made a decision to enhance the remediation system to accelerate completion of the remediation and the system is currently operating.  The additional cost associated with this enhancement is included in our accrual for this liability, which at June 30, 2011 is $1.9 million.

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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.  In May 2005, the NJDEP 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 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.  Furthermore, the Federal Trustee for natural resources have 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.  Finally, 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.  We expect additional discovery and litigation activities to occur during 2011.  The court has issued a trial plan that contemplates a liability trial for third-party defendants (including Hexcel) in April 2013, with additional proceedings if necessary to allocate costs between third-party defendants in January 2014.  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.  Management has determined that the cost-sharing agreement terminated in December 1998; however, the other party disputes this determination.  The Washington Department of Ecology (“Ecology”) has issued a unilateral Enforcement Order to us requiring us to (a) maintain the interim remedial system and to perform system separation, (b) to conduct a focused remedial investigation and (c) to conduct a focused feasibility study to develop recommended long term remedial measures.  We asserted defenses against performance of the order, particularly objecting to the remediation plan proposed by the previous owner, who still owns the adjacent contaminated site.  However, we are currently complying with the order, with one exception, without withdrawing our defenses.  As a result of a dispute resolution procedure, Hexcel and Ecology have reached an agreement to modify certain work requirements and to extend certain deadlines, and we are in full compliance with the order as modified.  The total accrued liability related to this matter was $1.5 million at June 30, 2011.

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. Hexcel contributed approximately 1.07% of the waste tonnage sent to the site during its operations.  In addition to the Omega site specifically, the EPA is investigating the scope of regional groundwater contamination in the area and is preparing a proposed remedial action for the regional groundwater contamination.  While the EPA has not finalized its Record of Decision as of this date, the Omega PRP Group members have been noticed by the EPA as potentially responsible parties who will be required to be involved in the remediation of the regional groundwater contamination as well.  Hexcel will likely incur costs

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associated with the regional investigation and remediation as a member of the Omega Group, our ultimate liability, if any, in connection with this matter cannot be determined at this time.

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 June 30, 2011, our aggregate environmental related accruals were $4.7 million, of which $3.2 million was included in accrued liabilities with the remainder included in non-current liabilities. 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 directly to our reserve balance was $2.1 million and $1.7 million for the quarters ended June 30, 2011 and 2010, respectively, and $3.5 million and $2.4 million for the six months ended June 30, 2011 and 2010.  In addition, our operating costs relating to environmental compliance charged directly to expenses were $2.5 million and $2.4 million for the quarters ended June 30, 2011 and 2010, respectively and $4.8 million and $4.7 million for the six-month periods ended June 30, 2011 and 2010, respectively.  Capital expenditures for environmental matters were $0.1 million and $0.2 million for the quarters ended June 30, 2011 and 2010, respectively and $0.3 million and $0.4 million for the six-month periods ended June 30, 2011 and 2010, respectively.

Litigation

Seemann Composites, Inc. v. Hexcel Corporation

Seemann Composites, Inc., (SCI) sued us in the United States District Court, Southern District of Mississippi (Civil Action No. 1:09-cv-00675-HSO-JMR), filed September 16, 2009.  SCI alleged that we supplied the wrong or a defective finished fabric to them, through one of our distributors, and sought unspecified compensatory damages and $10.0 million in punitive damages.  This matter has now been settled with no material impact to the Company’s results of operations.

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 six months ended June 30, 2011, and accrued warranty cost included in “accrued liabilities” in the condensed consolidated balance sheets at June 30, 2011 and December 31, 2010, was as follows:

(In millions)	Product Warranties
Balance as of December 31, 2010	$	4.3
Warranty expense	0.7
Balance as of March 31, 2011	5.0
Warranty expense	—
Deductions and other	(0.1		)
Balance as of June 30, 2011	$	4.9

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

Business Overview

Hexcel Corporation and its subsidiaries, is a leading advanced composites company.  We develop, manufacture, and market lightweight, high-performance composites, including carbon fibers, reinforcements, prepregs, honeycomb, matrix systems, adhesives and composite structures, for use in commercial aerospace, space and 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 and a wide variety of recreational equipment and other industrial applications.

We serve international markets through manufacturing facilities and sales offices located in the United States, Europe and Asia, and through sales representation offices located in Asia, Australia and South America.  We also hold a 50% interest in Asian Composites Manufacturing Sdn. Bhd., located in Malaysia, which manufactures composite structures for commercial aerospace applications.

Hexcel has two segments, Composite Materials and Engineered Products.  The Composite Materials segment manufactures and markets carbon fibers, fabrics and specialty reinforcements, prepregs, structural adhesives, honeycomb, composite panels, molding compounds, polyurethane systems and laminates that are incorporated into many applications, including military and commercial aircraft, wind turbine blades, recreational products and other industrial applications.  The Engineered Products segment manufactures and markets composite structures and precision machined honeycomb parts for use primarily in the aerospace industry.  Composite structures are manufactured from a variety of composite and other materials, including prepregs, honeycomb, structural adhesives and advanced molding materials, using such manufacturing processes as autoclave processing, multi-axis numerically controlled machining, heat forming, compression molding and other composite manufacturing techniques.

Net sales for the quarter were $353.7 million, 15.9% higher (11.9% in constant currency) than the $305.1 million reported for the second quarter of 2010.  Year to date net sales were 18.4% higher in constant currency.  The growth was led by both an increase in legacy commercial aerospace build rates and the ramp-up of new programs in the commercial aerospace market.

Commercial aerospace sales increased 29.1% (26.7% in constant currency) for the quarter as compared to the second quarter of 2010 and increased 29.5% (28.3% in constant currency) for the six-month period as compared to 2010.  Revenues attributed to new aircraft programs (A380, A350, B787, and B747-8) were up more than 30% versus the same period last year and comprise more than 25% of Commercial Aerospace sales.  Airbus and Boeing legacy aircraft related sales for the quarter were up over 25% as compared to the second quarter of 2010.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were also up over 20% for the quarter and essentially the same as the first quarter 2011. 

Space and Defense sales of $81.7 million were 2.9% higher (0.2% higher in constant currency) than the second quarter of 2010 and year to date sales were 6.3% higher (4.9% higher in constant currency) than last year’s comparable period.  We continue tobenefit from rotorcraft related growth. 

Industrial sales of $64.2 million for the second quarter of 2011 were flat (lower by 8.9% in constant currency) as compared to the second quarter of 2010.  Year to date sales were 14.8% higher (9.0% in constant currency) than a year ago.  Wind sales for the quarter declined about 10% year over year, but were up more than 10% sequentially and remained in line with the average of the last twelve months. Industrial sales other than wind were modestly above the second quarter of 2010.

Gross margin was 24.6% of net sales for the quarter as compared to 25.7% in the same period last year.  Although the quarter benefited from higher sales than last year, this year’s results include increased spending for new line start ups, higher acrylonitrile costs (raw material commodity input for carbon fiber) and the disruption caused by April’s Decatur, Alabama tornado.  Adjusted operating income increased from 13.3% in the second quarter of 2010 to 14.0% in the second quarter of 2011.  Higher sales volume combined with good cost control resulted in the higher operating margin.  Gross margin was 24.8% for the first six months of 2011as compared to 25.4% in the same period last year.  The impact for exchange rates on the quarter was nominal.

We expect to spend $150 to $175 million on capital additions in 2011, as we ramp-up for the expected growth ahead.  Accrual basis additions to capital expenditures were $55.1 million in the first six months of 2011 as compared to $13.7 million during the first six months of 2010.

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Free cash flow (defined as cash provided by operating activities less capital expenditures) for the first six months was $9.5 million as compared to $11.6 million for the same period of 2010 primarily due to higher capital expenditures in 2011, offset by higher earnings and lower working capital increases.

Given the strong performance in the first half of the year and our current outlook, we are increasing our adjusted diluted EPS guidance for 2011 to $1.05 - $1.12 (from $0.95 - $1.05).  We are also raising our sales guidance for the year to $1,325 million - $1,375 million from $1,275 million - $1,350 million.

Second Quarter and Six-Month Results

	Quarter Ended June 30,								Six Months Ended June 30,
(In millions, except per share data)	2011			2010			% Change		2011			2010			% Change
Net sales	$	353.7		$	305.1		15.9	%	$	685.3		$	568.1		20.6	%
Net sales change in constant currency							11.9	%							18.4	%
Operating income	49.4			40.5			22.0	%	96.6			64.3			50.2	%
Net income	37.4			23.1			61.9	%	63.8			38.9			64.0	%
Diluted net income per common share	$	0.37		$	0.23				$	0.63		$	0.39
Non-GAAP measures:
Adjusted operating income	$	49.4		$	40.5		22.0	%	$	90.9		$	67.8		34.1	%
As a percentage of net sales	14.0		%	13.3		%			13.3		%	11.9		%
Adjusted net income	$	31.9		$	23.1		38.1	%	$	57.2		$	37.6		52.1	%
Adjusted diluted earnings per share	$	0.32		$	0.23				$	0.57		$	0.38

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 June 30,					Six Months Ended June 30,
(In millions, except per share data)	2011			2010		2011			2010
Operating income	$	49.4		$	40.5	$	96.6		$	64.3
Other operating (income) expense (a)	—			—		(5.7		)	3.5
Adjusted operating income	$	49.4		$	40.5	$	90.9		$	67.8
Net income	$	37.4		$	23.1	$	63.8		$	38.9
Other operating (income) expense, net of tax (a)	—			—		(4.1		)	2.2
Non-operating expense, net of tax (b)	—			—		3.0			—
Benefit from tax audit settlement (c)	(5.5		)	—		(5.5		)	—
Tax credits (d)	—			—		—			(3.5		)
Adjusted net income	$	31.9		$	23.1	$	57.2		$	37.6

(a) Other operating income for the six months ended June 30, 2011 is a benefit from the curtailment of our U.K. pension plan.  In 2010, other operating expense is the increase in environmental reserves primarily for remediation of a manufacturing facility sold in 1986.

(b) Non-operating expense is the accelerated amortization of deferred financing costs and expensing of the call premium from the redemption of $150 million of 6.75% senior subordinated notes.

(c) Provision for income taxes includes a release of $5.5 million in the second quarter of 2011 of reserves primarily for uncertain to positions as a result of an audit settlement.

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(d) New Clean Energy Manufacturing Tax Credits awarded in the first quarter of 2010 for qualifying capital investments made in our U.S. wind energy facility in 2009.

Net Sales

Net sales increased for the quarter and six months ended June 30, 2011 over the same periods in 2010, primarily reflecting higher sales volume in the commercial aerospace markets.  On a constant currency basis, sales for the quarter ended June 30, 2011 were 11.9% higher than the same quarter in 2010 (15.9% increase at actual rates) and sales for the six months ended June 30, 2011 were 18.4% higher than the six months ended June 30, 2010 (20.6% increase at actual rates).

The following table summarizes net sales to third-party customers by segment and end market for the quarters and six months ended June 30, 2011 and 2010:

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011		2010		% Change		2011		2010		% Change
Consolidated Net Sales	$	353.7	$	305.1	15.9	%	$	685.3	$	568.1	20.6	%
Commercial Aerospace	207.8		161.0		29.1	%	405.4		313.0		29.5	%
Space & Defense	81.7		79.4		2.9	%	161.4		151.9		6.3	%
Industrial	64.2		64.7		(0.8	)%	118.5		103.2		14.8	%
Composite Materials	$	276.8	$	238.9	15.9	%	$	533.1	$	439.3	21.4	%
Commercial Aerospace	150.9		113.9		32.5	%	294.1		223.2		31.8	%
Space & Defense	62.5		60.7		3.0	%	122.4		113.8		7.6	%
Industrial	63.4		64.3		(1.4	)%	116.6		102.3		14.0	%
Engineered Products	$	76.9	$	66.2	16.2	%	$	152.2	$	128.8	18.2	%
Commercial Aerospace	56.9		47.1		20.8	%	111.3		89.8		23.9	%
Space & Defense	19.2		18.7		2.7	%	39.0		38.1		2.4	%
Industrial	0.8		0.4		100	%	1.9		0.9		111	%

Commercial Aerospace:  Net sales increased $46.8 million, or 29.1% (26.7% on a constant currency basis), to $207.8 million for the second quarter of 2011.  Net sales for the six months ended June 30, 2011 increased $92.4 million or 29.5% (28.3% on a constant currency basis) to $405.4 million over the six months ended June 30, 2010.   For the quarter, Airbus and Boeing related sales were up over 25%, as both new and legacy program sales were strong.   Revenues attributed to new aircraft programs (A380, A350, B787, and B747-8) represented more than 25% of commercial aerospace sales.  Sales to other commercial aerospace, which includes regional and business aircraft customers, were up over 20% compared to the same period last year and essentially the same as the first quarter of 2011 in constant currency.

Space & Defense: Net sales increased $2.3 million, or 2.9% (0.2% on a constant currency basis), to $81.7 million for the second quarter of 2011.  Net sales of $161.4 million for the six months ended June 30, 2011 increased $9.5 million or 6.3% (4.9% on a constant currency basis), above the prior year level as sales from rotorcraft grew as new programs and blade retrofit programs are increasingly composite based.

Industrial: Net sales for the second quarter of 2011 were flat (a decrease of 8.9% on a constant currency basis) as compared to the second quarter of 2010.  Net sales for the six months ended June 30, 2011 increased $15.3 million or 14.8% (an increase of 9.0% on constant currency basis) to $118.5 million.  Industrial sales other than wind were up modestly in the quarter but this was offset by the year-on-year decline in wind sales for the quarter.  However, wind sales experienced double-digit sales growth sequentially and remained in line with the average of the last twelve months.

Gross Margin

	Quarter Ended June 30,								Six Months Ended June 30,
(In millions)	2011			2010			% Change		2011			2010			% Change
Gross margin	$	87.0		$	78.4		11.0	%	$	170.0		$	144.5		17.6	%
Percentage of sales	24.6		%	25.7		%			24.8		%	25.4		%

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The increase in gross margin of $8.6 million for the second quarter of 2011 and $25.5 million for the first six months of 2011 resulted from higher sales volume. This year’s results include increased spending for new line start ups, staffing and training, as well as higher acrylonitrile costs (raw material commodity input for carbon fiber). Foreign exchange rates had a nominal impact.

Depreciation and amortization expense, on a constant currency basis, included in cost of sales during the quarter was $12.3 million, $0.3 million higher than the second quarter 2010.

Selling, General and Administrative Expenses (“SG&A”)

	Quarter Ended June 30,								Six Months Ended June 30,
(In millions)	2011			2010			% Change		2011			2010			% Change
SG&A expense	$	29.7		$	29.6		0.3	%	$	62.6		$	61.0		2.6	%
Percentage of sales	8.4		%	9.7		%			9.1		%	10.7		%

On a constant currency basis, SG&A expenses for the second quarter were 4% lower than last year and for the six-month period they were up modestly over last year.

Research and Technology Expenses (“R&T”)

	Quarter Ended June 30,								Six Months Ended June 30,
(In millions)	2011			2010			% Change		2011			2010			% Change
R&T expense	$	7.9		$	8.3		(4.8	)%	$	16.5		$	15.7		5.1	%
Percentage of sales	2.2		%	2.7		%			2.4		%	2.8		%

On a constant currency basis, R&T expenses for the quarter were down modestly and for the six months ended June 30, 2011 they were slightly higher than last year.

Operating Income

	Quarter Ended June 30,								Six Months Ended June 30,
(In millions)	2011			2010			% Change		2011			2010			% Change
Consolidated operating income	$	49.4		$	40.5		22.0	%	$	96.6		$	64.3		50.2	%
Operating margin	14.0		%	13.3		%			14.1		%	11.3		%
Composite Materials	48.5			42.8			13.3	%	98.3			73.3			34.1	%
Operating margin	16.7		%	17.1		%			17.5		%	15.9		%
Engineered Products	11.9			10.7			11.2	%	24.4			22.1			10.4	%
Operating margin	15.4		%	16.1		%			16.0		%	17.1		%
Corporate & Other	(11.0		)	(13.0		)	(15.4	)%	(26.1		)	(31.1		)	(16.1	)%

The 14% operating margin for the second quarter was the highest in Hexcel history, this was driven by good cost control and higher sales volume.  Corporate and other, for the six-month period ended June 30, 2010, included $3.5 million of additional environmental reserves. Foreign exchange rates had a nominal impact on the results.

Interest Expense

	Quarter Ended June 30,								Six Months Ended June 30,
(In millions)	2011			2010			% Change		2011			2010			% Change
Interest expense, net	$	2.9		$	7.1		(59.2	)%	$	7.1		$	13.7		(48.2	)%
Percentage of sales	0.8		%	2.3		%			1.0		%	2.4		%

The decrease in interest expense for the quarter and six-month period of 2011was primarily due to the lower borrowing rate as a result of the July 2010 refinancing and the February 2011 bond redemption, as well as lower outstanding debt.

Provision for Income Taxes

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011			2010
Income tax (benefit) expense	$	9.3		$	10.6		$	21.5		$	12.1
Effective tax rate	20.0		%	31.7		%	25.4		%	23.9		%

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The income tax provision was $9.3 million for the second quarter of 2011, an effective tax rate of 20%.  The current quarter and six-month period include $5.5 million of benefit resulting primarily from the release of reserves for uncertain tax positions as a result of an audit settlement.  Excluding this benefit, our effective tax rates would have been 31.8% for the quarter and 31.9% for the six months.  Last year’s second quarter tax provision was $10.6 million, a 31.7% effective tax rate.  The income tax provision for the six months ended June 30, 2010 included $3.5 million of the New Clean Energy Manufacturing Tax Credits awarded in January 2010 for qualifying capital investments made in our U.S. wind energy facility in 2009.  The effective tax rate excluding these credits would have been 30.8%.

Financial Condition

Liquidity:  As of June 30, 2011, we had cash and cash equivalents of $55.9 million.  Aggregate borrowings as of June 30, 2011 under the Senior Secured Credit Facility (the “Facility”) consisted of $170.0 million.  The Facility permits us to issue letters of credit up to an aggregate amount of $40.0 million.  Outstanding letters of credit reduce the amount available for borrowing under our revolving loan.  As of June 30, 2011, we had issued letters of credit under the Facility totaling $2.0 million, resulting in undrawn availability under the Facility as of June 30, 2011 of $208.0 million.  In addition, we borrowed $3.8 million from the credit line established in China associated with our operations there.  Our total debt, net of cash, as of June 30, 2011 was $195.5 million, a decrease of $19.5 million from December 31, 2010.

The 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, and limitations on capital expenditures. In accordance with the terms of the Facility, we are required to maintain a minimum interest coverage ratio of 4.00 (based on the ratio of EBITDA, as defined in the credit agreement, to interest expense) and may not exceed a maximum leverage ratio of 3.00 (based on the ratio of total debt to EBITDA) throughout the term of the Facility.  In addition, the Facility contains other terms and conditions such as customary representations and warranties, additional covenants and customary events of default.  As of June 30, 2011, 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 June 30, 2011, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations.  We do not have any significant required debt repayments until September 2014.  Our term loan requires repayments at a rate of approximately $1.3 million per quarter through June 2012 and increasing to $2.5 million per quarter until June 2014.  Our next required payment of $1.3 million is due in September 2011.  Our revolver facility expires in July 2015.

Operating Activities: Net cash provided by operating activities was $77.3 million in the first six months of 2011, as compared to net cash provided by operating activities of $31.7 million in the first six months of 2010 primarily from strong accounts receivable collections and higher earnings.

Investing Activities:Net cash used for investing activities of $67.8 million in the first six months of 2011 was for capital expenditures.  This compares to capital expenditures of $20.1 million during the first six months of 2010.  The increase in capital spending in 2011 primarily reflects capacity expansions to meet the anticipated aerospace demand.  We continue to expect accrual basis capital expenditures to be $150 to $175 million in 2011.

Financing Activities: Financing activities used $77.0 million of net cash in the first six months of 2011 compared with using $27.9 million in the same period of 2010.On February 1, 2011, we redeemed $150 million of our $225 million 6.75% senior subordinated notes at a call premium of 2.25%.  The redemption was primarily funded by a $135 million add-on to our senior secured credit facility that was completed in December 2010, of which $60 million was repaid in the first six months of 2011 using cash on hand.  Last year, we repaid $30 million of our Senior Secured Credit Facility with cash on hand.

As a result of the redemption in 2011, we accelerated the unamortized financing costs of the senior subordinated notes being redeemed and expensed the call premium incurring a pretax charge of $4.9 million (after tax of $0.03 per diluted share) in the first quarter of 2011.

Financial Obligations and Commitments: As of June 30, 2011, current maturities of notes payable and capital lease obligations were $9.3 million.  The next significant scheduled debt maturity will not occur until 2014, in the amount of $10.0 million.  Remaining debt and capital lease maturities in 2011 are approximately $2.8 million (refer to MD&A in our 2010 Annual Report on Form 10-K for further details regarding our financial obligations and commitments).  We have one capital lease for a building which expires in 2021.  In addition, certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

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The loans under the Senior Secured Credit Facility are scheduled to mature in July of 2015.  Our senior subordinated notes mature on February 1, 2015.

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, 2010.  There were no significant changes in our accounting policies and estimates since the end of fiscal 2010.

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; (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 new facilities 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 2011 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, particularly in Asia and Europe; foreign currency fluctuations; changes in aerospace delivery rates; reductions in sales to any significant customers, particularly Airbus, Boeing 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

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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.

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 2010 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 June 30, 2011 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 second 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 13 on pages 13 through 15 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, 2010, 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
April 1 — April 30, 2011	0		$	N/A	0	0
May 1 — May 31, 2011	20,215		21.83		0	0
June 1 — June 30, 2011	21,853		19.22		0	0
Total	42,068	(1)	$	20.47	0	0

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(1) All shares were delivered by employees in payment of the exercise price of non-qualified stock options.

ITEM 6.  Exhibits

Exhibit No.	Description
10.1	Revised Form of Employee Option Agreement (2011).
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 June 30, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) 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
July 25, 2011	/s/ Kimberly A. Hendricks
(Date)	Kimberly A. Hendricks
	Vice President, Corporate Controller and
	Chief Accounting Officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Revised Form of Employee Option Agreement (2011).
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 June 30, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) related notes.

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EX-10.1

Exhibit 10.1

FY 2011

REVISED EMPLOYEE OPTION AGREEMENT

under the

Hexcel Corporation 2003 Incentive Stock Plan

This Employee Option Agreement (the “Agreement”), is entered into as of the Grant Date, by and between the Optionee and Hexcel Corporation, a Delaware corporation (the “Company”).

The Company maintains the Hexcel Corporation 2003 Incentive Stock Plan (the “Plan”).  The Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) has determined that the Optionee shall be granted a Stock Option upon the terms and subject to the conditions hereinafter contained.  Capitalized terms used but not defined herein shall have the meaning assigned to them in the Plan.

1.             Notice of Grant; Acceptance of Agreement.  The aggregate number of shares granted (the “Option Shares”) and the Grant Date shall be as set forth under Optionee’s account on Merrill Lynch Benefits OnLine®.  Optionee will be deemed to accept the terms and conditions of this Agreement by clicking the “Accept” button on the Merrill Lynch Benefits OnLine® Award Acceptance screen with regard to the Option.

2.             Incorporation of Plan.  The Plan is incorporated by reference and made a part of this Agreement, and this Agreement shall be subject to the terms of the Plan, as the Plan may be amended from time to time, provided that any such amendment of the Plan must be made in accordance with Section IX of the Plan.  The Option granted herein constitutes an Award within the meaning of the Plan.

3.             Grant of Option.  Pursuant to the Plan and subject to the terms and conditions set forth herein and therein, the Company hereby grants to the Optionee the right and option (the “Option”) to purchase all or any part of the Option Shares of the Company’s common stock, $.01 par value per share (the “Common Stock”), which Option is not intended to qualify as an incentive stock option, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

4.             Purchase Price.  The Purchase Price per share of the Option Shares is the Fair Market Value per share of Common Stock as of the Grant Date.

5.             Terms of Option.

(a)           Expiration Date; Term.  Subject to Section 5(c) below, the Option shall expire on, and shall no longer be exercisable following, the tenth anniversary of the Grant Date. The ten-year period from the Grant Date to its tenth anniversary shall constitute the “Term” of the Option.

(b)           Vesting Period; Exercisability.  Subject to Section 5(c) below, the Option shall vest and become exercisable at the rate of 33-1/3% of the Option Shares on each of the first three anniversaries of the Grant Date.

(c)           Termination of Employment; Change in Control.

(i)            For purposes of the grant hereunder, any transfer of employment by the Optionee among the Company and its Subsidiaries shall not be considered a termination of employment.  Any change in employment that does not constitute a “separation from service” within the meaning of Section 1.409A-1(h) of the Treasury Regulations (or any successor provision) shall not be considered a termination of employment.  Any change in employment that does constitute a “separation from service” within the meaning of Section 1.409A-1(h) of the Treasury Regulations (or any successor provision) shall be considered a termination of employment.

If the Optionee’s employment with the Company is terminated for Cause (as defined in the last Section hereof), the Option, whether or not then vested, shall be automatically terminated as of the date of such termination of employment. If the Optionee’s employment with the Company shall terminate other than by reason of Retirement (as defined in the last Section hereof), Disability (as defined in the last Section hereof), death or Cause, the Option (to the extent then vested) may be exercised at any time within ninety (90) days after such termination (but not beyond the Term of the Option).  The Option, to the extent not then vested, shall immediately expire upon such termination.

If the Optionee dies or becomes Disabled (A) while employed by the Company or (B) within 90 days after the termination of his or her employment other than for Cause or Retirement, the Option shall (I) become fully and immediately vested and exercisable and (II) remain exercisable for one year from the date of death or Disability (but not beyond the Term of the Option).

If the Optionee’s employment terminates by reason of Retirement, (A) the Option shall, if not fully vested at the time of such termination, continue to vest in accordance with Section 5(b) above, and (B) the Option shall expire upon the earlier to occur of the five-year anniversary date of such Retirement and the expiration of the Term. If the Optionee dies during the five-year period immediately following the Retirement of the Optionee, the Options shall (I) become fully and immediately vested and exercisable and (II) remain exercisable for the remainder of the five-year period from the date of Retirement (but not beyond the Term of the Option).

(ii)           In the event of a Change in Control (as defined in the last Section hereof), the Option shall immediately become fully vested and exercisable and the post-termination periods of exercisability set forth in Section 5(c)(i) hereof shall apply, except that the post-termination period of exercisability shall be extended and the Option shall remain exercisable for a period of two years from the date of such termination of employment, if, within two years after a Change in Control, (A) the Optionee’s employment is terminated by the Company other than by reason of Retirement, Cause, Disability or death or (B) the Optionee terminates the Optionee’s employment for Good Reason (as defined in the last Section hereof).

(d)           Forfeiture of Option on Certain Conditions.    Optionee hereby acknowledges that the Company has given or will give Optionee access to certain confidential, proprietary or trade secret information, which the Company considers extremely valuable and which provides the Company with a competitive advantage in the markets in which the Company develops or sells its products.  The Optionee further acknowledges that the use of such information by Optionee other than in furtherance of Optionee’s job responsibilities with the Company would be extremely detrimental to the Company and would cause immediate and irreparable harm to the

2

Company.  In exchange for access to such confidential, proprietary or trade secret information, Optionee hereby agrees as follows:

(i)            Notwithstanding anything to the contrary contained in this Agreement, should the Optionee breach the “Protective Condition” (as defined in Section (ii)), then (A) the Option, to the extent not previously exercised, shall immediately be cancelled upon such breach, (B) the Optionee shall immediately deliver to the Company the number of Option Shares the Optionee received during the 180-day period immediately prior to such breach and (C) if any Option Shares were sold during the 180-day period immediately prior to such breach, the Optionee shall immediately deliver to the Company all proceeds of such sales. “Option Shares” shall mean shares of Common Stock the Optionee may receive pursuant to this Agreement. The Option Shares and proceeds to be delivered under clauses (B) and (C) may be reduced to reflect (x) the exercise price paid by the Optionee in connection with such Option Shares and (y) the Optionee’s liability for taxes payable on such Option Shares and proceeds.

(ii)           “Protective Condition” shall mean that (A) the Optionee complies with all terms and provisions of any obligation of confidentiality contained in a written agreement with the Company (or a Subsidiary) signed by the Optionee, or otherwise imposed on Optionee by applicable law, and (B) during the time Optionee is employed by the Company (or a Subsidiary) and for a period of one year after the Optionee’s employment with the Company (or a Subsidiary) terminates, the Optionee does not engage, in any capacity, directly or indirectly, including but not limited to as 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 enterprise then engaged in competition with the business conducted by the Company anywhere in the world; provided, however, that the Optionee may be employed by a competitor of the Company within such one year period so long as the duties and responsibilities of Optionee’s position with such competitor do not involve the same or substantially similar duties and responsibilities as those performed by the Optionee for the Company (or a Subsidiary) in a business segment of the new employer which competes with the business segment(s) with which the Optionee worked or had supervisory authority over while employed by the Company (or a Subsidiary).

(iii)          In the event any of clauses 5(d)(i), (ii) or (iii) are unenforceable in the jurisdiction in which the Optionee is employed on the date hereof, such clause(s) nevertheless shall be enforceable to the full extent permitted by the laws of any jurisdiction in which the Optionee engages in any activity prohibited by this clause 5(d).

(iv)          Notwithstanding any other provision in the Plan or this Agreement to the contrary, whenever the Company may be entitled or required by law, Company policy or the requirements of an exchange on which the Company’s shares are listed for trading, to cause an Award to be forfeited or to recoup compensation paid to the Optionee pursuant to the Plan, the Optionee shall accept such forfeiture and comply with any Company request or demand for recoupment.

6.             Adjustment Upon Changes in Capitalization.

(a)           The aggregate number of Option Shares and the Purchase Price shall be proportionately adjusted by the Committee for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares or other capital adjustment, or the payment of a stock dividend or other increase or decrease in such shares, effected without receipt of consideration by the Company, or other change in corporate or

3

capital structure.  The Committee shall also make the foregoing changes and any other changes, including changes in the classes of securities available, to the extent reasonably necessary or desirable to preserve the intended benefits under this Agreement in the event of any other reorganization, recapitalization, merger, consolidation, spin-off, extraordinary dividend or other distribution or similar transaction involving the Company.

(b)           Any adjustment under this Section 6 in the number of Option Shares and the Purchase Price shall be subject to Section 13 below and shall apply to only the unexercised portion of the Option. If fractions of a share would result from any such adjustment, the adjustment shall be rounded down to the nearest whole number of shares.

7.             Method of Exercising Option and Withholding.

(a)           The Option shall be exercised by the delivery by the Optionee to the Company at its principal office (or at such other address as may be established by the Committee) of written notice of the number of Option Shares with respect to which the Option is exercised, accompanied by payment in full of the aggregate Purchase Price for such Option Shares.  Payment for such Option Shares shall be made (i) in U.S. dollars by personal check, bank draft or money order payable to the order of the Company, or by money transfers or direct account debits to an account designated by the Company; (ii) through the delivery of shares of Common Stock with a Fair Market Value equal to the total payment due from the Optionee; (iii) pursuant to a “cashless exercise” program if such a program is established by the Company; (iv) by the Company withholding shares of Common Stock with a Fair Market Value equal to the total payment due from the Optionee; or (v) by any combination of the methods described in (i) through (iv) above.

(b)           The Company’s obligation to deliver shares of Common Stock upon the exercise of the Option shall be subject to the payment by the Optionee of applicable federal, state, local and other withholding tax, if any.  The Company or a Subsidiary shall, to the extent permitted by law, have the right to deduct from any payment of any kind including Option Shares otherwise due to the Optionee, any federal, state, local or other taxes required to be withheld with respect to such payment.

8.             Transfer.  Except as provided in this Section 8, the Option is not transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised during the Optionee’s lifetime only by the Optionee.  Any attempt to transfer the Option in contravention of this Section 8 is void ab initio.  The Option shall not be subject to execution, attachment or other process.  Notwithstanding the foregoing, the Optionee and, after the death of the Optionee the estate or any estate beneficiary of the Optionee, shall be permitted to transfer the Option to members of his or her immediate family (i.e., children, grandchildren or spouse), trusts for the benefit of such family members, and partnerships or other entities whose only partners or other equity owners are such family members; provided, however, that no consideration can be paid for the transfer of the Option and the transferee of the Option must agree to be subject to all conditions applicable to the Option prior to its transfer.

9.             No Rights in Option Shares.  The Optionee shall have none of the rights of a stockholder with respect to the Option Shares unless and until shares of Common Stock are issued upon exercise of the Option.

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10.           Issuance of Shares.  Any shares of Common Stock to be issued to the Optionee under this Agreement may be issued in either certificated form, or in uncertificated form (via the Direct Registration System or otherwise).

11.           No Right to Employment.  Nothing contained herein shall be deemed to confer upon the Optionee any right to remain as an employee of the Company.

12.           Section 409A

(a)           It is intended that this Agreement comply in all respects with the requirements of Sections 409A(a)(2) through (4) of the Code and applicable Treasury Regulations and other generally applicable guidance issued thereunder (collectively, the “Applicable Regulations”), and this Agreement shall be interpreted for all purposes in accordance with this intent.

(b)           Notwithstanding any term or provision of this Agreement (including any term or provision of the Plan incorporated herein by reference), the parties hereto agree that, from time to time, the Company may, without prior notice to or consent of the Optionee, amend this Agreement to the extent determined by the Company, in the exercise of its discretion in good faith, to be necessary or advisable to prevent the inclusion in the Optionee’s gross income pursuant to the Applicable Regulations of any compensation intended to be deferred hereunder. The Company shall notify the Optionee as soon as reasonably practicable of any such amendment affecting the Optionee.

(c)           In the event that the amounts payable under this Agreement are subject to any taxes, penalties or interest under the Applicable Regulations, the Optionee shall be solely liable for the payment of any such taxes, penalties or interest.

13.           Modifications; Extensions.

(a)           Notwithstanding any term or provision of this Agreement (including any term or provision of the Plan incorporated herein by reference), (i) no Modification shall be made in respect to the Option if such Modification would result in the Option constituting a deferral of compensation, and (ii) no Extension shall be made in respect to the Option if such Extension would result in the Option having an additional deferral feature from the Grant Date, in each case within the meaning of applicable Treasury Regulations under Code section 409A.

(b)           Subject to subsection (d) below, a “Modification” for purposes of subsection (a) means any change in the terms of the Option that may provide the Optionee with a direct or indirect reduction in the Purchase Price of the Option, regardless of whether the Optionee in fact benefits from the change in terms.

(c)           Subject to subsection (d) below, an “Extension” for purposes of subsection (a) means either (i) the provision to the Optionee of an additional period of time within which to exercise the Option beyond the time originally prescribed, or (ii) the conversion or exchange of the Option for a legally binding right to compensation in a future taxable year, or (iii) the addition of any feature for the deferral of compensation to the terms of the Option, or (iv) any renewal of the Option that has the effect of (i) through (iii) above.

(d)           Notwithstanding subsections (b) and (c) above, it shall not be a Modification or an Extension, respectively, to change the terms of an Option in any of the ways or for any of the purposes provided in applicable Treasury Regulations or other guidance under Section 409A of

5

the Code as not resulting in a Modification or Extension for purposes of that section.  In particular, it shall not be an Extension to extend the exercise period of the Option to a date no later than the earlier of (i) the latest date upon which the Option could have expired by its original terms under any circumstances or (ii) the 10th anniversary of the Grant Date.

14.           Governing Law/Jurisdiction.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflict of laws.

15.           Resolution of Disputes.  Any disputes arising under or in connection with this Agreement shall be resolved by binding arbitration before three arbitrators constituting an Employment Dispute Tribunal, to be held in Connecticut in accordance with the commercial rules and procedures of the American Arbitration Association.  Judgment upon the award rendered by the arbitrator shall be final and subject to appeal only to the extent permitted by law.  Each party shall bear such party’s own expenses incurred in connection with any arbitration. Anything to the contrary notwithstanding, each party hereto has the right to proceed with a court action for injunctive relief or relief from violations of law not within the jurisdiction of an arbitrator.

16.           Notices.  Any notice required or permitted under this Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Optionee at the last address specified in Optionee’s employment records, or such other address as the Optionee may designate in writing to the Company, or to the Company, Attention:  Corporate Secretary, or such other address as the Company may designate in writing to the Optionee.

17.           Failure To Enforce Not a Waiver.  The failure of either party hereto to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

18.           Miscellaneous.  This Agreement cannot be changed or terminated orally.  This Agreement and the Plan contain the entire agreement between the parties relating to the subject matter hereof.  The section headings herein are intended for reference only and shall not affect the interpretation hereof.

19.           Definitions.  For purposes of this Agreement:

(I)            “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.  The term “Control” shall have the meaning specified in Rule 12b-2 under the Exchange Act;

(II)           “Beneficial Owner” (and variants thereof) shall have the meaning given in Rule 13d-3 promulgated under the Exchange Act modified to reflect ownership pursuant to Section 318(a) of the Code;

(III)         “Cause” shall have the meaning ascribed to such term in the Executive Severance Agreement;

(IV)         “Change in Control” shall have the meaning ascribed to such term in the Executive Severance Agreement;

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(V)           “Disability” (or becoming “Disabled”) shall have the meaning ascribed to such term in the Executive Severance Agreement;

(VI)         “Executive Severance Agreement” shall mean the Employment Agreement, Employment and Severance Agreement, or Executive Severance Agreement, as applicable, between the Company and the Optionee, as amended from time to time;

(VII)        “Good Reason” shall have the meaning ascribed to such term in the Executive Severance Agreement;

(VIII)       “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) of the Exchange Act, and shall include “persons acting as a group” within the meaning of Section 1.409A-3(i)(5)(v)(B) of the Treasury Regulations (or any successor provision); and

(IX)         “Retirement” shall mean termination of the Optionee’s employment, other than by reason of death or Cause, either (A) at or after age 65 or (B) at or after age 55 after five (5) years of employment by the Company (or a Subsidiary thereof).

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, David E. Berges, 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.

July 25, 2011	/s/ David E. Berges
(Date)
	David E. Berges
	Chairman of the Board of Directors
	and Chief Executive Officer

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EX-31.2

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;

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.

July 25, 2011	/s/ Wayne Pensky
(Date)
	Wayne Pensky
	Senior Vice President and
	Chief Financial Officer

EX-32

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 June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David E. Berges, Chairman of the Board of Directors 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.

July 25, 2011	/s/ David E. Berges
(Date)	David E. Berges
	Chairman of the Board of Directors
	and Chief Executive Officer
July 25, 2011	/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.

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Condensed Consolidated Balance Sheets (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 55.9	$ 117.2
Accounts receivable, net	207.8	173.9
Inventories, net	207.9	169.9
Prepaid expenses and other current assets	50.8	36.7
Total current assets	522.4	497.7
Property, plant and equipment	1,139.8	1,063.9
Less accumulated depreciation	(502.4)	(465.6)
Property, plant and equipment, net	637.4	598.3
Goodwill and intangible assets	56.8	56.2
Investments in affiliated companies	21.6	19.9
Deferred tax assets	62.9	63.6
Other assets	18.3	22.4
Total assets	1,319.4	1,258.1
Current liabilities:
Short-term borrowings and current maturities of debt	9.3	27.6
Accounts payable	108.7	83.0
Accrued liabilities	109.1	95.3
Total current liabilities	227.1	205.9
Long-term debt	242.1	304.6
Other non-current liabilities	73.7	88.2
Total liabilities	542.9	598.7
Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares authorized, 100.3 and 99.5 shares issued at June 30, 2011 and December 31, 2010, respectively	1.0	1.0
Additional paid-in capital	573.7	552.3
Retained earnings	212.2	148.4
Accumulated other comprehensive income (loss)	14.4	(15.1)
Total stockholders' equity including treasury stock value	801.3	686.6
Less - Treasury stock, at cost, 2.0 and 2.2 shares at June 30, 2011 and December 31, 2010, respectively	(24.8)	(27.2)
Total stockholders' equity	776.5	659.4
Total liabilities and stockholders' equity	$ 1,319.4	$ 1,258.1

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Inventories, net

6 Months Ended

Jun. 30, 2011

Inventories, net

Inventories, net

Note 5 — Inventories, net

(In millions)	June 30, 2011			December 31, 2010
Raw materials	$	83.3		$	71.6
Work in progress	52.3			40.7
Finished goods	96.0			80.4
Total inventories, gross	$	231.6		$	192.7
Inventory allowances	(23.7		)	(22.8		)
Total inventories, net	$	207.9		$	169.9

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Retirement and Other Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2011

Retirement and Other Postretirement Benefit Plans.

Retirement and Other Postretirement Benefit Plans

Note 6 — 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 six months ended June 30, 2011 and 2010 were as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2011		2010		2011		2010
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.3	$	0.5	$	0.6
Interest cost	0.2		0.2		0.5		0.5
Net amortization and deferral	0.3		0.3		0.6		0.4
Net periodic benefit cost	$	0.8	$	0.8	$	1.6	$	1.5

	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.9	$	0.9
Other non-current liabilities	27.7		26.9
Total accrued benefit	$	28.6	$	27.8

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011			2010
European Defined Benefit Retirement Plans
Service cost	$	0.2		$	0.9		$	0.9		$	1.9
Interest cost	1.8			1.9			3.6			3.8
Expected return on plan assets	(2.0		)	(1.6		)	(3.9		)	(3.2		)
Net amortization and deferral	0.1			0.3			0.3			0.6
Curtailment gain	—			—			(5.7		)	—
Net periodic benefit cost	$	0.1		$	1.5		$	(4.8	)	$	3.1

	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	3.2	$	0.5
Other non-current liabilities	17.8		26.7
Total accrued benefit	$	21.0	$	27.2

As discussed in Note 3, effective January 31, 2011 credited service for the participants in our U.K. defined benefit plan was frozen.  This change reduced the projected plan obligation by $1.6 million and also resulted in recognizing $5.7 million of prior unrecognized service credits as a curtailment gain.  The defined benefit plan was replaced by a defined contribution plan.

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 $0.9 million in 2011 to cover unfunded benefits.  We contributed $0.6 million to our U.S. non-qualified defined benefit retirement plans during the 2010 fiscal year.

We contributed $2.5 million and $1.9 million to our European defined benefit retirement plans in the second quarters of 2011 and 2010, respectively.  Contributions were $3.9 million and $2.7 million for the six months ended June 30, 2011 and 2010, respectively.  We plan to contribute approximately $7.4 million during 2011 to our European plans.  We contributed $9.0 million to our European plans during the 2010 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 six months ended June 30, 2011 and 2010 were immaterial.

(In millions)	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.8	$	0.8
Other non-current liabilities	8.7		8.6
Total accrued benefit	$	9.5	$	9.4

In connection with our postretirement plans, we contributed $0.1 million during each of the second quarters of 2011 and 2010, respectively, and $0.1 million and $0.2 million during the six-month periods ended June 30, 2011 and 2010, respectively.  We periodically fund our postretirement plans to pay covered expenses as they are incurred.  Under the provisions of these postretirement plans, we expect to contribute approximately $0.8 million in 2011 to cover unfunded benefits.  We contributed $0.4 million to our postretirement plans during the 2010 fiscal year.

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Debt

6 Months Ended

Jun. 30, 2011

Debt

Debt

Note 7 — Debt

(In millions)	June 30, 2011		December 31, 2010
Working capital line of credit — China	$	3.8	$	7.1
Current maturities of capital lease and other obligations	0.5		0.5
Current maturities of term loan	5.0		5.0
Current maturities of 6.75% senior subordinated notes due 2015	—		15.0
Short-term borrowings and current maturities of long-term liabilities	9.3		27.6
Senior secured credit facility — term loan due 2015	90.0		92.5
Senior secured credit facility — revolving loan due 2015	75.0		—
6.75% senior subordinated notes due 2015	75.0		210.0
Capital lease and other obligations	2.1		2.1
Long-term debt	242.1		304.6
Total debt	$	251.4	$	332.2

Estimated Fair Values of Notes Payable

The approximate, aggregate fair values of our notes payable as of June 30, 2011 and December 31, 2010 were as follows:

(In millions)	June 30,2011		December 31, 2010
6.75% senior subordinated notes, due 2015	$	77	$	226
Senior secured credit facility — term loan due 2015	95		98

The aggregate fair values of the notes payable were estimated on the basis of quoted market prices.

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2011

Derivative Financial Instruments

Derivative Financial Instruments

Note 8 — Derivative Financial Instruments

Interest Rate Swap Agreements

In the fourth quarter 2010, we entered into an agreement to swap $98 million of a floating rate obligation for a fixed rate obligation at an average of 1.03% against LIBOR in U.S. dollars.  The swap is scheduled to mature on March 31, 2014, and was accounted for as a cash flow hedge of our floating rate bank loan. To ensure the swap was highly effective, all the principal terms of the swap matched the terms of the bank loan.  The fair value of the interest rate swap was a liability of $0.2 million at June 30, 2011 and an asset of $0.7 million at December 31, 2010.

Cross — Currency Interest Rate Swap Agreement

In September 2006, we entered into a cross-currency interest rate swap agreement to hedge a portion of our net Euro investment in Hexcel SASU (France).  This agreement is accounted for as a hedge of the foreign currency exposure of a net investment in a foreign operation and to the extent it is effective, gains and losses are recorded as an offset in the cumulative translation account (“CTA”), the same account in which translation gains and losses on the investment in Hexcel SASU are recorded.  All other changes, including any difference in current interest, are excluded from the assessment of effectiveness and are included in operating income as a component of interest expense.  The agreement has a notional value of $63.4 million, a term of five years, and is scheduled to mature on September 20, 2011.  We receive interest in U.S. dollars quarterly and pay interest in Euros on the same day.  U.S. interest is based on the three month LIBOR.  Euro interest is based on the three month EURIBOR.  The fair value of the swap at June 30, 2011 and December 31, 2010 was a liability of $8.5 million and $3.0 million, respectively.  Net credits to interest expense of $0.2 million related to the excluded portion of the derivative were recorded in the second quarter of 2011.  A net credit to interest expense of $0.2 million and a net charge to interest expense of $0.3 million related to the excluded portion of the derivative were recorded in the first six months of 2011 and 2010, respectively.  Net charges to interest expense of $0.2 million and $0.1 million related to the interest coupons were recorded during the second quarters of 2011 and 2010, respectively.  Net charges to interest expense of $0.3 million and $0.2 million related to the interest coupons were recorded during the first six months of 2011 and 2010, respectively.  The net amount of losses included in the CTA adjustment during the second quarter and six-month period of 2011 was $1.5 million and $6.8 million, respectively.  The net amount of gains included in the CTA adjustment during the second quarter and six-month period of 2010 were $6.2 million and $10.6 million, respectively.  The impact of applying prescribed credit risk adjustments was immaterial.

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 December 2013.  The aggregate notional amount of these contracts was $122.0 million and $124.2 million at June 30, 2011 and December 31, 2010, 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 by currency, thereby reducing our exposure to fluctuations in currency exchange rates.  These forward contracts are designated as cash flow hedges of forecasted revenues.  The effective portion of the hedges, gains of $2.7 million and $7.5 million, were recorded in other comprehensive income (“OCI”) for the three months and six months ended June 30, 2011, respectively, and losses of $5.2 million and $10.9 million for the three- and six-month periods ended June 30, 2010, respectively.  We excluded the forward points from the effectiveness assessment and recorded them as a reduction to interest expense of $0.3 million for the quarter and an increase to interest expense of $0.2 million for the six months ended June 30, 2011, and a reduction to interest expense of $0.3 million for the six months ended June 30, 2010. The carrying amount of these contracts was $5.9 million classified as other assets and $0.2 million classified in other liabilities on the Consolidated Balance Sheet at June 30, 2011 and $2.3 million in other assets and $2.6 million classified in other liabilities at December 31, 2010.  During the three months ended June 30, 2011 and 2010, we recognized net gains of $1.8 million and net losses of $2.6 million, respectively, recorded in sales and cost of sales.  During the six months ended June 30, 2011 and 2010, we recognized net gains of $1.3 million and net losses of $4.1 million, respectively, recorded in sales and cost of sales.

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 June 30, 2011 and 2010, we recognized net foreign exchange gains of $2.7 million and net foreign exchange losses of $4.8 million, respectively, in the Consolidated Statements of Operations.  During the six-month periods ended June 30, 2011 and 2010, we recognized net foreign exchange gains of $7.7 million and net foreign exchange losses of $7.7 million respectively, in the Consolidated Statements of Operations.  Asset and liability derivatives not designated as hedging instruments were not material.

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 six months ended June 30, 2011 and 2010 was as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011			2010
Unrealized gains (losses) at beginning of period, net of tax	$	3.8		$	(4.5	)	$	(0.2	)	$	(1.4	)
(Gains) losses reclassified to net sales	(1.5		)	2.0			(1.1		)	3.1
Increase (decrease) in fair value	2.4			(4.2		)	6.0			(8.4		)
Unrealized gains (losses) at end of period, net of tax	$	4.7		$	(6.7	)	$	4.7		$	(6.7	)

As of June 30, 2011, unrealized gains recorded in “accumulated other comprehensive income,” net of tax, were $4.7 million, of which $3.4 million are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

Note 9 — Income Taxes

The income tax provisions for the quarter and six months ended June 30, 2011 were $9.3 million and $21.5 million, respectively.  The effective tax rate for the quarter and six months ended June 30, 2011 was 20.0% and 25.4%, respectively.  The effective tax rates for the quarter and six months of 2011 reflects the release of $5.5 million of reserves primarily for uncertain tax positions as a result of an audit settlement.  Excluding this benefit, the effective tax rates would have been 31.8% and 31.9% for the current quarter and six-month periods.  The effective tax rate for the quarter and six months ended June 30, 2010 was 31.7% and 23.9%, respectively.  The lower effective rate in the six months of 2010 reflects $3.5 million of New Clean Energy Manufacturing Tax Credits awarded to us in January 2010 for qualifying capital investments incurred at our Colorado facility in 2009.  Excluding this credit, our effective tax rate would have been 30.8%.

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Comprehensive Income

6 Months Ended

Jun. 30, 2011

Comprehensive Income.

Comprehensive Income

Note 10 — Comprehensive Income

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the condensed consolidated statements of operations. The components of comprehensive income for the quarters and six months ended June 30, 2011 and 2010 were as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011		2010
Net income	$	37.4		$	23.1		$	63.8	$	38.9
Currency translation adjustments	6.6			(19.3		)	24.4		(36.5		)
Pension and other postretirement obligations	0.2			0.1			0.9		1.5
Net unrealized (losses) gains on financial instruments	(1.1		)	(2.2		)	4.2		(5.2		)
Comprehensive income (loss)	$	43.1		$	1.7		$	93.3	$	(1.3	)

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Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

Note 11 — 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 the credit standing of Hexcel when the derivative is in a net liability position.  The fair values of these assets and liabilities were approximately $7.5 million and $9.3 million, respectively, at June 30, 2011.  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 of liability was $0.2 million at June 30, 2011.

· Cross-currency interest rate swap derivative liabilities — valued using LIBOR and EURIBOR yield curves and quoted forward foreign exchange prices at the reporting date. Fair value at June 30, 2011 was a liability of $8.5 million.

· Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date. Fair value of assets and liabilities at June 30, 2011 was $7.5 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 six months ended June 30, 2011 that would reduce the receivable amount owed, if any, to the Company.

· Money market funds — considered available-for-sale, and classified as cash equivalents. Fair value at June 30, 2011 was $10.6 million, the same as book value.

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Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information

Segment Information

Note 12 — 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.

Financial information for our business segments for the quarters and six months ended June 30, 2011 and 2010 is as follows:

	(Unaudited)
(In millions)	Composite Materials (a)			Engineered Products		Corporate & Other (b)			Total
Second Quarter 2011
Net sales to external customers:
Commercial aerospace	$	150.9		$	56.9	$	—		$	207.8
Space and defense	62.5			19.2		—			81.7
Industrial	63.4			0.8		—			64.2
Net sales to external customers	276.8			76.9		—			353.7
Intersegment sales	13.9			0.2		(14.1		)	—
Total sales	290.7			77.1		(14.1		)	353.7
Operating income	48.5			11.9		(11.0		)	49.4
Depreciation and amortization	12.8			1.0		—			13.8
Stock-based compensation expense	0.9			0.1		1.4			2.4
Accrual basis additions to capital expenditures	28.4			1.5		—			29.9
Second Quarter 2010
Net sales to external customers:
Commercial aerospace	$	113.9		$	47.1	$	—		$	161.0
Space and defense	60.7			18.7		—			79.4
Industrial	64.3			0.4		—			64.7
Net sales to external customers	238.9			66.2		—			305.1
Intersegment sales	11.5			0.3		(11.8		)	—
Total sales	250.4			66.5		(11.8		)	305.1
Operating income	42.8			10.7		(13.0		)	40.5
Depreciation and amortization	12.7			0.9		—			13.6
Stock-based compensation expense	1.1			0.2		1.3			2.6
Accrual basis additions to capital expenditures	6.2			0.5		0.1			6.8
Six Months Ended June 30, 2011
Net sales to external customers
Commercial aerospace	$	294.1		$	111.3	$	—		$	405.4
Space and defense	122.4			39.0		—			161.4
Industrial	116.6			1.9		—			118.5
Net sales to external customers	533.1			152.2		—			685.3
Intersegment sales	27.8			0.5		(28.3		)	—
Total sales	560.9			152.7		(28.3		)	685.3
Operating income (a)	98.3			24.4		(26.1		)	96.6
Depreciation and amortization	25.7			2.1		0.1			27.9
Stock-based compensation expense	2.5			0.4		5.9			8.8
Other operating (income) expense	(5.7		)	—		—			(5.7		)
Accrual basis additions to capital expenditures	52.7			2.4		—			55.1
Six Months Ended June 30, 2010
Net sales to external customers
Commercial aerospace	$	223.2		$	89.8	$	—		$	313.0
Space and defense	113.8			38.1		—			151.9
Industrial	102.3			0.9		—			103.2
Net sales to external customers	439.3			128.8		—			568.1
Intersegment sales	20.4			0.3		(20.7		)	—
Total sales	459.7			129.1		(20.7		)	568.1
Operating income (b)	73.3			22.1		(31.1		)	64.3
Depreciation and amortization	23.6			1.9		0.1			25.6
Stock-based compensation expense	2.7			0.5		5.1			8.3
Other operating (income) expense	—			—		3.5			3.5
Accrual basis additions to capital expenditures	13.0			0.6		0.1			13.7

(a) First six months 2011 operating income for Composite Materials includes a $5.7 million gain resulting from the curtailment of our U.K. pension plan.

(b) First six months 2010 operating income for Corporate & Other includes a $3.5 million charge to the environmental reserves primarily for remediation at a manufacturing facility sold in 1986.

Goodwill and Intangible Assets

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

(In millions)	June 30, 2011		December 31, 2010
Composite Materials	$	40.8	$	40.1
Engineered Products	16.0		16.1
Goodwill and intangible assets	$	56.8	$	56.2

No impairments have been recorded against these amounts.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies.

Commitments and Contingencies

Note 13 — 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 (“RCRA”), and the Toxic Substances Control Act ( “TSCA”) and similar state, federal,  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.  For a number of such sites, we do not currently possess sufficient information to reasonably estimate the amount of liabilities to be recorded.  However, we believe, based on the amount and the nature of our waste, 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 commenced remediation of this site in accordance with an approved plan.  In the first quarter of 2010, we made a decision to enhance the remediation system to accelerate completion of the remediation and the system is currently operating.  The additional cost associated with this enhancement is included in our accrual for this liability, which at June 30, 2011 is $1.9 million.

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.  In May 2005, the NJDEP 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 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.  Furthermore, the Federal Trustee for natural resources have 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.  Finally, 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.  We expect additional discovery and litigation activities to occur during 2011.  The court has issued a trial plan that contemplates a liability trial for third-party defendants (including Hexcel) in April 2013, with additional proceedings if necessary to allocate costs between third-party defendants in January 2014.  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.  Management has determined that the cost-sharing agreement terminated in December 1998; however, the other party disputes this determination.  The Washington Department of Ecology (“Ecology”) has issued a unilateral Enforcement Order to us requiring us to (a) maintain the interim remedial system and to perform system separation, (b) to conduct a focused remedial investigation and (c) to conduct a focused feasibility study to develop recommended long term remedial measures.  We asserted defenses against performance of the order, particularly objecting to the remediation plan proposed by the previous owner, who still owns the adjacent contaminated site.  However, we are currently complying with the order, with one exception, without withdrawing our defenses.  As a result of a dispute resolution procedure, Hexcel and Ecology have reached an agreement to modify certain work requirements and to extend certain deadlines, and we are in full compliance with the order as modified.  The total accrued liability related to this matter was $1.5 million at June 30, 2011.

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. Hexcel contributed approximately 1.07% of the waste tonnage sent to the site during its operations.  In addition to the Omega site specifically, the EPA is investigating the scope of regional groundwater contamination in the area and is preparing a proposed remedial action for the regional groundwater contamination.  While the EPA has not finalized its Record of Decision as of this date, the Omega PRP Group members have been noticed by the EPA as potentially responsible parties who will be required to be involved in the remediation of the regional groundwater contamination as well.  Hexcel will likely incur costs associated with the regional investigation and remediation as a member of the Omega Group, our ultimate liability, if any, in connection with this matter cannot be determined at this time.

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 June 30, 2011, our aggregate environmental related accruals were $4.7 million, of which $3.2 million was included in accrued liabilities with the remainder included in non-current liabilities. 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 directly to our reserve balance was $2.1 million and $1.7 million for the quarters ended June 30, 2011 and 2010, respectively, and $3.5 million and $2.4 million for the six months ended June 30, 2011 and 2010.  In addition, our operating costs relating to environmental compliance charged directly to expenses were $2.5 million and $2.4 million for the quarters ended June 30, 2011 and 2010, respectively and $4.8 million and $4.7 million for the six-month periods ended June 30, 2011 and 2010, respectively.  Capital expenditures for environmental matters were $0.1 million and $0.2 million for the quarters ended June 30, 2011 and 2010, respectively and $0.3 million and $0.4 million for the six-month periods ended June 30, 2011 and 2010, respectively.

Litigation

Seemann Composites, Inc. v. Hexcel Corporation

Seemann Composites, Inc., (SCI) sued us in the United States District Court, Southern District of Mississippi (Civil Action No. 1:09-cv-00675-HSO-JMR), filed September 16, 2009.  SCI alleged that we supplied the wrong or a defective finished fabric to them, through one of our distributors, and sought unspecified compensatory damages and $10.0 million in punitive damages.  This matter has now been settled with no material impact to the Company’s results of operations.

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 six months ended June 30, 2011, and accrued warranty cost included in “accrued liabilities” in the condensed consolidated balance sheets at June 30, 2011 and December 31, 2010, was as follows:

(In millions)	Product Warranties
Balance as of December 31, 2010	$	4.3
Warranty expense	0.7
Balance as of March 31, 2011	5.0
Warranty expense	—
Deductions and other	(0.1		)
Balance as of June 30, 2011	$	4.9

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2011

Significant Accounting Policies

Investments in Affiliated Companies

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.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data	Jun. 30, 2011	Dec. 31, 2010
Condensed Consolidated Balance Sheets
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200.0	200.0
Common stock, shares issued	100.3	99.5
Treasury stock, shares	2.0	2.2

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Net Income per Common Share (Tables)

6 Months Ended

Jun. 30, 2011

Net Income per Common Share

Summary of earnings per share basic and diluted

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2011		2010		2011		2010
Basic net income per common share:
Net income	$	37.4	$	23.1	$	63.8	$	38.9
Weighted average common shares outstanding	98.6		97.5		98.4		97.4
Basic net income per common share	$	0.38	$	0.24	$	0.65	$	0.40
Diluted net income per common share:
Net income	$	37.4	$	23.1	$	63.8	$	38.9
Weighted average common shares outstanding — Basic	98.6		97.5		98.4		97.4
Plus incremental shares from assumed conversions:
Restricted stock units	0.7		0.9		0.8		1.0
Stock options	1.4		1.3		1.3		1.2
Weighted average common shares outstanding — Dilutive	100.7		99.7		100.5		99.6
Diluted net income per common share	$	0.37	$	0.23	$	0.63	$	0.39

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Inventories, net (Tables)

6 Months Ended

Jun. 30, 2011

Inventories, net

Schedule of net inventories

(In millions)	June 30, 2011			December 31, 2010
Raw materials	$	83.3		$	71.6
Work in progress	52.3			40.7
Finished goods	96.0			80.4
Total inventories, gross	$	231.6		$	192.7
Inventory allowances	(23.7		)	(22.8		)
Total inventories, net	$	207.9		$	169.9

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Retirement and Other Postretirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2011

U.S. Non-qualified Defined Benefit Retirement Plans

Retirement and Other Postretirement Benefit Plans

Schedule of net periodic benefit costs

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2011		2010		2011		2010
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.3	$	0.5	$	0.6
Interest cost	0.2		0.2		0.5		0.5
Net amortization and deferral	0.3		0.3		0.6		0.4
Net periodic benefit cost	$	0.8	$	0.8	$	1.6	$	1.5

Schedule of amounts recognized in balance sheet

	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.9	$	0.9
Other non-current liabilities	27.7		26.9
Total accrued benefit	$	28.6	$	27.8

European Defined Benefit Retirement Plans

Retirement and Other Postretirement Benefit Plans

Schedule of net periodic benefit costs

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011			2010
European Defined Benefit Retirement Plans
Service cost	$	0.2		$	0.9		$	0.9		$	1.9
Interest cost	1.8			1.9			3.6			3.8
Expected return on plan assets	(2.0		)	(1.6		)	(3.9		)	(3.2		)
Net amortization and deferral	0.1			0.3			0.3			0.6
Curtailment gain	—			—			(5.7		)	—
Net periodic benefit cost	$	0.1		$	1.5		$	(4.8	)	$	3.1

Schedule of amounts recognized in balance sheet

	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	3.2	$	0.5
Other non-current liabilities	17.8		26.7
Total accrued benefit	$	21.0	$	27.2

Postretirement Health Care and Life Insurance Benefit Plans

Retirement and Other Postretirement Benefit Plans

Schedule of amounts recognized in balance sheet

(In millions)	June 30, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.8	$	0.8
Other non-current liabilities	8.7		8.6
Total accrued benefit	$	9.5	$	9.4

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Debt (Tables)

6 Months Ended

Jun. 30, 2011

Debt

Schedule of debt and capital lease obligations

(In millions)	June 30, 2011		December 31, 2010
Working capital line of credit — China	$	3.8	$	7.1
Current maturities of capital lease and other obligations	0.5		0.5
Current maturities of term loan	5.0		5.0
Current maturities of 6.75% senior subordinated notes due 2015	—		15.0
Short-term borrowings and current maturities of long-term liabilities	9.3		27.6
Senior secured credit facility — term loan due 2015	90.0		92.5
Senior secured credit facility — revolving loan due 2015	75.0		—
6.75% senior subordinated notes due 2015	75.0		210.0
Capital lease and other obligations	2.1		2.1
Long-term debt	242.1		304.6
Total debt	$	251.4	$	332.2

Schedule of aggregate fair values of notes payable

(In millions)	June 30,2011		December 31, 2010
6.75% senior subordinated notes, due 2015	$	77	$	226
Senior secured credit facility — term loan due 2015	95		98

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2011

Derivative Financial Instruments

Schedule of change in fair value of foreign currency forward exchange contracts under hedge designations

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011			2010
Unrealized gains (losses) at beginning of period, net of tax	$	3.8		$	(4.5	)	$	(0.2	)	$	(1.4	)
(Gains) losses reclassified to net sales	(1.5		)	2.0			(1.1		)	3.1
Increase (decrease) in fair value	2.4			(4.2		)	6.0			(8.4		)
Unrealized gains (losses) at end of period, net of tax	$	4.7		$	(6.7	)	$	4.7		$	(6.7	)

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Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2011

Comprehensive Income.

Schedule of the components of comprehensive income

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2011			2010			2011		2010
Net income	$	37.4		$	23.1		$	63.8	$	38.9
Currency translation adjustments	6.6			(19.3		)	24.4		(36.5		)
Pension and other postretirement obligations	0.2			0.1			0.9		1.5
Net unrealized (losses) gains on financial instruments	(1.1		)	(2.2		)	4.2		(5.2		)
Comprehensive income (loss)	$	43.1		$	1.7		$	93.3	$	(1.3	)

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2011

Segment Information

Schedule of segment reporting information by segment

	(Unaudited)
(In millions)	Composite Materials (a)			Engineered Products		Corporate & Other (b)			Total
Second Quarter 2011
Net sales to external customers:
Commercial aerospace	$	150.9		$	56.9	$	—		$	207.8
Space and defense	62.5			19.2		—			81.7
Industrial	63.4			0.8		—			64.2
Net sales to external customers	276.8			76.9		—			353.7
Intersegment sales	13.9			0.2		(14.1		)	—
Total sales	290.7			77.1		(14.1		)	353.7
Operating income	48.5			11.9		(11.0		)	49.4
Depreciation and amortization	12.8			1.0		—			13.8
Stock-based compensation expense	0.9			0.1		1.4			2.4
Accrual basis additions to capital expenditures	28.4			1.5		—			29.9
Second Quarter 2010
Net sales to external customers:
Commercial aerospace	$	113.9		$	47.1	$	—		$	161.0
Space and defense	60.7			18.7		—			79.4
Industrial	64.3			0.4		—			64.7
Net sales to external customers	238.9			66.2		—			305.1
Intersegment sales	11.5			0.3		(11.8		)	—
Total sales	250.4			66.5		(11.8		)	305.1
Operating income	42.8			10.7		(13.0		)	40.5
Depreciation and amortization	12.7			0.9		—			13.6
Stock-based compensation expense	1.1			0.2		1.3			2.6
Accrual basis additions to capital expenditures	6.2			0.5		0.1			6.8
Six Months Ended June 30, 2011
Net sales to external customers
Commercial aerospace	$	294.1		$	111.3	$	—		$	405.4
Space and defense	122.4			39.0		—			161.4
Industrial	116.6			1.9		—			118.5
Net sales to external customers	533.1			152.2		—			685.3
Intersegment sales	27.8			0.5		(28.3		)	—
Total sales	560.9			152.7		(28.3		)	685.3
Operating income (a)	98.3			24.4		(26.1		)	96.6
Depreciation and amortization	25.7			2.1		0.1			27.9
Stock-based compensation expense	2.5			0.4		5.9			8.8
Other operating (income) expense	(5.7		)	—		—			(5.7		)
Accrual basis additions to capital expenditures	52.7			2.4		—			55.1
Six Months Ended June 30, 2010
Net sales to external customers
Commercial aerospace	$	223.2		$	89.8	$	—		$	313.0
Space and defense	113.8			38.1		—			151.9
Industrial	102.3			0.9		—			103.2
Net sales to external customers	439.3			128.8		—			568.1
Intersegment sales	20.4			0.3		(20.7		)	—
Total sales	459.7			129.1		(20.7		)	568.1
Operating income (b)	73.3			22.1		(31.1		)	64.3
Depreciation and amortization	23.6			1.9		0.1			25.6
Stock-based compensation expense	2.7			0.5		5.1			8.3
Other operating (income) expense	—			—		3.5			3.5
Accrual basis additions to capital expenditures	13.0			0.6		0.1			13.7

(a) First six months 2011 operating income for Composite Materials includes a $5.7 million gain resulting from the curtailment of our U.K. pension plan.

(b) First six months 2010 operating income for Corporate & Other includes a $3.5 million charge to the environmental reserves primarily for remediation at a manufacturing facility sold in 1986.

Schedule of goodwill and intangible assets by segment

(In millions)	June 30, 2011		December 31, 2010
Composite Materials	$	40.8	$	40.1
Engineered Products	16.0		16.1
Goodwill and intangible assets	$	56.8	$	56.2

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies.

Schedule of product warranty

(In millions)	Product Warranties
Balance as of December 31, 2010	$	4.3
Warranty expense	0.7
Balance as of March 31, 2011	5.0
Warranty expense	—
Deductions and other	(0.1		)
Balance as of June 30, 2011	$	4.9

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Significant Accounting Policies (Details) (Asian Composites Manufacturing Sdn. Bhd)	Jun. 30, 2011
Asian Composites Manufacturing Sdn. Bhd
Investments in affiliated companies
Equity ownership investment (as a percent)	50.00%

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Net Income per Common Share (Details) (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Basic net income per common share:
Net income	$ 37.4	$ 23.1	$ 63.8	$ 38.9
Weighted average common shares outstanding (in shares)	98.6	97.5	98.4	97.4
Basic net income per common share (in dollars per share)	$ 0.38	$ 0.24	$ 0.65	$ 0.40
Diluted net income per common share:
Net income	$ 37.4	$ 23.1	$ 63.8	$ 38.9
Weighted average common shares outstanding-Basic (in shares)	98.6	97.5	98.4	97.4
Incremental shares from assumed conversions:
Restricted stock units	0.7	0.9	0.8	1.0
Stock options	1.4	1.3	1.3	1.2
Weighted average common shares outstanding-Dilutive (in shares)	100.7	99.7	100.5	99.6
Diluted net income per common share (in dollars per share)	$ 0.37	$ 0.23	$ 0.63	$ 0.39
Antidilutive securities excluded from computation of earnings per share amount (in shares)	1.1	0.9	1.1	1.2

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Condensed Consolidated Statements of Operations (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net sales	$ 353.7	$ 305.1	$ 685.3	$ 568.1
Cost of sales	266.7	226.7	515.3	423.6
Gross margin	87.0	78.4	170.0	144.5
Selling, general and administrative expenses	29.7	29.6	62.6	61.0
Research and technology expenses	7.9	8.3	16.5	15.7
Other operating (income) expense			(5.7)	3.5
Operating income	49.4	40.5	96.6	64.3
Interest expense, net	2.9	7.1	7.1	13.7
Non-operating expense			4.9
Income before income taxes and equity in earnings of affiliated companies	46.5	33.4	84.6	50.6
Provision for income taxes	9.3	10.6	21.5	12.1
Income before equity in earnings of affiliated companies	37.2	22.8	63.1	38.5
Equity in earnings of affiliated companies	0.2	0.3	0.7	0.4
Net income	$ 37.4	$ 23.1	$ 63.8	$ 38.9
Basic net income per common share: (in dollars per share)	$ 0.38	$ 0.24	$ 0.65	$ 0.40
Diluted net income per common share: (in dollars per share)	$ 0.37	$ 0.23	$ 0.63	$ 0.39
Weighted average common shares outstanding:
Basic (in shares)	98.6	97.5	98.4	97.4
Diluted (in shares)	100.7	99.7	100.5	99.6

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Other Operating (Income) Expense (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Other Operating (Income) Expenses
Service credits recognized as a curtailment gain	$ 5.7
Other operating (income) expense	(5.7)	3.5
United Kingdom defined benefit plan (the "U.K. Plan")
Other Operating (Income) Expenses
Service credits recognized as a curtailment gain	5.7
Reduction in projected plan obligation	$ 1.6

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Non-Operating Expense (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended
	Feb. 28, 2011	Jun. 30, 2011
Other Non-Operating Expense
Interest rate (as a percent)		6.75%
6.75% senior subordinated notes due 2015
Other Non-Operating Expense
Senior subordinated notes redeemed	$ 150
Face value of senior subordinated notes	225
Interest rate (as a percent)		6.75%
Call premium (as a percent)	2.25%
Call premium	$ 4.9

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Inventories, net (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Inventories, net
Raw materials	$ 83.3	$ 71.6
Work in progress	52.3	40.7
Finished goods	96.0	80.4
Total inventories, gross	231.6	192.7
Inventory allowances	(23.7)	(22.8)
Total inventories, net	$ 207.9	$ 169.9

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Retirement and Other Postretirement Benefit Plans (Details) (USD $) In Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Net periodic benefit cost
Curtailment gain			$ (5.7)
U.S. Non-qualified Defined Benefit Retirement Plans
Net periodic benefit cost
Service cost	0.3	0.3	0.5	0.6
Interest cost	0.2	0.2	0.5	0.5
Net amortization and deferral	0.3	0.3	0.6	0.4
Net periodic benefit cost	0.8	0.8	1.6	1.5
Amounts recognized on the balance sheet:
Accrued liabilities	0.9		0.9		0.9
Other non-current liabilities	27.7		27.7		26.9
Total accrued benefit	28.6		28.6		27.8
U.S. Non-qualified Defined Benefit Retirement Plans
Contributions
Expected employer contribution to defined benefit retirement plans in current year	0.9		0.9
Employer contribution to defined benefit retirement plans					0.6
European Defined Benefit Retirement Plans
Net periodic benefit cost
Service cost	0.2	0.9	0.9	1.9
Interest cost	1.8	1.9	3.6	3.8
Expected return on plan assets	(2.0)	(1.6)	(3.9)	(3.2)
Net amortization and deferral	0.1	0.3	0.3	0.6
Curtailment gain			(5.7)
Net periodic benefit cost	0.1	1.5	(4.8)	3.1
Amounts recognized on the balance sheet:
Accrued liabilities	3.2		3.2		0.5
Other non-current liabilities	17.8		17.8		26.7
Total accrued benefit	21.0		21.0		27.2
Contributions
Expected employer contribution to defined benefit retirement plans in current year	7.4		7.4
Employer contribution to defined benefit retirement plans	2.5	1.9	3.9	2.7	9.0
United Kingdom defined benefit plan (the "U.K. Plan")
Net periodic benefit cost
Curtailment gain			(5.7)
Amounts recognized on the balance sheet:
Reduction in projected plan obligation			1.6
Postretirement Health Care and Life Insurance Benefit Plans
Amounts recognized on the balance sheet:
Accrued liabilities	0.8		0.8		0.8
Other non-current liabilities	8.7		8.7		8.6
Total accrued benefit	9.5		9.5		9.4
Contributions
Expected employer contribution to defined benefit retirement plans in current year	0.8		0.8
Employer contribution to defined benefit retirement plans	$ 0.1	$ 0.1	$ 0.1	$ 0.2	$ 0.4

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Debt (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2011	Dec. 31, 2010
Debt
Interest rate (as a percent)	6.75%
Short-term borrowings and current maturities of long-term liabilities	$ 9.3	$ 27.6
Long-term debt	242.1	304.6
Total Debt	251.4	332.2
Estimated Fair Values of Notes Payable
Long-term debt	242.1	304.6
Working capital line of credit-China
Debt
Short-term borrowings and current maturities of long-term liabilities	3.8	7.1
Capital lease and other obligations
Debt
Short-term borrowings and current maturities of long-term liabilities	0.5	0.5
Long-term debt	2.1	2.1
Estimated Fair Values of Notes Payable
Long-term debt	2.1	2.1
Term loan
Debt
Short-term borrowings and current maturities of long-term liabilities	5.0	5.0
6.75% senior subordinated notes due 2015
Debt
Interest rate (as a percent)	6.75%
Short-term borrowings and current maturities of long-term liabilities		15.0
Long-term debt	75.0	210.0
Estimated Fair Values of Notes Payable
Fair value of notes payable	77	226
Long-term debt	75.0	210.0
Senior secured credit facility - term loan due 2015
Debt
Long-term debt	90.0	92.5
Estimated Fair Values of Notes Payable
Fair value of notes payable	95	98
Long-term debt	90.0	92.5
Senior secured credit facility - revolving loan due 2015
Debt
Long-term debt	75.0
Estimated Fair Values of Notes Payable
Long-term debt	$ 75.0

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Derivative Financial Instruments (Details) (USD $) In Millions, unless otherwise specified							3 Months Ended	6 Months Ended			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended			6 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011 Designated as Hedging Instrument Interest Rate Swap Agreements	Dec. 31, 2010 Designated as Hedging Instrument Interest Rate Swap Agreements	Jun. 30, 2011 Designated as Hedging Instrument Cross-Currency Interest Rate Swap Agreement	Dec. 31, 2010 Designated as Hedging Instrument Cross-Currency Interest Rate Swap Agreement	Sep. 30, 2006 Designated as Hedging Instrument Cross-Currency Interest Rate Swap Agreement	Jun. 30, 2011 Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts	Jun. 30, 2011 Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts	Jun. 30, 2010 Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts	Dec. 31, 2010 Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts	Jun. 30, 2011 Hedge of Euro investment in Hexcel SASU (France) Cross-Currency Interest Rate Swap Agreement	Jun. 30, 2010 Hedge of Euro investment in Hexcel SASU (France) Cross-Currency Interest Rate Swap Agreement	Jun. 30, 2011 Hedge of Euro investment in Hexcel SASU (France) Cross-Currency Interest Rate Swap Agreement	Jun. 30, 2010 Hedge of Euro investment in Hexcel SASU (France) Cross-Currency Interest Rate Swap Agreement	Jun. 30, 2011 Cash flow hedges Foreign Currency Forward Exchange Contracts	Jun. 30, 2010 Cash flow hedges Foreign Currency Forward Exchange Contracts	Jun. 30, 2011 Cash flow hedges Foreign Currency Forward Exchange Contracts	Jun. 30, 2010 Cash flow hedges Foreign Currency Forward Exchange Contracts	Jun. 30, 2011 Interest Rate Swap Agreements	Jun. 30, 2011 Interest Rate Swap Agreements U.S. dollars	Sep. 30, 2006 Cross-Currency Interest Rate Swap Agreement	Jun. 30, 2011 Cross-Currency Interest Rate Swap Agreement U.S. dollars	Jun. 30, 2011 Cross-Currency Interest Rate Swap Agreement Euro	Jun. 30, 2011 Foreign Currency Forward Exchange Contracts	Jun. 30, 2010 Foreign Currency Forward Exchange Contracts	Jun. 30, 2011 Foreign Currency Forward Exchange Contracts	Jun. 30, 2010 Foreign Currency Forward Exchange Contracts
Derivative Financial Instruments
Floating rate obligation covered by interest rate swap agreement		$ 98	$ 98
Average fixed interest rate (as a percent)																			1.03%
Variable interest rate																				LIBOR		three month LIBOR	three month EURIBOR
Fair value of derivative liability		0.2		8.5	3.0		0.2	0.2		2.6
Notional amount				63.4		63.4	122.0	122.0		124.2
Derivative term at agreement inception date (in years)																					5
Gains (losses) excluded from assessment of hedge effectiveness and included in income as a component of interest expense							0.3	(0.2)	0.3		0.2		0.2	(0.3)
Gains (losses) recognized in income											(0.2)	(0.1)	(0.3)	(0.2)	1.8	(2.6)	1.3	(4.1)
Gains (losses) in other comprehensive income, effective portion											(1.5)	6.2	(6.8)	10.6	2.7	(5.2)	7.5	(10.9)
Fair value of derivative asset			0.7				5.9	5.9		2.3
Net gains (losses) on derivative contracts not designated as hedges																								2.7	(4.8)	7.7	(7.7)
Accumulated other comprehensive income, change in fair value of foreign currency forward exchange contracts under hedge designations
Unrealized gains (losses) gains at beginning of period, net of tax																								3.8	(4.5)	(0.2)	(1.4)
(Gains) losses reclassified to net sales																								(1.5)	2.0	(1.1)	3.1
Increase (decrease) in fair value																								2.4	(4.2)	6.0	(8.4)
Unrealized gains (losses) at end of period, net of tax																								4.7	(6.7)	4.7	(6.7)
Foreign currency gain (loss) reclassified into earnings over next twelve months	$ 3.4

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Income Taxes
Income tax provisions	$ 9.3	$ 10.6	$ 21.5	$ 12.1
Effective tax rate (as a percent)	20.00%	31.70%	25.40%	23.90%
Release of reserves for uncertain tax positions as a result of an audit settlement	5.5		5.5
Effective tax rate excluding audit settlements (as a percent)	31.80%		31.90%
New Clean Energy Manufacturing Tax Credits				$ 3.5
Effective tax rate excluding New Clean Energy Manufacturing Tax Credits (as a percent)				30.80%

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Comprehensive Income (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Comprehensive Income
Net income	$ 37.4	$ 23.1	$ 63.8	$ 38.9
Currency translation adjustments	6.6	(19.3)	24.4	(36.5)
Pension and other postretirement obligations	0.2	0.1	0.9	1.5
Net unrealized (losses) gains on financial instruments	(1.1)	(2.2)	4.2	(5.2)
Comprehensive income (loss)	$ 43.1	$ 1.7	$ 93.3	$ (1.3)

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Fair Value Measurements (Details) (USD $) In Millions	Jun. 30, 2011
Interest Rate Swap Agreements | Fair value measured on recurring basis | Level 2
Fair value of assets and liabilities
Derivative liabilities	$ 0.2
Cross-Currency Interest Rate Swap Agreement | Fair value measured on recurring basis | Level 2
Fair value of assets and liabilities
Derivative liabilities	8.5
Foreign Currency Forward Exchange Contracts | Fair value measured on recurring basis | Level 2
Fair value of assets and liabilities
Derivative assets	7.5
Derivative liabilities	0.6
Fair value measured on recurring basis | Level 2
Fair value of assets and liabilities
Derivative assets	7.5
Derivative liabilities	9.3
Fair value measured on recurring basis | Level 2 | Money market funds
Fair value of assets and liabilities
Cash equivalents	10.6
Book value | Money market funds
Fair value of assets and liabilities
Cash equivalents	$ 10.6

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Segment Information (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011		Jun. 30, 2010
Net sales to external customers:
Net sales to external customers	$ 353.7	$ 305.1	$ 685.3		$ 568.1
Total sales	353.7	305.1	685.3		568.1
Operating income	49.4	40.5	96.6		64.3
Depreciation and amortization	13.8	13.6	27.9		25.6
Stock-based compensation expense	2.4	2.6	8.8		8.3
Other operating (income) expense			(5.7)		3.5
Accrual basis additions to capital expenditures	29.9	6.8	55.1		13.7
Operating income
Unrecognized service credits as a curtailment gain in U.K. plan			5.7
Environmental remediation expense	2.5	2.4	4.8		4.7
Composite Materials
Net sales to external customers:
Net sales to external customers	276.8	238.9	533.1		439.3
Intersegment sales	13.9	11.5	27.8		20.4
Total sales	290.7	250.4	560.9		459.7
Operating income	48.5	42.8	98.3	[1]	73.3
Depreciation and amortization	12.8	12.7	25.7		23.6
Stock-based compensation expense	0.9	1.1	2.5		2.7
Other operating (income) expense			(5.7)
Accrual basis additions to capital expenditures	28.4	6.2	52.7		13.0
Operating income
Unrecognized service credits as a curtailment gain in U.K. plan			5.7
Composite Materials | Commercial aerospace
Net sales to external customers:
Net sales to external customers	150.9	113.9	294.1		223.2
Composite Materials | Space and defense
Net sales to external customers:
Net sales to external customers	62.5	60.7	122.4		113.8
Composite Materials | Industrial
Net sales to external customers:
Net sales to external customers	63.4	64.3	116.6		102.3
Engineered Products
Net sales to external customers:
Net sales to external customers	76.9	66.2	152.2		128.8
Intersegment sales	0.2	0.3	0.5		0.3
Total sales	77.1	66.5	152.7		129.1
Operating income	11.9	10.7	24.4		22.1
Depreciation and amortization	1.0	0.9	2.1		1.9
Stock-based compensation expense	0.1	0.2	0.4		0.5
Accrual basis additions to capital expenditures	1.5	0.5	2.4		0.6
Engineered Products | Commercial aerospace
Net sales to external customers:
Net sales to external customers	56.9	47.1	111.3		89.8
Engineered Products | Space and defense
Net sales to external customers:
Net sales to external customers	19.2	18.7	39.0		38.1
Engineered Products | Industrial
Net sales to external customers:
Net sales to external customers	0.8	0.4	1.9		0.9
Corporate and Other
Net sales to external customers:
Intersegment sales	(14.1)	(11.8)	(28.3)		(20.7)
Total sales	(14.1)	(11.8)	(28.3)		(20.7)
Operating income	(11.0)	(13.0)	(26.1)		(31.1)	[2]
Depreciation and amortization			0.1		0.1
Stock-based compensation expense	1.4	1.3	5.9		5.1
Other operating (income) expense					3.5
Accrual basis additions to capital expenditures		0.1			0.1
Operating income
Environmental remediation expense					3.5
Commercial aerospace
Net sales to external customers:
Net sales to external customers	207.8	161.0	405.4		313.0
Space and defense
Net sales to external customers:
Net sales to external customers	81.7	79.4	161.4		151.9
Industrial
Net sales to external customers:
Net sales to external customers	$ 64.2	$ 64.7	$ 118.5		$ 103.2

[1] First six months 2011 operating income for Composite Materials includes a $5.7 million gain resulting from the curtailment of our U.K. pension plan.

[2] First six months 2010 operating income for Corporate and Other includes a $3.5 million charge to the environmental reserves primarily for remediation at a manufacturing facility sold in 1986.

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Condensed Consolidated Statements of Cash Flows (USD $) In Millions	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities
Net income	$ 63.8	$ 38.9
Reconciliation to net cash provided by operating activities:
Depreciation and amortization	27.9	25.6
Amortization of debt discount and deferred financing costs and call premium expense	5.9	2.4
Deferred income taxes	6.7	4.2
Equity in earnings from affiliated companies	(0.7)	(0.4)
Stock-based compensation	8.8	8.3
Pension curtailment gain	(5.7)
Excess tax benefits on stock-based compensation	(3.6)	(0.7)
Changes in assets and liabilities:
Increase in accounts receivable	(25.4)	(52.3)
Increase in inventories	(31.5)	(28.9)
(Increase) decrease in prepaid expenses and other current assets	(3.1)	0.4
Increase in accounts payable and accrued liabilities	36.0	36.9
Other-net	(1.8)	(2.7)
Net cash provided by operating activities	77.3	31.7
Cash flows from investing activities
Capital expenditures	(67.8)	(20.1)
Net cash used for investing activities	(67.8)	(20.1)
Cash flows from financing activities
Borrowings from senior secured credit facility	135.0
Repayment of 6.75% senior subordinated notes	(150.0)
Repayment of senior secured credit facility	(60.0)
Call premium payment for 6.75% senior subordinated notes	(3.4)
(Repayments) borrowings from credit line	(3.3)	1.7
Repayment of senior secured credit facility - term loan	(2.5)	(30.0)
Capital lease obligations and other debt, net	(0.2)	(0.2)
Activity under stock plans	7.4	0.6
Net cash used for financing activities	(77.0)	(27.9)
Effect of exchange rate changes on cash and cash equivalents	6.2	(9.8)
Net decrease in cash and cash equivalents	(61.3)	(26.1)
Cash and cash equivalents at beginning of period	117.2	110.1
Cash and cash equivalents at end of period	55.9	84.0
Supplemental data:
Accrual basis additions to property, plant and equipment	$ 55.1	$ 13.7

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Segment Information (Details 2) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Goodwill and intangible assets by segment
Goodwill and intangible assets	$ 56.8	$ 56.2
Composite Materials
Goodwill and intangible assets by segment
Goodwill and intangible assets	40.8	40.1
Engineered Products
Goodwill and intangible assets by segment
Goodwill and intangible assets	$ 16.0	$ 16.1

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Commitments and Contingencies (Details) (USD $)	3 Months Ended			6 Months Ended				6 Months Ended	1 Months Ended						1 Months Ended
	Jun. 30, 2011	Mar. 31, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011 Lodi, New Jersey Site	Jun. 30, 2011 Kent, Washington Site	Jun. 30, 2011 Omega Chemical Corporation Superfund Site, Whittier, CA	Jun. 30, 2007 Lower Passaic River Study Area	Oct. 31, 2005 Lower Passaic River Study Area	May 31, 2005 Lower Passaic River Study Area	Feb. 29, 2004 Lower Passaic River Study Area	Oct. 31, 2003 Lower Passaic River Study Area	Feb. 04, 2009 Lower Passaic River Study Area	Sep. 30, 2009 Seemann Composites, Inc. v. Hexcel Corporation
Environmental costs
Accrual for environmental remediation	$ 4,700,000			$ 4,700,000		$ 1,900,000
Number of entities, in addition to Hexcel, who received a directive from the New Jersey Department of Environmental Protection													66
Number of entities who received notice from Environmental Protection Agency (EPA)												42
Estimated cost for study of environmental conditions by EPA												10,000,000
Number of participating entities financing the study of environmental conditions by EPA											43
Maximum amount of financing for the study of environmental conditions by EPA											10,000,000
Number of entities assuming responsibility for environmental study by EPA										73
Length of river for which interim remedial options are considered (in miles)									8
Number of interim remedial options									6
Estimated environmental remediation cost, low end of range									900,000,000
Estimated environmental remediation cost, high end of range									2,300,000,000
Minimum number of entities against whom third party complaint was filed														300
Approximate contribution to waste tonnage (as a percent)								1.07%
Aggregate environmental accruals included in accrued liabilities	3,200,000			3,200,000			1,500,000
Environmental remediation spending charged directly to reserve balance	2,100,000		1,700,000	3,500,000	2,400,000
Operating costs relating to environmental compliance	2,500,000		2,400,000	4,800,000	4,700,000
Capital expenditure for environmental matters	100,000		200,000	300,000	400,000
Litigation
Number of distributors alleged supplying wrong or defective finished fabric															1
Punitive damages sought by Seemann Composites, Inc v. Hexcel Corporation															10,000,000
Changes in accrued product warranty cost
Balance at the beginning of the period	5,000,000	4,300,000		4,300,000
Warranty expense		700,000
Deductions and other	(100,000)
Balance at the end of the period	$ 4,900,000	$ 5,000,000		$ 4,900,000

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 20, 2011
Document and Entity Information
Entity Registrant Name	HEXCEL CORP /DE/
Entity Central Index Key	0000717605
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		97,353,680
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

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Condensed Consolidated Statements of Cash Flows (Parenthetical)	Jun. 30, 2011
Condensed Consolidated Statements of Cash Flows
6.75% senior subordinated notes (as a percent)	6.75%

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Significant Accounting Policies

Significant Accounting Policies

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, 2010 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, 2010 was derived from the audited 2010 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 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 10, 2011.

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.

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Net Income per Common Share

6 Months Ended

Jun. 30, 2011

Net Income per Common Share

Net Income per Common Share

Note 2 — Net Income per Common Share

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2011		2010		2011		2010
Basic net income per common share:
Net income	$	37.4	$	23.1	$	63.8	$	38.9
Weighted average common shares outstanding	98.6		97.5		98.4		97.4
Basic net income per common share	$	0.38	$	0.24	$	0.65	$	0.40
Diluted net income per common share:
Net income	$	37.4	$	23.1	$	63.8	$	38.9
Weighted average common shares outstanding — Basic	98.6		97.5		98.4		97.4
Plus incremental shares from assumed conversions:
Restricted stock units	0.7		0.9		0.8		1.0
Stock options	1.4		1.3		1.3		1.2
Weighted average common shares outstanding — Dilutive	100.7		99.7		100.5		99.6
Diluted net income per common share	$	0.37	$	0.23	$	0.63	$	0.39

Total shares underlying stock options of 1.1 million for the quarter and six months were excluded from the computation of diluted net income per share for the periods ended June 30, 2011, as they were anti-dilutive. Total shares underlying stock options of 0.9 million for the quarter and 1.2 million for the six months were excluded from the computation of diluted net income per share for the periods ended June 30, 2010, as they were anti-dilutive.

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Other Operating (Income) Expense

6 Months Ended

Jun. 30, 2011

Other Operating (Income) Expense

Other Operating (Income) Expense

Note 3 — Other Operating (Income) Expense

Effective January 31, 2011, credited service for the participants in our U.K. plan was frozen.  This resulted in recognizing $5.7 million of prior unrecognized service credits as a curtailment gain and also reduced the projected plan obligation by $1.6 million. The six-month period ended June 30, 2010 included a pre-tax charge of $3.5 million for additional environmental reserves primarily to remediate our former Lodi, New Jersey manufacturing facility that was sold in 1986 (see note 13).

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Non-Operating Expense

6 Months Ended

Jun. 30, 2011

Non-Operating Expense

Non-Operating Expense

Note 4 — Non-Operating Expense

In February 2011, we redeemed $150 million of our $225 million 6.75% senior subordinated notes at a call premium of 2.25%.  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 $4.9 million.