10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10–K

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

For the Fiscal Year Ended December 31, 2013

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.)

281 Tresser Boulevard
Stamford, Connecticut 06901

(Address of principal executive offices and zip code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
COMMON STOCK	NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x  No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 in Rule 12b-2 of the Act). Yes o  No x

The aggregate market value of the registrant’s common stock held by non-affiliates was $3,387,607,226 based on the reported last sale price of common stock on June 28, 2013, which is the last business day of the registrant’s most recently completed second fiscal quarter.

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

Class	Outstanding as of January 30, 2014
COMMON STOCK	98,916,627

Documents Incorporated by Reference:

Proxy Statement for Annual Meeting of Stockholders (to the extent specified herein) — Part III.

PART I

ITEM 1. Business.

General Development of Business

Hexcel Corporation, founded in 1946, was incorporated in California in 1948, and reincorporated in Delaware in 1983.  Hexcel Corporation and its subsidiaries (herein referred to as “Hexcel”, “the Company”, “we”, “us”, or “our”), is a leading advanced composites company.  We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, engineered honeycomb and composite structures, for use in Commercial Aerospace, Space & Defense and Industrial markets.  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, a wide variety of recreational products and other industrial applications.

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

Narrative Description of Business and Segments

We are a manufacturer of products within a single industry: Advanced Composites.  Hexcel has two reportable segments, Composite Materials and Engineered Products. The Composite Materials segment is comprised of our carbon fiber, specialty reinforcements, resins, prepregs and other fiber-reinforced matrix materials, and honeycomb core product lines.  The Engineered Products segment is comprised of lightweight high strength composite structures, molded components and specialty machined honeycomb product lines.

The following summaries describe the ongoing activities related to the Composite Materials and Engineered Products segments as of December 31, 2013.

Composite Materials

The Composite Materials segment manufactures and markets carbon fibers, fabrics and specialty reinforcements, prepregs and other fiber-reinforced matrix materials, structural adhesives, honeycomb, molding compounds, tooling materials, polyurethane systems and laminates that are incorporated into many applications, including military and commercial aircraft, wind turbine blades, recreational products, transport (cars, boats, trains) and other industrial applications.

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The following table identifies the principal products and examples of the primary end-uses from the Composite Materials segment:

SEGMENT	PRODUCTS	PRIMARY END-USES
COMPOSITE MATERIALS	Carbon Fibers	·      Raw materials for prepregs, fabrics and specialty reinforcements
		·      Filament winding for various aerospace, defense and industrial applications
	Fabrics and Specialty Reinforcements	·      Raw materials for prepregs and honeycomb
		·      Composites and components used in aerospace, defense, wind energy, automotive, recreation and other industrial applications
	Prepregs, Other Fiber-Reinforced	·      Composite structures
	Matrix Materials and Resins	·      Commercial and military aircraft components
		·      Satellites and launchers
		·      Aeroengines
		·      Wind turbine and helicopter blades
		·      Boats, trains and performance cars
		·      Skis, snowboards, hockey sticks, and bicycles
	Structural Adhesives	·      Bonding of metals, honeycomb and composite materials
	Honeycomb	·      Composite structures and interiors
		·      Impact and shock absorption systems
		·      Helicopter blades

Carbon Fibers:  HexTow® carbon fibers are manufactured for sale to third-party customers as well as for our own use in manufacturing certain reinforcements and composite materials.  Carbon fibers are woven into carbon fabrics, used as reinforcement in conjunction with a resin matrix to produce pre-impregnated composite materials (referred to as “prepregs”).  Carbon fiber is also used in filament winding, hand layup, automatic tape layup and advanced fiber placement to produce finished composite components.  Key product applications include structural components for commercial and military aircraft, space launch vehicles, and certain other applications such as recreational and industrial equipment.

Fabrics and Specialty Reinforcements:  Fabrics and specialty reinforcements are made from a variety of fibers, including carbon, aramid and other high strength polymers, several types of fiberglass, quartz, ceramic and other specialty fibers.  These reinforcements are used in the production of prepregs and other matrix materials used in primary and secondary structural aerospace applications such as wing components, horizontal and vertical stabilizer components, fairings, radomes and engine blades and cases, engine nacelles as well as overhead storage bins and other interior components.  Our reinforcements are also used in the manufacture of a variety of industrial and recreational products such as wind energy blades, automotive components, oil exploration and production equipment, boats, surfboards, skis and other sporting goods equipment.

Prepregs:  HexPly® prepregs are manufactured for sale to third-party customers and for internal use by our Engineered Products segment in manufacturing composite laminates and monolithic structures, including finished components for aircraft structures and interiors.  Prepregs are manufactured by combining high-performance reinforcement fabrics or unidirectional fibers with a resin matrix to form a composite material that, when cured, has exceptional structural properties not present in either of the constituent materials.  Prepreg reinforcements include glass, carbon, aramid, quartz, ceramic and other specialty fibers.  Resin matrices include bismaleimide, cyanate ester, epoxy, phenolic, polyimide and other specialty resins.

Other Fiber-Reinforced Matrix Materials:  New fiber reinforced matrix developments include HexMC®, a form of quasi-isotropic carbon fiber prepreg that enables small to medium sized composite components to be mass produced.  HexTOOL® is a specialized form of HexMC® for use in the cost-effective construction of high temperature resistant composite tooling.  HexFIT® film infusion material is a product that combines resin films and dry fiber reinforcements to save lay-up time in production and enables the manufacture of large contoured composite structures, such as wind turbine blades.

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Resins:  HexFlow® polymer matrix materials are sold in liquid and film form for use in direct process manufacturing of composite parts.  Resins can be combined with fiber reinforcements in manufacturing processes such as resin transfer molding (RTM), resin film infusion (RFI) or vacuum assisted resin transfer molding (VARTM) to produce high quality composite components for both aerospace and industrial applications, without the need for customer investment in autoclaves.

Structural Adhesives:  We manufacture and market a comprehensive range of Reduxâ film and paste adhesives.  These structural adhesives, which bond metal to metal and composites and honeycomb structures, are used in the aerospace industry and for many industrial applications.

Honeycomb:  HexWeb® honeycomb is a lightweight, cellular structure generally composed of a sheet of nested hexagonal cells.  It can also be manufactured in over-expanded and asymmetric cell configurations to meet special design requirements such as contours or complex curvatures.  Honeycomb is primarily used as a lightweight core material and acts as a highly efficient energy absorber.  When sandwiched between composite or metallic facing skins, honeycomb significantly increases the stiffness of the structure, while adding very little weight.

We produce honeycomb from a number of metallic and non-metallic materials.  Most metallic honeycomb is made from aluminum and is available in a selection of alloys, cell sizes and dimensions.  Non-metallic materials used in the manufacture of honeycomb include fiberglass, carbon fiber, thermoplastics, non-flammable aramid papers, aramid fiber and other specialty materials.

We sell honeycomb as standard blocks and in slices cut from a block. Honeycomb is also supplied as sandwich panels, with facing skins bonded to either side of the core material.  Honeycomb is also used in Acousti-Cap® where a non-metallic permeable cap material is embedded into honeycomb core that is used in aircraft engine nacelles to dramatically reduce noise during takeoff and landing without adding a structural weight penalty.  Aerospace is the largest market for honeycomb products.  We also sell honeycomb for non-aerospace applications including automotive parts, sporting goods, building panels, high-speed trains and mass transit vehicles, energy absorption products, marine vessel compartments, and other industrial uses.  In addition, we produce honeycomb for our Engineered Products segment for use in manufacturing finished parts for airframe Original Equipment Manufacturers (“OEMs”).

The following table identifies the key customers and the major manufacturing facilities of the Composite Materials segment:

COMPOSITE MATERIALS
KEY CUSTOMERS
Aernnova	Daher	Safran Group
Airbus Group (including Eurocopter)	Embraer	Spirit Aerosystems
Alliant Techsystems	FACC	Textron
The Boeing Company	Finmeccanica	Toray
Bombardier	Gamesa	Trek
CFAN	GKN	Triumph
CTRM Aero Composites	Lockheed Martin	United Technologies
Cytec	Northrop Grumman	Vestas

MAJOR MANUFACTURING FACILITIES
Casa Grande, Arizona	Neumarkt, Austria
Dagneux, France	Parla, Spain
Decatur, Alabama	Salt Lake City, Utah
Duxford, England	Seguin, Texas
Illescas, Spain	Stade, Germany
Les Avenieres, France	Tianjin, China
Nantes, France	Windsor, Colorado

Net sales for the Composite Materials segment to third-party customers were $1,286.9 million in 2013, $1,230.9 million in 2012 and $1,074.5 million in 2011, which represented between 77% and 78%, of our net sales each year.  Net sales for composite materials are highly dependent upon the number of large commercial aircraft produced as further discussed under the captions “Significant Customers”, “Markets” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.  In addition, about 5% of our total production of composite materials in 2013 was used internally by the Engineered Products segment.

Engineered Products

The Engineered Products segment manufactures and markets composite structures and precision machined honeycomb parts primarily for use in the aerospace industry.  Composite structures are manufactured from a variety of composite and other materials,

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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.

The following table identifies the principal products and examples of the primary end-uses from the Engineered Products segment:

SEGMENT	PRODUCTS	PRIMARY END-USES
ENGINEERED PRODUCTS	Composite Structures	·      Aircraft structures and finished aircraft components, including wing to body fairings, wing panels, flight deck panels, door liners, helicopter blades, spars and tip caps
	Engineered Honeycomb	·      Aircraft structural sub-components and semi-finished components used in helicopter blades, engine nacelles, and aircraft surfaces (flaps, wings, elevators and fairings)
	HexMC® molded composite parts	·      Complex geometric parts for commercial aircrafts to replace traditionally metal parts including window frames, primary structure brackets and fittings as well as for certain industrial applications

Net sales for the Engineered Products segment to third-party customers were $391.3 million in 2013, $347.3 million in 2012, and $317.9 million in 2011, which represented between 22% and 23% of our net sales each year.

The Engineered Products segment has a 50% ownership interest in a Malaysian joint venture, Aerospace Composites Malaysia Sdn. Bhd., formerly, Asian Composites Manufacturing Sdn. Bhd. (“ACM”) with Boeing Worldwide Operations Limited.  Under the terms of the joint venture agreement, Hexcel and The Boeing Company (“Boeing”) have transferred the manufacture of certain semi-finished composite components to this joint venture.  Hexcel purchases the semi-finished composite components from the joint venture, and inspects and performs additional skilled assembly work before delivering them to Boeing.  The joint venture also manufactures composite components for other aircraft component manufacturers.  ACM had revenue of $62 million in 2013, and $59 million and $51 million in 2012 and 2011, respectively.

The following table identifies the key customers and the major manufacturing facilities of the Engineered Products segment:

ENGINEERED PRODUCTS
KEY CUSTOMERS	MAJOR MANUFACTURING FACILITIES
The Boeing Company	Kent, Washington
Bombardier	Burlington, Washington
General Dynamics	Pottsville, Pennsylvania
General Electric	Welkenraedt, Belgium
GKN	Alor Setar, Malaysia (JV)
Spirit Aerosystems
United Technologies

Financial Information About Segments and Geographic Areas

Financial information and further discussion of our segments and geographic areas, including external sales and long-lived assets, are contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 16 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

Significant Customers

Approximately 34%, 29% and 30% of our 2013, 2012 and 2011 net sales, respectively, were to Boeing and related subcontractors.  Of the 34% of overall sales to Boeing and its subcontractors in 2013, 30% related to Commercial Aerospace market applications and 4% related to Space & Defense market applications.  Approximately 29%, 28% and 27% of our 2013, 2012 and 2011 net sales, respectively, were to Airbus Group and its subcontractors.  Of the 29% of overall sales to Airbus Group and its subcontractors in 2013, 26% related to Commercial Aerospace market applications and 3% related to Space & Defense market applications.

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Markets

Our products are sold for a broad range of end-uses. The following tables summarize our net sales to third-party customers by market and by geography for each of the three years ended December 31:

	2013		2012		2011
Net Sales by Market
Commercial Aerospace	65	%	60	%	59	%
Space & Defense	22		23		22
Industrial	13		17		19
Total	100	%	100	%	100	%
Net Sales by Geography (a)
United States	52	%	51	%	52	%
Europe and China	48		49		48
Total	100	%	100	%	100	%

(a)Net sales by geography based on the location in which the product sold was manufactured.

	2013		2012		2011
Net Sales to External Customers (b)
United States	46	%	46	%	44	%
Europe	39		39		41
All Others	15		15		15
Total	100	%	100	%	100	%

(b)Net sales to external customers based on the location to which the product sold was delivered.

Commercial Aerospace

The Commercial Aerospace industry is our largest user of advanced composites.  Commercial Aerospace represented 65% of our 2013 net sales.  Approximately 85% of these revenues can be identified as sales to Airbus, Boeing and their subcontractors for the production of commercial aircraft.  The remaining 15% of these revenues were for regional and business aircraft.  The economic benefits airlines can obtain from weight savings in both fuel economy and aircraft range, combined with the design enhancement that comes from the advantages of advanced composites over traditional materials, have caused the industry to be the leader in the use of these materials.  While military aircraft and spacecraft have championed the development of these materials, Commercial Aerospace has had the greater consumption requirements and has commercialized the use of these products.  Accordingly, the demand for advanced structural material products is closely correlated to the demand for new commercial aircraft.

The use of advanced composites in Commercial Aerospace is primarily in the manufacture of new commercial aircraft.  The aftermarket for these products is very small as many of these materials are designed to last for the life of the aircraft.  The demand for new commercial aircraft is driven by two principal factors, the first of which is airline passenger traffic (the number of revenue passenger miles flown by the airlines) which affects the required size of airline fleets.  The International Air Transport Association (IATA) estimates 2013 revenue passenger miles were 5.3% higher than 2012.  Growth in passenger traffic requires growth in the size of the fleet of commercial aircraft operated by airlines worldwide.

A second factor, which is less sensitive to the general economy, is the replacement rates for existing aircraft.  The rates of retirement of passenger and freight aircraft, resulting mainly from obsolescence, are determined in part by the regulatory requirements established by various civil aviation authorities worldwide as well as public concern regarding aircraft age, safety and noise.  These rates may also be affected by the desire of the various airlines to improve operating costs with higher payloads and more fuel-efficient aircraft (which in turn is influenced by the price of fuel) and by reducing maintenance expense.  In addition, there is expected to be increasing pressure on airlines to replace their aging fleet with more fuel efficient and quieter aircraft to be more environmentally responsible.  When aircraft are retired from commercial airline fleets, they may be converted to cargo freight aircraft or scrapped.

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An additional factor that may cause airlines to defer or cancel orders is their ability to obtain financing, including leasing, for new aircraft orders.  This will be dependent both upon the financial health of the airline operators, as well as the overall availability of financing in the marketplace.

Each new generation of commercial aircraft has used increasing quantities of advanced composites, replacing metals.  This follows the trend previously seen in military fighter aircraft where advanced composites may now exceed 50% of the weight of the airframe.  Early versions of commercial jet aircraft, such as the Boeing 707, which was developed in the early 1950’s, contained almost no composite materials.  One of the first commercial aircraft to use a meaningful amount of composite materials, the Boeing 767 entered into service in 1983, and was built with an airframe containing approximately 6% composite materials.  The airframe of Boeing’s 777 aircraft, which entered service in 1995, is approximately 11% composite.  The Airbus A380, which was first delivered in 2007, has approximately 23% composite content by weight.  Boeing’s latest aircraft, the B787, which entered into service in September 2011, has a content of more than 50% composite materials by weight.  In December 2006, Airbus formally launched the A350 XWB (“A350”) which is also projected to have a composite content of 50% or more by weight.  Airbus targets the A350 to enter into service in the fourth quarter of 2014.  In 2011, both Airbus and Boeing announced new versions of their narrow body aircraft which will have new engines.  Airbus’s A320neo is expected to enter service in 2015 and Boeing’s B737 MAX in 2017.  It is expected that these new aircraft will offer more opportunities for composite materials than their predecessors.  We refer to this steady expansion of the use of composites in aircraft as the “secular penetration of composites” as it increases our average sales per airplane over time.

The impact on Hexcel of Airbus and Boeing’s production rate changes is typically influenced by two factors: the mix of aircraft produced and the inventory supply chain effects of increases or reductions in aircraft production.  We have products on all Airbus and Boeing planes.  The dollar value of our materials varies by aircraft type — twin aisle aircraft use more of our materials than narrow body aircraft and newer designed aircraft use more of our materials than older generations.  On average, for established programs, we deliver products into the supply chain about six months prior to aircraft delivery with a range between one and eighteen months depending on the product.  For aircraft that are in the development or ramp-up stage, such as the A350, we will have sales as much as several years in advance of the delivery.  Increased aircraft deliveries combined with the secular penetration of composites resulted in our Commercial Aerospace revenues increasing by approximately 15% in 2013 and 2012 and 28% in 2011.

Set forth below are historical aircraft deliveries as announced by Airbus and Boeing:

	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013
Airbus	229	294	311	325	303	305	320	378	434	453	483	498	510	534	588	626
Boeing	563	620	491	527	381	281	285	290	398	441	375	481	462	477	601	648
Total	792	914	802	852	684	586	605	668	832	894	858	979	972	1,011	1,189	1,274

Approximately 85% of our Commercial Aerospace revenues can be identified as sales to Airbus, Boeing and their subcontractors for the production of commercial aircraft.  Airbus and Boeing combined deliveries in 2013 were 1,274 aircraft, surpassing the previous high of 1,189 in 2012.  Based on Airbus and Boeing public estimates, the combined deliveries in 2014 are expected to be higher than 2013.  In 2013, the combined net orders reported by Airbus and Boeing were for 2,858 planes, bringing their backlog at December 31, 2013 to 10,639 planes — the highest in history.  The balance of our Commercial Aerospace sales is related to regional and business aircraft manufacture, and other commercial aircraft applications. These applications also exhibit increasing utilization of composite materials with each new generation of aircraft.  Regional and business aircraft sales of $161.7 million in 2013 were slightly higher than the $161 million in sales in 2012, which was about 7% above 2011.

Space & Defense

The Space & Defense market has historically been an innovator in the use of, and source of significant demand for, advanced composites.  The aggregate demand by Space & Defense customers is primarily a function of procurement of military aircraft that utilizes advanced composites by the United States and certain European governments.  We are currently qualified to supply materials to a broad range of over 100 helicopter, military aircraft and space programs.  The top ten programs by revenues represent about 54% of our Space & Defense revenues and no one program exceeds 15% of our revenues in this market.  Rotorcraft accounted for about 58% of Space & Defense sales in 2013.  Key programs include the V-22 (Osprey) tilt rotor aircraft, Blackhawk, A400M military transport, C-17, F-35 (joint strike fighter or JSF), S76, AH-64 Apache, European Fighter Aircraft (Typhoon), CH-53 Super Stallion, F/A-18E/F (Hornet), NH90, and Tiger helicopters.  In addition, our Engineered Products segment provides specialty value added services such as machining, sub-assembly, and even full blade manufacturing.  The benefits that we obtain from these programs will depend upon which are funded and the extent of such funding.  Space applications for advanced composites include solid rocket booster cases, fairings and payload doors for launch vehicles, and buss and solar arrays for military and commercial satellites.

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Another trend providing positive growth for Hexcel is the further penetration of composites in helicopter blades.  Numerous new helicopter programs in development, as well as upgrade or retrofit programs, have an increased reliance on Composite Materials products such as carbon fiber, prepregs, and honeycomb core to improve blade performance.  In addition, our Engineered Products segment provides specialty value added services such as machining, sub-assembly, and even full blade manufacturing.

Contracts for military and some commercial programs may contain provisions applicable to both U.S. Government contracts and subcontracts.  For example, a prime contractor may flow down a “termination for convenience” clause to materials suppliers such as Hexcel.  According to the terms of a contract, we may be subject to U.S. government Federal Acquisition Regulations, the Department of Defense Federal Acquisition Regulations Supplement, Cost Accounting Standards, and associated procurement laws.

Industrial Markets

The revenue for this market includes applications for our products outside the Commercial Aerospace and Space & Defense markets.  A number of these applications represent emerging opportunities for our products.  In developing new applications, we seek those opportunities where advanced composites technology offers significant benefits to the end user, often applications that demand high engineering performance.  Within the Industrial Markets, the major end user sub-markets include, in order of size based on our 2013 sales, wind energy, general industrial applications (including those sold through distributors), recreational equipment (e.g., skis and snowboards, bicycles and hockey sticks), and transportation (e.g., automobiles, mass transit and high-speed rail, and marine applications).  Our participation in industrial market applications complements our commercial and military aerospace businesses. We are committed to pursuing the utilization of advanced structural material technology where it can generate significant value and we can maintain a sustainable competitive advantage.

Further discussion of our markets, including certain risks, uncertainties and other factors with respect to “forward-looking statements” about those markets, is contained under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors”.

Backlog

In recent years, our customers have demanded shorter order lead times and “just-in-time” delivery performance.  While we have many multi-year contracts with our major aerospace customers, most of these contracts specify the proportion of the customers’ requirements that will be supplied by us and the terms under which the sales will occur, not the specific quantities to be procured.  Our Industrial customers have always desired to order their requirements on as short a lead-time as possible.  As a result, twelve-month order backlog is not a meaningful trend indicator for us.  As noted above, our Commercial Aerospace sales to Airbus and Boeing and their subcontractors accounted for 55% of our 2013 sales, and they have backlogs of 10,639 airplanes or more than eight years based on 2013 deliveries.

Raw Materials and Production Activities

Our manufacturing operations are in many cases vertically integrated.  We produce and internally utilize carbon fibers, industrial fabrics, composite materials and composite structures as well as sell these materials to third-party customers for their use in the manufacture of their products.

We manufacture high performance carbon fiber from polyacrylonitrile precursor (“PAN”).  The primary raw material for PAN is acrylonitrile.  All of the PAN we produce is for internal carbon fiber production.  We consume approximately two-thirds by value of the carbon fiber we produce and sell the remainder of our output to third-party customers.  However, as one of the world’s largest consumers of high performance carbon fiber, we also purchase significant quantities of carbon fiber from external sources for our own use.  The sources of carbon fiber we can use in any product or application are generally dictated by customer qualifications or certifications.  Otherwise we select a carbon fiber based on performance, price and availability.  With the increasing demand for carbon fiber, particularly in aerospace applications, we have more than doubled our PAN and carbon fiber capacity over the past several years to serve the growing needs of our customers and our own downstream products and we are continuing to expand our capacity to meet our customers’ forecasted requirements.  After a new production line starts operating, it can take up to a year to be certified for aerospace qualifications.  However, these lines can start supplying carbon fiber for many industrial and recreational applications within a shorter time period.

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We purchase glass yarn from a number of suppliers in the United States, Europe and Asia. We also purchase aramid and high strength fibers which are produced by only a few companies, and during periods of high demand, can be in short supply.  In addition, epoxy and other specialty resins, aramid paper and aluminum specialty foils are used in the manufacture of composite products.  A number of these products have only one or two sources qualified for use, so an interruption in their supply could disrupt our ability to meet our customer requirements. When entering into multi-year contracts with aerospace customers, we attempt to get back-to-back commitments from key raw material suppliers.

Our manufacturing activities are primarily based on “make-to-order”, or “demand pull” based on customer schedules, and to a lesser extent, “make-to-forecast” production requirements. We coordinate closely with key suppliers in an effort to avoid raw material shortages and excess inventories.  However, many of the key raw materials we consume are available from relatively few sources, and in many cases the cost of product qualification makes it impractical to develop multiple sources of supply. The lack of availability of these materials could under certain circumstances have a material adverse effect on our consolidated results of operations.

Research and Technology; Patents and Know-How

Research and Technology (“R&T”) departments support our businesses worldwide. Through R&T activities, we maintain expertise in precursor and carbon fiber, chemical and polymer formulation and curatives, fabric forming and textile architectures, advanced composite structures, process engineering, application development, analysis and testing of composite materials, computational design, and other scientific disciplines related to our worldwide business base.

Our products rely primarily on our expertise in materials science, textiles, process engineering and polymer chemistry.  Consistent with market demand, we have been placing more emphasis on higher performing products and cost effective production processes while seeking to improve the consistency of our products and our capital efficiency.  Towards this end, we have entered into formal and informal alliances, as well as licensing and teaming arrangements, with several customers, suppliers, external agencies and laboratories.  We believe that we possess unique capabilities to design, develop, manufacture and qualify composite materials and structures.  We have over 1,000 patents and pending applications worldwide, and have granted technology licenses and patent rights to several third parties primarily in connection with joint ventures and joint development programs.  It is our policy to actively enforce our proprietary rights. We believe that the patents and know-how rights currently owned or licensed by Hexcel are adequate for the conduct of our business. We do not believe that our business would be materially affected by the expiration of any single patent or series of related patents, or by the termination of any single license agreement or series of related license agreements.

We spent $41.7 million, $36.7 million and $32.6 million for R&T in 2013, 2012 and 2011, respectively.  Our 2013 spending was 13.6% higher than 2012 as we invested in new products and technology.  Our spending on a quarter to quarter basis fluctuates depending upon the amount of  new product development and qualification activities, particularly in relation to commercial aircraft applications, that are in progress.  These expenditures are expensed as incurred.

Environmental Matters

We are subject to federal, state, local and foreign laws and regulations designed to protect the environment and to regulate the discharge of materials into the environment.  We believe that our policies, practices, and procedures are properly designed to prevent unreasonable risk of environmental damage and associated financial liability.  To date, environmental control regulations have not had a significant adverse effect on our overall operations.

Our aggregate environmental related accruals at December 31, 2013 and 2012 were $3.9 million and $6.6 million, respectively.  As of December 31, 2013 and December 31, 2012, $3.4 million and $4.2 million, respectively, were included in “Other current accrued liabilities”, with the remainder included in “Other non-current liabilities”.  As related to certain of our environmental matters, except for the Lodi, New Jersey site, our accruals were estimated at the low end of a range of possible outcomes since there was no better point within the range.  If we had accrued, for those sites where we are able to estimate our liability, at the high end of the range of possible outcomes, our accruals would have been $6.5 million and $9.2 million at December 31, 2013 and 2012, respectively.  Environmental remediation spending charged directly to our reserve balance for 2013, 2012 and 2011, was $3.6 million, $3.4 million and $5.7 million, respectively.  In addition, our operating costs relating to environmental compliance were $13.5 million, $13.1 million and $10.3 million, for 2013, 2012, and 2011, respectively, and were charged directly to expense.  Capital expenditures for environmental matters approximated $4.6 million, $2.4 million and $4.1 million for 2013, 2012 and 2011 respectively.

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, as well as the impact, if any, of Hexcel being named in a new matter.  A discussion of environmental matters is contained in Item 3, “Legal Proceedings,” and in Note 13 to the accompanying consolidated financial statements included in this Annual Report on Form 10-K.

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Sales and Marketing

A staff of salaried marketing managers, product managers and sales personnel, sell and market our products directly to customers worldwide.  We also use independent distributors and manufacturer representatives for certain products, markets and regions.  In addition, we operate various sales representation offices in the Americas, Europe, Asia Pacific and Russia.

Competition

In the production and sale of advanced composites, we compete with a number of U.S. and international companies on a worldwide basis.  The broad markets for composites are highly competitive, and we have focused on both specific submarkets and specialty products within markets.  In addition to competing directly with companies offering similar products, we compete with producers of substitute composites such as structural foam, infusion technology, wood and metal.  Depending upon the material and markets, relevant competitive factors include approvals, database of usage, technology, product performance, delivery, service, price, customer preference for sole sourcing and customer preferred processes.

Employees

As of December 31, 2013, we employed 5,274 full-time employees and contract workers, 3,130 in the United States and 2,144 in other countries.  Of the 5,274 full-time employees, approximately 19% were represented by collective bargaining agreements.  We believe that our relations with employees and unions are good.  The number of full-time employees and contract workers as of December 31, 2012 and 2011 was 4,973 and 4,508, respectively.

Other Information

Our internet website is www.hexcel.com. We make available, free of charge through our website, our Form 10-Ks, 10-Qs and 8-Ks, and any amendments to these forms, as soon as reasonably practicable after filing with the Securities and Exchange Commission.

ITEM 1A. Risk Factors

An investment in our common stock or debt securities involves risks and uncertainties.  You should consider the following risk factors carefully, in addition to the other information contained in this Annual Report on Form 10-K, before deciding to purchase any of our securities.

The markets in which we operate can be cyclical, and downturns in them may adversely affect the results of our operations.

Some of the markets in which we operate have been, to varying degrees, cyclical and have experienced downturns.  A downturn in these markets could occur at any time as a result of events that are industry specific or macroeconomic and in the event of a downturn; we have no way of knowing if, when and to what extent there might be a recovery.  Any deterioration in any of the cyclical markets we serve could adversely affect our financial performance and operating results.

At December 31, 2013, Airbus and Boeing had a combined backlog of 10,639 aircraft, which is the highest in history and more than eight years of production at 2013 delivery rates.  To the extent any significant deferrals, cancellations or reduction in demand results in decreased aircraft build rates, it would reduce net sales for our Commercial Aerospace products and as a result reduce our operating income.  Approximately 65% of our net sales for 2013 were derived from sales to the Commercial Aerospace industry, which includes 85% from Airbus and Boeing aircraft and 15% from regional and business aircraft.  Reductions in demand for commercial aircraft or a delay in deliveries could result from many factors, including delays in the startup or ramp-up of new programs, changes in the propensity for the general public to travel by air (including as a result of terrorist events and any subsequent military response), a rise in the cost of aviation fuel, a change in technology resulting in the use of alternative materials, consolidation and liquidation of airlines, availability of funding for new aircraft purchases or leases, inventory corrections or disruptions throughout the supply chain and slower macroeconomic growth.

The A350 had its first flight in June 2013 and its first delivery is now expected in the fourth quarter of 2014.  Our content per plane is approximately $5 million and we expect the A350 will be our largest program with sales of approximately $600 million per year when Airbus reaches its projected buildrates of 120 per year.  Both Airbus and Boeing have experienced various delays in their newest aircraft programs, including the A380, B787, B747-8, A400M, and A350.  In the past, these have delayed our expected growth or our effective utilization of capacity installed for such growth.  Future delays in these or other major new customer programs could similarly impact our results.

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In addition, our customers continue to emphasize the need for cost reduction or other improvements in contract terms throughout the supply chain.  In response to these pressures, we may be required to accept increased risk or face the prospects of margin compression on some products in the future. Where possible, we seek to offset or mitigate the impact of such pressures through productivity and performance improvements, index clauses, currency hedging and other actions.

A significant decline in business with Boeing, Airbus, Vestas, or other significant customers could materially impact our business, operating results, prospects and financial condition.

We have concentrated customers in the Commercial Aerospace and wind energy markets.  In the Commercial Aerospace market, approximately 85%, and in the Space & Defense market, approximately 34%, of our 2013 net sales were made to Boeing and Airbus Group and their related subcontractors.  For the years ended December 31, 2013 and December 31, 2012, approximately 34% and 29% of our total consolidated net sales were to Boeing and its related subcontractors, respectively, and approximately 29% and 28% of our total consolidated net sales, respectively, were to Airbus Group, including Airbus and its related subcontractors.  In the wind energy market, our primary customer is Vestas Wind Systems A/S.  Significant changes in the demand for our customers’ end products, program delays, the share of their requirements that is awarded to us or changes in the design or materials used to construct their products could result in a significant loss of business with these customers.  The loss of, or significant reduction in purchases by, Boeing, Airbus Group and Vestas or any of our other significant customers could materially impair our business, operating results, prospects and financial condition.  The level of purchases by our customers is often affected by events beyond their control, including general economic conditions, demand for their products, business disruptions, disruptions in deliveries, strikes and other factors.

Reductions in space and defense spending could result in a decline in our net sales.

The growth in space and defense production that has occurred in recent years may not be sustained, individual programs important to Hexcel may be cancelled, production may not continue to grow and the increased demand for composite-intensive programs may not continue.  In addition, the production of military aircraft depends upon defense budgets and the related demand for defense and related equipment.  Approximately 22% of our net sales in 2013 were to the Space & Defense market of which about 55% were related to U.S. military programs.

A decrease in supply, interruptions at key facilities or an increase in cost of raw materials could result in a material decline in our profitability.

Our profitability depends largely on the price and continuity of supply of raw materials, which may be supplied through a sole source or a limited number of sources.  We purchase large volumes of raw materials, such as epoxy and phenolic resins, carbon fiber, fiberglass yarn, aluminum foil and aramid paper.  Any restrictions on the supply, or an increase in the cost, of our raw materials could significantly reduce our profit margins.  Efforts to mitigate restrictions on the supply or price increases of these raw materials by long-term purchase agreements, productivity improvements or by passing cost increases to our customers may not be successful.

The occurrence of material operational problems, including but not limited to failure of, or interruption to, key equipment or natural disasters, or inability to install, staff and qualify necessary capacity or achievement of planned manufacturing improvements, may have a material adverse effect on the productivity and profitability of a particular manufacturing facility.  With respect to certain facilities, such events could have a material effect on our company as a whole.

We have substantial international operations subject to uncertainties which could affect our operating results.

We believe that revenue from sales outside the U.S. will continue to account for a material portion of our total revenue for the foreseeable future.  In 2013, 48% of our production and 54% of our customer sales occurred outside of the United States.  Additionally, we have invested significant resources in our international operations and we intend to continue to make such investments in the future.  Our international operations are subject to numerous risks, including: (a) general economic and political conditions in the countries where we operate may have an adverse effect on our operations in those countries or not be favorable to our growth strategy; (b) the difficulty of enforcing agreements and collecting receivables through some foreign legal systems; (c) foreign customers may have longer payment cycles than customers in the U.S.; (d) cost of compliance with international trade laws of all of the countries in which we do business, including export control laws, relating to sales and purchases of goods and equipment and transfers of technology; (e) tax rates in some foreign countries may exceed those of the U.S. and foreign earnings may be subject to withholding requirements or the imposition of tariffs, exchange controls or other restrictions; (f) governments may adopt regulations or take other actions that would have a direct or indirect adverse impact on our business and market opportunities; and (g) the potential difficulty in enforcing our intellectual property rights in some foreign countries, and the potential for the intellectual property rights of others to affect our ability to sell product in certain markets.  Any one of these could adversely affect our financial condition and results of operations.

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In addition, fluctuations in currency exchange rates may influence the profitability and cash flows of our business.  For example, our European operations sell a portion of the products they produce in U.S. dollars, yet the labor, overhead costs and portions of material costs incurred in the manufacture of those products are denominated in Euros, British pounds sterling or U.S. dollars.  As a result, the local currency margins of goods manufactured with costs denominated in local currency, yet sold in U.S. dollars, will vary with fluctuations in currency exchange rates, reducing when the U.S. dollar weakens against the Euro and British pound sterling. In addition, the reported U.S. dollar value of the local currency financial statements of our foreign subsidiaries will vary with fluctuations in currency exchange rates.  While we enter into currency exchange and hedge agreements from time to time to mitigate these types of fluctuations, we cannot remove all fluctuations or hedge all exposures, and our earnings are impacted by changes in currency exchange rates.

We currently do not have political risk insurance in the countries in which we conduct business. While we carefully consider these risks when evaluating our international operations we cannot provide assurance that we will not be materially adversely affected as a result of such risks.

We could be adversely affected by environmental and safety requirements.

Our operations require the handling, use, storage and disposal of certain regulated materials and wastes. As a result, we are subject to various laws and regulations pertaining to pollution and protection of the environment, health and safety.  These requirements govern, among other things, emissions to air, discharge to waters and the generation, handling, storage, treatment and disposal of waste and remediation of contaminated sites.  We have made, and will continue to make, capital and other expenditures in order to comply with these laws and regulations.  These laws and regulations are complex, change frequently and could become more stringent in the future.

We have been named as a “potentially responsible party” under the U.S. Superfund law or similar state laws at several sites requiring clean up. These laws generally impose liability for costs to investigate and remediate contamination without regard to fault. Under certain circumstances liability may be joint and several, resulting in one responsible party being held responsible for the entire obligation.  Liability may also include damages to natural resources.  We have incurred and likely will continue to incur expenses to investigate and clean up certain of our existing and former facilities, for which we believe we have adequate reserves.  The ongoing operation of our manufacturing plants also entails environmental risks, and we may incur material costs or liabilities in the future which could adversely affect us.  Although most of our properties have been the subject of environmental site assessments, there can be no assurance that all potential instances of soil and groundwater contamination have been identified, even at those sites where assessments have been conducted.  Accordingly, we may discover previously unknown environmental conditions and the cost of remediating such conditions may be material.  See “Legal Proceedings” below and Note 13 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

In addition, we may be required to comply with evolving environmental, health and safety laws, regulations or requirements that may be adopted or imposed in the future or to address newly discovered information or conditions that require a response. In particular, climate change is receiving increased attention worldwide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions.  The U.S. Congress has considered climate change-related legislation and may retake the issue in the near future.  Specific policy measures could include cap and trade provisions or a carbon tax.  The European Union has instituted the Greenhouse Gas Emission Trading System (EU-ETS).  Our manufacturing plants use energy, including electricity and natural gas, and some of our plants may in the future emit amounts of greenhouse gas that could be affected by these legislative and regulatory efforts. Potential consequences could include increased energy, transportation and raw material costs and may require the Company to make additional investments in its facilities and equipment or limit our ability to grow.

Our forward-looking statements and projections may turn out to be inaccurate.

This Form 10-K includes 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”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “should”, “would”, “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 the startup or ramp-up of 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

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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, fluctuations in commodity prices, and fluctuations in the market price of our common stock, the impact of work stoppages or other labor disruptions and the impact of the above factors on our expectations of 2014 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, cost reductions and capacity additions, 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 and social conditions, and local regulations; 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; unforeseen vulnerability of our network and systems to interruptions or failures; and the availability, terms and deployment of capital.

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

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

We own and lease manufacturing facilities and sales offices located throughout the United States and in other countries, as noted below.  The corporate offices and principal corporate support activities are located in leased facilities in Stamford, Connecticut. Our research and technology administration and principal laboratories are located in Dublin, California; Duxford, England; Les Avenieres, France; Salt Lake City, Utah and Decatur, Alabama.

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The following table lists our manufacturing facilities by geographic location, related segment, and principal products manufactured. This table does not include the manufacturing facility owned by ACM.

Manufacturing Facilities

Facility Location	Segment	Principal Products
United States:
Burlington, Washington	Engineered Products	Engineered Honeycomb Parts
Casa Grande, Arizona	Composite Materials	Honeycomb and Honeycomb Parts
Decatur, Alabama	Composite Materials	PAN Precursor (used to produce Carbon Fibers)
Kent, Washington	Engineered Products	Composite structures
Pottsville, Pennsylvania	Engineered Products	Engineered Honeycomb Parts
Salt Lake City, Utah	Composite Materials	Carbon Fibers; Prepregs
Seguin, Texas	Composite Materials	Industrial Fabrics; Specialty Reinforcements
Windsor, Colorado	Composite Materials	Prepregs
International:
Dagneux, France	Composite Materials	Prepregs
Duxford, England	Composite Materials	Prepregs; Adhesives; Honeycomb and Honeycomb Parts
Illescas, Spain	Composite Materials	Carbon Fibers
Les Avenieres, France	Composite Materials	Industrial Fabrics; Specialty Reinforcements
Nantes, France	Composite Materials	Prepregs
Neumarkt, Austria	Composite Materials	Prepregs
Parla, Spain	Composite Materials	Prepregs
Stade, Germany	Composite Materials	Prepregs
Tianjin, China	Composite Materials	Prepregs
Welkenraedt, Belgium	Engineered Products	Engineered Honeycomb Parts

We lease the land and buildings in Nantes, France; Stade, Germany and Tianjin, China; and the land on which the Burlington, Washington facility is located.  We also lease portions of the facilities located in Casa Grande, Arizona, Pottsville, Pennsylvania and Kent, Washington.  We own all other remaining facilities.   For further information, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and to Note 6 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

ITEM 3. Legal Proceedings

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, health and safety matters.  We estimate and accrue our liabilities resulting from such matters based on a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs.  Such estimates are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

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

Environmental Matters

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

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We have been named as a potentially responsible party (“PRP”) with respect to several hazardous waste disposal sites that we do not own or possess, which are included on, or proposed to be included on, the Superfund National Priority List of the U.S. Environmental Protection Agency (“EPA”) or on equivalent lists of various state governments.  Because CERCLA allows for joint and several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs.  We believe, based on the amount and nature of our waste, 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 been remediating this site in accordance with a State approved plan and continue to do so under the New Jersey Licensed Site Remediation Professional program.  Hexcel has completed the primary remediation activities and we are in the process of conducting testing to support a monitored natural attenuation (MNA) program.  The accrual is $1.7 million at December 31, 2013.

Lower Passaic River Study Area

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

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.  At a case management conference held in March 2013, the Court announced that most third-party defendants had reached a tentative settlement with the State of New Jersey which, if approved by the Court, would end the state court litigation as to participating third-party defendants.  We committed to join the settlement and if the settlement is approved by the Court, we would pay New Jersey $0.3 million.  This amount was accrued in the first quarter of 2013.  In December 2013, the Court entered the settlement and entered an order dismissing participating third-party defendants from the litigation.  We have paid our settlement amount into escrow pending any appeal of the Court’s orders.  The scope of Hexcel’s continued involvement in the litigation depends on whether the settlement becomes final and no longer subject to appeal.

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Kent, Washington Site

We were party to a cost-sharing agreement regarding the operation of certain environmental remediation systems necessary to satisfy a post-closure care permit issued to a previous owner of our Kent, Washington site by the EPA.  Under the terms of the cost-sharing agreement, we were obligated to reimburse the previous owner for a portion of the cost of the required remediation activities.  The previous owner, who also continues to own an adjacent site, has installed certain remediation and isolation technologies and is operating those in accordance with an order agreed with the State of Washington.  This isolation is expected to ultimately prevent further migration of contaminants to our site and enable us to perform a cleanup of our site.  We and the Washington Department of Ecology have reached an agreed order to perform certain cleanup activities on our site by certain deadlines, and we are in full compliance with the order as modified.  The total accrued liability related to this matter was $0.8 million at December 31, 2013.

Omega Chemical Corporation Superfund Site, Whittier, CA

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

Environmental remediation reserve activity for the three years ended December 31, 2013 was as follows:

	For the year ended December 31,
(In millions)	2013			2012			2011
Beginning remediation accrual balance	$	6.6		$	5.0		$	7.3
Current period expenses	0.9			5.0			3.4
Cash expenditures	(3.6		)	(3.4		)	(5.7		)
Ending remediation accrual balance	$	3.9		$	6.6		$	5.0
Capital expenditures for environmental matters	$	4.6		$	2.4		$	4.1

Environmental Summary

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 December 31, 2013 and 2012, our aggregate environmental related accruals were $3.9 million and $6.6 million, respectively.  As of December 31, 2013 and 2012, $3.4 million and $4.2 million, respectively, were included in current other accrued liabilities, with the remainder included in other non-current liabilities.  As related to certain environmental matters, except for the Lodi site, the accruals were estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued, for those sites where we are able to estimate our liability, at the high end of the range of possible outcomes, our accrual would have been $6.5 million and $9.2 million at December 31, 2013 and 2012, respectively.

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 $3.6 million and $3.4 million for the years ended December 31, 2013 and 2012, respectively.  In addition, our operating costs relating to environmental compliance charged directly to expense were $13.5 million and $13.1 million for the years ended December 31, 2013 and 2012.

ITEM 4. Mine Safety Disclosure

Not applicable.

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PART II

ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Hexcel common stock is traded on the New York Stock Exchange.  The range of high and low sales prices of our common stock on the New York Stock Exchange is contained in Note 20 to the accompanying consolidated financial statements of this Annual Report on Form 10-K and is incorporated herein by reference.

Hexcel did not declare or pay any dividends in the past two years, nor has plans to pay dividends.  Our cash priorities are 1) organic growth — investing in R&T and capacity to support the expected growth primarily from increasing production rates and more composite-intensive aircraft; 2) acquisition opportunities and 3) return to shareholders.  In December 2012 and July 2013, the Company announced programs to repurchase up to $50 million and $150 million of common stock, respectively.  During 2013 the Company repurchased a total of $90 million of shares.

On January 30, 2014 there were 866 holders of record of our common stock.

The following chart provides information regarding repurchases of Hexcel common stock:

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
October 1 — October 31, 2013	0		$	NA		0	$	150,000,000
November 1 — November 30, 2013	0		NA			0	0
December 1 — December 31, 2013	747,663		$		42.87	747,663	$	117,947,687
Total	747,663	(1)	$	42.87		747,663	$	117,947,687

(1) In July 2013, our Board authorized us to repurchase $150 million of our outstanding common stock.  The Company spent $40 million to repurchase 896,653 shares of common stock during the fourth quarter of 2013 under its authorized Repurchase Plan, of which 148,990 shares were settled in January 2014.

ITEM 6. Selected Financial Data

The information required by Item 6 is contained on page 25 of this Annual Report on Form 10-K under the caption “Selected Financial Data” and is incorporated herein by reference.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information required by Item 7 is contained on pages 26 to 35 of this Annual Report on Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated herein by reference.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

The information required by Item 7A is contained under the heading “Market Risks” on pages 36 to 37 of this Annual Report on Form 10-K and is incorporated herein by reference.

ITEM 8. Financial Statements and Supplementary Data

The information required by Item 8 is contained on pages 41 to 71 of this Annual Report on Form 10-K under “Consolidated Financial Statements and Supplementary Data” and is incorporated herein by reference. The Report of Independent Registered Public

17

Accounting Firm is contained on page 40 of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm” and is incorporated herein by reference.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of December 31, 2013 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.  These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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

Management’s report on our internal control over financial reporting is contained on page 40 of this Annual Report on Form 10-K and is incorporated herein by reference.

ITEM 9B. Other Information

None.

PART III

ITEM 10.  Directors, Executive Officers and Corporate Governance

The information required by Item 10 will be contained in our definitive proxy statement for the 2014 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2013.  Such information is incorporated herein by reference.

ITEM 11.  Executive Compensation

The information required by Item 11 will be contained in our definitive proxy statement for the 2014 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2013.  Such information is incorporated herein by reference.

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 will be contained in our definitive proxy statement for the 2014 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2013.  Such information is incorporated herein by reference.

ITEM 13.  Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 will be contained in our definitive proxy statement for the 2014 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2013.  Such information is incorporated herein by reference.

ITEM 14.  Principal Accountant Fees and Services

The information required by Item 14 will be contained in our definitive proxy statement for the 2014 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2013.  Such information is incorporated herein by reference.

18

PART IV

ITEM 15.  Exhibits and Financial Statement Schedules

(a)  Financial Statements, Financial Statement Schedules and Exhibits

(1)	Financial Statements:
	Report of Independent Registered Public Accounting Firm
	Consolidated Balance Sheets as of December 31, 2013 and 2012
	Consolidated Statements of Operations for each of the three years ended December 31, 2013, 2012 and 2011
	Consolidated Statements of Comprehensive Income for each of the three years ended December 31, 2013, 2012 and 2011
	Consolidated Statements of Stockholders’ Equity for each of the three years ended December 31, 2013, 2012 and 2011
	Consolidated Statements of Cash Flows for each of the three years ended December 31, 2013, 2012 and 2011
	Notes to the Consolidated Financial Statements
(2)	Financial Statement Schedule for the three years ended December 31, 2013, 2012 and 2011:
	Schedule II — Valuation and Qualifying Accounts
	All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

(3)  Exhibits:
	The following list of exhibits includes exhibits submitted with this Form 10-K as filed with the SEC and those incorporated by reference to other filings.

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of Hexcel Corporation (incorporated herein by reference to Exhibit 1 to the Company’s Registration Statement on Form 8-A dated July 9, 1996, Registration No. 1-08472).
3.2	Certificate of Amendment of the Restated Certificate of Incorporation of Hexcel Corporation (incorporated herein by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
3.3	Amended and Restated Bylaws of Hexcel Corporation (incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated May 8, 2012).
10.1	Credit Agreement, dated as of June 27, 2013, by and among Hexcel Corporation, Hexcel Holdings Luxembourg S.à.r.l., the financial institutions from time to time party thereto, RBS Citizens, N.A., as administrative agent for the lenders, RBS Citizens, N.A., HSBC Bank USA, National Association, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint book managers and joint lead arrangers, Bank of America, N.A., HSBC Bank USA, National Association and Wells Fargo Bank, National Association, as syndication agents, and Fifth Third Bank, SunTrust Bank and TD Bank, N.A., as documentation agents (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated July 2, 2013).
10.2	Security Agreement, dated as of June 27, 2013, by and among Hexcel Corporation, Hexcel Reinforcements Holding Corp., Hexcel Reinforcements Corp. and RBS Citizens, N.A., as administrative agent for each of the Secured Parties (as defined in the Credit Agreement) (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on

19

	Form 8-K dated July 2, 2013).
10.3	Subsidiary Guaranty, dated as of June 27, 2013, by Hexcel Corporation, Hexcel Reinforcements Holding Corp. and Hexcel Reinforcements Corp. in favor of and for the benefit of RBS Citizens, N.A., as administrative agent for each of the Secured Parties (as defined in the Credit Agreement) (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K dated July 2, 2013).
10.4	Company Guaranty, dated as of June 27, 2013, by Hexcel Corporation in favor of and for the benefit of RBS Citizens, N.A., as administrative agent for each of the Secured Parties (as defined in the Credit Agreement) (incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K dated July 2, 2013).
10.5	Special Warranty Deed made and entered into January 20, 2012, by and between the United States of America, as Grantor, acting by and through its legal agent, the Tennessee Valley Authority, and Hexcel Corporation, as Grantee (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated January 25, 2012).
10.6*	Hexcel Corporation 2013 Incentive Stock Plan (incorporated herein by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration No. 333-188292), filed on May 2, 2013).
10.7*	Hexcel Corporation 2003 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.7(a)*	Hexcel Corporation 2003 Incentive Stock Plan as amended and restated December 11, 2003 (incorporated herein by reference to Exhibit 10.3(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003).
10.7(b)*	Hexcel Corporation 2003 Incentive Stock Plan as amended and restated May 19, 2005 (incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated May 24, 2005).
10.7(c)*	Hexcel Corporation 2003 Incentive Stock Plan as amended and restated December 31, 2008 (incorporated herein by reference to Exhibit 99.12 to the Company’s Current Report on Form 8-K dated January 7, 2009).
10.7(d)*	Hexcel Corporation 2003 Incentive Stock Plan, as amended and restated as of May 7, 2009 (incorporated herein by reference to Exhibit 10.4(d) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009).
10.8*	Hexcel Corporation Incentive Stock Plan, as amended and restated on January 30, 1997, and further amended on December 10, 1997 and March 25, 1999 (incorporated herein by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 filed on July 26, 1999).
10.8(a)*	Hexcel Corporation Incentive Stock Plan, as amended and restated on January 30, 1997, and further amended on December 10, 1997, March 25, 1999 and December 2, 1999 (incorporated by reference to Exhibit 10.3(c) of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999).
10.8(b)*	Hexcel Corporation Incentive Stock Plan, as amended and restated on February 3, 2000 (incorporated herein by reference to Annex A of the Company’s Proxy Statement dated March 31, 2000).
10.8(c)*	Hexcel Corporation Incentive Stock Plan, as amended and restated on December 19, 2000 (incorporated herein by reference to Exhibit 10.3(e) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.8(d)*	Hexcel Corporation Incentive Stock Plan, as amended and restated on December 19, 2000 and further amended on January 10, 2002 (incorporated herein by reference to Exhibit 10.3(f) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.9*	Hexcel Corporation 1998 Broad Based Incentive Stock Plan (incorporated herein by reference to Exhibit 4.3 of the Company’s Form S-8 filed on June 19, 1998, Registration No. 333-57223).
10.9(a)*	Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as amended on February 3, 2000 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2000).

20

10.9(b)*	Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as amended on February 3, 2000, and further amended on February 1, 2001 (incorporated herein by reference to Exhibit 10.4(b) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.9(c)*	Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as amended on February 3, 2000, and further amended on February 1, 2001 and January 10, 2002 (incorporated herein by reference to Exhibit 10.4(c) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.9(d)*	Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as amended on February 3, 2000, and further amended on February 1, 2001, January 10, 2002 and December 12, 2002 (incorporated herein by reference to Exhibit 10.4(d) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
10.10*	Hexcel Corporation Management Incentive Compensation Plan, as Amended and Restated on January 24, 2011 (incorporated herein by reference to Annex A to the Company’s Proxy Statement dated March 18, 2011).
10.11*	Hexcel Corporation Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.12*	Form of Employee Option Agreement (2012 and 2013) (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011).
10.13*	Form of Employee Option Agreement (2010) (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009).
10.14*	Form of Employee Option Agreement (2009) (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008).
10.15*	Modification to Option Agreements (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008).
10.16*	Form of Employee Option Agreement (2008) (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007)
10.17*	Form of Employee Option Agreement (2007) (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006)
10.18*	Form of Employee Option Agreement (2005 and 2006) (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated January 12, 2005).
10.19*	Form of Employee Option Agreement (2004) (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003).
10.20*	Form of Employee Option Agreement (2003) (incorporated herein by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
10.21*	Form of Restricted Stock Unit Agreement (2014) (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated January 27, 2014).
10.22*	Form of Restricted Stock Unit Agreement (2012 and 2013) (incorporated herein by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011).
10.23*	Form of Restricted Stock Unit Agreement (2010) (incorporated herein by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009).
10.24*	Form of Performance Based Award Agreement (2014) (incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated January 27, 2014).
10.25*	Form of Performance Based Award Agreement (2012 and 2013) (incorporated herein by reference to Exhibit 99.1 to

21

	the Company’s Current Report on Form 8-K dated January 26, 2012).
10.26*	Hexcel Corporation Nonqualified Deferred Compensation Plan, Effective as of January 1, 2005, Amended and Restated as of December 31, 2008 (incorporated herein by reference to Exhibit 99.14 to The Company’s Current Report on Form 8-K dated January 7, 2009).
10.27*	Employment and Consulting Agreement between Hexcel Corporation and David E. Berges, dated July 30, 2013 (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013).
10.27(a)*	Amended and Restated Supplemental Executive Retirement Agreement dated December 31, 2008, between David E. Berges and Hexcel Corporation (incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated January 7, 2009).
10.28*	Offer of Employment between Hexcel Corporation and Nick L. Stanage dated July 22, 2013 (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013).
10.28(a)*	Supplemental Executive Retirement Agreement dated October 28, 2009, between Nick L. Stanage and Hexcel Corporation (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated October 28, 2009).
10.28(b)*	Employment and Severance Agreement between Hexcel Corporation and Nick L. Stanage, dated October 28, 2009 (incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated October 28, 2009).
10.29*	Hexcel Corporation Executive Severance Policy (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013).
10.30*	Amended and Restated Executive Severance Agreement between Hexcel Corporation and Wayne C. Pensky, dated December 31, 2008 (incorporated herein by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K dated January 7, 2009).
10.30(a)*	Amended and Restated Executive Deferred Compensation Agreement between Hexcel Corporation and Wayne C. Pensky, dated December 31, 2007 (incorporated herein by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K dated January 7, 2008).
10.31*	Amended and Restated Executive Severance Agreement between Hexcel Corporation and Ira J. Krakower, dated December 31, 2008 (incorporated herein by reference to Exhibit 99.5 to the Company’s Current Report on Form 8-K dated January 7, 2009).
10.31(a)*	Amended and Restated Supplemental Executive Retirement Agreement dated December 31, 2008, between Ira J. Krakower and Hexcel Corporation (incorporated herein by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K dated January 7, 2009).
10.32*	Amended and Restated Executive Severance Agreement between Hexcel Corporation and Robert G. Hennemuth, dated December 31, 2008 (incorporated herein by reference to Exhibit 99.6 to the Company’s Current Report on Form 8-K dated January 7, 2009).
10.32(a)*	Amended and Restated Executive Deferred Compensation Agreement between Hexcel Corporation and Robert G. Hennemuth, dated December 31, 2007 (incorporated herein by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K dated January 7, 2008).
10.33*	Director Compensation Program, as adopted on May 2, 2013.
10.34*	Form of Restricted Stock Unit Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 99 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013).
10.35*	Hexcel Corporation 2009 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009).

22

21	Subsidiaries of the Company.
23	Consent of Independent Registered Public Accounting Firm.
24	Power of Attorney (included on signature page).
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 Annual Report on Form 10-K for the year ended December 31, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) Consolidates Statements of Comprehensive Income (iii) Consolidated Balance Sheets, (ivi) Consolidated Statements of Cash Flows, and (v) related notes.

* Indicates management contract or compensatory plan or arrangement.

23

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Hexcel Corporation
February 5, 2014	/s/ NICK L. STANAGE
(Date)	Nick L. Stanage
	Chairman of the Board of Directors,
	Chief Executive Officer and President

KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Nick L. Stanage, Wayne C. Pensky and Ira J. Krakower, individually, his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ NICK L. STANAGE	Chairman of the	February 5, 2014
(Nick L. Stanage)	Board of Directors,
	Chief Executive Officer and President
	(Principal Executive Officer)
/s/ WAYNE PENSKY	Senior Vice President and	February 5, 2014
(Wayne Pensky)	Chief Financial Officer
	(Principal Financial Officer)
/s/ KIMBERLY HENDRICKS	Vice President, Corporate Controller and
(Kimberly Hendricks)	Chief Accounting Officer	February 5, 2014
	(Principal Accounting Officer)
/s/ JOEL S. BECKMAN	Director	February 5, 2014
(Joel S. Beckman)
/s/ LYNN BRUBAKER	Director	February 5, 2014
(Lynn Brubaker)
/s/ JEFFREY C. CAMPBELL	Director	February 5, 2014
(Jeffrey C. Campbell)
/s/ SANDRA L. DERICKSON	Director	February 5, 2014
(Sandra L. Derickson)
/s/ W. KIM FOSTER	Director	February 5, 2014
(W. Kim Foster)
/s/ THOMAS A. GENDRON	Director	February 5, 2014
(Thomas A. Gendron)
/s/ JEFFREY A. GRAVES	Director	February 5, 2014
(Jeffrey A. Graves)
/s/ DAVID C. HILL	Director	February 5, 2014
(David C. Hill)
/s/ DAVID L. PUGH	Director	February 5, 2014
(David L. Pugh)

24

Selected Financial Data

The following table summarizes selected financial data as of and for the five years ended December 31:

(In millions, except per share data)	2013		2012			2011			2010		2009
Results of Operations:
Net sales	$	1,678.2	$	1,578.2		$	1,392.4		$	1,173.6	$	1,108.3
Cost of sales	1,224.2		1,171.5			1,050.3			891.0		859.8
Gross margin	454.0		406.7			342.1			282.6		248.5
Selling, general and administrative expenses	141.4		130.7			120.5			118.5		107.2
Research and technology expenses	41.7		36.7			32.6			30.8		30.1
Other (income) expense, net	—		(9.5		)	(3.0		)	3.5		7.5
Operating income	270.9		248.8			192.0			129.8		103.7
Interest expense, net	7.3		10.0			11.6			23.2		26.1
Non-operating expense, net	1.0		1.1			4.9			6.8		—
Income before income taxes and equity in earnings	262.6		237.7			175.5			99.8		77.6
Provision for income taxes	76.0		74.1			41.6			22.9		22.0
Income before equity in earnings	186.6		163.6			133.9			76.9		55.6
Equity in earnings from and gain on sale of investments in affiliated companies	1.3		0.7			1.6			0.5		0.7
Net income	$	187.9	$	164.3		$	135.5		$	77.4	$	56.3
Basic net income per common share	$	1.88	$	1.64		$	1.37		$	0.79	$	0.58
Diluted net income per common share	$	1.84	$	1.61		$	1.35		$	0.77	$	0.57
Weighted-average shares outstanding:
Basic	100.0		100.2			98.8			97.6		96.9
Diluted	102.1		102.0			100.7			99.9		98.2
Financial Position:
Total assets	$	1,836.1	$	1,603.1		$	1,376.1		$	1,258.1	$	1,246.6
Working capital	$	387.7	$	340.4		$	276.8		$	291.8	$	259.4
Long-term notes payable and capital lease obligations	$	292.0	$	240.0		$	238.3		$	304.6	$	358.8
Stockholders’ equity (a)	$	1,160.4	$	994.1		$	802.2		$	659.4	$	575.6
Other Data:
Depreciation	$	59.3	$	57.2		$	55.3		$	53.2	$	46.6
Accrual basis capital expenditures	$	206.5	$	241.3		$	184.5		$	60.7	$	85.7
Shares outstanding at year-end, less treasury stock	98.9		99.9			98.8			97.4		96.6

(a)No cash dividends were declared per share of common stock during any of the five years ended December 31, 2013.

25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Overview

	Year Ended December 31,
(In millions, except per share data)	2013			2012			2011
Net sales	$	1,678.2		$	1,578.2		$	1,392.4
Gross margin %	27.1		%	25.8		%	24.6		%
Other income, net	$	—		$	(9.5	)	$	(3.0	)
Operating income (a)	$	270.9		$	248.8		$	192.0
Operating income %	16.1		%	15.8		%	13.8		%
Interest expense, net	$	7.3		$	10.0		$	11.6
Non-operating expense	$	1.0		$	1.1		$	4.9
Provision for income taxes	$	76.0		$	74.1		$	41.6
Equity in earnings from investments in affiliated companies	$	1.3		$	0.7		$	1.6
Net income (a)	$	187.9		$	164.3		$	135.5
Diluted net income per common share	$	1.84		$	1.61		$	1.35

(a) The Company uses non-GAAP financial measures, including sales measured in constant dollars, operating income adjusted for items included in other (income) expense, net, net income adjusted for items included in non-operating expenses, the effective tax rate adjusted for certain out of period items and free cash flow.  Management believes these non-GAAP measurements are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results and comparisons to prior periods. These adjustments represent significant charges or credits that are important to an understanding of Hexcel’s overall operating results in the periods presented.  Such non-GAAP measurements are not determined in accordance with generally accepted accounting principles and should not be viewed as an alternative to GAAP measures of performance.  Reconciliations to adjusted operating income, adjusted net income and free cash flow are provided below:

	Year Ended December 31,
(In millions)	2013			2012			2011
GAAP operating income	$	270.9		$	248.8		$	192.0
Other income, net (1)	—			(9.5		)	(3.0		)
Adjusted operating income (Non-GAAP)	$	270.9		$	239.3		$	189.0
Adjusted operating income % of sales (Non-GAAP)	16.1		%	15.2		%	13.6		%

	Year Ended December 31,
(In millions)	2013		2012			2011
GAAP net income	$	187.9	$	164.3		$	135.5
Other income, net of tax (1)	—		(6.0		)	(2.3		)
Non-operating expense, net of tax (2)	0.6		0.7			3.0
Tax adjustments (3)	—		—			(11.3		)
Adjusted net income (Non-GAAP)	$	188.5	$	159.0		$	124.9
Adjusted diluted net income per share (Non-GAAP)	$	1.85	$	1.56		$	1.24

	Year Ended December 31,
(In millions)	2013			2012			2011
Net cash provided by operating activities	$	272.9		$	232.4		$	170.5
Less: Capital expenditures and deposits for capital purchases	(194.9		)	(263.7		)	(158.0		)
Free cash flow (Non-GAAP)	$	78.0		$	(31.3	)	$	12.5

(1)Other (income) expense, net for the year ended December 31, 2012 included income from a $9.6 million ($6.1 million after tax) business interruption insurance settlement related to a prior year claim, a $4.9 million ($3.1 million after tax) gain on the sale of land and a $5.0 million ($3.2 million after tax) charge for additional environmental reserves primarily for remediation of a manufacturing facility sold in 1986.  Other (income) expense, net for the year ended December 31, 2011 included a $5.7 million ($4.1 million after tax) benefit from the curtailment of a pension plan and other expense of $2.7 million ($1.8 million after tax) for the increase in environmental reserves primarily for remediation of a manufacturing facility sold in 1986.

26

(2)Non-operating expense, net of tax, in 2013 was the accelerated amortization of deferred financing costs and the deferred expense on interest rate swaps related to repaying the term loan and refinancing our revolving credit facility in June 2013.  Non-operating expense, net of tax, in 2012 and 2011 included $0.7 million and $3.0 million for the accelerated amortization of deferred financing costs and expensing of the call premium from redeeming $73.5 million in June 2012 and $150 million in February 2011 of the Company’s 6.75% senior subordinated notes.

(3)Tax adjustments in 2011 included a $5.8 million benefit from the reversal of valuation allowances against net operating loss and foreign tax credit carryforwards and a tax benefit from the release of $5.5 million of reserves primarily for uncertain tax positions as a result of an audit settlement.

Business Trends

Our total sales in 2013 increased 6% in constant currency over 2012.  In constant currency and by market, our Commercial Aerospace sales increased 15%, Space & Defense sales increased 5%, and our Industrial sales decreased 23%.  The Commercial Aerospace market represents 65% of our sales, followed by Space & Defense at 22% and Industrial at 13%.

·In 2013, our Commercial Aerospace sales increased by 15%.  Sales to Airbus and Boeing and their subcontractors, which comprised 85% of our Commercial Aerospace sales, were up almost 18% with new program sales (A380, A350, B787 and B787-8) up about 25% and legacy aircraft related sales up 12%.  Almost all of our Commercial Aerospace sales are for new aircraft production as we have only nominal aftermarket sales.

·Airbus and Boeing combined deliveries in 2013 were a record 1,274 aircraft, compared to the previous record of 1,189 aircraft in 2012.  The demand for new commercial aircraft is principally driven by two factors.  The first is airline passenger traffic (measured by revenue passenger miles) and the second is the replacement rate for existing aircraft.  The International Air Transport Association (IATA) estimates 2013 revenue passenger miles were 5.3% higher than 2012.  Combined orders for 2013 were 2,858 planes, compared to 2,036 orders for 2012.  Backlog at the end of 2013 increased to 10,639 planes, over eight years of backlog at the 2013 delivery pace.  Based on Airbus and Boeing announced projections, 2014 deliveries are estimated to be higher than 2013.

·Overall the Commercial Aerospace industry continues to utilize a greater proportion of advanced composite materials with each new generation of aircraft.  These new programs include the A380, A350, B787, and the B747-8.  As of December 2013, Airbus had a backlog of 182 orders for its A380 aircraft and has delivered 122.  The A380 has 23% composite content by weight and has more Hexcel material used in its production than any aircraft currently in service, over $3 million per plane.  Hexcel has been awarded a contract to supply carbon fiber composite materials for major primary structures for the A350, which Airbus has indicated will have about 53% composite content by weight.  In addition, we have opportunities for additional Hexcel products on the plane and our total content of materials per A350 will be approximately $5 million per aircraft and will be our largest program for both revenue per aircraft and total program.  As of December 31, 2013, Airbus has received 812 orders for the A350, which it projects will enter into service in the fourth quarter of 2014.  The B787 has more than 50% composite content by weight, including composite wings and fuselage, compared to the 11% composite content used in the construction of its B777 aircraft and 6% for the B767 the aircraft it is primarily replacing.  The B787 entered into service in September 2011.  Hexcel has $1.3 million to $1.6 million of content per plane, depending upon which engines are used. As of December 31, 2013, Boeing had a backlog of 916 orders for its B787 aircraft and has delivered 114.  While the B747-8 is structurally an aluminum intensive aircraft, new engines and nacelles provide Hexcel with the opportunity for significant additional revenues.  The freighter version of the B747-8 went into service in October 2011 and the passenger version in June 2012.  The B747-8 has slightly more Hexcel content per plane than the B787.  Our sales on these four new programs comprised more than 30% of our total Commercial Aerospace sales and we expect them to represent an increasing percent of our Commercial Aerospace sales in the future.

·In addition to the new programs discussed above, both Airbus and Boeing have announced new versions of their narrowbody planes that will have new engines.  Airbus’s A320neo is expected to enter service in 2015, while the Boeing’s B737 MAX is expected to enter service in 2017.  Both of these aircraft are expected to provide opportunities for Hexcel to increase its content on these new programs up to 50% higher than on the current models of the A320 and B737.

·The regional and business aircraft market sales, which account for 15% of Commercial Aerospace sales, remained relatively flat with 2012 sales levels of $161 million.

·Our Space & Defense constant currency sales increased 5% over 2012.  Rotorcraft sales continue to be strong and we continue to benefit from our extensive qualifications to supply composite materials and structures.  New helicopter programs in development, as well as upgrade or retrofit programs, have an increased reliance on composite materials products such as

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carbon fiber, prepregs, and honeycomb core to improve blade performance.  Key programs include the V-22 (Osprey) tilt rotor aircraft, Blackhawk, Airbus Group A400M military transport, C-17, F-35 (joint strike fighter or JSF), S76, AH-64 Apache, CH-53 Super Stallion, F/A-18E/F (Hornet), European Fighter Aircraft (Typhoon), NH90, and Tiger helicopters.  In addition, our Engineered Products segment provides specialty value added services such as machining, sub-assembly, and even full blade manufacturing.

·Our Industrial constant currency sales decreased by 23% in 2013 from 2012.  Industrial sales include wind energy, recreation, transportation and general industrial applications, with wind being the largest submarket.  Excluding wind energy sales, the rest of the Industrial sales declined about 15% in constant currency as compared to 2012.

·Wind energy sales were down over 25% from the record levels in 2012, as sales in the U.S. declined more than 50% due to the push to install turbines before the U.S. Production Tax Credit (PTC) expired at the end of 2012.  In January 2013, the PTC was extended for another year, and applies to projects that start construction before December 31, 2013.  Hexcel’s U.S. wind energy sales were less than 25% of the total of its wind energy sales in 2013.  Total wind energy sales for each of the four quarters of 2013 were about the same level.  Wind energy sales are expected to increase mid-single digits in 2014, which would return sales to 2011 levels.

Results of Operations

Our sales of $1,678.2 million were $100.0 million, or 6%, higher than 2012 and our operating income of $270.9 million (or 16.1% of sales) was 9% higher than 2012.  Other operating income for the year ended December 31, 2012 included income from a $9.6 million business interruption insurance settlement related to a prior year claim, a $4.9 million gain on the sale of land and a $5.0 million charge for additional environmental reserves primarily for remediation of a manufacturing facility sold in 1986.  Excluding these items, operating income in 2013 was 13% higher than 2012. Net income in 2013 included $0.6 million (net of tax) for the accelerated amortization of deferred financing costs and the deferred expense on interest rate swaps related to repaying the term loan and refinancing our revolving credit facility in June 2013.  Net income in 2012 and 2011 included non-operating expense of $0.7 million (net of tax) and $3.0 million (net of tax) for the accelerated amortization of deferred financing costs and expensing of the call premium from the redemption of $73.5 million in June 2012, and $150 million in February 2011 of the Company’s 6.75% senior subordinated notes.  Net income for 2011 also included tax benefits from the release of $11.3 million of reserves primarily for uncertain tax positions as a result of an audit settlement and the reversal of valuation allowances.

We have two reportable segments: Composite Materials and Engineered Products.  Although these segments provide customers with different products and services, they often overlap within three end business markets: Commercial Aerospace, Space & Defense and Industrial.  Therefore, we also find it meaningful to evaluate the performance of our segments through the three end business markets.  Further discussion and additional financial information about our segments may be found in Note 16 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

Net Sales:  Consolidated net sales of $1,678.2 million for 2013 were $100.0 million higher than the $1,578.2 million of net sales for 2012.  The sales increase in 2013 reflects increased volume in Commercial Aerospace driven by new aircraft programs and increased build rates.  Consolidated net sales in 2012 increased 13% over the $1,392.4 million of sales in 2011 due to volume increases in Commercial Aerospace.  Had the same U.S. dollar, British Pound sterling and Euro exchange rates applied in 2012 as in 2013 (“in constant currency”), consolidated net sales for 2013 would have been $88.9 million higher than 2012.  In constant currency, consolidated net sales for 2012 would have been $206.5 million, or 15.1%, higher than 2011 net sales.

Composite Materials: Net sales of $1,286.9 million for 2013 increased $56.0 million over the $1,230.9 million for 2012 driven by a 17.3% increase in Commercial Aerospace sales. Space and Defense sales were up slightly over 2012 and Industrial sales declined $65.8 million. The decline in Industrial sales was driven by wind energy which faced tough comparisons to 2012, driven by the strong sales in the first half of 2012. In 2012, net sales of $1,230.9 million increased 14.6% over 2011 as Commercial Aerospace sales increased 17.0% and Space & Defense and Industrial sales both increased over 11%.  Wind energy sales increased about 30% in 2012 over 2011.

Engineered Products: Net sales of $391.3 million for 2013 increased $44.0 million over the $347.3 million for 2012 driven by a 17.8% increase in Space & Defense sales.  Commercial Aerospace sales increased 8.4% over 2012.  There are not significant sales to the Industrial market from this segment.  In 2012, net sales of $347.3 million increased 9.2% over 2011 as Space & Defense sales increased 13%.

The following table summarizes net sales to third-party customers by segment and end market in 2013, 2012 and 2011:

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(In millions)	Commercial Aerospace			Space & Defense			Industrial			Total
2013 Net Sales
Composite Materials	$	804.3		$	271.9		$	210.7		$	1,286.9
Engineered Products	280.2			104.0			7.1			391.3
Total	$	1,084.5		$	375.9		$	217.8		$	1,678.2
	65		%	22		%	13		%	100		%
2012 Net Sales
Composite Materials	$	685.7		$	268.7		$	276.5		$	1,230.9
Engineered Products	258.4			88.3			0.6			347.3
Total	$	944.1		$	357.0		$	277.1		$	1,578.2
	60		%	23		%	17		%	100		%
2011 Net Sales
Composite Materials	$	586.1		$	241.3		$	247.1		$	1,074.5
Engineered Products	237.4			78.1			2.4			317.9
Total	$	823.5		$	319.4		$	249.5		$	1,392.4
	59		%	23		%	18		%	100		%

Commercial Aerospace:  Net sales to the Commercial Aerospace market increased $140.4 million or 14.9% to $1,084.5 million for 2013 as compared to net sales of $944.1 million for 2012; 2012 net sales increased by $120.6 million as compared to net sales of $823.5 million for 2011.  In constant currency, net sales to the Commercial Aerospace market increased $137.2 million, or 14.5% in 2013 and increased $126.8 million or 15.5% in 2012.

In 2013, sales for Airbus and Boeing programs increased 18% over the prior year, with new aircraft programs (A380, A350, B787 and B747-8) sales up 25% and legacy related sales 12% higher.  Sales for the regional and business aircraft market were essentially flat with 2012 sales level.

Growth in 2012 over 2011 came from sales to Airbus and Boeing programs which increased 16% over the prior year, with new aircraft programs (A380, A350, B787 and B747-8) sales up over 25% and legacy related sales up more than 10%.  Sales for the regional and business aircraft market increased 7% over 2011.

Space & Defense: Net sales of $375.9 million for 2013 increased 5.3% as compared to $357.0 million for 2012; 2012 net sales increased by 11.8% as compared to $319.4 million in 2011.  In 2013, net sales in constant currency, increased $16.1 million or 4.5%; in 2012 the increase was $42.4 million or 13.5%.  We continue to benefit from participating in a wide range of programs in the U.S., Europe and Asia, including rotorcraft, transport, fixed wing and satellite programs.

Industrial:  Net sales of $217.8 million for 2013 decreased by $59.3 million, or 21.4%, compared to net sales of $277.1 million for 2012.  In constant currency, net sales to the Industrial market decreased $64.3 million or 22.8% in 2012 and increased $37.3 million or 15.6% in 2012.  Our wind energy submarket accounts for just over half of our Industrial sales.  While wind energy sales were down over 25% in 2013 compared to the record sales levels in 2012, they were just 6% lower than 2011 and have remained at fairly constant levels over the past four quarters.  We expect wind energy sales to increase in the mid-single digits in 2014 based on the strong backlog of our largest wind energy customer.  We remain positive on the longer term outlook for our wind business.  Future growth in wind is dependent on many factors including global economic growth, government incentives, competing energy costs, and wind turbine efficiency, among other factors.  Our assets currently dedicated to production for the wind market represent less than 3% of Hexcel’s total fixed assets at December 31, 2013.  These assets can be modified for manufacturing products in markets other than wind energy.

Sales to the rest of the Industrial market other than wind were down about 15% in constant currency in 2013 as compared to 2012, after modest growth in 2012 over 2011.

Gross Margin: Gross margin for 2013 was $454.0 million or 27.1% of net sales as compared to $406.7 million or 25.8% of net sales in 2012. The increase reflected higher volume, better sales mix driven by higher aerospace sales and continued improvements in operating performance.  Exchange rates had nominal impact on 2013 gross margin percentage and contributed about 30 basis points to the gross margin percentage improvement in 2012, as compared to 2011.  The increase in 2012 also reflected higher sales volume and improvements in operating performance.  Gross margin for 2011 was $342.1 million, or 24.6% of net sales.

Selling, General and Administrative (“SG&A”) Expenses:  SG&A expenses were $141.4 million or 8.4% of net sales for 2013 and $130.7 million or 8.3% of net sales for 2012, and $120.5 million or 8.7% of net sales for 2011.  The increase in SG&A spending in 2013 reflects added infrastructure to support our growth and higher variable compensation.  SG&A spending in 2012 was higher than 2011 as we increased infrastructure to support our growth.

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Research and Technology (“R&T”) Expenses:  R&T expenses for 2013 were $41.7 million or 2.5% of net sales, $36.7 million or 2.3% of net sales in 2011 and $32.6 million or 2.3% of 2010 net sales.  Spending has increased as we invest in new products and technology.

Other Income, Net:  Other operating income for the year ended December 31, 2012 included income from a $9.6 million business interruption insurance settlement related to a prior year claim, a $4.9 million gain on the sale of land and a $5.0 million charge for additional environmental reserves primarily for remediation of a manufacturing facility sold in 1986.  Other operating income, net for the year ended December 31, 2011 includes a $5.7 million benefit from the curtailment of a pension plan, partially offset by other expense of $2.7 million for the increase in environmental reserves primarily for remediation of a manufacturing facility sold in 1986.

Operating Income:  Operating income for 2013 was $270.9 million compared with operating income of $248.8 million for 2012 and $192.0 million for 2011.  Operating income as a percent of sales was 16.1%, 15.8% and 13.8% % in 2013, 2012, and 2011, respectively.  Improved gross margin drove the increase in operating margin in 2013 and 2012.

One of the Company’s performance measures is operating income adjusted for other (income) expense, which is a non-GAAP measure.  There were no adjustments to the 2013 operating income of $270.9 million or 16.1% of net sales.  Adjusted operating income for the years ended December 31, 2012 and 2011 was $239.3 million and $189.0 million or 15.2% and 13.6% as a percentage of net sales, respectively.  A reconciliation from operating income to adjusted operating income is provided on page 26.

Almost all of the Company’s sales and costs are either in U.S. dollars, Euros or British Pound sterling, with approximately one-quarter of our sales in Euros or British Pound sterling.  In addition, much of our European Commercial Aerospace business has sales denominated in dollars and costs denominated in all three currencies.  The net impact is that as the dollar weakens against the Euro and the British Pound sterling, sales will increase while operating income will decrease.  We have an active hedging program to minimize the impact on operating income, but our operating income as a percentage of net sales is affected.  Foreign exchange had nominal impact on our operating income percentage in 2013 while in 2012 operating income percentages were approximately 30 basis points better than the comparable prior year due to exchange rates.

Operating income for the Composite Materials segment increased $19.0 million to $276.3 million, as compared to $257.3 million for 2012. Operating income for Composite Materials, in 2012 and 2011, included $14.5 million and $5.7 million of other operating income as discussed above.  Excluding the other operating items in 2012, operating income for Composite Materials would have increased by $33.5 million or 13.8% driven primarily by higher commercial aerospace sales volume.  Operating income for the Engineered Products segment increased by $8.3 million compared with 2012 to $58.9 million, on higher sales volume in all markets.  Operating income for the year ended December 31, 2012 for the Composite Materials segment increased $62.8 million or 32.2% to $257.3 million, as compared to $194.5 million for 2011, driven by productivity and good leverage on higher sales volume.  Operating income for the Engineered Products segment decreased by $1.0 million compared with 2011 to $50.6 million, as higher sales volume was offset by unfavorable product mix and costs related to the start-up of new programs.

We did not allocate corporate net operating expenses of $64.3 million, $59.1 million and $54.1 million to segments in 2013, 2012, and 2011, respectively. Corporate and Other included $5.0 million and $2.7 million in 2012 and 2011, respectively, of other expenses, as discussed above.

Interest Expense:  Interest expense was $7.3 million for 2013, $10.0 million for 2012, and $11.6 million for 2011.  The sequential decrease in interest expense over the three years is due primarily to lower interest rates, largely as a result of the redemption of $73.5 million in June 2012 and $150 million in February 2011 of the Company’s 6.75% senior subordinated notes, as well as the refinancing of the Company’s revolving credit facility.

Provision for Income Taxes:   Our 2013, 2012 and 2011 tax provision was $76.0 million, $74.1 million and $41.6 million for an effective tax rate of 28.9%, 31.2% and 23.7%, respectively.  The 2013 provision benefitted from the release of reserves from uncertain tax positions.  The 2011 provision included benefits of $11.3 million from the reversal of valuation allowances against net operating loss and foreign tax credit carryforwards and from the release of reserves primarily for uncertain tax positions as a result of an audit settlement.  Excluding these items, the 2013 and 2011 effective tax rates were 30.7% and 30.1%, respectively.  We believe the adjusted effective tax rate, which is a non-GAAP measure, is meaningful since it provides insight to the tax rate of ongoing operations.

Equity in Earnings from Affiliated Companies:  Equity in earnings represents our portion of the earnings from our joint venture in Malaysia.

Net Income:  Net income was $187.9 million, or $1.84 per diluted common share for the year ended December 31, 2013 compared to $164.3 million, or $1.61 per diluted common share for 2012 and $135.5 million, or $1.35 per diluted share for 2011.

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Strong sales volume, particularly in the commercial aerospace market, coupled with good cost control led the growth in earnings from 2011 through 2013.  Also see the above table for a reconciliation of GAAP net income from continuing operations to our adjusted “Non-GAAP” measure.

Significant Customers

Approximately 34%, 29% and 30% of our 2013, 2012 and 2011 net sales, respectively, were to Boeing and related subcontractors.  Of the 34% of overall sales to Boeing and its subcontractors in 2013, 30% related to Commercial Aerospace market applications and 4% related to Space & Defense market applications.  Approximately 29%, 28% and 27% of our 2013, 2012 and 2011 net sales, respectively, were to Airbus Group and its subcontractors.  Of the 29% of overall sales to Airbus Group and its subcontractors in 2013, 26% related to Commercial Aerospace market applications and 3% related to Space & Defense market applications.

Financial Condition

In 2013, we ended the year with total debt, net of cash, of $229.5 million and generated $78.0 million of free cash flow (cash provided by operating activities less cash paid for capital expenditures).  In 2013, the Company bought back $90 million of shares, and has $110 million remaining under its currently authorized share repurchase program.  In 2014, we expect our capital spending to be in the range of $225 million to $250 million as we expand capacity in line with our outlook, resulting in expected positive free cash flow of $25 million to $75 million.  We expect our typical use of cash in the first half of 2014, which will be funded by our available borrowings under our credit facility.

We have a portfolio of derivatives related to currencies and interest rates.  We monitor our counterparties and we only use those rated A- or better.

Liquidity

Our cash on hand at December 31, 2013 was $65.5 million and we had $306.5 million borrowings available under our credit facility. Our total debt as of December 31, 2013 was $295.0 million, an increase of $38.4 million from the December 31, 2012 balance. The level of available borrowing capacity fluctuates during the course of the year due to factors including capital expenditures, interest and variable compensation payments, changes to working capital, share repurchases as well as timing of receipts and disbursements within the normal course of business.

Short-term liquidity requirements consist primarily of normal recurring operating expenses and working capital needs, capital expenditures and debt service requirements.  We expect to meet our short-term liquidity requirements through net cash from operating activities, cash on hand and, if necessary, our revolving credit facility.  As of December 31, 2013, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations.  We do not have any significant required debt repayments until June 2018 when our revolving credit facility expires.

Credit Facilities:   In June 2013, the Company entered into a new $600 million senior secured revolving credit facility (the “Facility”) that matures in 2018.  The new facility replaces the Company’s previous senior secured credit facility ($82.5 million term loan and a $360 million revolving loan) that would have expired in July 2015.  The Facility permits us to issue letters of credit up to an aggregate amount of $40 million and allows us to draw up to $75 million in Euros.  Amounts drawn in Euros or any outstanding letters of credit reduce the amount available for borrowing under the revolving loan.  The initial interest rate was 50 basis points lower than the prior facility, and at the current leverage ratio the new rate is LIBOR + 1.25% (25 basis points lower that the initial rate).  Outstanding letters of credit reduce the amount available for borrowing under our revolving loan.  As of December 31, 2013, we had issued letters of credit under the Facility totaling $1.5 million, resulting in undrawn availability under the Facility as of December 31, 2013 of $306.5 million.  In addition, we borrowed $3.0 million from the credit line established in China associated with our operations there.

The new facility contains financial and other covenants, including, but not limited to, restrictions on the incurrence of debt and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio.  In accordance with the terms of the new facility, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA, as defined in the credit agreement, to interest expense) and may not exceed a maximum leverage ratio of 3.50 (based on the ratio of total debt to EBITDA) throughout the term of the new facility.  In addition, the new facility contains other terms and conditions such as customary representations and warranties, additional covenants and customary events of default.  The new facility is less restrictive than the prior agreement.  As of December 31, 2013, we were in compliance with all debt covenants and expect to remain in compliance.

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We have a $10.0 million borrowing facility for working capital needs of our Chinese entity with an outstanding balance of $3.0 million at December 31, 2013.  These funds can only be used locally and, accordingly, we do not include this facility in our borrowing capacity disclosures.  The facility is guaranteed by Hexcel Corporation but is uncommitted and can be cancelled at any time.

Operating Activities:  We generated $272.9 million in cash from operating activities during 2013, an increase of $40.5 million from 2012 primarily from higher earnings and lower working capital usage.  Cash generated from operating activities during 2012 was $232.4 million, an increase of $61.9 million from 2011 also from higher earnings and lower working capital usage.

Investing Activities:  Cash used for investing activities, primarily for capital expenditures, was $194.9 million in 2013 compared to $258.4 million in 2012 and $163.2 million in 2011.

The Company is in the process of expanding capacity over a multi-year period, primarily for manufacture of carbon fiber and prepregs to support aerospace growth.  These capital projects require large expenditures and long lead times, some taking up to two years to complete.  Approximately 75% of the $257.1 million in construction in progress as of December 31, 2013 represents spending on expansion projects primarily at our Decatur, Alabama and Salt Lake City, Utah facilities.  We expect a majority of these projects to be placed in service during 2014, with the remainder placed into service in 2015.

Financing Activities:  Financing activities were a use of cash of $47.2 million in 2013 as compared to a source of cash of $8.2 million in 2012.  In 2013 we borrowed a net $292.0 million from a new Senior Secured Credit Facility and repaid an $82.5 million term loan and $165.0 million prior Senior Secured Credit Facility.  As a result of the refinancing, we accelerated the unamortized financing costs related to the previous borrowings incurring a pretax charge of $1.0 million (after tax of $0.01 per diluted share).  We also incurred $2.4 million of issuance costs related to the new debt.  In addition, in 2013 we purchased $90 million of the Company’s stock.  In 2011 financing activities were a use of cash of $74.4 million.  In 2012 and 2011, we redeemed $73.5 million and $150 million of our $225 million 6.75% senior subordinated notes at a call premium of 1.125% and 2.25%, respectively, and purchased $1.5 million of notes on the open market.  The redemptions were principally funded by the add-ons to our then existing senior secured credit facility.  As a result of the redemptions, we accelerated the unamortized financing costs of the senior subordinated notes and expensed the call premium incurring a pretax charge of $1.1 million (after tax of $0.01 per diluted share) and $4.9 million (after tax of $0.03 per diluted share) in 2012 and 2011, respectively.  We repaid $57 million of the $135 million add on in 2011 using cash on hand.

Financial Obligations and Commitments:  As of December 31, 2013, current debt maturities were $3.0 million.  The next significant scheduled debt maturity will not occur until 2018, the year the senior secured credit facility matures. In addition, certain sales and administrative offices, data processing equipment and manufacturing equipment and facilities are leased under operating leases.

Total letters of credit issued and outstanding under the Senior Secured Credit Facility were $1.5 million as of December 31, 2013.

The following table summarizes the scheduled maturities as of December 31, 2013 of financial obligations and expiration dates of commitments for the years ended 2014 through 2018 and thereafter.

(In millions)	2014		2015		2016		2017		2018		Thereafter		Total
Senior secured credit facility — Revolver due 2018	$	—	$	—	$	—	$	—	$	292.0	$	—	$	292.0
Working capital facility	3.0		—		—		—		—		—		3.0
Subtotal	3.0		—		—		—		292.0		—		295.0
Operating leases	9.1		5.3		4.1		2.2		1.8		9.3		31.8
Total financial obligations	$	12.1	$	5.3	$	4.1	$	2.2	$	293.8	$	9.3	$	326.8
Letters of credit	$	1.5	$	—	$	—	$	—	$	—	$	—	$	1.5
Interest payments	7.6		7.0		6.9		6.9		5.3		—		33.7
Estimated benefit plan contributions	27.6		6.8		4.9		3.7		3.8		14.9		61.7
Other (a)	3.4		0.1		0.1		0.1		0.2		—		3.9
Total commitments	$	52.2	$	19.2	$	16.0	$	12.9	$	303.1	$	24.2	$	427.6

(a) Other represents estimated spending for environmental matters at known sites.

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As of December 31, 2013, we had $42.7 million of unrecognized tax benefits.  This represents tax benefits associated with various tax positions taken, or expected to be taken, on domestic and international tax returns that have not been recognized in our financial statements due to uncertainty regarding their resolution.  The resolution or settlement of these tax positions with the taxing authorities is at various stages.  We are unable to make a reliable estimate of the eventual cash flows of the $42.7 million of unrecognized tax benefits.

For further information regarding our financial obligations and commitments, see Notes 5, 6, 7, 12 and 13 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared based upon the selection and application of accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions about future events that affect amounts reported in our financial statements and accompanying notes.  Future events and their effects cannot be determined with absolute certainty.  Therefore, the determination of estimates requires the exercise of judgment.  Actual results could differ from those estimates, and any such differences may be significant to the financial statements.  The accounting policies below are those we believe are the most critical to the preparation of our financial statements and require the most difficult, subjective and complex judgments.  Our other accounting policies are described in the accompanying notes to the consolidated financial statements of this Annual Report on Form 10-K.

Deferred Tax Assets

As of December 31, 2013 we had $23.3 million in net deferred tax assets consisting of deferred tax assets of $159.0 million offset by deferred tax liabilities of $73.4 million and a valuation allowance of $62.3 million.  As of December 31, 2012, we had $62.6 million in net deferred tax assets consisting of deferred tax assets of $170.5 million offset by deferred tax liabilities of $58.5 million and a valuation allowance of $49.4 million.

The valuation allowance as of December 31, 2013 related to certain net operating loss carryforwards of our foreign subsidiaries, and state net operating loss carryforwards for which we have determined, based upon historical results and projected future book and taxable income levels, that a valuation allowance should continue to be maintained.

The determination of the required valuation allowance and the amount, if any, of deferred tax assets to be recognized involves significant estimates regarding the timing and amount of reversal of taxable temporary differences, future taxable income and the implementation of tax planning strategies.  In particular, we are required to weigh both positive and negative evidence in determining whether a valuation allowance is required.  Positive evidence would include, for example, a strong earnings history, an event that will increase our taxable income through a continuing reduction in expenses, and tax planning strategies indicating an ability to realize deferred tax assets.  Negative evidence would include, for example, a history of operating losses and losses expected in future years.

Uncertain Tax Positions

Included in the unrecognized tax benefits of $42.7 million at December 31, 2013 was $39 million of tax benefits that, if recognized, would impact our annual effective tax rate.  In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations. The Company recognized $0.7 million, $0.1 million, and ($0.1) million of interest expense (income) related to the above unrecognized tax benefits in 2013, 2012 and 2011, respectively.  The Company had accrued interest of approximately $1.6 million and $0.9 million as of December 31, 2013 and 2012, respectively.  During 2013 we did not reverse any interest and in 2012, we reversed $0.1 million related to the unrecognized tax benefits.

We are subject to taxation in the U.S. and various states and foreign jurisdictions.  The U.S. tax returns have been audited through 2007.  Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Austria (2007 onward), Belgium (2011 onward), France (2011 onward), Spain (2004 onward) and UK (2011 onward).  We are currently under examination in certain of the foreign jurisdictions.

As of December 31, 2013, we had uncertain tax positions for which it is reasonably possible that amounts of unrecognized tax benefits could significantly change over the next year.  These uncertain tax positions relate to our tax returns from 2004 onward, some of which are currently under examination by certain European tax authorities.  During 2011, we recognized $5.5 million of uncertain tax benefits as a result of a favorable settlement in one of the foreign tax jurisdictions.  As of December 31, 2013, the Company has not classified any of the unrecognized tax benefits as a current liability as it does not expect to settle any of the tax positions under examinations in various jurisdictions within the next twelve months.

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We expect that the amount of unrecognized tax benefits will continue to change in the next twelve months as a result of ongoing tax deductions, the resolution of audits and the passing of the statute of limitations.

Retirement and Other Postretirement Benefit Plans

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

Under the retirement savings plans, eligible U.S. employees can contribute up to 75% of their compensation to an individual 401(k) retirement savings account.  We make matching contributions equal to 50% of employee contributions, not to exceed 3% of employee compensation.

We have defined benefit retirement plans in the United Kingdom, Belgium, France and Austria covering certain employees of our subsidiaries in those countries.  The defined benefit plan in the United Kingdom (the “U.K. Plan”), the largest of the European plans, was terminated in 2011 and replaced with a defined contribution plan.  We recorded a curtailment gain of $5.7 million (after tax gain of $0.04 per diluted share) to recognize previously unrecognized prior service credits.  As of December 31, 2013, 58% of the total assets in the U.K. Plan were invested in equities.  Equity investments are made with the objective of achieving a return on plan assets consistent with the funding requirements of the plan, maximizing portfolio return and minimizing the impact of market fluctuations on the fair value of the plan assets.  As a result of an annual review of historical returns and market trends, the expected long-term weighted average rate of return for the U.K. Plan for the 2014 plan year will be 6.5% and for the other European Plans as a group it will be 3.25% to 4.5%.

We use actuarial models to account for our pension and postretirement plans, which require the use of certain assumptions, such as the expected long-term rate of return, discount rate, rate of compensation increase, healthcare cost trend rates, and retirement and mortality rates, to determine the net periodic costs of such plans.  These assumptions are reviewed and set annually at the beginning of each year.  In addition, these models use an “attribution approach” that generally spreads individual events, such as plan amendments and changes in actuarial assumptions, over the service lives of the employees in the plan.  That is, employees render service over their service lives on a relatively smooth basis and therefore, the income statement effects of retirement and postretirement benefit plans are earned in, and should follow, the same pattern.

We use our actual return experience, future expectations of long-term investment returns, and our actual and targeted asset allocations to develop our expected rate of return assumption used in the net periodic cost calculations of our funded European defined benefit retirement plans.  Due to the difficulty involved in predicting the market performance of certain assets, there will almost always be a difference in any given year between our expected return on plan assets and the actual return.  Following the attribution approach, each year’s difference is amortized over a number of future years.  Over time, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees.

We annually set our discount rate assumption for retirement-related benefits accounting to reflect the rates available on high-quality, fixed-income debt instruments.  The discount rate assumption used to calculate net periodic retirement related costs for the European funded plans was 4.35% in 2013, 4.73% for 2012 and 5.27% for 2011, respectively.  The rate of compensation increase, which is another significant assumption used in the actuarial model for pension accounting, is determined by us based upon our long-term plans for such increases and assumed inflation.  For the postretirement health care and life insurance benefits plan, we review external data and its historical trends for health care costs to determine the health care cost trend rates.  Retirement and mortality rates are based primarily on actual plan experience.

Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect the net periodic costs and recorded obligations in such future periods.  While we believe that the assumptions used are appropriate, significant changes in economic or other conditions, employee demographics, retirement and mortality rates, and investment performance may materially impact such costs and obligations.

For more information regarding our pension and other postretirement benefit plans, see Note 7 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

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Long-Lived Assets and Goodwill

We have significant long-lived assets.  We review these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The assessment of possible impairment is based upon our ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related operations.  If these cash flows are less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value.  The measurement of impairment requires estimates of these cash flows and fair value.  The calculation of fair value is determined based on discounted cash flows.  In determining fair value a considerable amount of judgment is required to determine discount rates, market premiums, financial forecasts, and asset lives.

In addition, we review goodwill for impairment at the reporting unit level at least annually, and whenever events or changes in circumstances indicate that goodwill might be impaired.  We have four reporting units within the Composite Materials segment, each of which are components that constitute a business for which discrete financial information is available and for which appropriate management regularly reviews the operating results.  Within the Engineered Products segment, the reporting unit is the segment as it comprises only a single component.  In 2013, the Company performed a qualitative assessment and determined that it was more likely than not that the fair values of our reporting units were not less than their carrying values and it was not necessary to perform the currently prescribed two-step goodwill impairment test.

In 2012 we reassessed the estimated useful lives of certain machinery and equipment.  We increased the useful lives of certain machinery and equipment from 20 years to 25 years, and increased the useful lives of certain other machinery and equipment from 10 - 12 years to 20 years.  We determined that this adjustment to the useful lives of certain assets is a change in accounting estimate and we accounted for the change prospectively; i.e. the accounting change impacted the three months ended December 31, 2012 and future periods. For the quarter and year ended December 31, 2012, the change in accounting estimate lowered depreciation expense by approximately $1.25 million (pre-tax), which was reflected in Gross Margin, or by approximately $0.01 earnings per basic and diluted common share.

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, health and safety matters.  We estimate and accrue our liabilities resulting from such matters based upon 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.  We believe we have adequately accrued for these potential liabilities; however, facts and circumstances may change, such as new developments, or a change in approach, including a change in settlement strategy or in an environmental remediation plan, that could cause the actual liability to exceed the estimates, or may require adjustments to the recorded liability balances in the future.

Our estimate of liability as a potentially responsible party (“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 December 31, 2013 and 2012, our aggregate environmental related accruals were $3.9 million and $6.6 million, respectively.  As of December 31, 2013 and 2012, $3.4 million and $4.2 million, respectively, was included in current other accrued liabilities, with the remainder included in other non-current liabilities.  As related to certain environmental matters, except for the Lodi site, the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  In 2013, if we had accrued, for those sites where we are able to estimate our liability, at the high end of the range of possible outcomes, our accrual would have been $6.5 million at December 31, 2013.

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 reserve activity for the three years ended December 31, 2013 was as follows:

	For the year ended
(In millions)	December 31, 2013			December 31, 2012			December 31, 2011
Beginning remediation accrual balance	$	6.6		$	5.0		$	7.3
Current period expenses	0.9			5.0			3.4
Cash expenditures	(3.6		)	(3.4		)	(5.7		)
Ending remediation accrual balance	$	3.9		$	6.6		$	5.0
Capital expenditures for environmental matters	$	4.6		$	2.4		$	4.1

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Market Risks

As a result of our global operating and financing activities, we are exposed to various market risks that may affect our consolidated results of operations and financial position.  These market risks include, but are not limited to, fluctuations in interest rates, which impact the amount of interest we must pay on certain debt instruments, and fluctuations in currency exchange rates, which impact the U.S. dollar value of transactions, assets and liabilities denominated in foreign currencies.  Our primary currency exposures are in Europe, where we have significant business activities.  To a lesser extent, we are also exposed to fluctuations in the prices of certain commodities, such as electricity, natural gas, aluminum, acrylonitrile and certain chemicals.

We attempt to net individual exposures, when feasible, taking advantage of natural offsets.  In addition, we employ or may employ interest rate swap agreements, cross-currency swap agreements and foreign currency forward exchange contracts for the purpose of hedging certain specifically identified interest rates and net currency exposures.  The use of these financial instruments is intended to mitigate some of the risks associated with fluctuations in interest rates and currency exchange rates, but does not eliminate such risks.  We do not use financial instruments for trading or speculative purposes.

Interest Rate Risks

Our long-term debt bears interest at variable rates.  From time to time we have entered into interest rate swap agreements to change the underlying mix of variable and fixed interest rate debt.  These interest rate swap agreements have modified the percentage of total debt that is exposed to changes in market interest rates.  Assuming a 10% favorable and a 10% unfavorable change in the underlying weighted average interest rates of our variable rate debt and swap agreements, interest expense for 2013 of $7.3 million would have decreased to $7.0 million and increased to $7.6 million, respectively.

Interest Rate Swaps

We have entered into approximately $150 million of interest rate swaps at December 31, 2013, that trade the LIBOR on our bank loan for a fixed rate at a weighted average rate of 0.81567%.  These interest rate swaps are designated as cash flow hedges to floating rate bank loans and expire by September 2016.  The fair value of interest rate swap agreements is recorded in other assets or other long-term liabilities with a corresponding amount to Other Comprehensive Income.

Foreign Currency Exchange Risks

We operate nine manufacturing facilities in Europe, which generated approximately 47% of our 2013 consolidated net sales.  Our European business activities primarily involve three major currencies — the U.S. dollar, the British pound, and the Euro.  We also conduct business and sell products to customers throughout the world, including a joint venture interest in Malaysia.  Most of the sales in these countries are denominated in U.S. dollars and they have local currency expenses.  Currency risk for these locations is not considered material.

In 2013, our European subsidiaries had third-party sales of $785 million of which approximately 54% were denominated in U.S. dollars, 42% were denominated in Euros and 4% were denominated in British pounds.  While we seek to reduce the exposure of our European subsidiaries to their sales in non-functional currencies through the purchase of raw materials in the same currency as that of the product sale, the net contribution of these sales to cover the costs of the subsidiary in its functional currency will vary with changes in foreign exchange rates, and as a result, so will vary the European subsidiaries’ percentage margins and profitability.  For revenues denominated in the functional currency of the subsidiary, changes in foreign currency exchange rates increase or decrease the value of these revenues in U.S. dollars but do not affect the profitability of the subsidiary in its functional currency.  The value of our investments in these countries could be impacted by changes in currency exchange rates over time, and could impact our ability to profitably compete in international markets.

We attempt to net individual functional currency positions of our various European subsidiaries, to take advantage of natural offsets and reduce the need to employ foreign currency forward exchange contracts.  We attempt to hedge some, but not necessarily all, of the net exposures of our European subsidiaries resulting from sales they make in non-functional currencies.  The benefit of such hedges varies with time and the foreign exchange rates at which the hedges are set.  For example, when the Euro strengthened against the U.S. dollar, the benefit of new hedges placed was much less than the value of hedges they replaced that were entered into when the U.S. dollar was stronger.  We seek to place additional foreign currency hedges when the dollar strengthens against the Euro or British pound.  We do not seek to hedge the value of our European subsidiaries’ functional currency sales and profitability in U.S. dollars.  We also enter into short-term foreign currency forward exchange contracts, usually with a term of ninety days or less, to hedge net

36

currency exposures resulting from specifically identified transactions.  Consistent with the nature of the economic hedge provided by such contracts, any unrealized gain or loss would be offset by corresponding decreases or increases, respectively, of the underlying transaction being hedged.

We have performed a sensitivity analysis as of December 31, 2013 using a modeling technique that measures the changes in the fair values arising from a hypothetical 10% adverse movement in the levels of foreign currency exchange rates relative to the U.S. dollar with all other variables held constant.  The analysis covers all of our foreign currency hedge contracts.  The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would have about a $2.4 million impact on our operating income.  However, it should be noted that over time as the adverse movement (in our case a weaker dollar as compared to the Euro or the British Pound sterling) continues and new hedges are layered in at the adverse rate, the impact would be more significant.  For example, had we not had any hedges in place for 2013, a 10% adverse movement would have reduced our operating income by about $16 million.

Foreign Currency Forward Exchange Contracts

A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British Pound sterling.  We entered into contracts to exchange U.S. dollars for Euros and British Pound sterling through March 2015.  The aggregate notional amount of these contracts was $187.1 million and $201.2 million at December 31, 2013 and 2012, respectively.  The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers.  These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates.  For the three years ended December 31, 2013, hedge ineffectiveness was immaterial.  Cash flows associated with these contracts are classified within net cash provided by operating activities of continuing operations.

The activity in “accumulated other comprehensive income (loss)” related to foreign currency forward exchange contracts for the years ended December 31, 2013, 2012 and 2011 was as follows:

(In millions)	2013			2012			2011
Unrealized gains (losses) at beginning of period	$	2.4		$	(4.5	)	$	(0.2	)
(Losses) gains reclassified to net sales	(0.3		)	2.4			(2.2		)
Increase (decrease) in fair value, net of tax	5.1			4.5			(2.1		)
Unrealized gains (losses) at end of period	$	7.2		$	2.4		$	(4.5	)

Unrealized gains of $4.8 million recorded in “accumulated other comprehensive income,” net of tax, as of December 31, 2013 are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.  The impact of credit risk adjustments was immaterial for the three years.

In addition, non-designated foreign exchange forward contracts are used to hedge balance sheet exposures.  The notional amounts outstanding at December 31, 2013 were U.S. $173.7 million against EUR, and British Pound sterling 11.0 million against EUR and at December 31, 2012 were U.S. $165.0 million against EUR and British Pound sterling 4.0 million against EUR.  Any changes in fair value of these forward contracts are recorded in the consolidated statements of operations and were immaterial for the years 2013, 2012 and 2011.

Utility Price Risks

We have exposure to utility price risks as a result of volatility in the cost and supply of energy and in natural gas.  To minimize the risk, from time to time we enter into fixed price contracts at certain of our manufacturing locations for a portion of our energy usage.  Although these contracts would reduce the risk to us during the contract period, future volatility in the supply and pricing of energy and natural gas could have an impact on our future consolidated results of operations.

Recently Issued Accounting Standards

New Accounting Pronouncements

ASU 2011-11 Balance Sheet (Topic 210); Disclosures about Offsetting Assets and Liabilities: In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11 which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position.  ASU 2011-11 is effective for annual and interim reporting periods beginning on or after January 1, 2013. The Company has no offsetting agreements and as such, adoption of this guidance did not have any impact on the Company’s reported financial results.

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

ASU 2013-11 Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740):  In July 2013, the FASB issued ASU No. 2013-11, which requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward on a jurisdictional basis.  ASU 2013-11 is expected to reduce diversity in practice by providing specific guidance on the presentation of unrecognized tax benefits.  ASU 2013-11 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  Early adoption is permitted and the Company has chosen to adopt ASU 2013-11 in the fourth quarter of 2013.

Consolidated Financial Statements and Supplementary Data

Description	Page
Management’s Responsibility for Consolidated Financial Statements	39
Management’s Report on Internal Control Over Financial Reporting	39
Report of Independent Registered Public Accounting Firm	40
Consolidated Financial Statements of Hexcel Corporation and Subsidiaries:
Consolidated Balance Sheets as of December 31, 2013 and 2012	41
Consolidated Statements of Operations for each of the three years ended December 31, 2013, 2012 and 2011	42
Consolidated Statements of Comprehensive Income for each of the three years ended December 31, 2013, 2012 and 2011	42
Consolidated Statements of Stockholders’ Equity for each of the three years ended December 31, 2013, 2012 and 2011	43
Consolidated Statements of Cash Flows for each of the three years ended December 31, 2013, 2012 and 2011	44
Notes to the Consolidated Financial Statements	45-70
Schedule of Valuation and Qualifying Accounts	71

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Management’s Responsibility for Consolidated Financial Statements

Hexcel management has prepared and is responsible for the consolidated financial statements and the related financial data contained in this report.  These financial statements, which include estimates, were prepared in accordance with accounting principles generally accepted in the United States of America.  Management uses its best judgment to ensure that such statements reflect fairly the consolidated financial position, results of operations and cash flows of the Company.

The Audit Committee of the Board of Directors reviews and monitors the consolidated financial statements and accounting policies of Hexcel.  These financial statements and policies are reviewed regularly by management and such financial statements are audited by our independent registered public accounting firm, PricewaterhouseCoopers LLP.  The Audit Committee, composed solely of outside directors, meets periodically, separately and jointly, with management and the independent registered public accounting firm.

Management’s Report on Internal Control Over Financial Reporting

Hexcel management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel 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 and includes those policies and procedures that:

·pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Hexcel management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2013.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (1992).  Based on our assessment, management concluded that, as of December 31, 2013, our internal control over financial reporting was effective.

The effectiveness of Hexcel’s internal control over financial reporting, as of December 31, 2013, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears on page 40.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Hexcel Corporation

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Hexcel Corporation and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (1992).  The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.  Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Stamford, Connecticut

February 5, 2014

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Hexcel Corporation and Subsidiaries

Consolidated Balance Sheets

As of December 31,

(In millions, except per share data)	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	65.5		$	32.6
Accounts receivable, net	232.4			229.0
Inventories	265.3			232.8
Prepaid expenses and other current assets	93.2			81.3
Total current assets	656.4			575.7
Property, plant and equipment, net	1,067.4			914.4
Goodwill and other intangible assets	61.0			57.8
Investments in affiliated companies	23.3			22.6
Deferred tax assets	10.3			15.4
Other assets	17.7			17.2
Total assets	$	1,836.1		$	1,603.1
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	3.0		$	16.6
Accounts payable	135.9			115.7
Accrued compensation and benefits	89.2			58.8
Other accrued liabilities	40.6			44.2
Total current liabilities	268.7			235.3
Long-term notes payable and capital lease obligations	292.0			240.0
Long-term retirement obligations	41.1			81.3
Other non-current liabilities	73.9			52.4
Total liabilities	675.7			609.0
Commitments and contingencies (see Note 13)
Stockholders’ equity:
Common stock, $0.01 par value, 200.0 shares of stock authorized, 104.0 and 102.4 shares of stock issued at December 31, 2013 and 2012, respectively	1.0			1.0
Additional paid-in capital	642.3			617.0
Retained earnings	636.1			448.2
Accumulated other comprehensive income (loss)	10.7			(31.9		)
	1,290.1			1,034.3
Less: Treasury stock, at cost, 5.1 and 2.5 shares at December 31, 2013 and 2012, respectively	(129.7		)	(40.2		)
Total stockholders’ equity	1,160.4			994.1
Total liabilities and stockholders’ equity	$	1,836.1		$	1,603.1

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

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Hexcel Corporation and Subsidiaries

Consolidated Statements of Operations

For the Years Ended December 31,

(In millions, except per share data)	2013		2012			2011
Net sales	$	1,678.2	$	1,578.2		$	1,392.4
Cost of sales	1,224.2		1,171.5			1,050.3
Gross margin	454.0		406.7			342.1
Selling, general and administrative expenses	141.4		130.7			120.5
Research and technology expenses	41.7		36.7			32.6
Other income, net	—		(9.5		)	(3.0		)
Operating income	270.9		248.8			192.0
Interest expense, net	7.3		10.0			11.6
Non-operating expense	1.0		1.1			4.9
Income before income taxes and equity in earnings	262.6		237.7			175.5
Provision for income taxes	76.0		74.1			41.6
Income before equity in earnings	186.6		163.6			133.9
Equity in earnings from investments in affiliated companies	1.3		0.7			1.6
Net income	$	187.9	$	164.3		$	135.5
Basic net income per common share:	$	1.88	$	1.64		$	1.37
Diluted net income per common share:	$	1.84	$	1.61		$	1.35
Weighted average common shares outstanding:
Basic	100.0		100.2			98.8
Diluted	102.1		102.0			100.7

Hexcel Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Years Ended December 31,

(In millions)	2013		2012			2011
Net income	$	187.9	$	164.3		$	135.5
Other comprehensive income (loss)
Currency translation adjustments	19.6		11.7			(10.1		)
Net unrealized pension and other benefit actuarial gains (losses) and prior service credits, net of tax	16.9		(10.8		)	(5.0		)
Net unrealized gains (losses) on financial instruments, net of tax	6.1		7.0			(9.6		)
Other comprehensive income (loss)	42.6		7.9			(24.7		)
Comprehensive income	$	230.5	$	172.2		$	110.8

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

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Hexcel Corporation and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Years Ended December 31, 2013, 2012 and 2011

	Common Stock						Accumulated
(In millions)	Par		Additional Paid-In Capital		Accumulated Retained Earnings		Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders’ Equity
Balance, December 31, 2010	$	1.0	$	552.3	$	148.4	$	(15.1	)	$	(27.2	)	$	659.4
Net income					135.5								135.5
Change in other comprehensive (loss) — net of tax							(24.7		)				(24.7		)
Stock based compensation			36.9										36.9
Acquisition of treasury stock										(4.9		)	(4.9		)
Balance, December 31, 2011	$	1.0	$	589.2	$	283.9	$	(39.8	)	$	(32.1	)	$	802.2
Net income					164.3								164.3
Change in other comprehensive income — net of tax							7.9						7.9
Stock based compensation			27.8										27.8
Acquisition of treasury stock										(8.1		)	(8.1		)
Balance, December 31, 2012	$	1.0	$	617.0	$	448.2	$	(31.9	)	$	(40.2	)	$	994.1
Net income					187.9								187.9
Change in other comprehensive income — net of tax							42.6						42.6
Stock based compensation			25.3										25.3
Acquisition of treasury stock										(89.5		)	(89.5		)
Balance, December 31, 2013	$	1.0	$	642.3	$	636.1	$	10.7		$	(129.7	)	$	1,160.4

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

43

Hexcel Corporation and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31,

(In millions)	2013			2012			2011
Cash flows from operating activities
Net income	$	187.9		$	164.3		$	135.5
Reconciliation to net cash provided by operating activities:
Depreciation	59.3			57.2			55.3
Amortization of debt discount and deferred financing costs	2.1			3.1			7.1
Deferred income taxes	16.4			30.9			23.4
Stock-based compensation	18.9			15.8			13.9
Excess tax benefits on stock-based compensation	(5.3		)	(6.8		)	(8.5		)
Equity in earnings from investments in affiliated companies	(1.3		)	(0.7		)	(1.6		)
Gain on sale of surplus real estate	—			(4.9		)	—
Pension curtailment gain	—			—			(5.7		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	6.4			(28.1		)	(28.2		)
Increase in inventories	(28.4		)	(15.2		)	(48.8		)
(Increase) decrease in prepaid expenses and other current assets	(3.3		)	0.7			(1.1		)
Increase in accounts payable and accrued liabilities	19.2			20.3			34.1
Increase (decrease) in other, net	1.0			(4.2		)	(4.9		)
Net cash provided by operating activities	272.9			232.4			170.5
Cash flows from investing activities
Capital expenditures and deposits for capital purchases	(194.9		)	(263.7		)	(158.0		)
Proceeds from sale of surplus real estate	—			5.3			—
Settlement of foreign currency hedge	—			—			(5.2		)
Net cash used for investing activities	(194.9		)	(258.4		)	(163.2		)
Cash flows from financing activities
Borrowings from senior secured credit facility	309.0			87.0			135.0
Issuance costs related to debt	(2.4		)	(0.6		)	—
Capital lease obligations and other debt, net	(3.8		)	(0.5		)	(3.0		)
Repayment of senior secured credit facility	(17.0		)	—			—
Repayment of senior secured credit agreement — term loan	(85.0		)	(7.5		)	(5.0		)
Repayment of prior senior secured credit facilities	(165.0		)	—			(57.0		)
Purchase of stock	(90.0		)	—			—
Repayment of 6.75% senior subordinated notes	—			(73.5		)	(151.5		)
Call premium payment for 6.75% senior subordinated notes	—			(0.8		)	(3.4		)
Activity under stock plans and other	7.0			4.1			10.5
Net cash (used for) provided by financing activities	(47.2		)	8.2			(74.4		)
Effect of exchange rate changes on cash and cash equivalents	2.1			0.9			(0.6		)
Net increase (decrease) in cash and cash equivalents	32.9			(16.9		)	(67.7		)
Cash and cash equivalents at beginning of year	32.6			49.5			117.2
Cash and cash equivalents at end of year	$	65.5		$	32.6		$	49.5
Supplemental information (See Note 14):
Accrual basis additions to property, plant and equipment	$	206.5		$	241.3		$	184.5

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Significant Accounting Policies

Nature of Operations

Hexcel Corporation and its subsidiaries (herein referred to as “Hexcel”, “the Company”, “we”, “us”, or “our”), is a leading advanced composites company.  We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, engineered honeycomb and composite structures, for use in Commercial Aerospace, Space & Defense and Industrial Applications.  Our products are used in a wide variety of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive, a wide variety of recreational products and other industrial applications.

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

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Hexcel Corporation and its subsidiaries after elimination of all intercompany accounts, transactions and profits.  We have a 50% equity ownership investment in an Asian joint venture Aerospace Composites Malaysia Sdn. Bhd. (“ACM”), formerly known as Asian Composites Manufactoring Sdn. Bhd.  In accordance with accounting standards we have determined that this investment is not a variable interest entity and as we do not have the ability to exercise control over financial or operating decisions, this investment is accounted for using the equity method of accounting.

Use of Estimates

Preparation of the accompanying consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid investments with an original maturity of three months or less when purchased.  Our cash equivalents are held in prime money market investments with strong sponsor organizations which are monitored on a continuous basis.

Inventories

Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out and average cost methods.  Inventory is reported at its estimated net realizable value based upon our historical experience with inventory becoming obsolete due to age, changes in technology and other factors.

Property, Plant and Equipment

Property, plant and equipment, including capitalized interest applicable to major project expenditures, is recorded at cost.  Asset and accumulated depreciation accounts are eliminated for dispositions, with resulting gains or losses reflected in earnings.  Depreciation of plant and equipment is provided using the straight-line method over the estimated useful lives of the various assets.  The estimated useful lives range from 10 to 40 years for buildings and improvements and from 3 to 25 years for machinery and equipment.  Repairs and maintenance are expensed as incurred, while major replacements and betterments are capitalized and depreciated over the remaining useful life of the related asset.

In 2012, we reassessed the estimated useful lives of certain machinery and equipment.  We increased the useful lives of this machinery and equipment from 20 years to 25 years, and increased the useful lives of other certain machinery and equipment from 10 - 12 years to 20 years.  We determined that this adjustment to the useful lives of certain assets was a change in accounting estimate and we accounted for the change prospectively; i.e. the accounting change impacts the three months ended December 31, 2012 and future periods. See Note 3.

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Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets of an acquired business. Goodwill is tested for impairment at the reporting unit level annually, or when events or changes in circumstances indicate that goodwill might be impaired.  The Company’s annual test for goodwill impairment was performed in the fourth quarter.  The Company performed a qualitative assessment and determined that it was more likely than not that the fair values of our reporting units were not less than their carrying values and it was not necessary to perform the currently prescribed two-step goodwill impairment test.

We amortize the cost of other intangibles over their estimated useful lives unless such lives are deemed indefinite. The Company has indefinite-lived intangible assets, consisting of purchased emissions credits.  These indefinite lived intangibles are tested annually for impairment as of November 30th, or when events or changes in circumstances indicate the potential for impairment.  If the carrying amount of the indefinite lived intangible exceeds the fair value, the intangible asset is written down to its fair value.  Fair value is calculated using discounted cash flows.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property, plant and equipment and identifiable intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable.  These indicators include: a significant decrease in the market price of a long-lived asset, a significant change in the extent or manner in which a long-lived asset is used or its physical condition, a significant adverse change in legal factors or business climate that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount expected for the acquisition or construction of a long-lived asset, a current period operating or cash flow loss combined with a history of losses associated with a long-lived asset and a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated life.

Software Development Costs

Costs incurred to develop software for internal-use are accounted for under Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.”  All costs relating to the preliminary project stage and the post-implementation/operation stage are expensed as incurred.  Costs incurred during the application development stage are capitalized and amortized over the useful life of the software.  The amortization of capitalized costs commences when functionality of the computer software is achieved.

Investments

We have a 50% equity ownership investment in an Asian joint venture Aerospace Composites Malaysia Sdn. Bhd., formerly Asian Composites Manufacturing Sdn. Bhd.  In accordance with ASC 810 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.  The Company continues to evaluate to make certain that the facts and circumstances associated with this investment have not changed with respect to accounting for a variable interest entity.

Debt Financing Costs

Debt financing costs are deferred and amortized to interest expense over the life of the related debt.  At December 31, 2013 and 2012, deferred debt financing costs, net of accumulated amortization, were $5.0 million and $4.6 million.

Share-Based Compensation

The fair value of Restricted Stock Units (RSU’s) is equal to the market price of our stock at date of grant and is amortized to expense ratably over the vesting period.  Performance restricted stock units (“PRSUs”) are a form of RSUs in which the number of shares ultimately received depends on the extent to which we achieve a specified performance target. The fair value of the PRSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized straight-line over the total vesting period.  A change in the performance measure expected to be achieved is recorded as an adjustment in the period in which the change occurs.  We use the Black-Scholes model to value compensation expense for all option-based payment awards made to employees and directors based on estimated fair values on the grant date.  The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our consolidated statements of operations.  The value of RSU’s, PRSU’s and Non-qualifying options awards for retirement eligible employees is expensed on the grant date as they are fully vested.

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Currency Translation

The assets and liabilities of international subsidiaries are translated into U.S. dollars at year-end exchange rates, and revenues and expenses are translated at average exchange rates during the year.  Cumulative currency translation adjustments are included in “accumulated other comprehensive income (loss)” in the stockholders’ equity section of the consolidated balance sheets.  Gains and losses from foreign currency transactions are not material.

Revenue Recognition

Our revenue is predominately derived from sales of inventory, and is recognized when persuasive evidence of an arrangement exists, title and risk of loss passes to the customer, the sales price is fixed or determinable and collectability is reasonably assured.  However, from time to time we enter into contractual arrangements for which other specific revenue recognition guidance is applied.

Recognition of revenue on bill and hold arrangements occurs only when risk of ownership has passed to the buyer, a fixed written commitment has been provided by the buyer, the goods are complete and ready for shipment, the goods are segregated from inventory, no performance obligations remain and a schedule for delivery of goods has been established.  Revenues derived from design and installation services are recognized when the service is provided.  Revenues derived from long-term construction-type contracts are accounted for using the percentage-of-completion method, and progress is measured on a cost-to-cost basis.  If at any time expected costs exceed the value of the contract, the loss is recognized immediately.

Product Warranty

We provide for an estimated amount of product warranty at the point a claim is probable and estimable.  This estimated amount is provided by product and based on current facts, circumstances and historical warranty experience.  Warranty expense was $1.2 million, $2.2 million and $2.0 million for the years ended December 31, 2013, 2012 and 2011 respectively.

Research and Technology

Significant costs are incurred each year in connection with research and technology (“R&T”) programs that are expected to contribute to future earnings.  Such costs are related to the development and, in certain instances, the qualification and certification of new and improved products and their uses.  R&T costs are expensed as incurred.

Income Taxes

We provide for income taxes using the liability approach.  Under the liability approach, deferred income tax assets and liabilities reflect tax net operating loss and credit carryforwards and the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes.  Deferred tax assets require a valuation allowance when it is more likely than not, based on the evaluation of positive and negative evidence, that some portion of the deferred tax assets may not be realized.  The realization of deferred tax assets is dependent upon the timing and magnitude of future taxable income prior to the expiration of the deferred tax assets’ attributes.  When events and circumstances so dictate, we evaluate the realizability of our deferred tax assets and the need for a valuation allowance by forecasting future taxable income.  Investment tax credits are recorded on a flow-through basis, which reflects the credit in net income as a reduction of the provision for income taxes in the same period as the credit is realized for federal income tax purposes.  In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations.

Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of trade accounts receivable.  Two customers and their related subcontractors accounted for more than half of our annual net sales in 2013, 2012 and 2011.  Refer to Note 16 for further information on significant customers.  We perform ongoing credit evaluations of our customers’ financial condition but generally do not require collateral or other security to support customer receivables.  We establish an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other financial information.  As of December 31, 2013 and 2012, the allowance for doubtful accounts was $0.9 million and $1.8 million, respectively.  Bad debt expense was immaterial for all years presented.

Derivative Financial Instruments

We use various financial instruments, including foreign currency forward exchange contracts and interest rate swap agreements, to manage our exposure to market fluctuations by generating cash flows that offset, in relation to their amount and timing, the cash

47

flows of certain foreign currency denominated transactions or underlying debt instruments.  We mark our foreign exchange forward contracts to fair value.  The change in the fair value is recorded in current period earnings.  When the derivatives qualify, we designate our foreign currency forward exchange contracts as cash flow hedges against forecasted foreign currency denominated transactions and report the effective portions of changes in fair value of the instruments in “accumulated other comprehensive income (loss)” until the underlying hedged transactions affect income.  We designate our interest rate swap agreements as fair value or cash flow hedges against specific debt instruments and recognize interest differentials as adjustments to interest expense as the differentials may occur.  We do not use financial instruments for trading or speculative purposes.

In accordance with accounting guidance, we recognize all derivatives as either assets or liabilities on our balance sheet and measure those instruments at fair value.

Self-insurance

We are self-insured up to specific levels for certain medical and health insurance and workers’ compensation plans.  Accruals are established based on actuarial assumptions and historical claim experience, and include estimated amounts for incurred but not reported claims.

New Accounting Pronouncements

ASU 2011-11 Balance Sheet (Topic 210); Disclosures about Offsetting Assets and Liabilities: In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11 which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position.  ASU 2011-11 is effective for annual and interim reporting periods beginning on or after January 1, 2013. The Company has no offsetting agreements and as such, adoption of this guidance did not have any impact on the Company’s reported financial results.

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

ASU 2013-11 Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740):  In July 2013, the FASB issued ASU No. 2013-11, which requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward on a jurisdictional basis.  ASU 2013-11 is expected to reduce diversity in practice by providing specific guidance on the presentation of unrecognized tax benefits.  ASU 2013-11 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  Early adoption is permitted and the Company has chosen to adopt ASU 2013-11 in the fourth quarter of 2013.

Note 2 — Inventories

	December 31,
(In millions)	2013		2012
Raw materials	$	103.4	$	95.0
Work in progress	62.2		51.2
Finished goods	99.7		86.6
Total inventories	$	265.3	$	232.8

Note 3 — Net Property, Plant and Equipment

	December 31,
(In millions)	2013			2012
Land	$	50.9		$	41.9
Buildings	396.2			298.3
Equipment	957.0			783.4
Construction in progress	257.1			335.6
Property, plant and equipment	1,661.2			1,459.2
Less accumulated depreciation	(593.8		)	(544.8		)
Net property, plant and equipment	$	1,067.4		$	914.4

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Depreciation expense related to property, plant and equipment for the years ended December 31, 2013, 2012 and 2011, was $59.3 million, $57.2 million and $55.3 million, respectively.  Capitalized interest of $2.9 million and $3.1 million for 2013 and 2012, respectively, was included in construction in progress and is associated with our carbon fiber expansion programs.  Capitalized costs associated with software developed for internal use were $4.4 million and $2.8 million for 2013 and 2012, respectively.

In 2012, we reassessed the estimated useful lives of certain machinery and equipment.  We increased the useful lives of certain machinery and equipment from 20 years to 25 years, and increased the useful lives of certain other machinery and equipment from 10 - 12 years to 20 years.  We determined that this adjustment to the useful lives of certain assets was a change in accounting estimate and we accounted for the change prospectively; i.e. the accounting change impacts the three months ended December 31, 2012 and future periods.  For the quarter and year ended December 31, 2012, the change in accounting estimate lowered depreciation expense by approximately $1.25 million (pre-tax), which was reflected in Gross Margin, or by approximately $0.01 earnings per basic and diluted common share.

Note 4 — Goodwill and Purchased Intangible Assets

Changes in the carrying amount of gross goodwill and other purchased intangibles for the years ended December 31, 2013 and 2012, by segment, are as follows:

(In millions)	Composite Materials			Engineered Products		Total
Balance as of December 31, 2011	$	41.3		$	16.1	$	57.4
Currency translation adjustments and other	0.4			—		0.4
Balance as of December 31, 2012	$	41.7		$	16.1	$	57.8
Additions	3.0			—		3.0
Amortization expense	(0.1		)	—		(0.1		)
Currency translation adjustments and other	0.4			—		0.4
Balance as of December 31, 2013	$	45.0		$	16.1	$	61.1

We performed our annual impairment review of goodwill as of November 30, 2013 and determined that it was more likely than not that the fair values of our reporting units are above their carrying values.  The addition to intangible assets in 2013 represents a license agreement with a third party.  The goodwill and intangible asset balances as of December 31, 2013 include $3.6 million of indefinite-lived intangible assets, $2.9 of a definitive-lived intangible asset and $54.6 million of goodwill.

Note 5 - Debt

(In millions)	December 31, 2013		December 31, 2012
Foreign operation’s working capital line of credit	$	3.0	$	4.8
Current maturities of capital lease and other obligations	—		1.8
Current maturities of term loan	—		10.0
Short-term borrowings and current maturities of long-term debt	3.0		16.6
Senior secured credit facility —revolving loan due 2018	292.0		—
Senior secured credit facility —term loan due 2015	—		75.0
Senior secured credit facility — revolving loan due 2015	—		165.0
Long-term debt	292.0		240.0
Total debt	$	295.0	$	256.6

Estimated Fair Values of Notes Payable

We did not have any notes payable outstanding at December 31, 2013.

Senior Secured Credit Facility

In June 2013 we entered into a new $600 million senior secured revolving credit facility which matures in June 2018.  The new facility replaces the Company’s previous senior secured credit facility ($82.5 million term loan and a $360 million revolving loan) that would have expired in July 2015.  At the current leverage ratio the new rate is LIBOR + 1.25% or 75 basis points lower than the prior

49

facility.  In addition to the lower interest rates and fees on undrawn balances, the new facility provides greater flexibility. The proceeds from the new facility were used to repay all amounts, and terminate all commitments outstanding under the Company’s credit agreement and to pay fees and expenses in connection with the refinancing.  As a result of the refinancing, the Company accelerated certain unamortized financing costs of the credit facility being replaced and the deferred expense on related interest rate swaps incurring a pretax charge of $1.0 million in the second quarter of 2013.

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

Additionally, at December 31, 2013 we have interest rate swaps totaling approximately $150 million that expire before September 2016.  These interest rate swaps are designated as cash flow hedges to our term loan.  The interest rate swaps trade LIBOR for a fixed rate at an average rate of 0.81567%.

6.75% Senior Subordinated Notes, due 2015

On February 1, 2005, we issued $225 million of 6.75% senior subordinated notes due 2015.  The notes were unsecured senior subordinated obligations of Hexcel Corporation.  Interest accrued at the rate of 6.75% per annum and were payable semi-annually in arrears on February 1 and August 1.

In June 2012 and February 2011, we redeemed $73.5 million and $150 million of these notes at a call premium of 1.125% and 2.25%, respectively, and purchased $1.5 million of notes on the open market.  The redemptions were primarily funded by a $75 million and $135 million add-on to the Facility in 2012 and December 2010.  As a result of the redemptions, we accelerated the unamortized financing costs of the senior subordinated notes being redeemed and expensed the call premium incurring a pretax charge of $1.1 million (after tax of $0.01 per diluted share) and $4.9 million (after tax of $0.03 per diluted share) in 2012 and 2011, respectively.

Other Credit Facility

We have a $10.0 million borrowing facility for working capital needs of our Chinese entity with an outstanding balance of $3.0 million on December 31, 2013.  The facility contains a $10.0 million revolving credit line.  These funds can only be used locally, and accordingly, we do not include this facility in our borrowing capacity disclosures.  The facility is guaranteed by Hexcel Corporation, but is uncommitted and cancellable by the lender at any time.

Aggregate Maturities of Debt

The table below reflects aggregate scheduled maturities of debt as of December 31, 2013.

Payable during the years ending December 31:	(In millions)
2014	$	3.0
2015	—
2016	—
2017	—
2018	292.0
Total debt	$	295.0

Note 6 - Leasing Arrangements

On February 1, 2013 we exercised our purchase option on a capital lease for a building.  In March 2013 we sold the building.  The related assets, accumulated depreciation, and related liability balances under capital leasing arrangements, as of December 31, 2012 and 2011, were:

(In millions)	2012			2011
Property, plant and equipment	$	3.7		$	3.7
Less accumulated depreciation	(1.6		)	(1.6		)
Net property, plant and equipment	$	2.1		$	2.1
Capital lease obligations	$	1.8		$	2.0
Less current maturities	(1.8		)	(0.2		)
Long-term capital lease obligations, net	$	—		$	1.8

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Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.  We recognize rental expense on operating leases straight-line over the term of a lease.  Total rental expense was $16.1 million in 2013, $15.4 million in 2012 and $15.2 million in 2011.

Scheduled future minimum lease payments as of December 31, 2013 were:

(In millions)
Payable during the years ending December 31:	Operating Leases
2014	9.1
2015	5.3
2016	4.1
2017	2.2
2018	1.8
Thereafter	9.3
Total minimum lease payments	$	31.8

Note 7 — Retirement and Other Postretirement Benefit Plans

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

Accounting standards require the use of certain assumptions, such as the expected long-term rate of return, discount rate, rate of compensation increase, healthcare cost trend rates, and retirement and mortality rates, to determine the net periodic costs of such plans.  These assumptions are reviewed and set annually at the beginning of each year.  In addition, these models use an “attribution approach” that generally spreads individual events, such as plan amendments and changes in actuarial assumptions, over the service lives of the employees in the plan.  That is, employees render service over their service lives on a relatively smooth basis and therefore, the income statement effects of retirement and postretirement benefit plans are earned in, and should follow, the same pattern.

We use our actual return experience, future expectations of long-term investment returns, and our actual and targeted asset allocations to develop our expected rate of return assumption used in the net periodic cost calculations of our funded European defined benefit retirement plans.  Due to the difficulty involved in predicting the market performance of certain assets, there will be a difference in any given year between our expected return on plan assets and the actual return.  Following the attribution approach, each year’s difference is amortized over a number of future years.  Over time, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees.

We annually set our discount rate assumption for retirement-related benefits accounting to reflect the rates available on high-quality, fixed-income debt instruments.  The rates used reached a lowpoint as of 2012 and rebounded during 2013 and are expected to remain stable for 2014.  The rate of compensation increase for nonqualified pension plans, which is another significant assumption used in the actuarial model for pension accounting, is determined by us based upon our long-term plans for such increases and assumed inflation.  For the postretirement health care and life insurance benefits plan, we review external data and the plan’s historical trends for health care costs to determine the health care cost trend rates.  Retirement and termination rates are based primarily on actual plan experience.  The mortality table used for the U.S. plans is based on the RP2000 Mortality Table projected to 2020 and for the U.K. Plans the S1NA table with CMI 2011 projections (1.5% p.a. future improvements).

Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect the net periodic costs and recorded obligations in such future periods.  While we believe that the assumptions used are appropriate, significant changes in economic or other conditions, employee demographics, retirement and mortality rates, and investment performance may materially impact such costs and obligations.

51

U.S. Defined Benefit Retirement Plans

We have nonqualified defined benefit retirement plans covering certain current and former U.S. employees that are funded as benefits are incurred.  Under the provisions of these plans, we expect to contribute approximately $23.8 million in 2014 to cover unfunded benefits.

Multi-Employer Plan

The Company is party to a multi-employer pension plan covering certain U.S. employees with union affiliations.  The plan is the Western Metal Industry Pension Fund, (“the Plan”).  The Plan’s employer identification number is 91-6033499; the Plan number is 001.  In 2012, the Plan reported Hexcel Corporation as being an employer that contributed greater than 5% of the Plan’s total contributions.  The expiration date of the collective bargaining agreement is September 30, 2015.  The Plan has been listed in “critical status” and has been operating in accordance with a Rehabilitation Plan since 2010.  The Plan, as amended under the Rehabilitation Plan, reduced the adjustable benefits of the participants and levied a surcharge on employer contributions.  The Company has contributed approximately $1.0 million in 2013, 2012 and 2011.  We expect the Company’s contribution to be about $1.0 million in 2014 and remain at that level over the next few years.

U.S. Retirement Savings Plan

Under the retirement savings plan, eligible U.S. employees can contribute up to 75% of their annual compensation to an individual 401(k) retirement savings account.  The Company makes matching contributions equal to 50% of employee contributions, not to exceed 3% of employee compensation each year.  We also contribute an additional 2% to 4% of each eligible employee’s salary to an individual 401(k) retirement savings account, depending on the employee’s age.  This increases the maximum contribution to individual employee savings accounts to between 5% and 7% per year, before any profit sharing contributions that are made when we meet or exceed certain performance targets that are set annually.  These profit sharing contributions are made at the Company’s discretion and are targeted at 3% of an eligible employee’s pay, with a maximum of 4.5%.

U.S. Postretirement Plans

In addition to defined benefit and retirement savings plan benefits, we also provide certain postretirement health care and life insurance benefits to eligible U.S. retirees.  Depending upon the plan, benefits are available to eligible employees who retire after meeting certain age and service requirements and were employed by Hexcel as of February 1996.  Our funding policy for the postretirement health care and life insurance benefit plans is generally to pay covered expenses as they are incurred.  Under the provisions of these plans, we expect to contribute approximately $0.6 million in 2014 to cover unfunded benefits.

European Defined Benefit Retirement Plans

We have defined benefit retirement plans in the United Kingdom, Belgium, France and Austria covering certain employees of our subsidiaries in those countries.  The defined benefit plan in the United Kingdom (the “U.K. Plan”), the largest of the European plans, was terminated in 2011 and replaced with a defined contribution plan.  We recorded a curtailment gain of $5.7 million (after tax gain of $0.04 per diluted share) to recognize previously unrecognized prior service credits.  As of December 31, 2013, 57% of the total assets in the U.K. Plan were invested in equities.  Equity investments are made with the objective of achieving a return on plan assets consistent with the funding requirements of the plan, maximizing portfolio return and minimizing the impact of market fluctuations on the fair value of the plan assets.  As a result of an annual review of historical returns and market trends, the expected long-term weighted average rate of return for the U.K. Plan for the 2014 plan year will be 6.5% and 3.25% to 4.5% for the other European Plans as a group.

U.K. Defined Contribution Pension Plan

Under the Defined Contribution Section, eligible U.K. employees can belong to the Deferred Contribution Plan on a non-participatory basis or can elect to contribute 3%, 5% or 7% of their pensionable salary.  The Company will contribute 5%, 9% and 13% respectively.  The plan also provides life insurance and disability insurance benefits for members.

Retirement and Other Postretirement Plans - France

The employees of our French subsidiaries are entitled to receive a lump-sum payment upon retirement subject to certain service conditions under the provisions of the national chemicals and textile workers collective bargaining agreements.  The amounts attributable to the French plans have been included within the total expense and obligation amounts noted for the European plans.

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Net Periodic Pension Expense

Net periodic expense for our U.S. and European qualified and nonqualified defined benefit pension plans and our retirement savings plans for the three years ended December 31, 2013 is detailed in the table below.

(In millions)	2013		2012		2011
Defined benefit retirement plans	$	7.3	$	5.4	$	(0.3	)
Union sponsored multi-employer pension plan	1.6		1.2		0.9
Retirement savings plans-matching contributions	3.0		3.3		2.9
Retirement savings plans-profit sharing contributions	6.7		7.6		8.0
Net periodic expense	$	18.6	$	17.5	$	11.5

Defined Benefit Retirement and Postretirement Plans

Net periodic cost of our defined benefit retirement and postretirement plans for the three years ended December 31, 2013, were:

(In millions)	U.S. Plans						European Plans
Defined Benefit Retirement Plans	2013		2012		2011		2013			2012			2011
Service cost	$	1.7	$	1.3	$	1.5	$	0.7		$	0.5		$	1.1
Interest cost	0.8		1.1		1.1		6.9			6.6			7.2
Expected return on plan assets	—		—		—		(8.0		)	(7.3		)	(7.8		)
Net amortization	4.0		2.3		1.6		1.2			0.9			0.7
Curtailment gain	—		—		—		—			—			(5.7		)
Net periodic pension cost (income)	$	6.5	$	4.7	$	4.2	$	0.8		$	0.7		$	(4.5	)

(In millions) U.S. Postretirement Plans	2013			2012			2011
Interest cost	0.2			0.3			0.4
Net amortization and deferral	(0.4		)	(0.5		)	(0.3		)
Net periodic postretirement benefit (income) cost	$	(0.2	)	$	(0.2	)	$	0.1

	Defined Benefit Retirement Plans
	U.S. Plans						European Plans						Postretirement Plans
(In millions)	2013			2012			2013			2012			2013			2012
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net loss (gain)	$	1.0		$	3.1		$	(16.5	)	$	12.1		$	(1.6	)	$	0.1
Amortization of actuarial losses	(3.9		)	(2.2		)	(1.3		)	(0.9		)	0.4			0.5
Amortization of prior service credit (cost)	(0.1		)	(0.1		)	—			—			—			—
Effect of foreign exchange	—			—			0.2			1.9			—			—
Total recognized in other comprehensive income (pre-tax)	$	(3.0	)	$	0.8		$	(17.6	)	$	13.1		$	(1.2	)	$	0.6

The Company expects to recognize $2.4 million of net actuarial loss and an immaterial net prior service cost as a component of net periodic pension cost in 2014 for its defined benefit plans.  The recognition of net prior service credit and net actuarial gain as a component of net periodic postretirement benefit cost in 2014 is expected to be immaterial.

The benefit obligation, fair value of plan assets, funded status, and amounts recognized in the consolidated financial statements for our defined benefit retirement plans and postretirement plans, as of and for the years ended December 31, 2013 and 2012, were:

53

	Defined Benefit Retirement Plans
	U.S. Plans						European Plans						Postretirement Plans
(In millions)	2013			2012			2013			2012			2013			2012
Change in benefit obligation:
Benefit obligation - beginning of year	$	38.6		$	33.4		$	164.8		$	139.8		$	8.1		$	8.0
Service cost	1.7			1.3			0.7			0.5			—			—
Interest cost	0.8			1.1			6.8			6.6			0.2			0.3
Plan participants’ contributions	—			—			0.1			0.1			0.1			0.1
Actuarial loss (gain)	1.1			3.1			(8.3		)	15.2			(1.6		)	0.1
Benefits and expenses paid	(0.3		)	(0.3		)	(4.9		)	(3.7		)	(0.4		)	(0.4		)
Currency translation adjustments	—			—			3.5			6.3			—			—
Benefit obligation - end of year	$	41.9		$	38.6		$	162.7		$	164.8		$	6.4		$	8.1
Change in plan assets:
Fair value of plan assets - beginning of year	$	—		$	—		$	128.3		$	110.8		$	—		$	—
Actual return on plan assets	—			—			16.2			10.3			—			—
Employer contributions	0.3			0.3			5.9			5.7			0.3			0.3
Plan participants’ contributions	—			—			0.1			0.1			0.1			0.1
Benefits and expenses paid	(0.3		)	(0.3		)	(4.9		)	(3.7		)	(0.4		)	(0.4		)
Currency translation adjustments	—			—			3.7			5.1			—			—
Fair value of plan assets - end of year	$	—		$	—		$	149.3		$	128.3		$	—		$	—
Amounts recognized in Consolidated Balance Sheets:
Noncurrent Assets	$	—		$	—		$	2.7		$	—		$	—		$	—
Current liabilities	$	23.8		$	0.3		$	0.4		$	0.4		$	0.6		$	0.6
Non-current liabilities	18.1			38.3			15.7			36.1			5.8			7.5
Total Liabilities	$	41.9		$	38.6		$	16.1		$	36.5		$	6.4		$	8.1
Amounts recognized in Accumulated Other Comprehensive Income:
Actuarial net (loss) gain	$	(7.3	)	$	(10.2	)	$	(32.2	)	$	(49.7	)	$	4.3		$	3.1
Prior service cost	(0.1		)	(0.2		)	(0.1		)	(0.1		)	—			—
Total amounts recognized in accumulated other comprehensive (loss) income	$	(7.4	)	$	(10.4	)	$	(32.3	)	$	(49.8	)	$	4.3		$	3.1

The measurement date used to determine the benefit obligations and plan assets of the defined benefit retirement and postretirement plans was December 31, 2013.

The total accumulated benefit obligation (“ABO”) for the U.S. defined benefit retirement plans was $40.9 million and $38.0 million as of December 31, 2013 and 2012, respectively.  The European Plans’ ABO exceeded plan assets as of December 31, 2013 and 2012, by $11.0 million and $32.3 million, respectively.  These plans’ ABO was $17.5 million and $160.6 million as of December 31, 2013 and 2012, respectively.  The ABO and plan assets of the U.K. Plan are not included in the 2013 disclosures as the plan is no longer underfunded.

As of December 31, 2013 and 2012, the accrued benefit costs for the defined benefit retirement plans and postretirement benefit plans included within “accrued compensation and benefits” was $24.8 million and $1.3 million, respectively, and within “other non-current liabilities” was $39.6 million and $81.9 million, respectively, in the accompanying consolidated balance sheets.

Benefit payments for the plans are expected to be as follows:

(In millions)	U.S. Plans		European Plans		Postretirement Plans
2014	$	23.8	$	3.8	$	0.6
2015	4.5		4.0		0.7
2016	2.2		5.0		0.7
2017	1.1		5.7		0.6
2018	1.4		6.8		0.7
2019-2023	10.2		37.1		2.9
	$	43.2	$	62.4	$	6.2

54

Fair Values of Pension Assets

The following table presents pension assets measured at fair value at December 31, 2013 and 2012 utilizing the fair value hierarchy discussed in Note 19:

(In millions)	December 31,		Fair Value Measurements at December 31, 2013
Description	2013		Level 1		Level 2		Level 3
Equity funds	$	83.3	$	—	$	83.3	$	—
Active corporate bond fund	58.5		—		58.5		—
Diversified investment funds	2.9		—		—		2.9
Insurance contracts	3.6		—		—		3.6
Cash and cash equivalents	1.0		—		1.0		—
Total assets	$	149.3	$	—	$	142.8	$	6.5

	December 31,		Fair Value Measurements at December 31, 2012
Description	2012		Level 1		Level 2		Level 3
Equity funds	$	70.0	$	—	$	70.0	$	—
Active corporate bond fund	52.1		—		52.1		—
Diversified investment funds	3.1		—		0.3		2.8
Insurance contracts	3.1		—		—		3.1
Total assets	$	128.3	$	—	$	122.4	$	5.9

(In millions) Reconciliation of Level 3 Assets	Balance at January 1, 2013		Actual return on plan assets		Purchases, sales and settlements			Changes due to exchange rates		Balance at December 31, 2013
Diversified investment funds	$	2.8	$	0.2	$	(0.2	)	$	0.1	$	2.9
Insurance contracts	3.1		0.1		0.2			0.2		3.6
Total level 3 assets	$	5.9	$	0.3	$	—		$	0.3	$	6.5

Reconciliation of Level 3 Assets	Balance at January 1, 2012		Actual return on plan assets		Purchases, sales and settlements		Changes due to exchange rates		Balance at December 31, 2012
Diversified investment funds	$	2.5	$	0.2	$	0.1	$	—	$	2.8
Insurance contracts	2.6		0.2		0.2		0.1		3.1
Total level 3 assets	$	5.1	$	0.4	$	0.3	$	0.1	$	5.9

Plan assets are invested in a number of unit linked pooled funds by an independent asset management group.  Equity funds are split 50/50 between U.K. and overseas equity funds (North America, Japan, Asia Pacific and Emerging Markets).  The asset management firm uses quoted prices in active markets to value the assets.

The Bond Allocation is invested in a number of Active Corporate Bond funds which are pooled funds.  The Corporate Bond funds primarily invest in corporate fixed income securities denominated in British Pounds Sterling with credit ratings of BBB- and above.  We use quoted prices in active markets to value the assets.

Diversified investment funds are invested in an external pension fund which in turn invests in a range of asset classes including equities and government and corporate bonds, hedge funds and private equity.  The fair value of the assets as of December 31, 2013 is equal to the fair value of the assets as of January 1, 2013, as provided by the external pension fund, adjusted for cash flows over the year and the estimated investment return on underlying assets over the year.

Insurance contracts contain a minimum guaranteed return.  The fair value of the assets is equal to the total amount of all individual technical reserves plus the non-allocated employer’s financing fund reserves at the valuation date.  The individual technical and financing fund reserves are equal to the accumulated paid contributions taking into account the insurance tarification and any allocated profit sharing return.

The actual allocations for the pension assets at December 31, 2013 and 2012, and target allocations by asset class, are as follows:

55

	Percentage Of Plan Assets		Target Allocations		Percentage Of Plan Assets		Target Allocations
Asset Class	2013		2013		2012		2012
U.K. Equity Fund	28.1	%	30.6	%	28.0	%	28.6	%
Overseas Equity Fund	27.7		30.6		26.6		28.6
Active Corporate Bond Funds	39.2		34.5		40.6		38.2
Insurance Contracts	2.4		2.4		2.4		2.4
Diversified Investment Funds	1.9		1.9		2.4		2.2
Cash and cash equivalents	0.7		—		—		—
Total	100	%	100	%	100	%	100	%

Assumptions

The assumed discount rate for pension plans reflects the market rates for high-quality fixed income debt instruments currently available.  The Buck Standard Yield Curve was used for the U.S. non-qualified and postretirement plans.  For the U.K. plan, plan cash flows were not available and therefore we considered the derived yield to market on a representative bond of suitable duration taken from Buck’s synthetic bond yield curve.  We believe that the timing and amount of cash flows related to these instruments is expected to match the estimated defined benefit payment streams of our plans. The assumed discount rate for the U.S. non-qualified plans has changed to use individual discount rates for each plan based on their associated cash flows.

Salary increase assumptions are based on historical experience and anticipated future management actions.  For the postretirement health care and life insurance benefit plans, we review external data and our historical trends for health care costs to determine the health care cost trend rates.  Retirement rates are based primarily on actual plan experience and on rates from previously mentioned mortality tables.  Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect the net periodic costs and recorded obligations in such future periods.  While we believe that the assumptions used are appropriate, significant changes in economic or other conditions, employee demographics, retirement and mortality rates, and investment performance may materially impact such costs and obligations.

Assumptions used to estimate the actuarial present value of benefit obligations at December 31, 2013, 2012 and 2011 are shown in the following table. These year-end values are the basis for determining net periodic costs for the following year.

	2013	2012	2011
U.S. defined benefit retirement plans:
Discount rates	0.1% - 4.0%	2.0%	3.2%
Rate of increase in compensation	3.0%	3.0%-5.8%	3.0%
Expected long-term rate of return on plan assets	N/A	N/A	N/A
European defined benefit retirement plans:
Discount rates	3.0% - 4.6%	3.25% - 4.5%	4.5% - 4.75%
Rates of increase in compensation	3.0%	3.0%	3.0%
Expected long-term rates of return on plan assets	4.0% — 6.5%	4.0% — 6.5%	4.25% — 6.5%
Postretirement benefit plans:
Discount rates	3.8%	2.75%	3.85%

The following table presents the impact that a one-percentage-point increase and a one-percentage-point decrease in the expected long-term rate of return and discount rate would have on the 2014 pension expense, and the impact on our retirement obligation as of December 31, 2013 for a one-percentage-point change in the discount rate:

	Non-Qualified			Retiree Medical			U.K. Retirement
(In millions)	Pension Plans			Plans			Plan
Periodic pension expense
One-percentage-point increase:
Expected long-term rate of return	$	N/A		$	N/A		$	(1.4	)
Discount rate	$	(0.1	)	$	—		$	(0.2	)
One-percentage-point decrease:
Expected long-term rate of return	$	N/A		$	N/A		$	1.4
Discount rate	$	0.3		$	—		$	0.4
Retirement obligation
One-percentage-point increase in discount rate	$	(1.1	)	$	(0.4	)	$	(21.2	)
One-percentage-point decrease in discount rate	$	1.2		$	0.4		$	26.8

56

The annual rate of increase in the per capita cost of covered health care benefits is assumed to be 8.0% for medical non-Medicare eligible, 6.0% for Medicare eligible and 5.0% for dental and vision for 2014.  The medical rates are assumed to gradually decline to 4.5% by 2021, whereas dental and vision rates are assumed to remain constant at 5.0%.  A one-percentage-point increase and a one-percentage-point decrease in the assumed health care cost trend would have an insignificant impact on the total of service and interest cost components, and would have an unfavorable and a favorable impact of approximately $0.2 million and $0.2 million on the postretirement benefit obligation for both 2013 and 2012, respectively.

Note 8 - Income Taxes

Income before income taxes and the provision for income taxes, for the three years ended December 31, 2013, were as follows:

(In millions)	2013		2012		2011
Income before income taxes:
U.S.	$	149.8	$	137.4	$	106.3
International	112.8		100.3		69.2
Total income before income taxes	$	262.6	$	237.7	$	175.5
Provision for income taxes:
Current:
U.S.	$	30.5	$	36.9	$	10.6
International	29.2		20.7		7.6
Current provision for income taxes	59.7		57.6		18.2
Deferred:
U.S.	13.1		10.4		24.4
International	3.2		6.1		(1.0		)
Deferred provision for income taxes	16.3		16.5		23.4
Total provision for income taxes	$	76.0	$	74.1	$	41.6

A reconciliation of the provision for income taxes at the U.S. federal statutory income tax rate of 35% to the effective income tax rate, for the three years ended December 31, 2013, is as follows:

(In millions)	2013			2012			2011
Provision for taxes at U.S. federal statutory rate	$	91.9		$	83.2		$	61.5
State and local taxes, net of federal benefit	2.0			2.2			2.2
Foreign effective rate differential	(12.5		)	(10.3		)	(8.4		)
Research and Development tax credits	(2.8		)	(0.7		)	(2.0		)
Other	(2.6		)	0.5			(0.2		)
Tax Settlement	—			0.2			(5.5		)
Change in valuation allowance	—			(1.0		)	(6.0		)
Total provision for income taxes	$	76.0		$	74.1		$	41.6

The 2013 tax provision includes a benefit for U.S. Research and Development (“R&D”) tax credits comprised of the current year R&D tax credit and a catch-up adjustment for the prior year R&D tax credit which was excluded from last years’ provision due to the expiration of the tax credit at December 31, 2011.  The current R&D tax credit expired December 31, 2013.

Included in the 2011 provision were certain tax benefits relating to the reversal of valuation allowances on net operating losses in certain foreign jurisdictions and U.S. foreign tax credit carryforwards as it became more likely than not that these deferred tax assets would be realized.  The 2011 provision also reflects the favorable impact of a tax audit settlement in one of the foreign jurisdictions.

As of December 31, 2013 and 2012, we did not have a U.S. income tax provision for undistributed earnings of international subsidiaries.  We do not currently have any specific plans to repatriate funds from our international subsidiaries; however we may do so in the future if a dividend can be remitted with no material tax impact.  Such earnings are considered to be permanently reinvested.  Estimating the tax liability that would result if these earnings were repatriated is not practicable at this time.

57

Deferred Income Taxes

Deferred income taxes result from tax attributes including foreign tax credits, net operating loss carryforwards and temporary differences between the recognition of items for income tax purposes and financial reporting purposes.  Principal components of deferred income taxes as of December 31, 2013 and 2012 are:

(In millions)	2013			2012
Assets
Net operating loss carryforwards	$	63.6		$	56.2
Unfunded pension liability and other postretirement obligations	16.0			15.3
Advanced payments from foreign affiliates	28.9			22.3
Tax credit carryforwards	11.2			35.4
Stock based compensation	14.4			12.6
Other comprehensive income	6.0			14.0
Reserves and other	18.9			14.7
Subtotal	159.0			170.5
Valuation allowance	(62.3		)	(49.4		)
Total assets	$	96.7		$	121.1
Liabilities
Accelerated depreciation	(63.4		)	(50.1		)
Accelerated amortization	(9.2		)	(8.2		)
Other	(0.8		)	(0.2		)
Total liabilities	$	(73.4	)	$	(58.5	)
Net deferred tax asset	$	23.3		$	62.6

Deferred tax assets and deferred tax liabilities as presented in the consolidated balance sheets as of December 31, 2013 and 2012 are as follows and are recorded in prepaid expenses and other current assets, deferred tax assets, other accrued liabilities and other non-current liabilities in the consolidated balance sheets:

(In millions)	2013			2012
Current deferred tax assets, net	$	63.3		$	62.5
Current deferred tax liability, net	(1.4		)	(0.2		)
Long-term deferred tax assets, net	10.3			15.4
Long-term deferred tax liability, net	(48.9		)	(15.1		)
Net deferred tax assets	$	23.3		$	62.6

In July 2013, the FASB issued ASU No. 2013-11, which requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward on a jurisdictional basis.  ASU 2013-11 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  Early adoption is permitted and the Company has chosen to adopt ASU 2013-11 in the fourth quarter of 2013. The adoption of this standard resulted in a reduction of the Company’s long term deferred tax assets by $21.4 million.

The deferred tax assets for the respective periods were assessed for recoverability and, where applicable, a valuation allowance was recorded to reduce the total deferred tax asset to an amount that will, more likely than not, be realized in the future. The net change in the total valuation allowance for the years ended December 31, 2013 and 2012 was an increase of $12.9 million and $10.0 million, respectively.  The valuation allowance as of December 31, 2013 and 2012 relates primarily to net operating loss carryforwards of our foreign subsidiaries, and certain state net operating loss carryforwards for which we have determined, based upon historical results and projected future book and taxable income levels, that a valuation allowance should continue to be maintained.

Although realization is not assured, we have concluded that it is more-likely-than-not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The amount of the net deferred tax assets considered realizable, however, could be reduced in the near term if actual future income or income tax rates are lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.

Net Operating Loss & Tax Credit Carryforwards

At December 31, 2013, we had tax credit carryforwards for U.S. tax purposes of $28.8 million available to offset future income taxes.  These credits will begin to expire if not utilized in 2014.

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We also had net operating loss carryforwards for foreign income tax purposes of $231.8 million, for which there are valuation allowances of $214.8 million as of December 31, 2013.  Our foreign net operating losses can be carried forward without limitation in Belgium, Luxembourg and U.K.  The carryforward period in Spain and China is limited to 18 and 5 years, respectively.  We have a full valuation allowance against certain foreign net operating losses for which the Company believes it is not more likely than not that the net operating losses will be utilized.

Uncertain Tax Positions

Our unrecognized tax benefits at December 31, 2013, relate to various Foreign and U.S. jurisdictions.

The following table summarizes the activity related to our unrecognized tax benefits:

	Unrecognized Tax Benefits
(In millions)	2013			2012			2011
Balance as of January 1,	$	32.6		$	12.5		$	20.1
Additions based on tax positions related to the current year	5.2			1.7			1.5
Additions/(reductions) for tax positions of prior years	5.7			19.0			(1.1		)
Decreases relating to settlements with tax authorities	—			—			(6.7		)
Expiration of the statute of limitations for the assessment of taxes	(1.3		)	(0.8		)	(1.6		)
Other, including currency translation	0.5			0.2			0.3
Balance as of December 31,	$	42.7		$	32.6		$	12.5

Included in the unrecognized tax benefits of $42.7 million at December 31, 2013 was $39 million of tax benefits that, if recognized, would impact our annual effective tax rate.  In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations. The Company recognized $0.7 million, $0.1 million, ($0.1) million of interest expense (income) related to the above unrecognized tax benefits in 2013, 2012 and 2011, respectively.  The Company had accrued interest of approximately $1.6 million and $0.9 million as of December 31, 2013 and 2012, respectively.  During 2013 we did not reverse any interest and in 2012, we reversed $0.1 million related to the unrecognized tax benefits.

We are subject to taxation in the U.S. and various states and foreign jurisdictions.  The U.S. tax returns have been audited through 2007.  Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Austria (2007 onward), Belgium (2011 onward), France (2011 onward), Spain (2004 onward) and U.K. (2011 onward).  We are currently under examination in certain of the foreign jurisdictions.

As of December 31, 2013, we had uncertain tax positions for which it is reasonably possible that amounts of unrecognized tax benefits could significantly change over the next year.  These uncertain tax positions relate to our tax returns from 2004 onward, some of which are currently under examination by certain European tax authorities.  During 2011, the Company settled an audit with foreign tax authorities in one of the jurisdictions under examination.  The favorable settlement resulted in a reduction of uncertain tax benefits of approximately $5.5 million which was recognized in 2011.  As of December 31, 2013, the Company has not classified any of the unrecognized tax benefits as a current liability as it does not expect to settle any of the tax positions under examinations in various jurisdictions within the next twelve months.

We expect that the amount of unrecognized tax benefits will continue to change in the next twelve months as a result of ongoing tax deductions, the resolution of audits and the passing of the statute of limitations. We are unable to make a reliable estimate of the eventual cash flows of the $42.7 million of unrecognized tax benefits.

Note 9 - Capital Stock

Common Stock Outstanding

Common stock outstanding as of December 31, 2013, 2012 and 2011 was as follows:

(Number of shares in millions)	2013	2012	2011
Common stock:
Balance, beginning of year	102.4	101.0	99.5
Activity under stock plans	1.6	1.4	1.5
Balance, end of year	104.0	102.4	101.0
Treasury stock:
Balance, beginning of year	2.5	2.2	2.2
Issued under stock plans	—	—	(0.5	)
Repurchased	2.6	0.3	0.5
Balance, end of year	5.1	2.5	2.2
Common stock outstanding	98.9	99.9	98.8

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In July 2013, our Board authorized us to repurchase an additional $150 million of our outstanding common stock.  The Company spent $40 million to repurchase 896,653 shares of common stock during the fourth quarter of 2013 under this authorized Repurchase Plan, of which 148,990 shares were settled in January 2014.

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

Note 10 — Stock-Based Compensation

The following table details the stock-based compensation expense by type of award for the years ended December 31, 2013, 2012 and 2011:

	Year Ended December 31,
(In millions, except per share data)	2013		2012		2011
Non-qualified stock options	$	3.8	$	4.5	$	4.1
Restricted stock, service based (“RSUs”)	6.0		6.5		5.0
Restricted stock, performance based (“PRSUs”)	8.8		4.6		4.7
Employee stock purchase plan	0.3		0.2		0.1
Stock-based compensation expense	$	18.9	$	15.8	$	13.9
Tax benefit from stock options exercised during the period	$	5.3	$	6.8	$	8.5

Non-Qualified Stock Options

Non-qualified stock options have been granted to our employees and directors under our stock compensation plan.  Options granted generally vest over three years and expire ten years from the date of grant.

A summary of option activity under the plan for the three years ended December 31, 2013 is as follows:

	Number of Options (In millions)		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)
Outstanding at December 31, 2010	4.5		$	10.84	5.16
Options granted	0.6		$	19.19
Options exercised	(1.6	)	$	8.17
Options expired or forfeited	(0.1	)	$	12.93
Outstanding at December 31, 2011	3.4		$	13.55	6.45
Options granted	0.5		$	25.03
Options exercised	(0.6	)	$	10.41
Options expired or forfeited	—		$	21.82
Outstanding at December 31, 2012	3.3		$	15.67	6.26
Options granted	0.3		$	28.27
Options exercised	(0.6	)	$	14.44
Outstanding at December 31, 2013	3.0		$	17.30	5.96

	Year Ended December 31,
(In millions, except weighted average exercise price)	2013		2012
Aggregate intrinsic value of outstanding options	$	82.5	$	37.4
Aggregate intrinsic value of exercisable options	$	66.9	$	29.5
Total intrinsic value of options exercised	$	10.9	$	9.1
Total number of options exercisable	2.2		2.2
Weighted average exercise price of options exercisable	$	14.09	$	13.57
Total unrecognized compensation cost on nonvested options (a)	$	1.6	$	2.1

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(a)Unrecognized compensation cost relates to nonvested stock options and is expected to be recognized over the remaining vesting period ranging from one year to three years.

The following table summarizes information about non-qualified stock options outstanding as of December 31, 2013:

				Options Outstanding				Options Exercisable
Range of Exercise Prices				Number of Options Outstanding (a)	Weighted Average Remaining Life (in Years)	Weighted Average Exercise Price		Number of Options Exercisable (a)	Weighted Average Exercise Price
$	7.83	–	10.90	1.1	5.59	$	9.38	1.1	$	9.38
$	14.51	–	21.11	1.0	4.97	$	18.54	0.8	$	17.45
$	22.00	–	28.27	0.9	7.58	$	25.79	0.3	$	23.54
$	7.83	–	28.27	3.0	5.96	$	17.30	2.2	$	14.09

(a)in millions

Valuation Assumptions in Estimating Fair Value

We estimated the fair value of stock options at the grant date using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
Risk-free interest rate	1.08		%	0.83		%	1.88		%
Expected option life (in years) Executive	6.32			5.44			4.84
Expected option life (in years) Non-Executive	4.80			4.45			4.71
Dividend yield	—		%	—		%	—		%
Volatility	40.12		%	45.76		%	44.08		%
Weighted-average fair value per option granted	$	11.07		$	10.24		$	7.65

We determine the expected option life for each grant based on ten years of historical option activity for two separate groups of employees (executive and non-executive).  The weighted-average expected life (“WAEL”) is derived from the average midpoint between the vesting and the contractual term and considers the effect of both the inclusion and exclusion of post-vesting cancellations during the ten-year period.  Expected volatility is calculated based on a blend of both historic volatility of our common stock and implied volatility of our traded options.  We weigh both volatility inputs equally and utilize the average as the volatility input for the Black-Scholes calculation.  The risk-free interest rate for the expected term is based on the U.S. Treasury yield curve in effect at the time of grant and corresponding to the expected term.  No dividends were paid in either period.

Restricted Stock Units — Service Based

As of December 31, 2013, a total of 592,882 shares of service based restricted stock (“RSUs”) were outstanding, which vest based on years of service under the 2003 and 2013 incentive stock plans.  RSUs are granted to key employees, executives and directors of the Company.  The fair value of the RSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized on a straight line basis over the requisite service period.  The stock-based compensation expense recognized is based on an estimate of shares ultimately expected to vest, and therefore it has been reduced for estimated forfeitures.

The table presented below provides a summary of the Company’s RSU activity for the years ended December 31, 2013, 2012 and 2011:

	Number of RSUs (In millions)		Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2010	1.0		$	11.76
RSUs granted	0.3		$	20.63
RSUs issued	(0.4	)	$	12.51
Outstanding at December 31, 2011	0.9		$	14.49
RSUs granted	0.3		$	25.26
RSUs issued	(0.4	)	$	12.10
Outstanding at December 31, 2012	0.8		$	18.90
RSUs granted	0.2		$	28.95
RSUs issued	(0.4	)	$	15.70
Outstanding at December 31, 2013	0.6		$	23.79

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As of December 31, 2013, there was total unrecognized compensation cost related to nonvested RSUs of $3.1 million, which is to be recognized over the remaining vesting period ranging from one year to three years.

Restricted Stock Units — Performance Based

As of December 31, 2013, a total of 453,897 shares of performance based restricted stock (“PRSUs”) were outstanding under the 2003 and 2013 incentive stock plans.  The total amount of PRSUs that will ultimately vest is based on the achievement of various financial performance targets set forth by the Company’s Compensation Committee on the date of grant.  PRSUs are based on a three year performance period.  Based on current projections and performance targets, it is estimated that an additional 0.3 million performance shares may be issuable for the 2011, 2012 and 2013 awards.  The fair value of the PRSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized straight-line over the total three year period.  A change in the performance measure expected to be achieved is recorded as an adjustment in the period in which the change occurs.

The table presented below provides a summary, of the Company’s PRSU activity, at original grant amounts, for the years ended December 31, 2013, 2012 and 2011:

	Number of PRSUs (In millions)		Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2010	0.6		$	9.77
PRSUs granted	0.1		$	19.02
Outstanding at December 31, 2011	0.7		$	11.53
PRSUs granted	0.1		$	25.03
PRSUs additional performance shares	0.2		$	8.00
PRSUs issued	(0.5	)	$	8.28
Outstanding at December 31, 2012	0.5		$	16.93
PRSUs granted	0.2		$	28.27
PRSUs additional performance shares	0.3		$	10.72
PRSUs issued	(0.5	)	$	10.64
Outstanding at December 31, 2013	0.5		$	24.60

As of December 31, 2013, there was total unrecognized compensation cost related to nonvested PRSUs of $3.7 million, which is to be recognized over the remaining vesting period ranging from one year to three years.  The final amount of compensation cost to be recognized is dependent upon our financial performance.

Stock-Based Compensation Cash Activity

During 2013, cash received from stock option exercises and from employee stock purchases was $9.8 million.  We used $7.4 million in cash related to the shares withheld to satisfy employee tax obligations for NQOs exercised and RSUs and PRSUs converted during the year ended December 31, 2013.  We realized a tax benefit of $5.3 million in connection with stock options exercised and RSUs and PRSUs converted during 2013.

We classify the cash flows resulting from these tax benefits as financing cash flows.  We either issue new shares of our common stock or utilize treasury shares upon the exercise of stock options or the conversion of stock units.

Shares Authorized for Grant

As of December 31, 2013, an aggregate of 3.8 million shares were authorized for future grant under our stock plan, which covers stock options, RSUs, PRSUs and at the discretion of Hexcel, could result in the issuance of other types of stock-based awards.

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Employee Stock Purchase Plan (“ESPP”)

The Company offers an ESPP, which allows for eligible employees to contribute up to 10% of their base earnings toward the quarterly purchase of our common stock at a purchase price equal to 85% of the fair market value of the common stock.  There were 31,003 and 31,448 ESPP shares purchased in 2013 and 2012, respectively.

Note 11 - Net Income Per Common Share

Computations of basic and diluted net income per common share for the years ended December 31, 2013, 2012 and 2011, are as follows:

(In millions, except per share data)	2013		2012		2011
Net income	$	187.9	$	164.3	$	135.5
Basic net income per common share:
Weighted average common shares outstanding	100.0		100.2		98.8
Basic net income per common share	$	1.88	$	1.64	$	1.37
Diluted net income per common share:
Weighted average common shares outstanding — Basic	100.0		100.2		98.8
Plus incremental shares from assumed conversions:
Restricted stock units	0.7		0.8		0.9
Stock options	1.4		1.0		1.0
Weighted average common shares outstanding — Diluted	102.1		102.0		100.7
Diluted net income per common share	$	1.84	$	1.61	$	1.35
Anti-dilutive shares outstanding, excluded from computation	—		0.5		0.3

Note 12 — Derivative Financial Instruments

Interest Rate Swap Agreements

In June 2012 and in 2010, we entered into agreements to swap $75 million and $98 million, respectively, of floating rate obligations for fixed rate obligations at 0.6725% and 1.03% against LIBOR in U.S. dollars.  Both swaps were scheduled to mature in March 2014.  As a result of our refinancing of the bank loan, we de-designated the notional $98 million swap which resulted in a charge of $0.4 million.   In September, we terminated the swap and settled for cash of $0.5 million.  Also in September, we entered into three new interest rate swaps, whereby we pay a fixed rate in exchange for floating LIBOR.  The maturity dates of the new swaps are from March 2016 to September 2016 at an average rate of 0.81567%.

All swaps are accounted for as cash flow hedges of our floating rate bank loans.  To ensure the swaps were highly effective, all of the principal terms of the swaps matched the terms of the bank loans.  The remaining balance of the swaps at December 31, 2013 was approximately $150 million.  The fair value of all interest rate swaps was a liability of $0.6 million and $1.0 million at December 31, 2013 and 2012, respectively.

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 June 2016.  The aggregate notional amount of these contracts was $187.1 million and $201.2 million at December 31, 2013 and December 31, 2012, respectively.  The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers.  These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates.  The effective portion of the hedges was a gain of $7.9 million, $6.4 million and $2.9 million, for the years ended December 31, 2013, 2012 and 2011, respectively and are recorded in other comprehensive income (“OCI”).  At December 31, 2013, $11.5 million of the carrying amount of these contracts was classified in other assets and $0.6 million in other liabilities on the consolidated balance sheets and $3.6 million in other assets and $1.6 million classified in other liabilities at December 31, 2012.  During the years ended December 31, 2013, 2012 and 2011, we recognized a net gain of $0.4 million, a net loss of $3.1 million and a net gain of $3.1 million, respectively, recorded in gross margin.  For the three years ended December 31, 2013, 2012 and 2011, hedge ineffectiveness was immaterial.

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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 years ended December 31, 2013, 2012 and 2011, we recognized a net foreign exchange gain of $7.6 million, a gain of $5.3 million, and a loss of $4.8 million, respectively, in the consolidated statements of operations. The carrying amount of the contracts for asset and liability derivatives not designated as hedging instruments was $2.6 million classified in other assets and $0.1 million in other liabilities and $3.1 million classified in other assets and $0.1 million in other liabilities on the December 31, 2013 and 2012 consolidated balance sheets, respectively.

The activity in “accumulated other comprehensive income (loss)” related to foreign currency forward exchange contracts for the years ended December 31, 2013, 2012 and 2011 was as follows:

(In millions)	2013			2012			2011
Unrealized gains (losses) at beginning of period	$	2.4		$	(4.5	)	$	(0.2	)
(Losses) gains reclassified to net sales	(0.3		)	2.4			(2.2		)
Increase (decrease) in fair value, net of tax of $2.8 million, $1.9 million and ($0.8) million in 2013, 2012 and 2011 respectively	5.1			4.5			(2.1		)
Unrealized gains (losses) at end of period	$	7.2		$	2.4		$	(4.5	)

Unrealized gains of $4.8 million recorded in “accumulated other comprehensive income,” net of tax of $2.3 million, as of December 31, 2013 are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.  The impact of credit risk adjustments was immaterial for the three years.

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, health and safety matters.  We estimate and accrue our liabilities resulting from such matters based on a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs.  Such estimates are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

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

Environmental Matters

We are subject to various U.S. and international federal, state and local environmental, and health and safety laws and regulations.  We are also subject to liabilities arising under the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”), the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and similar state and international laws and regulations that impose responsibility for the control, remediation and abatement of air, water and soil pollutants and the manufacturing, storage, handling and disposal of hazardous substances and waste.

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

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remediating this site in accordance with a State approved plan and continue to do so under the New Jersey Licensed Site Remediation Professional program.  Hexcel has completed the primary remediation activities and we are in the process of conducting testing to support a monitored natural attenuation (MNA) program.  The accrual is $1.7 million at December 31, 2013.

Lower Passaic River Study Area

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

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.  At a case management conference held in March 2013, the Court announced that most third-party defendants had reached a tentative settlement with the State of New Jersey which, if approved by the Court, would end the state court litigation as to participating third-party defendants.  We committed to join the settlement and if the settlement is approved by the Court, we would pay New Jersey $0.3 million.  This amount was accrued in the first quarter of 2013.  In December 2013, the Court entered the settlement and entered an order dismissing participating third-party defendants from the litigation.  We have paid our settlement amount into escrow pending any appeal of the Court’s orders.  The scope of Hexcel’s continued involvement in the litigation depends on whether the settlement becomes final and no longer subject to appeal.

Kent, Washington Site

We were party to a cost-sharing agreement regarding the operation of certain environmental remediation systems necessary to satisfy a post-closure care permit issued to a previous owner of our Kent, Washington site by the EPA.  Under the terms of the cost-sharing agreement, we were obligated to reimburse the previous owner for a portion of the cost of the required remediation activities.  The previous owner, who also continues to own an adjacent site, has installed certain remediation and isolation technologies and is operating those in accordance with an order agreed with the State of Washington.  This isolation is expected to ultimately prevent further migration of contaminants to our site and enable us to perform a cleanup of our site.  We and the Washington Department of Ecology have reached an agreed order to perform certain cleanup activities on our site by certain deadlines, and we are in full compliance with the order as modified.  The total accrued liability related to this matter was $0.8 million at December 31, 2013.

Omega Chemical Corporation Superfund Site, Whittier, CA

We are a potentially responsible party at a former chemical waste site in Whittier, CA. The PRPs at Omega have established a PRP Group, the “Omega PRP Group”, and are currently investigating and remediating soil and groundwater at the site pursuant to a

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

Environmental remediation reserve activity for the three years ended December 31, 2013 was as follows:

	For the year ended December 31,
(In millions)	2013			2012			2011
Beginning remediation accrual balance	$	6.6		$	5.0		$	7.3
Current period expenses	0.9			5.0			3.4
Cash expenditures	(3.6		)	(3.4		)	(5.7		)
Ending remediation accrual balance	$	3.9		$	6.6		$	5.0
Capital expenditures for environmental matters	$	4.6		$	2.4		$	4.1

Environmental Summary

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 December 31, 2013 and 2012, our aggregate environmental related accruals were $3.9 million and $6.6 million, respectively.  As of December 31, 2013 and 2012, $3.4 million and $4.2 million, respectively, were included in current other accrued liabilities, with the remainder included in other non-current liabilities.  As related to certain environmental matters, except for the Lodi site, the accruals were estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued, for those sites where we are able to estimate our liability, at the high end of the range of possible outcomes, our accrual would have been $6.5 million and $9.2 million at December 31, 2013 and 2012, respectively.

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 $3.6 million and $3.4 million for the years ended December 31, 2013 and 2012, respectively.  In addition, our operating costs relating to environmental compliance charged directly to expense were $13.5 million and $13.1 million for the years ended December 31, 2013 and 2012.

Product Warranty

Warranty expense for the years ended December 31, 2013, 2012 and 2011, and accrued warranty cost, included in “other accrued liabilities” in the consolidated balance sheets were as follows:

(In millions)	Product Warranties
Balance as of December 31, 2010	$	4.3
Warranty expense	2.0
Deductions and other	(0.6		)
Balance as of December 31, 2011	$	5.7
Warranty expense	2.2
Deductions and other	(2.8		)
Balance as of December 31, 2012	$	5.1
Warranty expense	1.2
Deductions and other	(1.8		)
Balance as of December 31, 2013	$	4.5

66

Note 14 — Supplemental Cash Flow

Supplemental cash flow information, for the years ended December 31, 2013, 2012 and 2011, consisted of the following:

(In millions)	2013		2012		2011
Cash paid for:
Interest	$	7.6	$	12.6	$	15.5
Taxes	$	49.0	$	23.4	$	10.2

Note 15 — Accumulated Other Comprehensive Loss

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the consolidated statements of operations.  The components of accumulated other comprehensive income (loss) as of December 31, 2013 and 2012 were as follows:

(In millions)	2013			2012
Currency translation adjustments (a)	$	26.7		$	7.1
Net unrealized gains on financial instruments, net of tax (b)	8.2			2.2
Pension obligation adjustment, net of tax (c)	(24.2		)	(41.2		)
Accumulated other comprehensive income (loss)	$	10.7		$	(31.9	)

(a)	The currency translation adjustments are not currently adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.
(b)	Reduced by the tax impact of ($1.8) million and ($0.1) million at December 31, 2013 and 2012, respectively.
(c)	Reduced by the tax impact of $11.1 million and $16.0 million at December 31, 2013 and 2012, respectively.

Note 16 — Segment Information

The financial results for our 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 segments based on operating income, and generally account for intersegment sales based on arm’s length prices.  We report two segments, Composite Materials and Engineered Products.  Corporate and certain other expenses are not allocated to the segments, except to the extent that the expense can be directly attributable to the segment.  Corporate & Other is shown to reconcile to Hexcel’s consolidated results.

In addition to the product line-based segmentation of our business, we also monitor sales into our principal end markets as a means to understanding demand for our products.  Therefore, for each segment, we have also reported disaggregated sales by end market.

The following table presents financial information on our segments as of December 31, 2013, 2012 and 2011, and for the years then ended.

(In millions)	Composite Materials			Engineered Products		Corporate & Other			Total
Third-Party Sales
2013	$	1,286.9		$	391.3	$	—		$	1,678.2
2012	1,230.9			347.3		—			1,578.2
2011	1,074.5			317.9		—			1,392.4
Intersegment sales
2013	$	68.0		$	1.8	$	(69.8	)	$	—
2012	56.8			2.0		(58.8		)	—
2011	53.8			1.6		(55.4		)	—
Operating income (loss)
2013	$	276.3		$	58.9	$	(64.3	)	$	270.9
2012	257.3			50.6		(59.1		)	248.8
2011	194.5			51.6		(54.1		)	192.0
Depreciation
2013	$	54.4		$	4.7	$	0.2		$	59.3
2012	52.6			4.5		0.1			57.2
2011	50.8			4.3		0.2			55.3
Equity in earnings from affiliated companies
2013	$	—		$	1.3	$	—		$	1.3
2012	—			0.7		—			0.7
2011	—			1.6		—			1.6
Other (income) expense, net
2012	(14.5		)	—		5.0			(9.5		)
2011	(5.7		)	—		2.7			(3.0		)
Segment assets
2013	$	1,479.2		$	244.0	$	112.9		$	1,836.1
2012	1,295.4			215.2		92.5			1,603.1
2011	1,076.0			192.3		107.8			1,376.1
Investments in affiliated companies
2013	$	—		$	23.3	$	—		$	23.3
2012	—			22.6		—			22.6
2011	—			21.7		—			21.7
Accrual basis additions to property, plant and equipment
2013	$	194.6		$	11.9	$	—		$	206.5
2012	228.6			12.5		0.2			241.3
2011	176.6			6.9		1.0			184.5

67

Geographic Data

Net sales and long-lived assets, by geographic area, consisted of the following for the three years ended December 31, 2013, 2012 and 2011:

(In millions)	2013		2012		2011
Net sales by Geography (a):
United States	$	871.0	$	801.4	$	721.5
International
France	321.1		302.9		257.6
Spain	164.8		150.6		142.6
United Kingdom	110.9		114.7		102.1
Austria	96.2		105.0		95.5
Other	114.2		103.6		73.1
Total international	807.2		776.8		670.9
Total consolidated net sales	$	1,678.2	$	1,578.2	$	1,392.4
Net Sales to External Customers (b):
United States	$	765.2	$	719.4	$	615.7
International
France	146.1		144.4		132.3
Germany	135.2		128.2		87.7
Spain	154.7		123.9		120.8
United Kingdom	81.4		82.2		80.2
Other	395.6		380.1		355.7
Total international	913.0		858.8		776.7
Total	$	1,678.2	$	1,578.2	$	1,392.4
Long-lived assets (c):
United States	$	854.6	$	733.5	$	568.2
International
United Kingdom	92.6		83.8		68.4
Spain	73.2		68.2		60.5
France	55.8		37.9		36.0
Other	75.5		48.8		46.4
Total international	297.1		238.7		211.3
Total consolidated long-lived assets	$	1,151.7	$	972.2	$	779.5

(a)Net sales by geography based on the location in which the product sold was manufactured.

(b)Net sales to external customers based on the location to which the product sold was delivered.

(c)Long-lived assets primarily consist of property, plant and equipment, net and goodwill.

Significant Customers and Suppliers

Boeing and its subcontractors accounted for approximately 34%, 29% and 30% of 2013, 2012 and 2011 net sales, respectively.  Similarly, Airbus Group, including Airbus and its subcontractors, accounted for approximately 29%, 28% and 27% of 2013, 2012 and 2011 net sales, respectively.  In the Composite Materials segment approximately 24%, 19% and 20% of sales for 2013, 2012 and 2011, respectively, were to Boeing and its subcontractors.  Approximately 35%, 34% and 33% of sales for 2013, 2012 and 2011, respectively were to Airbus Group and its subcontractors.  In the Engineered Products segment approximately 68%, 66% and 64% of sales for 2013, 2012 and 2011, respectively were to Boeing and its subcontractors.

A significant decline in business with Boeing or Airbus Group could materially impact our business, operating results, prospects and financial condition.

Certain key raw materials we consume are available from relatively few sources, and in many cases the cost of product qualification makes it impractical to develop multiple sources of supply. The lack of availability of these materials could under certain circumstances materially impact our consolidated results of operations.

68

Note 17 — Other Income, net

Other income, net for the two years ended December 31, 2012, consisted of the following:

(In millions)	2012			2011
Business interruption insurance settlement	$	(9.6	)	$	—
Gain on sale of land	(4.9		)	—
Pension curtailment gain	—			(5.7		)
Environmental expense	5.0			2.7
Other income, net	$	(9.5	)	$	(3.0	)

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

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.  Also in 2011, the Company recorded an additional $2.7 million in expense for additional environmental reserves primarily to remediate our former Lodi, New Jersey manufacturing facility that was sold in 1986 as further discussed in Note 13 to the consolidated financial statements.

Note 18 — Non-operating Expense

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

In June 2012 and February 2011, we redeemed $73.5 million and $150 million of our 6.75% senior subordinated notes at a call premium of 1.125% and 2.25%, respectively.  As a result of the redemption, we accelerated the unamortized financing costs of the senior subordinated notes redeemed and expensed the call premium incurring a pretax charge of $1.1 million and $4.9 million, in 2012 and 2011, respectively.

Note 19 — Fair Value Measurements

The fair values of our financial instruments are classified into one of the following categories:

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

·Level 2: Observable inputs other than quoted prices in 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 our own and counterparty credit risk.  At December 31, 2013 and 2012, we did not have any assets or liabilities that utilize Level 3 inputs.

For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value.  The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). The fair value of these assets and liabilities was approximately $14.0 million and $1.3 million, and approximately $6.6 million and $2.7 million respectively at December 31, 2013 and 2012.  In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the consolidated balance sheet.

Below is a summary of valuation techniques for all Level 2 financial assets and liabilities:

69

·Interest rate swap — valued using LIBOR yield curves at the reporting date.  Fair value was a liability of $0.6 million at December 31, 2013.

·Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date.  Fair value of assets and liabilities at December 31, 2013 was $14.0 million and $0.7 million, respectively.

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

Note 20 - Quarterly Financial and Market Data (Unaudited)

Quarterly financial and market data for the years ended December 31, 2013 and 2012 were:

	First		Second			Third		Fourth
(In millions)	Quarter		Quarter			Quarter		Quarter
2013
Net sales	$	416.5	$	422.6		$	412.3	$	426.8
Gross margin	112.0		116.8			112.1		113.1
Operating income	63.0		71.9			69.0		67.0
Net income	43.6		48.5			48.7		47.1
Net income per common share:
Basic	$	0.43	$	0.49		$	0.49	$	0.47
Diluted	$	0.43	$	0.48		$	0.48	$	0.46
Market price:
High	$	30.23	$	35.46		$	39.67	$	44.69
Low	$	26.50	$	27.64		$	33.88	$	38.09
2012
Net sales	$	400.1	$	399.2		$	391.6	$	387.3
Gross margin	106.4		105.5			99.2		95.6
Other income, net	—		(9.5		)	—		—
Operating income	60.6		73.9			60.0		54.3
Net income	39.6		48.0			39.8		36.9
Net income per common share:
Basic	$	0.40	$	0.48		$	0.40	$	0.37
Diluted	$	0.39	$	0.47		$	0.39	$	0.36
Market price:
High	$	26.71	$	27.80		$	26.49	$	27.29
Low	$	23.42	$	23.05		$	22.53	$	23.55

70

Schedule II

Hexcel Corporation and Subsidiaries

Valuation and Qualifying Accounts

(In millions)	Balance at beginning of year		Charged to expense/(recovery)		Deductions and other			Balance at end of year
Year ended December 31, 2013
Allowance for doubtful accounts	$	1.8	$	—	$	(0.9	)	$	0.9
Valuation allowance for deferred tax assets	49.4		10.5		2.4			62.3
Year ended December 31, 2012
Allowance for doubtful accounts	$	1.2	$	1.1	$	(0.5	)	$	1.8
Valuation allowance for deferred tax assets	39.4		9.0		1.0			49.4
Year ended December 31, 2011
Allowance for doubtful accounts	$	1.5	$	—	$	(0.3	)	$	1.2
Valuation allowance for deferred tax assets	36.5		10.5		(7.6		)	39.4

71

EX-10.33

Exhibit 10.33

Adopted by the Board of Directors

May 2, 2013

Hexcel Corporation

Director Compensation Program

(as of May 2, 2013)

Each member of the Board of Directors (the “Board”) of Hexcel Corporation (the “Company”) who is not an employee of the Company (each a “Non-employee Director”) shall receive compensation for such person’s services as a member of the Board as outlined in this Director Compensation Program.

Cash Compensation

Annual Retainer Fees

·Annual retainer fee in the amount of $48,000 payable quarterly during the calendar year. If a director serves for less than a full calendar year, the retainer fee will be pro-rated by days for the portion of the calendar year the director is a member of the Board.

·Additional annual retainer fees for the lead director, committee members and committee chairs as follows:

Lead Director	$	25,000
Audit Committee Chair(1)	$	12,500
Audit Committee member	$	10,000
Compensation Committee Chair(1)	$	7,500
Compensation Committee member	$	7,500
Nominating and Corporate Governance Committee Chair(1)	$	5,000
Nominating and Corporate Governance Committee member	$	5,000
Finance Committee Chair(1)	$	5,000
Finance Committee member	$	5,000

(1)Note: a member of a committee receives the “Chair” fee in addition to the member fee.

Meeting Fees

·There are no additional fees paid for attendance at regularly scheduled meetings

·If a special Board committee is formed for a specific purpose (for example, a pricing committee for a securities offering), then each member shall be paid $1,000 for attendance at each meeting

·If the Board or any standing committee meets an excessive number of times beyond regularly scheduled meetings during the annual retainer period, the Lead Director can recommend for consideration and approval by the Compensation Committee the payment of additional meeting fees to the members of the Board or such committee

Equity Compensation

Upon (1) initial election to the Board and (2) upon re-election to the Board and effective as of the date of the Annual Meeting of Stockholders each year, each Non-employee Director shall be awarded a grant of Restricted Stock Units (RSUs) on the following basis:

·The aggregate value of each grant shall be set at $105,000, but shall be reviewed and is subject to change by the Compensation Committee from time to time based on the advice of its independent compensation consultant and other factors it deems relevant.

·Each RSU shall have a value equal to the closing price of a share of common stock on the date of grant.

·The RSUs shall vest ratably on a daily basis over the one year period beginning on the grant date, and will convert into an equal number of shares of common stock on the first anniversary of the date of grant.

·Each director will have the option to elect to defer conversion of the RSUs until such time as the director leaves the Board.  With respect to grants upon initial election to the Board, such election must be made prior to the date of grant.  With respect to grants upon re-election to the Board, such election must be made by December 31 of the year prior to the year in which the grant is awarded. This will defer conversion, but not vesting.

·The RSUs will be issued under a Restricted Stock Unit Agreement in a form approved by the Compensation Committee from time to time. The appropriate officers of the Company have the authority to make changes to the form of Restricted Stock Unit Agreement to preserve the tax deferred nature of any deferral election by a director in accordance with the requirements of Section 409A of the Internal Revenue Code.

2

EX-21

Exhibit 21

SUBSIDIARIES OF HEXCEL CORPORATION

DOMESTIC:

1.	ACM Holdings LLC (Delaware)
2.	Hexcel Foundation (California)
3.	Hexcel LLC (Delaware)
4.	Hexcel Pacific Rim Corporation (California)
5.	Hexcel Pottsville Corporation (Delaware)
6.	Hexcel Reinforcements Corp. (Delaware)
7.	Hexcel Reinforcements Holding Corp. (Delaware)
FOREIGN:
1.	Hexcel Asia Pacific Trading Limited (Hong Kong)
2.	Hexcel-China Holdings Corp. (Mauritius)
3.	Hexcel Composites GmbH (Austria)
4.	Hexcel Composites GmbH (Germany)
5.	Hexcel Composites GmbH & Co. KG (Austria)
6.	Hexcel Composites Limited (UK)
7.	Hexcel Composites SASU (France)
8.	Hexcel Composites Sdn. Bhd. (Malaysia)
9.	Hexcel Composites S.L. (Spain)
10.	Hexcel Composites S.P.R.L. (Belgium)
11.	Hexcel Composites S.r.l. (Italy)
12.	Hexcel Europe Limited (UK)
13.	Hexcel Fibers S.L. (Spain)
14	Hexcel Financing Luxembourg S.à.r.l.
15.	Hexcel Holding GmbH (Austria)
16.	Hexcel Holdings Hong Kong Limited (Hong Kong)
17.	Hexcel Holdings Luxembourg S.à r.l. (Luxembourg)
18.	Hexcel Holding Spain, S.L. (Spain)
19.	Hexcel Holdings SASU (France)
20.	Hexcel Holdings (UK) Limited (UK)
21.	Hexcel Ireland Ltd. (Ireland)
22.	Hexcel Japan K. K. (Japan)
23.	Hexcel LLC Luxembourg SCS
24.	Hexcel Overseas (UK)
25.	Hexcel Reinforcements Holding Corp. Luxembourg SCS
26.	Hexcel Reinforcements SASU (France)
27.	Hexcel Research Ltd. (UK)
28.	Hexcel SASU (France)
29.	Hexcel (Tianjin) Composites Material Co., Ltd.
30.	Hexcel (UK) Limited (UK)
31.	Société de Technologies Appliquées aux Matériaux SARL (France)

1

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-124747) and Form S-8 (No. 333-160202, No. 333-160203, No. 333-166354, No. 333-104158, No. 333-104159, No. 333-01225, No. 333-36099, No. 333-36163, No. 333-57223, No. 333-83745, No. 333-83747, No. 333-46472, No. 333-46476, No. 333-46626, No. 333-67944, No. 333-67946, No. 333-90060, No. 333-90062, No. 333-85196 and 333-188292) of Hexcel Corporation of our report dated February 5, 2014 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Stamford, Connecticut

February 5, 2014

1

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Nick L. Stanage, certify that:

1.     I have reviewed this annual report on Form 10-K 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 issuer’s internal controls over financial reporting.

February 5, 2014	/s/ NICK L. STANAGE
(Date)	Nick L. Stanage
	Chairman of the Board of Directors,
	Chief Executive Officer and President

1

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Wayne Pensky, certify that:

1.     I have reviewed this annual report on Form 10-K 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 issuer’s internal controls over financial reporting.

February 5, 2014	/s/ WAYNE PENSKY
(Date)	Wayne Pensky
	Senior Vice President
	And
	Chief Financial Officer

1

EX-32

Exhibit 32

CERTIFICATION

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 Annual Report of Hexcel Corporation (“Hexcel”) on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nick L. Stanage, Chairman of the Board of Directors, Chief Executive Officer and President of Hexcel, and Wayne Pensky, Senior Vice President and Chief Financial Officer of Hexcel, 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 Hexcel.

February 5, 2014	/s/ NICK L. STANAGE
(Date)	Nick L. Stanage
	Chairman of the Board of Directors,
	Chief Executive Officer and President
February 5, 2014	/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.

1

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Stock-Based Compensation

Schedule of stock-based compensation expense by type of award

	Year Ended December 31,
(In millions, except per share data)	2013		2012		2011
Non-qualified stock options	$	3.8	$	4.5	$	4.1
Restricted stock, service based (“RSUs”)	6.0		6.5		5.0
Restricted stock, performance based (“PRSUs”)	8.8		4.6		4.7
Employee stock purchase plan	0.3		0.2		0.1
Stock-based compensation expense	$	18.9	$	15.8	$	13.9
Tax benefit from stock options exercised during the period	$	5.3	$	6.8	$	8.5

Summary of option activity

	Number of Options (In millions)		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)
Outstanding at December 31, 2010	4.5		$	10.84	5.16
Options granted	0.6		$	19.19
Options exercised	(1.6	)	$	8.17
Options expired or forfeited	(0.1	)	$	12.93
Outstanding at December 31, 2011	3.4		$	13.55	6.45
Options granted	0.5		$	25.03
Options exercised	(0.6	)	$	10.41
Options expired or forfeited	—		$	21.82
Outstanding at December 31, 2012	3.3		$	15.67	6.26
Options granted	0.3		$	28.27
Options exercised	(0.6	)	$	14.44
Outstanding at December 31, 2013	3.0		$	17.30	5.96

Schedule of other stock option statistics

	Year Ended December 31,
(In millions, except weighted average exercise price)	2013		2012
Aggregate intrinsic value of outstanding options	$	82.5	$	37.4
Aggregate intrinsic value of exercisable options	$	66.9	$	29.5
Total intrinsic value of options exercised	$	10.9	$	9.1
Total number of options exercisable	2.2		2.2
Weighted average exercise price of options exercisable	$	14.09	$	13.57
Total unrecognized compensation cost on nonvested options (a)	$	1.6	$	2.1

(a) Unrecognized compensation cost relates to nonvested stock options and is expected to be recognized over the remaining vesting period ranging from one year to three years.

Summary of information about outstanding and exercisable stock options

				Options Outstanding				Options Exercisable
Range of Exercise Prices				Number of Options Outstanding (a)	Weighted Average Remaining Life (in Years)	Weighted Average Exercise Price		Number of Options Exercisable (a)	Weighted Average Exercise Price
$	7.83	–	10.90	1.1	5.59	$	9.38	1.1	$	9.38
$	14.51	–	21.11	1.0	4.97	$	18.54	0.8	$	17.45
$	22.00	–	28.27	0.9	7.58	$	25.79	0.3	$	23.54
$	7.83	–	28.27	3.0	5.96	$	17.30	2.2	$	14.09

(a) in millions

Schedule of assumptions used in determining the estimated the fair value of stock options

	2013			2012			2011
Risk-free interest rate	1.08		%	0.83		%	1.88		%
Expected option life (in years) Executive	6.32			5.44			4.84
Expected option life (in years) Non-Executive	4.80			4.45			4.71
Dividend yield	—		%	—		%	—		%
Volatility	40.12		%	45.76		%	44.08		%
Weighted-average fair value per option granted	$	11.07		$	10.24		$	7.65

Summary of the company's service based RSU activity

	Number of RSUs (In millions)		Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2010	1.0		$	11.76
RSUs granted	0.3		$	20.63
RSUs issued	(0.4	)	$	12.51
Outstanding at December 31, 2011	0.9		$	14.49
RSUs granted	0.3		$	25.26
RSUs issued	(0.4	)	$	12.10
Outstanding at December 31, 2012	0.8		$	18.90
RSUs granted	0.2		$	28.95
RSUs issued	(0.4	)	$	15.70
Outstanding at December 31, 2013	0.6		$	23.79

Summary of the company's PRSU activity

	Number of PRSUs (In millions)		Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2010	0.6		$	9.77
PRSUs granted	0.1		$	19.02
Outstanding at December 31, 2011	0.7		$	11.53
PRSUs granted	0.1		$	25.03
PRSUs additional performance shares	0.2		$	8.00
PRSUs issued	(0.5	)	$	8.28
Outstanding at December 31, 2012	0.5		$	16.93
PRSUs granted	0.2		$	28.27
PRSUs additional performance shares	0.3		$	10.72
PRSUs issued	(0.5	)	$	10.64
Outstanding at December 31, 2013	0.5		$	24.60

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Debt (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended															12 Months Ended		12 Months Ended				1 Months Ended			12 Months Ended
	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Interest rate swap	Jun. 30, 2012 Interest rate swap	Dec. 31, 2010 Interest rate swap	Dec. 31, 2013 Interest rate swap Cash flow hedges	Dec. 31, 2013 Foreign operation's working capital line of credit	Dec. 31, 2012 Foreign operation's working capital line of credit	Dec. 31, 2013 Revolving credit line	Jun. 30, 2013 Revolving credit line	Dec. 31, 2012 Capital lease and other obligations	Jun. 30, 2013 Term loan	Dec. 31, 2012 Term loan	Dec. 31, 2013 Senior secured credit facility - revolving loan due 2018	Jun. 30, 2013 Senior secured credit facility - revolving loan due 2018	Dec. 31, 2013 Senior secured credit facility - revolving loan due 2018 Minimum	Dec. 31, 2013 Senior secured credit facility - revolving loan due 2018 Maximum	Dec. 31, 2012 Senior secured credit facility - term loan due 2015	Dec. 31, 2012 Senior secured credit facility - revolving loan due 2015	Jun. 30, 2012 6.75% senior subordinated notes due 2015	Feb. 28, 2011 6.75% senior subordinated notes due 2015	Dec. 31, 2010 6.75% senior subordinated notes due 2015	Dec. 31, 2012 6.75% senior subordinated notes due 2015	Dec. 31, 2011 6.75% senior subordinated notes due 2015	Dec. 31, 2013 6.75% senior subordinated notes due 2015	Feb. 01, 2005 6.75% senior subordinated notes due 2015
Debt
Interest rate (as a percent)		6.75%	6.75%	6.75%																		6.75%	6.75%
Short-term borrowings and current maturities of long-term debt		$ 3.0	$ 16.6						$ 3.0	$ 4.8			$ 1.8		$ 10.0
Long-term debt		292.0	240.0													292.0				75.0	165.0
Total debt		295.0	256.6
Maximum borrowing capacity									10.0		10.0						600.0
Face value												360.0		82.5														225.0
Variable rate basis																LIBOR
Spread on variable rate basis (as a percent)																1.25%
Reduction in new initial interest rate (as a percent)																0.75%
Amount outstanding									3.0
Interest coverage ratio required to be maintained (as a percent)																		3.50	3.50
Notional amount								150.0
Average fixed interest rate (as a percent)					81.567%	0.6725%	1.03%	0.81567%
Repayment of debt																						73.5	150.0
Call premium (as a percent)																						1.125%	2.25%
Amount of notes purchased on the open market																											1.5
Add-on to senior secured credit facility																								135.0	75.0
Call premium																									1.1	4.9
Impact of call premium on diluted earnings per share, net of tax (in dollars per share)																									$ 0.01	$ 0.03
Pre-tax charge incurred on call premium	$ 1.0																								$ 1.1	$ 4.9

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Significant Accounting Policies (Details)	Dec. 31, 2013
Significant Accounting Policies
Interest in affiliated company, accounted for using equity method of accounting (as a percent)	50.00%

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended			1 Months Ended						3 Months Ended			1 Months Ended				12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jun. 30, 2012 Lower Passaic River Study Area entity	Jun. 30, 2007 Lower Passaic River Study Area mi option	Oct. 31, 2005 Lower Passaic River Study Area entity	May 31, 2005 Lower Passaic River Study Area entity	Feb. 29, 2004 Lower Passaic River Study Area entity	Oct. 31, 2003 Lower Passaic River Study Area entity	Mar. 31, 2013 Lower Passaic River Study Area	Jun. 30, 2012 Lower Passaic River Study Area	Feb. 04, 2009 Lower Passaic River Study Area entity	Jun. 30, 2007 Lower Passaic River Study Area Minimum	Jun. 30, 2007 Lower Passaic River Study Area Maximum	Dec. 31, 2013 Lodi, New Jersey Site	Dec. 31, 2013 Kent, Washington Site	Sep. 30, 2013 Omega Chemical Corporation Superfund Site, Whittier, CA	Dec. 31, 2013 Omega Chemical Corporation Superfund Site, Whittier, CA
Environmental costs
Accrual for environmental remediation	$ 3.9	$ 6.6	$ 5.0												$ 1.7	$ 0.8		$ 0.6
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
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
Number of entities assuming responsibility for environmental study by EPA						73
Portion of the river for which interim remedial options are considered (in miles)					8
Number of interim remedial options					6
Estimated cost of the six interim remedial options for the lower eight miles of the river													900	2,300
Number of PRPs entered into environmental activities with EPA				69
Environmental remediation activity, Cash expenditures	3.6	3.4	5.7	20.0
Accrued additional charges											0.5
Minimum number of entities against whom third party complaint was filed												300
Amount payable, if settlement is approved by the Court										0.3
Approximate contribution to waste tonnage (as a percent)																	1.07%
Environmental remediation reserve activity
Beginning remediation accrual balance	6.6	5.0	7.3												1.7	0.8		0.6
Current period expenses	0.9	5.0	3.4
Cash expenditures	(3.6)	(3.4)	(5.7)	(20.0)
Ending remediation accrual balance	3.9	6.6	5.0												1.7	0.8		0.6
Capital expenditure for environmental matters	4.6	2.4	4.1
Aggregate environmental accruals included in current other accrued liabilities	3.4	4.2
Amount which is a better estimate within the range	0
Remediation accrual balance if accrued at high end of the range of possible outcomes	6.5	9.2
Environmental remediation spending charged to reserve balance	3.6	3.4
Operating costs relating to environmental compliance		5.0	2.7
Changes in accrued product warranty cost
Balance at the beginning of the period	5.1	5.7	4.3
Warranty expense	1.2	2.2	2.0
Deductions and other	(1.8)	(2.8)	(0.6)
Balance at the end of the period	$ 4.5	$ 5.1	$ 5.7

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Debt (Details 2) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Aggregate Maturities of Debt
2014	$ 3.0
2018	292.0
Total debt	$ 295.0	$ 256.6

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Fair Value Measurements (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2013 Fair value measured on recurring basis Level 2	Dec. 31, 2012 Fair value measured on recurring basis Level 2	Dec. 31, 2013 Fair value measured on recurring basis Level 2 Interest Rate Swap Agreements	Dec. 31, 2013 Fair value measured on recurring basis Level 2 Foreign Currency Forward Exchange Contracts
Fair value of assets and liabilities
Derivative assets		$ 14.0	$ 6.6		$ 14.0
Derivative liabilities		$ 1.3	$ 2.7	$ 0.6	$ 0.7
Number of counterparties, which experienced significant downgrades	0

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Other Income, net (Tables)

12 Months Ended

Dec. 31, 2013

Other Income, net

Schedule of other income, net

(In millions)	2012			2011
Business interruption insurance settlement	$	(9.6	)	$	—
Gain on sale of land	(4.9		)	—
Pension curtailment gain	—			(5.7		)
Environmental expense	5.0			2.7
Other income, net	$	(9.5	)	$	(3.0	)

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Goodwill and Purchased Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2013

Goodwill and Purchased Intangible Assets

Schedule of gross goodwill and other purchased intangible assets

(In millions)	Composite Materials			Engineered Products		Total
Balance as of December 31, 2011	$	41.3		$	16.1	$	57.4
Currency translation adjustments and other	0.4			—		0.4
Balance as of December 31, 2012	$	41.7		$	16.1	$	57.8
Additions	3.0			—		3.0
Amortization expense	(0.1		)	—		(0.1		)
Currency translation adjustments and other	0.4			—		0.4
Balance as of December 31, 2013	$	45.0		$	16.1	$	61.1

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Quarterly Financial and Market Data (Unaudited) (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Quarterly Financial and Market Data (Unaudited)
Net sales	$ 426.8	$ 412.3	$ 422.6	$ 416.5	$ 387.3	$ 391.6	$ 399.2	$ 400.1	$ 1,678.2	$ 1,578.2	$ 1,392.4
Gross margin	113.1	112.1	116.8	112.0	95.6	99.2	105.5	106.4	454.0	406.7	342.1
Other income, net							(9.5)			(9.5)	(3.0)
Operating income	67.0	69.0	71.9	63.0	54.3	60.0	73.9	60.6	270.9	248.8	192.0
Net income	$ 47.1	$ 48.7	$ 48.5	$ 43.6	$ 36.9	$ 39.8	$ 48.0	$ 39.6
Net income per common share:
Basic	$ 0.47	$ 0.49	$ 0.49	$ 0.43	$ 0.37	$ 0.40	$ 0.48	$ 0.40	$ 1.88	$ 1.64	$ 1.37
Diluted	$ 0.46	$ 0.48	$ 0.48	$ 0.43	$ 0.36	$ 0.39	$ 0.47	$ 0.39	$ 1.84	$ 1.61	$ 1.35
Maximum
Market price:
Common Stock Value during the Period	$ 44.69	$ 39.67	$ 35.46	$ 30.23	$ 27.29	$ 26.49	$ 27.80	$ 26.71
Minimum
Market price:
Common Stock Value during the Period	$ 38.09	$ 33.88	$ 27.64	$ 26.50	$ 23.55	$ 22.53	$ 23.05	$ 23.42

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Segment Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013 item	Dec. 31, 2012	Dec. 31, 2011
Segment Information
Number of reporting segments									2
Segment information
Sales	$ 426.8	$ 412.3	$ 422.6	$ 416.5	$ 387.3	$ 391.6	$ 399.2	$ 400.1	$ 1,678.2	$ 1,578.2	$ 1,392.4
Other (income) expense, net	67.0	69.0	71.9	63.0	54.3	60.0	73.9	60.6	270.9	248.8	192.0
Depreciation									59.3	57.2	55.3
Equity in earnings from affiliated companies									1.3	0.7	1.6
Other income, net							(9.5)			(9.5)	(3.0)
Segment assets	1,836.1				1,603.1				1,836.1	1,603.1	1,376.1
Investments in affiliated companies	23.3				22.6				23.3	22.6	21.7
Accrual basis additions to property, plant and equipment									206.5	241.3	184.5
Composite Materials
Segment information
Other (income) expense, net									276.3	257.3	194.5
Depreciation									54.4	52.6	50.8
Other income, net										(14.5)	(5.7)
Segment assets	1,479.2				1,295.4				1,479.2	1,295.4	1,076.0
Accrual basis additions to property, plant and equipment									194.6	228.6	176.6
Engineered Products
Segment information
Other (income) expense, net									58.9	50.6	51.6
Depreciation									4.7	4.5	4.3
Equity in earnings from affiliated companies									1.3	0.7	1.6
Segment assets	244.0				215.2				244.0	215.2	192.3
Investments in affiliated companies	23.3				22.6				23.3	22.6	21.7
Accrual basis additions to property, plant and equipment									11.9	12.5	6.9
Corporate and Other
Segment information
Other (income) expense, net									(64.3)	(59.1)	(54.1)
Depreciation									0.2	0.1	0.2
Other income, net										5.0	2.7
Segment assets	112.9				92.5				112.9	92.5	107.8
Accrual basis additions to property, plant and equipment										0.2	1.0
Operating Segments | Composite Materials
Segment information
Sales									1,286.9	1,230.9	1,074.5
Operating Segments | Engineered Products
Segment information
Sales									391.3	347.3	317.9
Intersegment Elimination | Composite Materials
Segment information
Sales									68.0	56.8	53.8
Intersegment Elimination | Engineered Products
Segment information
Sales									1.8	2.0	1.6
Intersegment Elimination | Corporate and Other
Segment information
Sales									$ (69.8)	$ (58.8)	$ (55.4)

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Retirement and Other Postretirement Benefit Plans (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Retirement and Other Postretirement Benefit Plans
Period for which the discount rate has declined	3 years
Multi-Employer Plan
Minimum percentage of the Plan's total contributions contributed by the entity		5.00%
Employer contribution	$ 1.0	$ 1.0	$ 1.0
Expected contribution in 2014	$ 1.0
U.S. Retirement Savings Plan
U.S. retirement saving plan
Maximum percentage of employee's annual compensation allowed as contribution to individual 401(k) retirement saving account (as a percent)	75.00%
Employer contribution as a percentage of employee contribution (as a percent)	50.00%
Employer matching contribution as a percentage of employee's annual compensation (as a percent)	3.00%
U.S. Retirement Savings Plan | Minimum
U.S. retirement saving plan
Additional employer contribution as a percentage of eligible income depending on employee's age (as a percent)	2.00%
Maximum employer contribution to individual 401(k) retirement saving account, after additional contribution (as a percent)	5.00%
U.S. Retirement Savings Plan | Maximum
U.S. retirement saving plan
Employer matching contribution as a percentage of employee's annual compensation (as a percent)	4.50%
Additional employer contribution as a percentage of eligible income depending on employee's age (as a percent)	4.00%
Maximum employer contribution to individual 401(k) retirement saving account, after additional contribution (as a percent)	7.00%
UK Defined Contribution Pension Plan
U.S. retirement saving plan
Percentage of pensionable salary that eligible employees can elect to contribute under the first option	3.00%
Percentage of pensionable salary that eligible employees can elect to contribute under the second option	5.00%
Percentage of pensionable salary that eligible employees can elect to contribute under the third option	7.00%
Company's contribution under the first option (as a percent)	5.00%
Company's contribution under the second option (as a percent)	9.00%
Company's contribution under the third option (as a percent)	13.00%

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Other Income, net (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		12 Months Ended
	Jun. 30, 2012	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Other Income, net
Business interruption insurance settlement			$ (9.6)
Gain on sale of land			(4.9)
Pension curtailment gain				(5.7)
Environmental expense			5.0	2.7
Other Income, net	(9.5)		(9.5)	(3.0)
Reduction in projected plan obligation		$ 1.6

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Non-operating Expense (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended				1 Months Ended			1 Months Ended		12 Months Ended
	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jun. 30, 2013 Senior secured credit facility - revolving loan due 2018	Jun. 30, 2013 Previous term Loan	Jun. 30, 2013 Previous revolving credit line	Jun. 30, 2012 6.75% senior subordinated notes due 2015	Feb. 28, 2011 6.75% senior subordinated notes due 2015	Dec. 31, 2012 6.75% senior subordinated notes due 2015	Dec. 31, 2011 6.75% senior subordinated notes due 2015
Other non-operating expense
Pre-tax charge incurred on call premium	$ 1.0									$ 1.1	$ 4.9
Maximum borrowing capacity					600.0	82.5	360.0
Debt maturity period					5 years
Senior subordinated notes redeemed								$ 73.5	$ 150.0
Interest rate (as a percent)		6.75%	6.75%	6.75%				6.75%	6.75%
Call premium (as a percent)								1.125%	2.25%

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Supplemental Cash Flow (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash paid for:
Interest	$ 7.6	$ 12.6	$ 15.5
Taxes	$ 49.0	$ 23.4	$ 10.2

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Other Income, net

12 Months Ended

Dec. 31, 2013

Other Income, net

Other Income, net

Note 17 — Other Income, net

Other income, net for the two years ended December 31, 2012, consisted of the following:

(In millions)	2012			2011
Business interruption insurance settlement	$	(9.6	)	$	—
Gain on sale of land	(4.9		)	—
Pension curtailment gain	—			(5.7		)
Environmental expense	5.0			2.7
Other income, net	$	(9.5	)	$	(3.0	)

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

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.  Also in 2011, the Company recorded an additional $2.7 million in expense for additional environmental reserves primarily to remediate our former Lodi, New Jersey manufacturing facility that was sold in 1986 as further discussed in Note 13 to the consolidated financial statements.

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Significant Accounting Policies (Details 3) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2012 item	Dec. 31, 2011 item
Concentration of credit risk
Allowance for doubtful accounts	$ 0.9	$ 1.8
Net sales | Customer concentration
Concentration of credit risk
Number of major customers	2	2	2
Net sales | Customer concentration | Two customers and their related subcontractors | Minimum
Concentration of credit risk
Concentration percentage (as a percent)	50.00%	50.00%	50.00%

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies

Schedule of environmental remediation reserve activity

	For the year ended December 31,
(In millions)	2013			2012			2011
Beginning remediation accrual balance	$	6.6		$	5.0		$	7.3
Current period expenses	0.9			5.0			3.4
Cash expenditures	(3.6		)	(3.4		)	(5.7		)
Ending remediation accrual balance	$	3.9		$	6.6		$	5.0
Capital expenditures for environmental matters	$	4.6		$	2.4		$	4.1

Schedule of product warranty

(In millions)	Product Warranties
Balance as of December 31, 2010	$	4.3
Warranty expense	2.0
Deductions and other	(0.6		)
Balance as of December 31, 2011	$	5.7
Warranty expense	2.2
Deductions and other	(2.8		)
Balance as of December 31, 2012	$	5.1
Warranty expense	1.2
Deductions and other	(1.8		)
Balance as of December 31, 2013	$	4.5

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Segment Information (Details 3) (Net sales, Customer concentration)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Boeing company and its subcontractors
Segment information
Concentration percentage (as a percent)	34.00%	29.00%	30.00%
Boeing company and its subcontractors | Composite Materials
Segment information
Concentration percentage (as a percent)	24.00%	19.00%	20.00%
Boeing company and its subcontractors | Engineered Products
Segment information
Concentration percentage (as a percent)	68.00%	66.00%	64.00%
Airbus Group and its subcontractors
Segment information
Concentration percentage (as a percent)	29.00%	28.00%	27.00%
Airbus Group and its subcontractors | Composite Materials
Segment information
Concentration percentage (as a percent)	35.00%	34.00%	33.00%

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Taxes

Schedule of income taxes and provision for income taxes

(In millions)	2013		2012		2011
Income before income taxes:
U.S.	$	149.8	$	137.4	$	106.3
International	112.8		100.3		69.2
Total income before income taxes	$	262.6	$	237.7	$	175.5
Provision for income taxes:
Current:
U.S.	$	30.5	$	36.9	$	10.6
International	29.2		20.7		7.6
Current provision for income taxes	59.7		57.6		18.2
Deferred:
U.S.	13.1		10.4		24.4
International	3.2		6.1		(1.0		)
Deferred provision for income taxes	16.3		16.5		23.4
Total provision for income taxes	$	76.0	$	74.1	$	41.6

Schedule of a reconciliation of the provision for income taxes at the U.S. federal statutory income tax rate to the actual income tax provision

(In millions)	2013			2012			2011
Provision for taxes at U.S. federal statutory rate	$	91.9		$	83.2		$	61.5
State and local taxes, net of federal benefit	2.0			2.2			2.2
Foreign effective rate differential	(12.5		)	(10.3		)	(8.4		)
Research and Development tax credits	(2.8		)	(0.7		)	(2.0		)
Other	(2.6		)	0.5			(0.2		)
Tax Settlement	—			0.2			(5.5		)
Change in valuation allowance	—			(1.0		)	(6.0		)
Total provision for income taxes	$	76.0		$	74.1		$	41.6

Schedule of deferred income taxes

(In millions)	2013			2012
Assets
Net operating loss carryforwards	$	63.6		$	56.2
Unfunded pension liability and other postretirement obligations	16.0			15.3
Advanced payments from foreign affiliates	28.9			22.3
Tax credit carryforwards	11.2			35.4
Stock based compensation	14.4			12.6
Other comprehensive income	6.0			14.0
Reserves and other	18.9			14.7
Subtotal	159.0			170.5
Valuation allowance	(62.3		)	(49.4		)
Total assets	$	96.7		$	121.1
Liabilities
Accelerated depreciation	(63.4		)	(50.1		)
Accelerated amortization	(9.2		)	(8.2		)
Other	(0.8		)	(0.2		)
Total liabilities	$	(73.4	)	$	(58.5	)
Net deferred tax asset	$	23.3		$	62.6

Schedule of classification of deferred tax assets and deferred tax liabilities in consolidated balance sheets

(In millions)	2013			2012
Current deferred tax assets, net	$	63.3		$	62.5
Current deferred tax liability, net	(1.4		)	(0.2		)
Long-term deferred tax assets, net	10.3			15.4
Long-term deferred tax liability, net	(48.9		)	(15.1		)
Net deferred tax assets	$	23.3		$	62.6

Schedule of unrecognized tax benefits

	Unrecognized Tax Benefits
(In millions)	2013			2012			2011
Balance as of January 1,	$	32.6		$	12.5		$	20.1
Additions based on tax positions related to the current year	5.2			1.7			1.5
Additions/(reductions) for tax positions of prior years	5.7			19.0			(1.1		)
Decreases relating to settlements with tax authorities	—			—			(6.7		)
Expiration of the statute of limitations for the assessment of taxes	(1.3		)	(0.8		)	(1.6		)
Other, including currency translation	0.5			0.2			0.3
Balance as of December 31,	$	42.7		$	32.6		$	12.5

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Net Property, Plant and Equipment (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended			3 Months Ended	12 Months Ended							12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Useful lives	Dec. 31, 2012 Useful lives	Dec. 31, 2013 Land	Dec. 31, 2012 Land	Dec. 31, 2013 Buildings	Dec. 31, 2012 Buildings	Dec. 31, 2013 Equipment	Dec. 31, 2012 Equipment	Dec. 31, 2013 Construction in progress	Dec. 31, 2012 Construction in progress	Dec. 31, 2012 Other machinery and equipment Useful lives	Dec. 31, 2011 Other machinery and equipment Useful lives Minimum	Dec. 31, 2011 Other machinery and equipment Useful lives Maximum	Dec. 31, 2013 Machinery and equipment Minimum	Dec. 31, 2013 Machinery and equipment Maximum	Dec. 31, 2012 Machinery and equipment Useful lives	Dec. 31, 2011 Machinery and equipment Useful lives
Net Property, Plant and Equipment
Property, plant and equipment	$ 1,661.20	$ 1,459.20				$ 50.90	$ 41.90	$ 396.20	$ 298.30	$ 957.00	$ 783.40	$ 257.10	$ 335.60
Less accumulated depreciation	(593.8)	(544.8)
Net property, plant and equipment	1,067.4	914.4
Depreciation expense related to property, plant and equipment	59.3	57.2	55.3
Capitalized interest												2.9	3.1
Capitalized costs associated with software developed for internal use	4.4	2.8
Useful life														20 years	10 years	12 years	3 years	25 years	25 years	20 years
Pre-tax lowered depreciation				$ 1.25	$ 1.25
Increase in earnings per basic and diluted common share (in dollars per share)				$ 0.01	$ 0.01

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Stock-Based Compensation (Details 3) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Weighted-Average Grant Date Fair Value
Cash received from stock option exercises and employee stock purchases	$ 9.8
Cash used for shares withheld to satisfy employee tax obligations for NQOs exercised and RSUs converted	7.4
Shares authorized for future grant under stock plan (in shares)	3,800,000
RSUs
Summary of the Company's RSU activity
Outstanding at the beginning of the period	800,000	900,000	1,000,000
Granted	200,000	300,000	300,000
Issued	(400,000)	(400,000)	(400,000)
Outstanding at the end of the period	600,000	800,000	900,000
Weighted-Average Grant Date Fair Value
Outstanding at the beginning of the period	$ 18.90	$ 14.49	$ 11.76
Granted	$ 28.95	$ 25.26	$ 20.63
Issued	$ 15.70	$ 12.10	$ 12.51
Outstanding at the end of the period	$ 23.79	$ 18.90	$ 14.49
Unrecognized compensation cost	3.1
RSUs | Minimum
Weighted-Average Grant Date Fair Value
Period over which unrecognized compensation costs will be recognized	1 year
RSUs | Maximum
Weighted-Average Grant Date Fair Value
Period over which unrecognized compensation costs will be recognized	3 years
PRSUs
Summary of the Company's RSU activity
Outstanding at the beginning of the period	500,000	700,000	600,000
Granted	200,000	100,000	100,000
Earned	300,000	200,000
Issued	(500,000)	(500,000)
Outstanding at the end of the period	500,000	500,000	700,000
Weighted-Average Grant Date Fair Value
Outstanding at the beginning of the period	$ 16.93	$ 11.53	$ 9.77
Granted	$ 28.27	$ 25.03	$ 19.02
Earned	$ 10.72	$ 8.00
Issued	$ 10.64	$ 8.28
Outstanding at the end of the period	$ 24.60	$ 16.93	$ 11.53
Unrecognized compensation cost	$ 3.7
Performance period	3 years	3 years	3 years
PRSUs | Minimum
Weighted-Average Grant Date Fair Value
Period over which unrecognized compensation costs will be recognized	1 year
Performance period	3 years
Current projections and performance targets estimated additional performance shares issuable	300,000
PRSUs | Maximum
Weighted-Average Grant Date Fair Value
Period over which unrecognized compensation costs will be recognized	3 years
Employee stock purchase plan
Weighted-Average Grant Date Fair Value
Maximum contribution by eligible employees as percentage of base earnings (as a percent)	10.00%
Common stock purchase price as percentage of fair market value (as a percent)	85.00%
Shares purchased under employee stock purchase plan (in shares)	31,003	31,448

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended			3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Early adoption of standard
Income before income taxes:
U.S.	$ 149.8	$ 137.4	$ 106.3
International	112.8	100.3	69.2
Income before income taxes and equity in earnings	262.6	237.7	175.5
Current:
U.S.	30.5	36.9	10.6
International	29.2	20.7	7.6
Current provision for income taxes	59.7	57.6	18.2
Deferred:
U.S.	13.1	10.4	24.4
International	3.2	6.1	(1.0)
Deferred provision for income taxes	16.3	16.5	23.4
Total provision for income taxes	76.0	74.1	41.6
U.S. federal statutory income tax rate (as a percent)	35.00%
Reconciliation of provision for income taxes at U.S. federal statutory income tax rate to effective income tax rate
Provision for taxes at U.S. federal statutory rate	91.9	83.2	61.5
State and local taxes, net of federal benefit	2.0	2.2	2.2
Foreign effective rate differential	(12.5)	(10.3)	(8.4)
Research and Development tax credits	(2.8)	(0.7)	(2.0)
Other	(2.6)	0.5	(0.2)
Tax Settlement		0.2	(5.5)
Change in valuation allowance		(1.0)	(6.0)
Total provision for income taxes	76.0	74.1	41.6
Assets
Net operating loss carryforwards	63.6	56.2
Unfunded pension liability and other postretirement obligations	16.0	15.3
Advanced payments from foreign affiliates	28.9	22.3
Tax credit carryforwards	11.2	35.4
Stock based compensation	14.4	12.6
Other comprehensive income	6.0	14.0
Reserves and other	18.9	14.7
Subtotal	159.0	170.5
Valuation allowance	(62.3)	(49.4)
Total assets	96.7	121.1
Liabilities
Accelerated depreciation	(63.4)	(50.1)
Accelerated amortization	(9.2)	(8.2)
Other	(0.8)	(0.2)
Total liabilities	(73.4)	(58.5)
Net deferred tax assets	23.3	62.6
Deferred tax assets and deferred tax liabilities as presented in consolidated balance sheets
Current deferred tax assets, net	63.3	62.5
Current deferred tax liability, net	(1.4)	(0.2)
Long-term deferred tax assets, net	10.3	15.4
Long-term deferred tax liability, net	48.9	(15.1)
Net deferred tax assets	23.3	62.6
Effect of early adoption of standard
Reduction in long-term deferred tax liability, net				$ 21.4

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Quarterly Financial and Market Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial and Market Data (Unaudited)

Schedule of quarterly financial and market data

	First		Second			Third		Fourth
(In millions)	Quarter		Quarter			Quarter		Quarter
2013
Net sales	$	416.5	$	422.6		$	412.3	$	426.8
Gross margin	112.0		116.8			112.1		113.1
Operating income	63.0		71.9			69.0		67.0
Net income	43.6		48.5			48.7		47.1
Net income per common share:
Basic	$	0.43	$	0.49		$	0.49	$	0.47
Diluted	$	0.43	$	0.48		$	0.48	$	0.46
Market price:
High	$	30.23	$	35.46		$	39.67	$	44.69
Low	$	26.50	$	27.64		$	33.88	$	38.09
2012
Net sales	$	400.1	$	399.2		$	391.6	$	387.3
Gross margin	106.4		105.5			99.2		95.6
Other income, net	—		(9.5		)	—		—
Operating income	60.6		73.9			60.0		54.3
Net income	39.6		48.0			39.8		36.9
Net income per common share:
Basic	$	0.40	$	0.48		$	0.40	$	0.37
Diluted	$	0.39	$	0.47		$	0.39	$	0.36
Market price:
High	$	26.71	$	27.80		$	26.49	$	27.29
Low	$	23.42	$	23.05		$	22.53	$	23.55

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Significant Accounting Policies

Significant Accounting Policies

Note 1 — Significant Accounting Policies

Nature of Operations

Hexcel Corporation and its subsidiaries (herein referred to as “Hexcel”, “the Company”, “we”, “us”, or “our”), is a leading advanced composites company.  We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, engineered honeycomb and composite structures, for use in Commercial Aerospace, Space & Defense and Industrial Applications.  Our products are used in a wide variety of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive, a wide variety of recreational products and other industrial applications.

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

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Hexcel Corporation and its subsidiaries after elimination of all intercompany accounts, transactions and profits.  We have a 50% equity ownership investment in an Asian joint venture Aerospace Composites Malaysia Sdn. Bhd. (“ACM”), formerly known as Asian Composites Manufactoring Sdn. Bhd.  In accordance with accounting standards we have determined that this investment is not a variable interest entity and as we do not have the ability to exercise control over financial or operating decisions, this investment is accounted for using the equity method of accounting.

Use of Estimates

Preparation of the accompanying consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid investments with an original maturity of three months or less when purchased.  Our cash equivalents are held in prime money market investments with strong sponsor organizations which are monitored on a continuous basis.

Inventories

Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out and average cost methods.  Inventory is reported at its estimated net realizable value based upon our historical experience with inventory becoming obsolete due to age, changes in technology and other factors.

Property, Plant and Equipment

Property, plant and equipment, including capitalized interest applicable to major project expenditures, is recorded at cost.  Asset and accumulated depreciation accounts are eliminated for dispositions, with resulting gains or losses reflected in earnings.  Depreciation of plant and equipment is provided using the straight-line method over the estimated useful lives of the various assets.  The estimated useful lives range from 10 to 40 years for buildings and improvements and from 3 to 25 years for machinery and equipment.  Repairs and maintenance are expensed as incurred, while major replacements and betterments are capitalized and depreciated over the remaining useful life of the related asset.

In 2012, we reassessed the estimated useful lives of certain machinery and equipment.  We increased the useful lives of this machinery and equipment from 20 years to 25 years, and increased the useful lives of other certain machinery and equipment from 10 - 12 years to 20 years.  We determined that this adjustment to the useful lives of certain assets was a change in accounting estimate and we accounted for the change prospectively; i.e. the accounting change impacts the three months ended December 31, 2012 and future periods. See Note 3.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets of an acquired business. Goodwill is tested for impairment at the reporting unit level annually, or when events or changes in circumstances indicate that goodwill might be impaired.  The Company’s annual test for goodwill impairment was performed in the fourth quarter.  The Company performed a qualitative assessment and determined that it was more likely than not that the fair values of our reporting units were not less than their carrying values and it was not necessary to perform the currently prescribed two-step goodwill impairment test.

We amortize the cost of other intangibles over their estimated useful lives unless such lives are deemed indefinite. The Company has indefinite-lived intangible assets, consisting of purchased emissions credits.  These indefinite lived intangibles are tested annually for impairment as of November 30th, or when events or changes in circumstances indicate the potential for impairment.  If the carrying amount of the indefinite lived intangible exceeds the fair value, the intangible asset is written down to its fair value.  Fair value is calculated using discounted cash flows.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property, plant and equipment and identifiable intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable.  These indicators include: a significant decrease in the market price of a long-lived asset, a significant change in the extent or manner in which a long-lived asset is used or its physical condition, a significant adverse change in legal factors or business climate that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount expected for the acquisition or construction of a long-lived asset, a current period operating or cash flow loss combined with a history of losses associated with a long-lived asset and a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated life.

Software Development Costs

Costs incurred to develop software for internal-use are accounted for under Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.”  All costs relating to the preliminary project stage and the post-implementation/operation stage are expensed as incurred.  Costs incurred during the application development stage are capitalized and amortized over the useful life of the software.  The amortization of capitalized costs commences when functionality of the computer software is achieved.

Investments

We have a 50% equity ownership investment in an Asian joint venture Aerospace Composites Malaysia Sdn. Bhd., formerly Asian Composites Manufacturing Sdn. Bhd.  In accordance with ASC 810 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.  The Company continues to evaluate to make certain that the facts and circumstances associated with this investment have not changed with respect to accounting for a variable interest entity.

Debt Financing Costs

Debt financing costs are deferred and amortized to interest expense over the life of the related debt.  At December 31, 2013 and 2012, deferred debt financing costs, net of accumulated amortization, were $5.0 million and $4.6 million.

Share-Based Compensation

The fair value of Restricted Stock Units (RSU’s) is equal to the market price of our stock at date of grant and is amortized to expense ratably over the vesting period.  Performance restricted stock units (“PRSUs”) are a form of RSUs in which the number of shares ultimately received depends on the extent to which we achieve a specified performance target. The fair value of the PRSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized straight-line over the total vesting period.  A change in the performance measure expected to be achieved is recorded as an adjustment in the period in which the change occurs.  We use the Black-Scholes model to value compensation expense for all option-based payment awards made to employees and directors based on estimated fair values on the grant date.  The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our consolidated statements of operations.  The value of RSU’s, PRSU’s and Non-qualifying options awards for retirement eligible employees is expensed on the grant date as they are fully vested.

Currency Translation

The assets and liabilities of international subsidiaries are translated into U.S. dollars at year-end exchange rates, and revenues and expenses are translated at average exchange rates during the year.  Cumulative currency translation adjustments are included in “accumulated other comprehensive income (loss)” in the stockholders’ equity section of the consolidated balance sheets.  Gains and losses from foreign currency transactions are not material.

Revenue Recognition

Our revenue is predominately derived from sales of inventory, and is recognized when persuasive evidence of an arrangement exists, title and risk of loss passes to the customer, the sales price is fixed or determinable and collectability is reasonably assured.  However, from time to time we enter into contractual arrangements for which other specific revenue recognition guidance is applied.

Recognition of revenue on bill and hold arrangements occurs only when risk of ownership has passed to the buyer, a fixed written commitment has been provided by the buyer, the goods are complete and ready for shipment, the goods are segregated from inventory, no performance obligations remain and a schedule for delivery of goods has been established.  Revenues derived from design and installation services are recognized when the service is provided.  Revenues derived from long-term construction-type contracts are accounted for using the percentage-of-completion method, and progress is measured on a cost-to-cost basis.  If at any time expected costs exceed the value of the contract, the loss is recognized immediately.

Product Warranty

We provide for an estimated amount of product warranty at the point a claim is probable and estimable.  This estimated amount is provided by product and based on current facts, circumstances and historical warranty experience.  Warranty expense was $1.2 million, $2.2 million and $2.0 million for the years ended December 31, 2013, 2012 and 2011 respectively.

Research and Technology

Significant costs are incurred each year in connection with research and technology (“R&T”) programs that are expected to contribute to future earnings.  Such costs are related to the development and, in certain instances, the qualification and certification of new and improved products and their uses.  R&T costs are expensed as incurred.

Income Taxes

We provide for income taxes using the liability approach.  Under the liability approach, deferred income tax assets and liabilities reflect tax net operating loss and credit carryforwards and the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes.  Deferred tax assets require a valuation allowance when it is more likely than not, based on the evaluation of positive and negative evidence, that some portion of the deferred tax assets may not be realized.  The realization of deferred tax assets is dependent upon the timing and magnitude of future taxable income prior to the expiration of the deferred tax assets’ attributes.  When events and circumstances so dictate, we evaluate the realizability of our deferred tax assets and the need for a valuation allowance by forecasting future taxable income.  Investment tax credits are recorded on a flow-through basis, which reflects the credit in net income as a reduction of the provision for income taxes in the same period as the credit is realized for federal income tax purposes.  In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations.

Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of trade accounts receivable.  Two customers and their related subcontractors accounted for more than half of our annual net sales in 2013, 2012 and 2011.  Refer to Note 16 for further information on significant customers.  We perform ongoing credit evaluations of our customers’ financial condition but generally do not require collateral or other security to support customer receivables.  We establish an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other financial information.  As of December 31, 2013 and 2012, the allowance for doubtful accounts was $0.9 million and $1.8 million, respectively.  Bad debt expense was immaterial for all years presented.

Derivative Financial Instruments

We use various financial instruments, including foreign currency forward exchange contracts and interest rate swap agreements, to manage our exposure to market fluctuations by generating cash flows that offset, in relation to their amount and timing, the cash flows of certain foreign currency denominated transactions or underlying debt instruments.  We mark our foreign exchange forward contracts to fair value.  The change in the fair value is recorded in current period earnings.  When the derivatives qualify, we designate our foreign currency forward exchange contracts as cash flow hedges against forecasted foreign currency denominated transactions and report the effective portions of changes in fair value of the instruments in “accumulated other comprehensive income (loss)” until the underlying hedged transactions affect income.  We designate our interest rate swap agreements as fair value or cash flow hedges against specific debt instruments and recognize interest differentials as adjustments to interest expense as the differentials may occur.  We do not use financial instruments for trading or speculative purposes.

In accordance with accounting guidance, we recognize all derivatives as either assets or liabilities on our balance sheet and measure those instruments at fair value.

Self-insurance

We are self-insured up to specific levels for certain medical and health insurance and workers’ compensation plans.  Accruals are established based on actuarial assumptions and historical claim experience, and include estimated amounts for incurred but not reported claims.

New Accounting Pronouncements

ASU 2011-11 Balance Sheet (Topic 210); Disclosures about Offsetting Assets and Liabilities: In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11 which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position.  ASU 2011-11 is effective for annual and interim reporting periods beginning on or after January 1, 2013. The Company has no offsetting agreements and as such, adoption of this guidance did not have any impact on the Company’s reported financial results.

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

ASU 2013-11 Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740):  In July 2013, the FASB issued ASU No. 2013-11, which requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward on a jurisdictional basis.  ASU 2013-11 is expected to reduce diversity in practice by providing specific guidance on the presentation of unrecognized tax benefits.  ASU 2013-11 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  Early adoption is permitted and the Company has chosen to adopt ASU 2013-11 in the fourth quarter of 2013.

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Income Taxes (Details 2) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011 item
Income Taxes
Net change in the total valuation allowance	$ 12.9	$ 10.0
Tax credit carryforwards for U.S. tax purposes	28.8
Operating loss carryforwards
Unrecognized tax benefits that impact on effective tax rate	39
Reduction of uncertain tax benefits due to the favorable settlement			6.7
Activity related to unrecognized tax benefit
Balance at the beginning of the period	32.6	12.5	20.1
Additions based on tax positions related to the current year	5.2	1.7	1.5
Additions/(reductions) for tax positions of prior years	5.7	19.0	(1.1)
Decreases relating to settlements with tax authorities / reduction of uncertain tax benefits due to the favorable settlement			(6.7)
Expiration of the statute of limitations for the assessment of taxes	(1.3)	(0.8)	(1.6)
Other, including currency translation	0.5	0.2	0.3
Balance at the end of the period	42.7	32.6	12.5
Interest expense (income) related to unrecognized tax benefit	0.7	0.1	(0.1)
Interest accrued on unrecognized tax benefits	1.6	0.9
Interest related to the unrecognized tax benefit reversed		0.1
Number of jurisdictions in which the company settled an audit with foreign tax authorities			1
U.S. | Maximum
Operating loss carryforwards
Statute of limitations on years that can be open for examination	5 years
U.S. | Minimum
Operating loss carryforwards
Statute of limitations on years that can be open for examination	3 years
Foreign country
Operating loss carryforwards
Net operating loss carryforwards	231.8
Valuation allowance on net operating losses	214.8
Reduction of uncertain tax benefits due to the favorable settlement			5.5
Activity related to unrecognized tax benefit
Decreases relating to settlements with tax authorities / reduction of uncertain tax benefits due to the favorable settlement			$ (5.5)
Foreign country | Maximum
Operating loss carryforwards
Statute of limitations on years that can be open for examination	5 years
Foreign country | Minimum
Operating loss carryforwards
Statute of limitations on years that can be open for examination	3 years
Spain
Operating loss carryforwards
Carryforward period	18 years
China
Operating loss carryforwards
Carryforward period	5 years

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Supplemental Cash Flow (Tables)

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow

Schedule of supplemental cash flow information

(In millions)	2013		2012		2011
Cash paid for:
Interest	$	7.6	$	12.6	$	15.5
Taxes	$	49.0	$	23.4	$	10.2

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Schedule II Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2013

Schedule II Valuation and Qualifying Accounts

Schedule II Valuation and Qualifying Accounts

Hexcel Corporation and Subsidiaries

Valuation and Qualifying Accounts

(In millions)	Balance at beginning of year		Charged to expense/(recovery)		Deductions and other			Balance at end of year
Year ended December 31, 2013
Allowance for doubtful accounts	$	1.8	$	—	$	(0.9	)	$	0.9
Valuation allowance for deferred tax assets	49.4		10.5		2.4			62.3
Year ended December 31, 2012
Allowance for doubtful accounts	$	1.2	$	1.1	$	(0.5	)	$	1.8
Valuation allowance for deferred tax assets	39.4		9.0		1.0			49.4
Year ended December 31, 2011
Allowance for doubtful accounts	$	1.5	$	—	$	(0.3	)	$	1.2
Valuation allowance for deferred tax assets	36.5		10.5		(7.6		)	39.4

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Quarterly Financial and Market Data (Unaudited)

12 Months Ended

Dec. 31, 2013

Quarterly Financial and Market Data (Unaudited)

Quarterly Financial and Market Data (Unaudited)

Note 20 - Quarterly Financial and Market Data (Unaudited)

Quarterly financial and market data for the years ended December 31, 2013 and 2012 were:

	First		Second			Third		Fourth
(In millions)	Quarter		Quarter			Quarter		Quarter
2013
Net sales	$	416.5	$	422.6		$	412.3	$	426.8
Gross margin	112.0		116.8			112.1		113.1
Operating income	63.0		71.9			69.0		67.0
Net income	43.6		48.5			48.7		47.1
Net income per common share:
Basic	$	0.43	$	0.49		$	0.49	$	0.47
Diluted	$	0.43	$	0.48		$	0.48	$	0.46
Market price:
High	$	30.23	$	35.46		$	39.67	$	44.69
Low	$	26.50	$	27.64		$	33.88	$	38.09
2012
Net sales	$	400.1	$	399.2		$	391.6	$	387.3
Gross margin	106.4		105.5			99.2		95.6
Other income, net	—		(9.5		)	—		—
Operating income	60.6		73.9			60.0		54.3
Net income	39.6		48.0			39.8		36.9
Net income per common share:
Basic	$	0.40	$	0.48		$	0.40	$	0.37
Diluted	$	0.39	$	0.47		$	0.39	$	0.36
Market price:
High	$	26.71	$	27.80		$	26.49	$	27.29
Low	$	23.42	$	23.05		$	22.53	$	23.55

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Leasing Arrangements (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, plant and equipment under capital leasing arrangements
Property, plant and equipment	$ 3.7	$ 3.7
Less accumulated depreciation	(1.6)	(1.6)
Net property, plant and equipment	2.1	2.1
Liability balances under capital leasing arrangements
Capital lease obligations	1.8	2.0
Less current maturities	(1.8)	(0.2)
Long-term capital lease obligations, net		1.8
Operating leases
Rental expenses on operating leases	16.1	15.4	15.2
Future minimum operating lease payments
2014	9.1
2015	5.3
2016	4.1
2017	2.2
2018	1.8
Thereafter	9.3
Total minimum lease payments	$ 31.8

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Accumulated Other Comprehensive Loss (Tables)

12 Months Ended

Dec. 31, 2013

Accumulated Other Comprehensive Loss

Schedule of components of accumulated other comprehensive income (loss)

(In millions)	2013			2012
Currency translation adjustments (a)	$	26.7		$	7.1
Net unrealized gains on financial instruments, net of tax (b)	8.2			2.2
Pension obligation adjustment, net of tax (c)	(24.2		)	(41.2		)
Accumulated other comprehensive income (loss)	$	10.7		$	(31.9	)

(a)	The currency translation adjustments are not currently adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.
(b)	Reduced by the tax impact of ($1.8) million and ($0.1) million at December 31, 2013 and 2012, respectively.
(c)	Reduced by the tax impact of $11.1 million and $16.0 million at December 31, 2013 and 2012, respectively.

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Hexcel Corporation and its subsidiaries after elimination of all intercompany accounts, transactions and profits.  We have a 50% equity ownership investment in an Asian joint venture Aerospace Composites Manufacturing Sdn. Bhd. (“ACM”), formerly known as Asian Composites Manufactoring Sdn. Bhd.  In accordance with accounting standards we have determined that this investment is not a variable interest entity and as we do not have the ability to exercise control over financial or operating decisions, this investment is accounted for using the equity method of accounting.

Use of Estimates

Use of Estimates

Preparation of the accompanying consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid investments with an original maturity of three months or less when purchased.  Our cash equivalents are held in prime money market investments with strong sponsor organizations which are monitored on a continuous basis.

Inventories

Inventories

Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out and average cost methods.  Inventory is reported at its estimated net realizable value based upon our historical experience with inventory becoming obsolete due to age, changes in technology and other factors.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment, including capitalized interest applicable to major project expenditures, is recorded at cost.  Asset and accumulated depreciation accounts are eliminated for dispositions, with resulting gains or losses reflected in earnings.  Depreciation of plant and equipment is provided using the straight-line method over the estimated useful lives of the various assets.  The estimated useful lives range from 10 to 40 years for buildings and improvements and from 3 to 25 years for machinery and equipment.  Repairs and maintenance are expensed as incurred, while major replacements and betterments are capitalized and depreciated over the remaining useful life of the related asset.

In 2012, we reassessed the estimated useful lives of certain machinery and equipment.  We increased the useful lives of this machinery and equipment from 20 years to 25 years, and increased the useful lives of other certain machinery and equipment from 10 - 12 years to 20 years.  We determined that this adjustment to the useful lives of certain assets was a change in accounting estimate and we accounted for the change prospectively; i.e. the accounting change impacts the three months ended December 31, 2012 and future periods. See Note 3.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets of an acquired business. Goodwill is tested for impairment at the reporting unit level annually, or when events or changes in circumstances indicate that goodwill might be impaired.  The Company’s annual test for goodwill impairment was performed in the fourth quarter.  The Company performed a qualitative assessment and determined that it was more likely than not that the fair values of our reporting units were not less than their carrying values and it was not necessary to perform the currently prescribed two-step goodwill impairment test.

We amortize the cost of other intangibles over their estimated useful lives unless such lives are deemed indefinite. The Company has indefinite-lived intangible assets, consisting of purchased emissions credits.  These indefinite lived intangibles are tested annually for impairment as of November 30th, or when events or changes in circumstances indicate the potential for impairment.  If the carrying amount of the indefinite lived intangible exceeds the fair value, the intangible asset is written down to its fair value.  Fair value is calculated using discounted cash flows.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property, plant and equipment and identifiable intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable.  These indicators include: a significant decrease in the market price of a long-lived asset, a significant change in the extent or manner in which a long-lived asset is used or its physical condition, a significant adverse change in legal factors or business climate that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount expected for the acquisition or construction of a long-lived asset, a current period operating or cash flow loss combined with a history of losses associated with a long-lived asset and a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated life.

Software Development Costs

Software Development Costs

Costs incurred to develop software for internal-use are accounted for under Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.”  All costs relating to the preliminary project stage and the post-implementation/operation stage are expensed as incurred.  Costs incurred during the application development stage are capitalized and amortized over the useful life of the software.  The amortization of capitalized costs commences when functionality of the computer software is achieved.

Investments

Investments

We have a 50% equity ownership investment in an Asian joint venture Aerospace Composites Manufacturing Sdn. Bhd., formerly Asian Composites Manufacturing Sdn. Bhd.  In accordance with ASC 810 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.  The Company continues to evaluate to make certain that the facts and circumstances associated with this investment have not changed with respect to accounting for a variable interest entity.

Debt Financing Costs

Debt Financing Costs

Debt financing costs are deferred and amortized to interest expense over the life of the related debt.  At December 31, 2013 and 2012, deferred debt financing costs, net of accumulated amortization, were $5.0 million and $4.6 million.

Share-Based Compensation

Share-Based Compensation

The fair value of Restricted Stock Units (RSU’s) is equal to the market price of our stock at date of grant and is amortized to expense ratably over the vesting period.  Performance restricted stock units (“PRSUs”) are a form of RSUs in which the number of shares ultimately received depends on the extent to which we achieve a specified performance target. The fair value of the PRSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized straight-line over the total vesting period.  A change in the performance measure expected to be achieved is recorded as an adjustment in the period in which the change occurs.  We use the Black-Scholes model to value compensation expense for all option-based payment awards made to employees and directors based on estimated fair values on the grant date.  The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our consolidated statements of operations.  The value of RSU’s, PRSU’s and Non-qualifying options awards for retirement eligible employees is expensed on the grant date as they are fully vested.

Currency Translation

Currency Translation

The assets and liabilities of international subsidiaries are translated into U.S. dollars at year-end exchange rates, and revenues and expenses are translated at average exchange rates during the year.  Cumulative currency translation adjustments are included in “accumulated other comprehensive income (loss)” in the stockholders’ equity section of the consolidated balance sheets.  Gains and losses from foreign currency transactions are not material.

Revenue Recognition

Revenue Recognition

Our revenue is predominately derived from sales of inventory, and is recognized when persuasive evidence of an arrangement exists, title and risk of loss passes to the customer, the sales price is fixed or determinable and collectability is reasonably assured.  However, from time to time we enter into contractual arrangements for which other specific revenue recognition guidance is applied.

Recognition of revenue on bill and hold arrangements occurs only when risk of ownership has passed to the buyer, a fixed written commitment has been provided by the buyer, the goods are complete and ready for shipment, the goods are segregated from inventory, no performance obligations remain and a schedule for delivery of goods has been established.  Revenues derived from design and installation services are recognized when the service is provided.  Revenues derived from long-term construction-type contracts are accounted for using the percentage-of-completion method, and progress is measured on a cost-to-cost basis.  If at any time expected costs exceed the value of the contract, the loss is recognized immediately.

Product Warranty

Product Warranty

We provide for an estimated amount of product warranty at the point a claim is probable and estimable.  This estimated amount is provided by product and based on current facts, circumstances and historical warranty experience.  Warranty expense was $1.2 million, $2.2 million and $2.0 million for the years ended December 31, 2013, 2012 and 2011 respectively.

Research and Technology

Research and Technology

Significant costs are incurred each year in connection with research and technology (“R&T”) programs that are expected to contribute to future earnings.  Such costs are related to the development and, in certain instances, the qualification and certification of new and improved products and their uses.  R&T costs are expensed as incurred.

Income Taxes

Income Taxes

We provide for income taxes using the liability approach.  Under the liability approach, deferred income tax assets and liabilities reflect tax net operating loss and credit carryforwards and the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes.  Deferred tax assets require a valuation allowance when it is more likely than not, based on the evaluation of positive and negative evidence, that some portion of the deferred tax assets may not be realized.  The realization of deferred tax assets is dependent upon the timing and magnitude of future taxable income prior to the expiration of the deferred tax assets’ attributes.  When events and circumstances so dictate, we evaluate the realizability of our deferred tax assets and the need for a valuation allowance by forecasting future taxable income.  Investment tax credits are recorded on a flow-through basis, which reflects the credit in net income as a reduction of the provision for income taxes in the same period as the credit is realized for federal income tax purposes.  In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of trade accounts receivable.  Two customers and their related subcontractors accounted for more than half of our annual net sales in 2013, 2012 and 2011.  Refer to Note 16 for further information on significant customers.  We perform ongoing credit evaluations of our customers’ financial condition but generally do not require collateral or other security to support customer receivables.  We establish an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other financial information.  As of December 31, 2013 and 2012, the allowance for doubtful accounts was $0.9 million and $1.8 million, respectively.  Bad debt expense was immaterial for all years presented.

Derivative Financial Instruments

Derivative Financial Instruments

We use various financial instruments, including foreign currency forward exchange contracts and interest rate swap agreements, to manage our exposure to market fluctuations by generating cash flows that offset, in relation to their amount and timing, the cash flows of certain foreign currency denominated transactions or underlying debt instruments.  We mark our foreign exchange forward contracts to fair value.  The change in the fair value is recorded in current period earnings.  When the derivatives qualify, we designate our foreign currency forward exchange contracts as cash flow hedges against forecasted foreign currency denominated transactions and report the effective portions of changes in fair value of the instruments in “accumulated other comprehensive income (loss)” until the underlying hedged transactions affect income.  We designate our interest rate swap agreements as fair value or cash flow hedges against specific debt instruments and recognize interest differentials as adjustments to interest expense as the differentials may occur.  We do not use financial instruments for trading or speculative purposes.

In accordance with accounting guidance, we recognize all derivatives as either assets or liabilities on our balance sheet and measure those instruments at fair value.

Self-insurance

Self-insurance

We are self-insured up to specific levels for certain medical and health insurance and workers’ compensation plans.  Accruals are established based on actuarial assumptions and historical claim experience, and include estimated amounts for incurred but not reported claims.

New Accounting Pronouncements

New Accounting Pronouncements

ASU 2011-11 Balance Sheet (Topic 210); Disclosures about Offsetting Assets and Liabilities: In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11 which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position.  ASU 2011-11 is effective for annual and interim reporting periods beginning on or after January 1, 2013. The Company has no offsetting agreements and as such, adoption of this guidance did not have any impact on the Company’s reported financial results.

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

ASU 2013-11 Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740):  In July 2013, the FASB issued ASU No. 2013-11, which requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward on a jurisdictional basis.  ASU 2013-11 is expected to reduce diversity in practice by providing specific guidance on the presentation of unrecognized tax benefits.  ASU 2013-11 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  Early adoption is permitted and the Company has chosen to adopt ASU 2013-11 in the fourth quarter of 2013.

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Inventories (Tables)

12 Months Ended

Dec. 31, 2013

Inventories

Schedule of net inventories

	December 31,
(In millions)	2013		2012
Raw materials	$	103.4	$	95.0
Work in progress	62.2		51.2
Finished goods	99.7		86.6
Total inventories	$	265.3	$	232.8

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Consolidated Statements of Cash Flows (Parenthetical)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Consolidated Statements of Cash Flows
6.75% senior subordinated notes (as a percent)	6.75%	6.75%	6.75%

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Net Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Net Property, Plant and Equipment

Schedule of property, plant and equipment

	December 31,
(In millions)	2013			2012
Land	$	50.9		$	41.9
Buildings	396.2			298.3
Equipment	957.0			783.4
Construction in progress	257.1			335.6
Property, plant and equipment	1,661.2			1,459.2
Less accumulated depreciation	(593.8		)	(544.8		)
Net property, plant and equipment	$	1,067.4		$	914.4

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Net Income Per Common Share (Tables)

12 Months Ended

Dec. 31, 2013

Net Income Per Common Share

Summary of earnings per share basic and diluted

(In millions, except per share data)	2013		2012		2011
Net income	$	187.9	$	164.3	$	135.5
Basic net income per common share:
Weighted average common shares outstanding	100.0		100.2		98.8
Basic net income per common share	$	1.88	$	1.64	$	1.37
Diluted net income per common share:
Weighted average common shares outstanding — Basic	100.0		100.2		98.8
Plus incremental shares from assumed conversions:
Restricted stock units	0.7		0.8		0.9
Stock options	1.4		1.0		1.0
Weighted average common shares outstanding — Diluted	102.1		102.0		100.7
Diluted net income per common share	$	1.84	$	1.61	$	1.35
Anti-dilutive shares outstanding, excluded from computation	—		0.5		0.3

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Goodwill and Purchased Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Composite Materials	Dec. 31, 2012 Composite Materials	Dec. 31, 2013 Engineered Products	Dec. 31, 2012 Engineered Products	Dec. 31, 2011 Engineered Products
Changes in the carrying amount of gross goodwill and other purchased intangibles
Balance at the beginning of the period	$ 57.8	$ 57.4	$ 41.7	$ 41.3	$ 16.1	$ 16.1	$ 16.1
Additions	3.0		3.0
Amortization expense	(0.1)		(0.1)
Currency translation adjustments and other	0.4	0.4	0.4	0.4
Balance at the end of the period	61.1	57.8	45.0	41.7	16.1	16.1	16.1
Indefinite-lived intangible assets	3.6
Definitive-lived intangible asset	2.9
Goodwill	$ 54.6

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Accumulated Other Comprehensive Loss (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accumulated Other Comprehensive Loss
Currency translation adjustments	$ 26.7	$ 7.1
Net unrealized gains on financial instruments, net of tax	8.2	2.2
Pension obligation adjustment, net of tax	(24.2)	(41.2)
Accumulated other comprehensive income (loss)	10.7	(31.9)
Tax effect of net unrealized gains (losses) on financial instruments	(1.8)	(0.1)
Tax effect of pension obligation adjustment	$ 11.1	$ 16.0

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Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 65.5	$ 32.6
Accounts receivable, net	232.4	229.0
Inventories	265.3	232.8
Prepaid expenses and other current assets	93.2	81.3
Total current assets	656.4	575.7
Property, plant and equipment, net	1,067.4	914.4
Goodwill and other intangible assets	61.0	57.8
Investments in affiliated companies	23.3	22.6
Deferred tax assets	10.3	15.4
Other assets	17.7	17.2
Total assets	1,836.1	1,603.1
Current liabilities:
Short-term borrowings and current maturities of long-term debt	3.0	16.6
Accounts payable	135.9	115.7
Accrued compensation and benefits	89.2	58.8
Other accrued liabilities	40.6	44.2
Total current liabilities	268.7	235.3
Long-term notes payable and capital lease obligations	292.0	240.0
Long-term retirement obligations	41.1	81.3
Other non-current liabilities	73.9	52.4
Total liabilities	675.7	609.0
Commitments and contingencies (see Note 13)
Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares of stock authorized, 104.0 and 102.4 shares of stock issued at December 31, 2013 and 2012, respectively	1.0	1.0
Additional paid-in capital	642.3	617.0
Retained earnings	636.1	448.2
Accumulated other comprehensive income (loss)	10.7	(31.9)
Total stockholders' equity including treasury stock value	1,290.1	1,034.3
Less: Treasury stock, at cost, 5.1 and 2.5 shares at December 31, 2013 and 2012, respectively	(129.7)	(40.2)
Total stockholders' equity	1,160.4	994.1
Total liabilities and stockholders' equity	$ 1,836.1	$ 1,603.1

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2013

Segment Information

Schedule of segment reporting information

(In millions)	Composite Materials			Engineered Products		Corporate & Other			Total
Third-Party Sales
2013	$	1,286.9		$	391.3	$	—		$	1,678.2
2012	1,230.9			347.3		—			1,578.2
2011	1,074.5			317.9		—			1,392.4
Intersegment sales
2013	$	68.0		$	1.8	$	(69.8	)	$	—
2012	56.8			2.0		(58.8		)	—
2011	53.8			1.6		(55.4		)	—
Operating income (loss)
2013	$	276.3		$	58.9	$	(64.3	)	$	270.9
2012	257.3			50.6		(59.1		)	248.8
2011	194.5			51.6		(54.1		)	192.0
Depreciation
2013	$	54.4		$	4.7	$	0.2		$	59.3
2012	52.6			4.5		0.1			57.2
2011	50.8			4.3		0.2			55.3
Equity in earnings from affiliated companies
2013	$	—		$	1.3	$	—		$	1.3
2012	—			0.7		—			0.7
2011	—			1.6		—			1.6
Other (income) expense, net
2012	(14.5		)	—		5.0			(9.5		)
2011	(5.7		)	—		2.7			(3.0		)
Segment assets
2013	$	1,479.2		$	244.0	$	112.9		$	1,836.1
2012	1,295.4			215.2		92.5			1,603.1
2011	1,076.0			192.3		107.8			1,376.1
Investments in affiliated companies
2013	$	—		$	23.3	$	—		$	23.3
2012	—			22.6		—			22.6
2011	—			21.7		—			21.7
Accrual basis additions to property, plant and equipment
2013	$	194.6		$	11.9	$	—		$	206.5
2012	228.6			12.5		0.2			241.3
2011	176.6			6.9		1.0			184.5

Schedule of net sales and long-lived assets, by geographic area

(In millions)	2013		2012		2011
Net sales by Geography (a):
United States	$	871.0	$	801.4	$	721.5
International
France	321.1		302.9		257.6
Spain	164.8		150.6		142.6
United Kingdom	110.9		114.7		102.1
Austria	96.2		105.0		95.5
Other	114.2		103.6		73.1
Total international	807.2		776.8		670.9
Total consolidated net sales	$	1,678.2	$	1,578.2	$	1,392.4
Net Sales to External Customers (b):
United States	$	765.2	$	719.4	$	615.7
International
France	146.1		144.4		132.3
Germany	135.2		128.2		87.7
Spain	154.7		123.9		120.8
United Kingdom	81.4		82.2		80.2
Other	395.6		380.1		355.7
Total international	913.0		858.8		776.7
Total	$	1,678.2	$	1,578.2	$	1,392.4
Long-lived assets (c):
United States	$	854.6	$	733.5	$	568.2
International
United Kingdom	92.6		83.8		68.4
Spain	73.2		68.2		60.5
France	55.8		37.9		36.0
Other	75.5		48.8		46.4
Total international	297.1		238.7		211.3
Total consolidated long-lived assets	$	1,151.7	$	972.2	$	779.5

(a) Net sales by geography based on the location in which the product sold was manufactured.

(b) Net sales to external customers based on the location to which the product sold was delivered.

(c) Long-lived assets primarily consist of property, plant and equipment, net and goodwill.

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Consolidated Statements of Stockholders' Equity (USD $) In Millions, unless otherwise specified	Total	Common Stock Par	Common Stock Additional Paid-In Capital	Accumulated Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock
Balance at Dec. 31, 2010	$ 659.4	$ 1.0	$ 552.3	$ 148.4	$ (15.1)	$ (27.2)
Increase (Decrease) in Stockholders' Equity
Net income	135.5			135.5
Change in other comprehensive income (loss) - net of tax	(24.7)				(24.7)
Stock based compensation	36.9		36.9
Acquisition of treasury stock	(4.9)					(4.9)
Balance at Dec. 31, 2011	802.2	1.0	589.2	283.9	(39.8)	(32.1)
Increase (Decrease) in Stockholders' Equity
Net income	164.3			164.3
Change in other comprehensive income (loss) - net of tax	7.9				7.9
Stock based compensation	27.8		27.8
Acquisition of treasury stock	(8.1)					(8.1)
Balance at Dec. 31, 2012	994.1	1.0	617.0	448.2	(31.9)	(40.2)
Increase (Decrease) in Stockholders' Equity
Net income	187.9			187.9
Change in other comprehensive income (loss) - net of tax	42.6				42.6
Stock based compensation	25.3		25.3
Acquisition of treasury stock	(89.5)					(89.5)
Balance at Dec. 31, 2013	$ 1,160.4	$ 1.0	$ 642.3	$ 636.1	$ 10.7	$ (129.7)

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Retirement and Other Postretirement Benefit Plans (Details 3) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fair value of pension assets
Fair value measurements	$ 149.3	$ 128.3
Reconciliation of Level 3 Assets
Fair value of plan assets - beginning of year	128.3
Fair value of plan assets - end of year	149.3	128.3
Total plan assets invested in active corporate bond funds (as a percent)	100.00%	100.00%
Target allocations by asset class (as a percent)	100.00%	100.00%
Equity funds
Fair value of pension assets
Fair value measurements	83.3	70.0
Reconciliation of Level 3 Assets
Fair value of plan assets - end of year	83.3	70.0
U.K. Equity Fund
Reconciliation of Level 3 Assets
Total plan assets invested in active corporate bond funds (as a percent)	28.10%	28.00%
Target allocations by asset class (as a percent)	30.60%	28.60%
Total invested in equities (as a percent)	50.00%
Overseas Equity Fund
Reconciliation of Level 3 Assets
Total plan assets invested in active corporate bond funds (as a percent)	27.70%	26.60%
Target allocations by asset class (as a percent)	30.60%	28.60%
Total invested in equities (as a percent)	50.00%
Active Corporate Bond Funds
Fair value of pension assets
Fair value measurements	58.5	52.1
Reconciliation of Level 3 Assets
Fair value of plan assets - beginning of year	52.1
Fair value of plan assets - end of year	58.5	52.1
Total plan assets invested in active corporate bond funds (as a percent)	39.20%	40.60%
Target allocations by asset class (as a percent)	34.50%	38.20%
Diversified Investment Funds
Fair value of pension assets
Fair value measurements	2.9	3.1
Reconciliation of Level 3 Assets
Fair value of plan assets - beginning of year	3.1
Fair value of plan assets - end of year	2.9	3.1
Total plan assets invested in active corporate bond funds (as a percent)	1.90%	2.40%
Target allocations by asset class (as a percent)	1.90%	2.20%
Insurance Contracts
Fair value of pension assets
Fair value measurements	3.6	3.1
Reconciliation of Level 3 Assets
Fair value of plan assets - beginning of year	3.1
Fair value of plan assets - end of year	3.6	3.1
Total plan assets invested in active corporate bond funds (as a percent)	2.40%	2.40%
Target allocations by asset class (as a percent)	2.40%	2.40%
Cash and cash equivalents
Fair value of pension assets
Fair value measurements	1.0
Reconciliation of Level 3 Assets
Fair value of plan assets - end of year	1.0
Target allocations by asset class (as a percent)	0.70%
Level 2
Fair value of pension assets
Fair value measurements	142.8	122.4
Reconciliation of Level 3 Assets
Fair value of plan assets - end of year	142.8	122.4
Level 2 | Equity funds
Fair value of pension assets
Fair value measurements	83.3	70.0
Reconciliation of Level 3 Assets
Fair value of plan assets - end of year	83.3	70.0
Level 2 | Active Corporate Bond Funds
Fair value of pension assets
Fair value measurements	58.5	52.1
Reconciliation of Level 3 Assets
Fair value of plan assets - end of year	58.5	52.1
Level 2 | Diversified Investment Funds
Fair value of pension assets
Fair value measurements		0.3
Reconciliation of Level 3 Assets
Fair value of plan assets - end of year		0.3
Level 2 | Cash and cash equivalents
Fair value of pension assets
Fair value measurements	1.0
Reconciliation of Level 3 Assets
Fair value of plan assets - end of year	1.0
Level 3
Fair value of pension assets
Fair value measurements	6.5	5.9
Reconciliation of Level 3 Assets
Fair value of plan assets - beginning of year	5.9	5.1
Actual return on plan assets	0.3	0.4
Purchases, sales and settlements		0.3
Changes due to exchange rates	0.3	0.1
Fair value of plan assets - end of year	6.5	5.9
Level 3 | Diversified Investment Funds
Fair value of pension assets
Fair value measurements	2.9	2.8
Reconciliation of Level 3 Assets
Fair value of plan assets - beginning of year	2.8	2.5
Actual return on plan assets	0.2	0.2
Purchases, sales and settlements	(0.2)	0.1
Changes due to exchange rates	0.1
Fair value of plan assets - end of year	2.9	2.8
Level 3 | Insurance Contracts
Fair value of pension assets
Fair value measurements	3.6	3.1
Reconciliation of Level 3 Assets
Fair value of plan assets - beginning of year	3.1	2.6
Actual return on plan assets	0.1	0.2
Purchases, sales and settlements	0.2	0.2
Changes due to exchange rates	0.2	0.1
Fair value of plan assets - end of year	$ 3.6	$ 3.1

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Leasing Arrangements (Tables)

12 Months Ended

Dec. 31, 2013

Leasing Arrangements

Schedule of related assets, accumulated depreciation and related liability balances under capital leasing arrangements

(In millions)	2012			2011
Property, plant and equipment	$	3.7		$	3.7
Less accumulated depreciation	(1.6		)	(1.6		)
Net property, plant and equipment	$	2.1		$	2.1
Capital lease obligations	$	1.8		$	2.0
Less current maturities	(1.8		)	(0.2		)
Long-term capital lease obligations, net	$	—		$	1.8

Schedule of future minimum lease payments

(In millions)
Payable during the years ending December 31:	Operating Leases
2014	9.1
2015	5.3
2016	4.1
2017	2.2
2018	1.8
Thereafter	9.3
Total minimum lease payments	$	31.8

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Stock-Based Compensation (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stock-based compensation expense
Stock-based compensation expense	$ 18.9	$ 15.8	$ 13.9
Tax benefit from stock options exercised during the period	5.3	6.8	8.5
Non-qualified stock options
Stock-based compensation expense
Stock-based compensation expense	3.8	4.5	4.1
RSUs
Stock-based compensation expense
Stock-based compensation expense	6.0	6.5	5.0
PRSUs
Stock-based compensation expense
Stock-based compensation expense	8.8	4.6	4.7
Employee stock purchase plan
Stock-based compensation expense
Stock-based compensation expense	$ 0.3	$ 0.2	$ 0.1

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Supplemental Cash Flow

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow

Supplemental Cash Flow

Note 14 — Supplemental Cash Flow

Supplemental cash flow information, for the years ended December 31, 2013, 2012 and 2011, consisted of the following:

(In millions)	2013		2012		2011
Cash paid for:
Interest	$	7.6	$	12.6	$	15.5
Taxes	$	49.0	$	23.4	$	10.2

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Retirement and Other Postretirement Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2013

Retirement and Other Postretirement Benefit Plans

Schedule of net periodic pension expenses

(In millions)	2013		2012		2011
Defined benefit retirement plans	$	7.3	$	5.4	$	(0.3	)
Union sponsored multi-employer pension plan	1.6		1.2		0.9
Retirement savings plans-matching contributions	3.0		3.3		2.9
Retirement savings plans-profit sharing contributions	6.7		7.6		8.0
Net periodic expense	$	18.6	$	17.5	$	11.5

Schedule of net periodic cost of defined benefit retirement and postretirement plans

(In millions)	U.S. Plans						European Plans
Defined Benefit Retirement Plans	2013		2012		2011		2013			2012			2011
Service cost	$	1.7	$	1.3	$	1.5	$	0.7		$	0.5		$	1.1
Interest cost	0.8		1.1		1.1		6.9			6.6			7.2
Expected return on plan assets	—		—		—		(8.0		)	(7.3		)	(7.8		)
Net amortization	4.0		2.3		1.6		1.2			0.9			0.7
Curtailment gain	—		—		—		—			—			(5.7		)
Net periodic pension cost (income)	$	6.5	$	4.7	$	4.2	$	0.8		$	0.7		$	(4.5	)

(In millions) U.S. Postretirement Plans	2013			2012			2011
Interest cost	0.2			0.3			0.4
Net amortization and deferral	(0.4		)	(0.5		)	(0.3		)
Net periodic postretirement benefit (income) cost	$	(0.2	)	$	(0.2	)	$	0.1

Schedule of other changes in plan assets and benefit obligations recognized in other comprehensive income

	Defined Benefit Retirement Plans
	U.S. Plans						European Plans						Postretirement Plans
(In millions)	2013			2012			2013			2012			2013			2012
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net loss (gain)	$	1.0		$	3.1		$	(16.5	)	$	12.1		$	(1.6	)	$	0.1
Amortization of actuarial losses	(3.9		)	(2.2		)	(1.3		)	(0.9		)	0.4			0.5
Amortization of prior service credit (cost)	(0.1		)	(0.1		)	—			—			—			—
Effect of foreign exchange	—			—			0.2			1.9			—			—
Total recognized in other comprehensive income (pre-tax)	$	(3.0	)	$	0.8		$	(17.6	)	$	13.1		$	(1.2	)	$	0.6

Schedule of benefit obligation, fair value of plan assets, funded status and amounts recognized in the consolidated financial statements

	Defined Benefit Retirement Plans
	U.S. Plans						European Plans						Postretirement Plans
(In millions)	2013			2012			2013			2012			2013			2012
Change in benefit obligation:
Benefit obligation - beginning of year	$	38.6		$	33.4		$	164.8		$	139.8		$	8.1		$	8.0
Service cost	1.7			1.3			0.7			0.5			—			—
Interest cost	0.8			1.1			6.8			6.6			0.2			0.3
Plan participants’ contributions	—			—			0.1			0.1			0.1			0.1
Actuarial loss (gain)	1.1			3.1			(8.3		)	15.2			(1.6		)	0.1
Benefits and expenses paid	(0.3		)	(0.3		)	(4.9		)	(3.7		)	(0.4		)	(0.4		)
Currency translation adjustments	—			—			3.5			6.3			—			—
Benefit obligation - end of year	$	41.9		$	38.6		$	162.7		$	164.8		$	6.4		$	8.1
Change in plan assets:
Fair value of plan assets - beginning of year	$	—		$	—		$	128.3		$	110.8		$	—		$	—
Actual return on plan assets	—			—			16.2			10.3			—			—
Employer contributions	0.3			0.3			5.9			5.7			0.3			0.3
Plan participants’ contributions	—			—			0.1			0.1			0.1			0.1
Benefits and expenses paid	(0.3		)	(0.3		)	(4.9		)	(3.7		)	(0.4		)	(0.4		)
Currency translation adjustments	—			—			3.7			5.1			—			—
Fair value of plan assets - end of year	$	—		$	—		$	149.3		$	128.3		$	—		$	—
Amounts recognized in Consolidated Balance Sheets:
Noncurrent Assets	$	—		$	—		$	2.7		$	—		$	—		$	—
Current liabilities	$	23.8		$	0.3		$	0.4		$	0.4		$	0.6		$	0.6
Non-current liabilities	18.1			38.3			15.7			36.1			5.8			7.5
Total Liabilities	$	41.9		$	38.6		$	16.1		$	36.5		$	6.4		$	8.1
Amounts recognized in Accumulated Other Comprehensive Income:
Actuarial net (loss) gain	$	(7.3	)	$	(10.2	)	$	(32.2	)	$	(49.7	)	$	4.3		$	3.1
Prior service cost	(0.1		)	(0.2		)	(0.1		)	(0.1		)	—			—
Total amounts recognized in accumulated other comprehensive (loss) income	$	(7.4	)	$	(10.4	)	$	(32.3	)	$	(49.8	)	$	4.3		$	3.1

Schedule of expected benefit payments for the plan

(In millions)	U.S. Plans		European Plans		Postretirement Plans
2014	$	23.8	$	3.8	$	0.6
2015	4.5		4.0		0.7
2016	2.2		5.0		0.7
2017	1.1		5.7		0.6
2018	1.4		6.8		0.7
2019-2023	10.2		37.1		2.9
	$	43.2	$	62.4	$	6.2

Schedule of pension assets measured at fair value

(In millions)	December 31,		Fair Value Measurements at December 31, 2013
Description	2013		Level 1		Level 2		Level 3
Equity funds	$	83.3	$	—	$	83.3	$	—
Active corporate bond fund	58.5		—		58.5		—
Diversified investment funds	2.9		—		—		2.9
Insurance contracts	3.6		—		—		3.6
Cash and cash equivalents	1.0		—		1.0		—
Total assets	$	149.3	$	—	$	142.8	$	6.5

	December 31,		Fair Value Measurements at December 31, 2012
Description	2012		Level 1		Level 2		Level 3
Equity funds	$	70.0	$	—	$	70.0	$	—
Active corporate bond fund	52.1		—		52.1		—
Diversified investment funds	3.1		—		0.3		2.8
Insurance contracts	3.1		—		—		3.1
Total assets	$	128.3	$	—	$	122.4	$	5.9

(In millions) Reconciliation of Level 3 Assets	Balance at January 1, 2013		Actual return on plan assets		Purchases, sales and settlements			Changes due to exchange rates		Balance at December 31, 2013
Diversified investment funds	$	2.8	$	0.2	$	(0.2	)	$	0.1	$	2.9
Insurance contracts	3.1		0.1		0.2			0.2		3.6
Total level 3 assets	$	5.9	$	0.3	$	—		$	0.3	$	6.5

Reconciliation of Level 3 Assets	Balance at January 1, 2012		Actual return on plan assets		Purchases, sales and settlements		Changes due to exchange rates		Balance at December 31, 2012
Diversified investment funds	$	2.5	$	0.2	$	0.1	$	—	$	2.8
Insurance contracts	2.6		0.2		0.2		0.1		3.1
Total level 3 assets	$	5.1	$	0.4	$	0.3	$	0.1	$	5.9

Schedule of actual allocations for pension assets and target allocations by asset class

	Percentage Of Plan Assets		Target Allocations		Percentage Of Plan Assets		Target Allocations
Asset Class	2013		2013		2012		2012
U.K. Equity Fund	28.1	%	30.6	%	28.0	%	28.6	%
Overseas Equity Fund	27.7		30.6		26.6		28.6
Active Corporate Bond Funds	39.2		34.5		40.6		38.2
Insurance Contracts	2.4		2.4		2.4		2.4
Diversified Investment Funds	1.9		1.9		2.4		2.2
Cash and cash equivalents	0.7		—		—		—
Total	100	%	100	%	100	%	100	%

Schedule of assumptions used to estimate the actuarial present value of benefit obligations

	2013	2012	2011
U.S. defined benefit retirement plans:
Discount rates	0.1% - 4.0%	2.0%	3.2%
Rate of increase in compensation	3.0%	3.0%-5.8%	3.0%
Expected long-term rate of return on plan assets	N/A	N/A	N/A
European defined benefit retirement plans:
Discount rates	3.0% - 4.6%	3.25% - 4.5%	4.5% - 4.75%
Rates of increase in compensation	3.0%	3.0%	3.0%
Expected long-term rates of return on plan assets	4.0% — 6.5%	4.0% — 6.5%	4.25% — 6.5%
Postretirement benefit plans:
Discount rates	3.8%	2.75%	3.85%

Schedule of impact of one-percentage-point change in expected long-term rate of return and discount rate on pension expense and retirement obligation

	Non-Qualified			Retiree Medical			U.K. Retirement
(In millions)	Pension Plans			Plans			Plan
Periodic pension expense
One-percentage-point increase:
Expected long-term rate of return	$	N/A		$	N/A		$	(1.4	)
Discount rate	$	(0.1	)	$	—		$	(0.2	)
One-percentage-point decrease:
Expected long-term rate of return	$	N/A		$	N/A		$	1.4
Discount rate	$	0.3		$	—		$	0.4
Retirement obligation
One-percentage-point increase in discount rate	$	(1.1	)	$	(0.4	)	$	(21.2	)
One-percentage-point decrease in discount rate	$	1.2		$	0.4		$	26.8

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Segment Information

12 Months Ended

Dec. 31, 2013

Segment Information

Segment Information

Note 16 — Segment Information

The financial results for our 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 segments based on operating income, and generally account for intersegment sales based on arm’s length prices.  We report two segments, Composite Materials and Engineered Products.  Corporate and certain other expenses are not allocated to the segments, except to the extent that the expense can be directly attributable to the segment.  Corporate & Other is shown to reconcile to Hexcel’s consolidated results.

In addition to the product line-based segmentation of our business, we also monitor sales into our principal end markets as a means to understanding demand for our products.  Therefore, for each segment, we have also reported disaggregated sales by end market.

The following table presents financial information on our segments as of December 31, 2013, 2012 and 2011, and for the years then ended.

(In millions)	Composite Materials			Engineered Products		Corporate & Other			Total
Third-Party Sales
2013	$	1,286.9		$	391.3	$	—		$	1,678.2
2012	1,230.9			347.3		—			1,578.2
2011	1,074.5			317.9		—			1,392.4
Intersegment sales
2013	$	68.0		$	1.8	$	(69.8	)	$	—
2012	56.8			2.0		(58.8		)	—
2011	53.8			1.6		(55.4		)	—
Operating income (loss)
2013	$	276.3		$	58.9	$	(64.3	)	$	270.9
2012	257.3			50.6		(59.1		)	248.8
2011	194.5			51.6		(54.1		)	192.0
Depreciation
2013	$	54.4		$	4.7	$	0.2		$	59.3
2012	52.6			4.5		0.1			57.2
2011	50.8			4.3		0.2			55.3
Equity in earnings from affiliated companies
2013	$	—		$	1.3	$	—		$	1.3
2012	—			0.7		—			0.7
2011	—			1.6		—			1.6
Other (income) expense, net
2012	(14.5		)	—		5.0			(9.5		)
2011	(5.7		)	—		2.7			(3.0		)
Segment assets
2013	$	1,479.2		$	244.0	$	112.9		$	1,836.1
2012	1,295.4			215.2		92.5			1,603.1
2011	1,076.0			192.3		107.8			1,376.1
Investments in affiliated companies
2013	$	—		$	23.3	$	—		$	23.3
2012	—			22.6		—			22.6
2011	—			21.7		—			21.7
Accrual basis additions to property, plant and equipment
2013	$	194.6		$	11.9	$	—		$	206.5
2012	228.6			12.5		0.2			241.3
2011	176.6			6.9		1.0			184.5

Geographic Data

Net sales and long-lived assets, by geographic area, consisted of the following for the three years ended December 31, 2013, 2012 and 2011:

(In millions)	2013		2012		2011
Net sales by Geography (a):
United States	$	871.0	$	801.4	$	721.5
International
France	321.1		302.9		257.6
Spain	164.8		150.6		142.6
United Kingdom	110.9		114.7		102.1
Austria	96.2		105.0		95.5
Other	114.2		103.6		73.1
Total international	807.2		776.8		670.9
Total consolidated net sales	$	1,678.2	$	1,578.2	$	1,392.4
Net Sales to External Customers (b):
United States	$	765.2	$	719.4	$	615.7
International
France	146.1		144.4		132.3
Germany	135.2		128.2		87.7
Spain	154.7		123.9		120.8
United Kingdom	81.4		82.2		80.2
Other	395.6		380.1		355.7
Total international	913.0		858.8		776.7
Total	$	1,678.2	$	1,578.2	$	1,392.4
Long-lived assets (c):
United States	$	854.6	$	733.5	$	568.2
International
United Kingdom	92.6		83.8		68.4
Spain	73.2		68.2		60.5
France	55.8		37.9		36.0
Other	75.5		48.8		46.4
Total international	297.1		238.7		211.3
Total consolidated long-lived assets	$	1,151.7	$	972.2	$	779.5

(a) Net sales by geography based on the location in which the product sold was manufactured.

(b) Net sales to external customers based on the location to which the product sold was delivered.

(c) Long-lived assets primarily consist of property, plant and equipment, net and goodwill.

Significant Customers and Suppliers

Boeing and its subcontractors accounted for approximately 34%, 29% and 30% of 2013, 2012 and 2011 net sales, respectively.  Similarly, Airbus Group, including Airbus and its subcontractors, accounted for approximately 29%, 28% and 27% of 2013, 2012 and 2011 net sales, respectively.  In the Composite Materials segment approximately 24%, 19% and 20% of sales for 2013, 2012 and 2011, respectively, were to Boeing and its subcontractors.  Approximately 35%, 34% and 33% of sales for 2013, 2012 and 2011, respectively were to Airbus Group and its subcontractors.  In the Engineered Products segment approximately 68%, 66% and 64% of sales for 2013, 2012 and 2011, respectively were to Boeing and its subcontractors.

A significant decline in business with Boeing or Airbus Group could materially impact our business, operating results, prospects and financial condition.

Certain key raw materials we consume are available from relatively few sources, and in many cases the cost of product qualification makes it impractical to develop multiple sources of supply. The lack of availability of these materials could under certain circumstances materially impact our consolidated results of operations.

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Net Income Per Common Share (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net Income Per Common Share
Net income									$ 187.9	$ 164.3	$ 135.5
Basic net income per common share:
Weighted average common shares outstanding (in shares)									100.0	100.2	98.8
Basic net income per common share (in dollars per share)	$ 0.47	$ 0.49	$ 0.49	$ 0.43	$ 0.37	$ 0.40	$ 0.48	$ 0.40	$ 1.88	$ 1.64	$ 1.37
Diluted net income per common share:
Weighted average common shares outstanding - Basic (in shares)									100.0	100.2	98.8
Plus incremental shares from assumed conversions:
Restricted stock units (in shares)									0.7	0.8	0.9
Stock options (in shares)									1.4	1.0	1.0
Weighted average common shares outstanding - Dilutive (in shares)									102.1	102.0	100.7
Diluted net income per common share (in dollars per share)	$ 0.46	$ 0.48	$ 0.48	$ 0.43	$ 0.36	$ 0.39	$ 0.47	$ 0.39	$ 1.84	$ 1.61	$ 1.35
Anti-dilutive securities excluded from computation of earnings per share amount (in shares)										0.5	0.3

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Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities
Net income	$ 187.9	$ 164.3	$ 135.5
Reconciliation to net cash provided by operating activities:
Depreciation	59.3	57.2	55.3
Amortization of debt discount and deferred financing costs	2.1	3.1	7.1
Deferred income taxes	16.4	30.9	23.4
Stock-based compensation	18.9	15.8	13.9
Excess tax benefits on stock-based compensation	(5.3)	(6.8)	(8.5)
Equity in earnings from investments in affiliated companies	(1.3)	(0.7)	(1.6)
Gain on sale of surplus real estate		(4.9)
Pension curtailment gain			(5.7)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	6.4	(28.1)	(28.2)
Increase in inventories	(28.4)	(15.2)	(48.8)
(Increase) decrease in prepaid expenses and other current assets	(3.3)	0.7	(1.1)
Increase in accounts payable and accrued liabilities	19.2	20.3	34.1
(Increase) decrease in other, net	1.0	(4.2)	(4.9)
Net cash provided by operating activities	272.9	232.4	170.5
Cash flows from investing activities
Capital expenditures and deposits for capital purchases	(194.9)	(263.7)	(158.0)
Proceeds from sale of surplus real estate		5.3
Settlement of foreign currency hedge			(5.2)
Net cash used for investing activities	(194.9)	(258.4)	(163.2)
Cash flows from financing activities
Borrowings from senior secured credit facility	309.0	87.0	135.0
Issuance costs related to debt	(2.4)	(0.6)
Capital lease obligations and other debt, net	(3.8)	(0.5)	(3.0)
Repayment of senior secured credit facility	(17.0)
Repayment of senior secured credit agreement - term loan	(85.0)	(7.5)	(5.0)
Repayment of prior senior secured credit facilities	(165.0)		(57.0)
Purchase of stock	(90.0)
Repayment of 6.75% senior subordinated notes		(73.5)	(151.5)
Call premium payment for 6.75% senior subordinated notes		(0.8)	(3.4)
Activity under stock plans and other	7.0	4.1	10.5
Net cash (used for) provided by financing activities	(47.2)	8.2	(74.4)
Effect of exchange rate changes on cash and cash equivalents	2.1	0.9	(0.6)
Net increase (decrease) in cash and cash equivalents	32.9	(16.9)	(67.7)
Cash and cash equivalents at beginning of year	32.6	49.5	117.2
Cash and cash equivalents at end of year	65.5	32.6	49.5
Supplemental information (See Note 14):
Accrual basis additions to property, plant and equipment	$ 206.5	$ 241.3	$ 184.5

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Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
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	104.0	102.4
Treasury stock, shares	5.1	2.5

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Capital Stock

12 Months Ended

Dec. 31, 2013

Capital Stock

Capital Stock

Note 9 - Capital Stock

Common Stock Outstanding

Common stock outstanding as of December 31, 2013, 2012 and 2011 was as follows:

(Number of shares in millions)	2013	2012	2011
Common stock:
Balance, beginning of year	102.4	101.0	99.5
Activity under stock plans	1.6	1.4	1.5
Balance, end of year	104.0	102.4	101.0
Treasury stock:
Balance, beginning of year	2.5	2.2	2.2
Issued under stock plans	—	—	(0.5	)
Repurchased	2.6	0.3	0.5
Balance, end of year	5.1	2.5	2.2
Common stock outstanding	98.9	99.9	98.8

In July 2013, our Board authorized us to repurchase an additional $150 million of our outstanding common stock.  The Company spent $40 million to repurchase 896,653 shares of common stock during the fourth quarter of 2013 under this authorized Repurchase Plan, of which 148,990 shares were settled in January 2014.

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

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Jan. 30, 2014	Jun. 28, 2013
Document and Entity Information
Entity Registrant Name	HEXCEL CORP /DE/
Entity Central Index Key	0000717605
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 3,387,607,226
Entity Common Stock, Shares Outstanding		98,916,627
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2013

Stock-Based Compensation

Stock-Based Compensation

Note 10 — Stock-Based Compensation

The following table details the stock-based compensation expense by type of award for the years ended December 31, 2013, 2012 and 2011:

	Year Ended December 31,
(In millions, except per share data)	2013		2012		2011
Non-qualified stock options	$	3.8	$	4.5	$	4.1
Restricted stock, service based (“RSUs”)	6.0		6.5		5.0
Restricted stock, performance based (“PRSUs”)	8.8		4.6		4.7
Employee stock purchase plan	0.3		0.2		0.1
Stock-based compensation expense	$	18.9	$	15.8	$	13.9
Tax benefit from stock options exercised during the period	$	5.3	$	6.8	$	8.5

Non-Qualified Stock Options

Non-qualified stock options have been granted to our employees and directors under our stock compensation plan.  Options granted generally vest over three years and expire ten years from the date of grant.

A summary of option activity under the plan for the three years ended December 31, 2013 is as follows:

	Number of Options (In millions)		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)
Outstanding at December 31, 2010	4.5		$	10.84	5.16
Options granted	0.6		$	19.19
Options exercised	(1.6	)	$	8.17
Options expired or forfeited	(0.1	)	$	12.93
Outstanding at December 31, 2011	3.4		$	13.55	6.45
Options granted	0.5		$	25.03
Options exercised	(0.6	)	$	10.41
Options expired or forfeited	—		$	21.82
Outstanding at December 31, 2012	3.3		$	15.67	6.26
Options granted	0.3		$	28.27
Options exercised	(0.6	)	$	14.44
Outstanding at December 31, 2013	3.0		$	17.30	5.96

	Year Ended December 31,
(In millions, except weighted average exercise price)	2013		2012
Aggregate intrinsic value of outstanding options	$	82.5	$	37.4
Aggregate intrinsic value of exercisable options	$	66.9	$	29.5
Total intrinsic value of options exercised	$	10.9	$	9.1
Total number of options exercisable	2.2		2.2
Weighted average exercise price of options exercisable	$	14.09	$	13.57
Total unrecognized compensation cost on nonvested options (a)	$	1.6	$	2.1

(a) Unrecognized compensation cost relates to nonvested stock options and is expected to be recognized over the remaining vesting period ranging from one year to three years.

The following table summarizes information about non-qualified stock options outstanding as of December 31, 2013:

				Options Outstanding				Options Exercisable
Range of Exercise Prices				Number of Options Outstanding (a)	Weighted Average Remaining Life (in Years)	Weighted Average Exercise Price		Number of Options Exercisable (a)	Weighted Average Exercise Price
$	7.83	–	10.90	1.1	5.59	$	9.38	1.1	$	9.38
$	14.51	–	21.11	1.0	4.97	$	18.54	0.8	$	17.45
$	22.00	–	28.27	0.9	7.58	$	25.79	0.3	$	23.54
$	7.83	–	28.27	3.0	5.96	$	17.30	2.2	$	14.09

(a) in millions

Valuation Assumptions in Estimating Fair Value

We estimated the fair value of stock options at the grant date using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
Risk-free interest rate	1.08		%	0.83		%	1.88		%
Expected option life (in years) Executive	6.32			5.44			4.84
Expected option life (in years) Non-Executive	4.80			4.45			4.71
Dividend yield	—		%	—		%	—		%
Volatility	40.12		%	45.76		%	44.08		%
Weighted-average fair value per option granted	$	11.07		$	10.24		$	7.65

We determine the expected option life for each grant based on ten years of historical option activity for two separate groups of employees (executive and non-executive).  The weighted-average expected life (“WAEL”) is derived from the average midpoint between the vesting and the contractual term and considers the effect of both the inclusion and exclusion of post-vesting cancellations during the ten-year period.  Expected volatility is calculated based on a blend of both historic volatility of our common stock and implied volatility of our traded options.  We weigh both volatility inputs equally and utilize the average as the volatility input for the Black-Scholes calculation.  The risk-free interest rate for the expected term is based on the U.S. Treasury yield curve in effect at the time of grant and corresponding to the expected term.  No dividends were paid in either period.

Restricted Stock Units — Service Based

As of December 31, 2013, a total of 592,882 shares of service based restricted stock (“RSUs”) were outstanding, which vest based on years of service under the 2003 and 2013 incentive stock plans.  RSUs are granted to key employees, executives and directors of the Company.  The fair value of the RSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized on a straight line basis over the requisite service period.  The stock-based compensation expense recognized is based on an estimate of shares ultimately expected to vest, and therefore it has been reduced for estimated forfeitures.

The table presented below provides a summary of the Company’s RSU activity for the years ended December 31, 2013, 2012 and 2011:

	Number of RSUs (In millions)		Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2010	1.0		$	11.76
RSUs granted	0.3		$	20.63
RSUs issued	(0.4	)	$	12.51
Outstanding at December 31, 2011	0.9		$	14.49
RSUs granted	0.3		$	25.26
RSUs issued	(0.4	)	$	12.10
Outstanding at December 31, 2012	0.8		$	18.90
RSUs granted	0.2		$	28.95
RSUs issued	(0.4	)	$	15.70
Outstanding at December 31, 2013	0.6		$	23.79

As of December 31, 2013, there was total unrecognized compensation cost related to nonvested RSUs of $3.1 million, which is to be recognized over the remaining vesting period ranging from one year to three years.

Restricted Stock Units — Performance Based

As of December 31, 2013, a total of 453,897 shares of performance based restricted stock (“PRSUs”) were outstanding under the 2003 and 2013 incentive stock plans.  The total amount of PRSUs that will ultimately vest is based on the achievement of various financial performance targets set forth by the Company’s Compensation Committee on the date of grant.  PRSUs are based on a three year performance period.  Based on current projections and performance targets, it is estimated that an additional 0.3 million performance shares may be issuable for the 2011, 2012 and 2013 awards.  The fair value of the PRSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized straight-line over the total three year period.  A change in the performance measure expected to be achieved is recorded as an adjustment in the period in which the change occurs.

The table presented below provides a summary, of the Company’s PRSU activity, at original grant amounts, for the years ended December 31, 2013, 2012 and 2011:

	Number of PRSUs (In millions)		Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2010	0.6		$	9.77
PRSUs granted	0.1		$	19.02
Outstanding at December 31, 2011	0.7		$	11.53
PRSUs granted	0.1		$	25.03
PRSUs additional performance shares	0.2		$	8.00
PRSUs issued	(0.5	)	$	8.28
Outstanding at December 31, 2012	0.5		$	16.93
PRSUs granted	0.2		$	28.27
PRSUs additional performance shares	0.3		$	10.72
PRSUs issued	(0.5	)	$	10.64
Outstanding at December 31, 2013	0.5		$	24.60

As of December 31, 2013, there was total unrecognized compensation cost related to nonvested PRSUs of $3.7 million, which is to be recognized over the remaining vesting period ranging from one year to three years.  The final amount of compensation cost to be recognized is dependent upon our financial performance.

Stock-Based Compensation Cash Activity

During 2013, cash received from stock option exercises and from employee stock purchases was $9.8 million.  We used $7.4 million in cash related to the shares withheld to satisfy employee tax obligations for NQOs exercised and RSUs and PRSUs converted during the year ended December 31, 2013.  We realized a tax benefit of $5.3 million in connection with stock options exercised and RSUs and PRSUs converted during 2013.

We classify the cash flows resulting from these tax benefits as financing cash flows.  We either issue new shares of our common stock or utilize treasury shares upon the exercise of stock options or the conversion of stock units.

Shares Authorized for Grant

As of December 31, 2013, an aggregate of 3.8 million shares were authorized for future grant under our stock plan, which covers stock options, RSUs, PRSUs and at the discretion of Hexcel, could result in the issuance of other types of stock-based awards.

Employee Stock Purchase Plan (“ESPP”)

The Company offers an ESPP, which allows for eligible employees to contribute up to 10% of their base earnings toward the quarterly purchase of our common stock at a purchase price equal to 85% of the fair market value of the common stock.  There were 31,003 and 31,448 ESPP shares purchased in 2013 and 2012, respectively.

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Schedule II Valuation and Qualifying Accounts (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Allowance for doubtful accounts
Changes in valuation allowances and reserves
Balance at beginning of year	$ 1.8	$ 1.2	$ 1.5
Charged to expenses/(recovery)		1.1
Deductions and other	(0.9)	(0.5)	(0.3)
Balance at end of year	0.9	1.8	1.2
Valuation allowance for deferred tax assets
Changes in valuation allowances and reserves
Balance at beginning of year	49.4	39.4	36.5
Charged to expenses/(recovery)	10.5	9.0	10.5
Deductions and other	(2.4)	1.0	(7.6)
Balance at end of year	$ 62.3	$ 49.4	$ 39.4

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Consolidated Statements of Operations (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Consolidated Statements of Operations
Net sales	$ 1,678.2	$ 1,578.2	$ 1,392.4
Cost of sales	1,224.2	1,171.5	1,050.3
Gross margin	454.0	406.7	342.1
Selling, general and administrative expenses	141.4	130.7	120.5
Research and technology expenses	41.7	36.7	32.6
Other income, net		(9.5)	(3.0)
Operating income	270.9	248.8	192.0
Interest expense, net	7.3	10.0	11.6
Non-operating expense	1.0	1.1	4.9
Income before income taxes and equity in earnings	262.6	237.7	175.5
Provision for income taxes	76.0	74.1	41.6
Income before equity in earnings	186.6	163.6	133.9
Equity in earnings from investments in affiliated companies	1.3	0.7	1.6
Net income	$ 187.9	$ 164.3	$ 135.5
Basic net income per common share: (in dollars per share)	$ 1.88	$ 1.64	$ 1.37
Diluted net income per common share: (in dollars per share)	$ 1.84	$ 1.61	$ 1.35
Weighted average common shares outstanding:
Basic (in shares)	100.0	100.2	98.8
Diluted (in shares)	102.1	102.0	100.7

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Goodwill and Purchased Intangible Assets

12 Months Ended

Dec. 31, 2013

Goodwill and Purchased Intangible Assets

Goodwill and Purchased Intangible Assets

Note 4 — Goodwill and Purchased Intangible Assets

Changes in the carrying amount of gross goodwill and other purchased intangibles for the years ended December 31, 2013 and 2012, by segment, are as follows:

(In millions)	Composite Materials			Engineered Products		Total
Balance as of December 31, 2011	$	41.3		$	16.1	$	57.4
Currency translation adjustments and other	0.4			—		0.4
Balance as of December 31, 2012	$	41.7		$	16.1	$	57.8
Additions	3.0			—		3.0
Amortization expense	(0.1		)	—		(0.1		)
Currency translation adjustments and other	0.4			—		0.4
Balance as of December 31, 2013	$	45.0		$	16.1	$	61.1

We performed our annual impairment review of goodwill as of November 30, 2013 and determined that it was more likely than not that the fair values of our reporting units are above their carrying values.  The addition to intangible assets in 2013 represents a license agreement with a third party.  The goodwill and intangible asset balances as of December 31, 2013 include $3.6 million of indefinite-lived intangible assets, $2.9 of a definitive-lived intangible asset and $54.6 million of goodwill.

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Net Property, Plant and Equipment

12 Months Ended

Dec. 31, 2013

Net Property, Plant and Equipment

Net Property, Plant and Equipment

Note 3 — Net Property, Plant and Equipment

	December 31,
(In millions)	2013			2012
Land	$	50.9		$	41.9
Buildings	396.2			298.3
Equipment	957.0			783.4
Construction in progress	257.1			335.6
Property, plant and equipment	1,661.2			1,459.2
Less accumulated depreciation	(593.8		)	(544.8		)
Net property, plant and equipment	$	1,067.4		$	914.4

Depreciation expense related to property, plant and equipment for the years ended December 31, 2013, 2012 and 2011, was $59.3 million, $57.2 million and $55.3 million, respectively.  Capitalized interest of $2.9 million and $3.1 million for 2013 and 2012, respectively, was included in construction in progress and is associated with our carbon fiber expansion programs.  Capitalized costs associated with software developed for internal use were $4.4 million and $2.8 million for 2013 and 2012, respectively.

In 2012, we reassessed the estimated useful lives of certain machinery and equipment.  We increased the useful lives of certain machinery and equipment from 20 years to 25 years, and increased the useful lives of certain other machinery and equipment from 10 - 12 years to 20 years.  We determined that this adjustment to the useful lives of certain assets was a change in accounting estimate and we accounted for the change prospectively; i.e. the accounting change impacts the three months ended December 31, 2012 and future periods.  For the quarter and year ended December 31, 2012, the change in accounting estimate lowered depreciation expense by approximately $1.25 million (pre-tax), which was reflected in Gross Margin, or by approximately $0.01 earnings per basic and diluted common share.

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Accumulated Other Comprehensive Loss

12 Months Ended

Dec. 31, 2013

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Note 15 — Accumulated Other Comprehensive Loss

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the consolidated statements of operations.  The components of accumulated other comprehensive income (loss) as of December 31, 2013 and 2012 were as follows:

(In millions)	2013			2012
Currency translation adjustments (a)	$	26.7		$	7.1
Net unrealized gains on financial instruments, net of tax (b)	8.2			2.2
Pension obligation adjustment, net of tax (c)	(24.2		)	(41.2		)
Accumulated other comprehensive income (loss)	$	10.7		$	(31.9	)

(a)	The currency translation adjustments are not currently adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.
(b)	Reduced by the tax impact of ($1.8) million and ($0.1) million at December 31, 2013 and 2012, respectively.
(c)	Reduced by the tax impact of $11.1 million and $16.0 million at December 31, 2013 and 2012, respectively.

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Net Income Per Common Share

12 Months Ended

Dec. 31, 2013

Net Income Per Common Share

Net Income Per Common Share

Note 11 - Net Income Per Common Share

Computations of basic and diluted net income per common share for the years ended December 31, 2013, 2012 and 2011, are as follows:

(In millions, except per share data)	2013		2012		2011
Net income	$	187.9	$	164.3	$	135.5
Basic net income per common share:
Weighted average common shares outstanding	100.0		100.2		98.8
Basic net income per common share	$	1.88	$	1.64	$	1.37
Diluted net income per common share:
Weighted average common shares outstanding — Basic	100.0		100.2		98.8
Plus incremental shares from assumed conversions:
Restricted stock units	0.7		0.8		0.9
Stock options	1.4		1.0		1.0
Weighted average common shares outstanding — Diluted	102.1		102.0		100.7
Diluted net income per common share	$	1.84	$	1.61	$	1.35
Anti-dilutive shares outstanding, excluded from computation	—		0.5		0.3

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Retirement and Other Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2013

Retirement and Other Postretirement Benefit Plans

Retirement and Other Postretirement Benefit Plans

Note 7 — Retirement and Other Postretirement Benefit Plans

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

Accounting standards require the use of certain assumptions, such as the expected long-term rate of return, discount rate, rate of compensation increase, healthcare cost trend rates, and retirement and mortality rates, to determine the net periodic costs of such plans.  These assumptions are reviewed and set annually at the beginning of each year.  In addition, these models use an “attribution approach” that generally spreads individual events, such as plan amendments and changes in actuarial assumptions, over the service lives of the employees in the plan.  That is, employees render service over their service lives on a relatively smooth basis and therefore, the income statement effects of retirement and postretirement benefit plans are earned in, and should follow, the same pattern.

We use our actual return experience, future expectations of long-term investment returns, and our actual and targeted asset allocations to develop our expected rate of return assumption used in the net periodic cost calculations of our funded European defined benefit retirement plans.  Due to the difficulty involved in predicting the market performance of certain assets, there will be a difference in any given year between our expected return on plan assets and the actual return.  Following the attribution approach, each year’s difference is amortized over a number of future years.  Over time, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees.

We annually set our discount rate assumption for retirement-related benefits accounting to reflect the rates available on high-quality, fixed-income debt instruments.  The rates used reached a lowpoint as of 2012 and rebounded during 2013 and are expected to remain stable for 2014.  The rate of compensation increase for nonqualified pension plans, which is another significant assumption used in the actuarial model for pension accounting, is determined by us based upon our long-term plans for such increases and assumed inflation.  For the postretirement health care and life insurance benefits plan, we review external data and the plan’s historical trends for health care costs to determine the health care cost trend rates.  Retirement and termination rates are based primarily on actual plan experience.  The mortality table used for the U.S. plans is based on the RP2000 Mortality Table projected to 2020 and for the U.K. Plans the S1NA table with CMI 2011 projections (1.5% p.a. future improvements).

Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect the net periodic costs and recorded obligations in such future periods.  While we believe that the assumptions used are appropriate, significant changes in economic or other conditions, employee demographics, retirement and mortality rates, and investment performance may materially impact such costs and obligations.

U.S. Defined Benefit Retirement Plans

We have nonqualified defined benefit retirement plans covering certain current and former U.S. employees that are funded as benefits are incurred.  Under the provisions of these plans, we expect to contribute approximately $23.8 million in 2014 to cover unfunded benefits.

Multi-Employer Plan

The Company is party to a multi-employer pension plan covering certain U.S. employees with union affiliations.  The plan is the Western Metal Industry Pension Fund, (“the Plan”).  The Plan’s employer identification number is 91-6033499; the Plan number is 001.  In 2012, the Plan reported Hexcel Corporation as being an employer that contributed greater than 5% of the Plan’s total contributions.  The expiration date of the collective bargaining agreement is September 30, 2015.  The Plan has been listed in “critical status” and has been operating in accordance with a Rehabilitation Plan since 2010.  The Plan, as amended under the Rehabilitation Plan, reduced the adjustable benefits of the participants and levied a surcharge on employer contributions.  The Company has contributed approximately $1.0 million in 2013, 2012 and 2011.  We expect the Company’s contribution to be about $1.0 million in 2014 and remain at that level over the next few years.

U.S. Retirement Savings Plan

Under the retirement savings plan, eligible U.S. employees can contribute up to 75% of their annual compensation to an individual 401(k) retirement savings account.  The Company makes matching contributions equal to 50% of employee contributions, not to exceed 3% of employee compensation each year.  We also contribute an additional 2% to 4% of each eligible employee’s salary to an individual 401(k) retirement savings account, depending on the employee’s age.  This increases the maximum contribution to individual employee savings accounts to between 5% and 7% per year, before any profit sharing contributions that are made when we meet or exceed certain performance targets that are set annually.  These profit sharing contributions are made at the Company’s discretion and are targeted at 3% of an eligible employee’s pay, with a maximum of 4.5%.

U.S. Postretirement Plans

In addition to defined benefit and retirement savings plan benefits, we also provide certain postretirement health care and life insurance benefits to eligible U.S. retirees.  Depending upon the plan, benefits are available to eligible employees who retire after meeting certain age and service requirements and were employed by Hexcel as of February 1996.  Our funding policy for the postretirement health care and life insurance benefit plans is generally to pay covered expenses as they are incurred.  Under the provisions of these plans, we expect to contribute approximately $0.6 million in 2014 to cover unfunded benefits.

European Defined Benefit Retirement Plans

We have defined benefit retirement plans in the United Kingdom, Belgium, France and Austria covering certain employees of our subsidiaries in those countries.  The defined benefit plan in the United Kingdom (the “U.K. Plan”), the largest of the European plans, was terminated in 2011 and replaced with a defined contribution plan.  We recorded a curtailment gain of $5.7 million (after tax gain of $0.04 per diluted share) to recognize previously unrecognized prior service credits.  As of December 31, 2013, 57% of the total assets in the U.K. Plan were invested in equities.  Equity investments are made with the objective of achieving a return on plan assets consistent with the funding requirements of the plan, maximizing portfolio return and minimizing the impact of market fluctuations on the fair value of the plan assets.  As a result of an annual review of historical returns and market trends, the expected long-term weighted average rate of return for the U.K. Plan for the 2014 plan year will be 6.5% and 3.25% to 4.5% for the other European Plans as a group.

U.K. Defined Contribution Pension Plan

Under the Defined Contribution Section, eligible U.K. employees can belong to the Deferred Contribution Plan on a non-participatory basis or can elect to contribute 3%, 5% or 7% of their pensionable salary.  The Company will contribute 5%, 9% and 13% respectively.  The plan also provides life insurance and disability insurance benefits for members.

Retirement and Other Postretirement Plans - France

The employees of our French subsidiaries are entitled to receive a lump-sum payment upon retirement subject to certain service conditions under the provisions of the national chemicals and textile workers collective bargaining agreements.  The amounts attributable to the French plans have been included within the total expense and obligation amounts noted for the European plans.

Net Periodic Pension Expense

Net periodic expense for our U.S. and European qualified and nonqualified defined benefit pension plans and our retirement savings plans for the three years ended December 31, 2013 is detailed in the table below.

(In millions)	2013		2012		2011
Defined benefit retirement plans	$	7.3	$	5.4	$	(0.3	)
Union sponsored multi-employer pension plan	1.6		1.2		0.9
Retirement savings plans-matching contributions	3.0		3.3		2.9
Retirement savings plans-profit sharing contributions	6.7		7.6		8.0
Net periodic expense	$	18.6	$	17.5	$	11.5

Defined Benefit Retirement and Postretirement Plans

Net periodic cost of our defined benefit retirement and postretirement plans for the three years ended December 31, 2013, were:

(In millions)	U.S. Plans						European Plans
Defined Benefit Retirement Plans	2013		2012		2011		2013			2012			2011
Service cost	$	1.7	$	1.3	$	1.5	$	0.7		$	0.5		$	1.1
Interest cost	0.8		1.1		1.1		6.9			6.6			7.2
Expected return on plan assets	—		—		—		(8.0		)	(7.3		)	(7.8		)
Net amortization	4.0		2.3		1.6		1.2			0.9			0.7
Curtailment gain	—		—		—		—			—			(5.7		)
Net periodic pension cost (income)	$	6.5	$	4.7	$	4.2	$	0.8		$	0.7		$	(4.5	)

(In millions) U.S. Postretirement Plans	2013			2012			2011
Interest cost	0.2			0.3			0.4
Net amortization and deferral	(0.4		)	(0.5		)	(0.3		)
Net periodic postretirement benefit (income) cost	$	(0.2	)	$	(0.2	)	$	0.1

	Defined Benefit Retirement Plans
	U.S. Plans						European Plans						Postretirement Plans
(In millions)	2013			2012			2013			2012			2013			2012
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net loss (gain)	$	1.0		$	3.1		$	(16.5	)	$	12.1		$	(1.6	)	$	0.1
Amortization of actuarial losses	(3.9		)	(2.2		)	(1.3		)	(0.9		)	0.4			0.5
Amortization of prior service credit (cost)	(0.1		)	(0.1		)	—			—			—			—
Effect of foreign exchange	—			—			0.2			1.9			—			—
Total recognized in other comprehensive income (pre-tax)	$	(3.0	)	$	0.8		$	(17.6	)	$	13.1		$	(1.2	)	$	0.6

The Company expects to recognize $2.4 million of net actuarial loss and an immaterial net prior service cost as a component of net periodic pension cost in 2014 for its defined benefit plans.  The recognition of net prior service credit and net actuarial gain as a component of net periodic postretirement benefit cost in 2014 is expected to be immaterial.

The benefit obligation, fair value of plan assets, funded status, and amounts recognized in the consolidated financial statements for our defined benefit retirement plans and postretirement plans, as of and for the years ended December 31, 2013 and 2012, were:

	Defined Benefit Retirement Plans
	U.S. Plans						European Plans						Postretirement Plans
(In millions)	2013			2012			2013			2012			2013			2012
Change in benefit obligation:
Benefit obligation - beginning of year	$	38.6		$	33.4		$	164.8		$	139.8		$	8.1		$	8.0
Service cost	1.7			1.3			0.7			0.5			—			—
Interest cost	0.8			1.1			6.8			6.6			0.2			0.3
Plan participants’ contributions	—			—			0.1			0.1			0.1			0.1
Actuarial loss (gain)	1.1			3.1			(8.3		)	15.2			(1.6		)	0.1
Benefits and expenses paid	(0.3		)	(0.3		)	(4.9		)	(3.7		)	(0.4		)	(0.4		)
Currency translation adjustments	—			—			3.5			6.3			—			—
Benefit obligation - end of year	$	41.9		$	38.6		$	162.7		$	164.8		$	6.4		$	8.1
Change in plan assets:
Fair value of plan assets - beginning of year	$	—		$	—		$	128.3		$	110.8		$	—		$	—
Actual return on plan assets	—			—			16.2			10.3			—			—
Employer contributions	0.3			0.3			5.9			5.7			0.3			0.3
Plan participants’ contributions	—			—			0.1			0.1			0.1			0.1
Benefits and expenses paid	(0.3		)	(0.3		)	(4.9		)	(3.7		)	(0.4		)	(0.4		)
Currency translation adjustments	—			—			3.7			5.1			—			—
Fair value of plan assets - end of year	$	—		$	—		$	149.3		$	128.3		$	—		$	—
Amounts recognized in Consolidated Balance Sheets:
Noncurrent Assets	$	—		$	—		$	2.7		$	—		$	—		$	—
Current liabilities	$	23.8		$	0.3		$	0.4		$	0.4		$	0.6		$	0.6
Non-current liabilities	18.1			38.3			15.7			36.1			5.8			7.5
Total Liabilities	$	41.9		$	38.6		$	16.1		$	36.5		$	6.4		$	8.1
Amounts recognized in Accumulated Other Comprehensive Income:
Actuarial net (loss) gain	$	(7.3	)	$	(10.2	)	$	(32.2	)	$	(49.7	)	$	4.3		$	3.1
Prior service cost	(0.1		)	(0.2		)	(0.1		)	(0.1		)	—			—
Total amounts recognized in accumulated other comprehensive (loss) income	$	(7.4	)	$	(10.4	)	$	(32.3	)	$	(49.8	)	$	4.3		$	3.1

The measurement date used to determine the benefit obligations and plan assets of the defined benefit retirement and postretirement plans was December 31, 2013.

The total accumulated benefit obligation (“ABO”) for the U.S. defined benefit retirement plans was $40.9 million and $38.0 million as of December 31, 2013 and 2012, respectively.  The European Plans’ ABO exceeded plan assets as of December 31, 2013 and 2012, by $11.0 million and $32.3 million, respectively.  These plans’ ABO was $17.5 million and $160.6 million as of December 31, 2013 and 2012, respectively.  The ABO and plan assets of the U.K. Plan are not included in the 2013 disclosures as the plan is no longer underfunded.

As of December 31, 2013 and 2012, the accrued benefit costs for the defined benefit retirement plans and postretirement benefit plans included within “accrued compensation and benefits” was $24.8 million and $1.3 million, respectively, and within “other non-current liabilities” was $39.6 million and $81.9 million, respectively, in the accompanying consolidated balance sheets.

Benefit payments for the plans are expected to be as follows:

(In millions)	U.S. Plans		European Plans		Postretirement Plans
2014	$	23.8	$	3.8	$	0.6
2015	4.5		4.0		0.7
2016	2.2		5.0		0.7
2017	1.1		5.7		0.6
2018	1.4		6.8		0.7
2019-2023	10.2		37.1		2.9
	$	43.2	$	62.4	$	6.2

Fair Values of Pension Assets

The following table presents pension assets measured at fair value at December 31, 2013 and 2012 utilizing the fair value hierarchy discussed in Note 19:

(In millions)	December 31,		Fair Value Measurements at December 31, 2013
Description	2013		Level 1		Level 2		Level 3
Equity funds	$	83.3	$	—	$	83.3	$	—
Active corporate bond fund	58.5		—		58.5		—
Diversified investment funds	2.9		—		—		2.9
Insurance contracts	3.6		—		—		3.6
Cash and cash equivalents	1.0		—		1.0		—
Total assets	$	149.3	$	—	$	142.8	$	6.5

	December 31,		Fair Value Measurements at December 31, 2012
Description	2012		Level 1		Level 2		Level 3
Equity funds	$	70.0	$	—	$	70.0	$	—
Active corporate bond fund	52.1		—		52.1		—
Diversified investment funds	3.1		—		0.3		2.8
Insurance contracts	3.1		—		—		3.1
Total assets	$	128.3	$	—	$	122.4	$	5.9

(In millions) Reconciliation of Level 3 Assets	Balance at January 1, 2013		Actual return on plan assets		Purchases, sales and settlements			Changes due to exchange rates		Balance at December 31, 2013
Diversified investment funds	$	2.8	$	0.2	$	(0.2	)	$	0.1	$	2.9
Insurance contracts	3.1		0.1		0.2			0.2		3.6
Total level 3 assets	$	5.9	$	0.3	$	—		$	0.3	$	6.5

Reconciliation of Level 3 Assets	Balance at January 1, 2012		Actual return on plan assets		Purchases, sales and settlements		Changes due to exchange rates		Balance at December 31, 2012
Diversified investment funds	$	2.5	$	0.2	$	0.1	$	—	$	2.8
Insurance contracts	2.6		0.2		0.2		0.1		3.1
Total level 3 assets	$	5.1	$	0.4	$	0.3	$	0.1	$	5.9

Plan assets are invested in a number of unit linked pooled funds by an independent asset management group.  Equity funds are split 50/50 between U.K. and overseas equity funds (North America, Japan, Asia Pacific and Emerging Markets).  The asset management firm uses quoted prices in active markets to value the assets.

The Bond Allocation is invested in a number of Active Corporate Bond funds which are pooled funds.  The Corporate Bond funds primarily invest in corporate fixed income securities denominated in British Pounds Sterling with credit ratings of BBB- and above.  We use quoted prices in active markets to value the assets.

Diversified investment funds are invested in an external pension fund which in turn invests in a range of asset classes including equities and government and corporate bonds, hedge funds and private equity.  The fair value of the assets as of December 31, 2013 is equal to the fair value of the assets as of January 1, 2013, as provided by the external pension fund, adjusted for cash flows over the year and the estimated investment return on underlying assets over the year.

Insurance contracts contain a minimum guaranteed return.  The fair value of the assets is equal to the total amount of all individual technical reserves plus the non-allocated employer’s financing fund reserves at the valuation date.  The individual technical and financing fund reserves are equal to the accumulated paid contributions taking into account the insurance tarification and any allocated profit sharing return.

The actual allocations for the pension assets at December 31, 2013 and 2012, and target allocations by asset class, are as follows:

	Percentage Of Plan Assets		Target Allocations		Percentage Of Plan Assets		Target Allocations
Asset Class	2013		2013		2012		2012
U.K. Equity Fund	28.1	%	30.6	%	28.0	%	28.6	%
Overseas Equity Fund	27.7		30.6		26.6		28.6
Active Corporate Bond Funds	39.2		34.5		40.6		38.2
Insurance Contracts	2.4		2.4		2.4		2.4
Diversified Investment Funds	1.9		1.9		2.4		2.2
Cash and cash equivalents	0.7		—		—		—
Total	100	%	100	%	100	%	100	%

Assumptions

The assumed discount rate for pension plans reflects the market rates for high-quality fixed income debt instruments currently available.  The Buck Standard Yield Curve was used for the U.S. non-qualified and postretirement plans.  For the U.K. plan, plan cash flows were not available and therefore we considered the derived yield to market on a representative bond of suitable duration taken from Buck’s synthetic bond yield curve.  We believe that the timing and amount of cash flows related to these instruments is expected to match the estimated defined benefit payment streams of our plans. The assumed discount rate for the U.S. non-qualified plans has changed to use individual discount rates for each plan based on their associated cash flows.

Salary increase assumptions are based on historical experience and anticipated future management actions.  For the postretirement health care and life insurance benefit plans, we review external data and our historical trends for health care costs to determine the health care cost trend rates.  Retirement rates are based primarily on actual plan experience and on rates from previously mentioned mortality tables.  Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect the net periodic costs and recorded obligations in such future periods.  While we believe that the assumptions used are appropriate, significant changes in economic or other conditions, employee demographics, retirement and mortality rates, and investment performance may materially impact such costs and obligations.

Assumptions used to estimate the actuarial present value of benefit obligations at December 31, 2013, 2012 and 2011 are shown in the following table. These year-end values are the basis for determining net periodic costs for the following year.

	2013	2012	2011
U.S. defined benefit retirement plans:
Discount rates	0.1% - 4.0%	2.0%	3.2%
Rate of increase in compensation	3.0%	3.0%-5.8%	3.0%
Expected long-term rate of return on plan assets	N/A	N/A	N/A
European defined benefit retirement plans:
Discount rates	3.0% - 4.6%	3.25% - 4.5%	4.5% - 4.75%
Rates of increase in compensation	3.0%	3.0%	3.0%
Expected long-term rates of return on plan assets	4.0% — 6.5%	4.0% — 6.5%	4.25% — 6.5%
Postretirement benefit plans:
Discount rates	3.8%	2.75%	3.85%

The following table presents the impact that a one-percentage-point increase and a one-percentage-point decrease in the expected long-term rate of return and discount rate would have on the 2014 pension expense, and the impact on our retirement obligation as of December 31, 2013 for a one-percentage-point change in the discount rate:

	Non-Qualified			Retiree Medical			U.K. Retirement
(In millions)	Pension Plans			Plans			Plan
Periodic pension expense
One-percentage-point increase:
Expected long-term rate of return	$	N/A		$	N/A		$	(1.4	)
Discount rate	$	(0.1	)	$	—		$	(0.2	)
One-percentage-point decrease:
Expected long-term rate of return	$	N/A		$	N/A		$	1.4
Discount rate	$	0.3		$	—		$	0.4
Retirement obligation
One-percentage-point increase in discount rate	$	(1.1	)	$	(0.4	)	$	(21.2	)
One-percentage-point decrease in discount rate	$	1.2		$	0.4		$	26.8

The annual rate of increase in the per capita cost of covered health care benefits is assumed to be 8.0% for medical non-Medicare eligible, 6.0% for Medicare eligible and 5.0% for dental and vision for 2014.  The medical rates are assumed to gradually decline to 4.5% by 2021, whereas dental and vision rates are assumed to remain constant at 5.0%.  A one-percentage-point increase and a one-percentage-point decrease in the assumed health care cost trend would have an insignificant impact on the total of service and interest cost components, and would have an unfavorable and a favorable impact of approximately $0.2 million and $0.2 million on the postretirement benefit obligation for both 2013 and 2012, respectively.

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Retirement and Other Postretirement Benefit Plans (Details 4) (USD $) In Millions, unless otherwise specified	12 Months Ended																					12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 U.S. Non-qualified Defined Benefit Retirement Plans	Dec. 31, 2012 U.S. Non-qualified Defined Benefit Retirement Plans	Dec. 31, 2011 U.S. Non-qualified Defined Benefit Retirement Plans	Dec. 31, 2013 U.S. Non-qualified Defined Benefit Retirement Plans Minimum	Dec. 31, 2012 U.S. Non-qualified Defined Benefit Retirement Plans Minimum	Dec. 31, 2013 U.S. Non-qualified Defined Benefit Retirement Plans Maximum	Dec. 31, 2012 U.S. Non-qualified Defined Benefit Retirement Plans Maximum	Dec. 31, 2013 U.S. Postretirement Plans	Dec. 31, 2012 U.S. Postretirement Plans	Dec. 31, 2011 U.S. Postretirement Plans	Dec. 31, 2013 European Defined Benefit Retirement Plans	Dec. 31, 2012 European Defined Benefit Retirement Plans	Dec. 31, 2011 European Defined Benefit Retirement Plans	Dec. 31, 2013 European Defined Benefit Retirement Plans Minimum	Dec. 31, 2012 European Defined Benefit Retirement Plans Minimum	Dec. 31, 2011 European Defined Benefit Retirement Plans Minimum	Dec. 31, 2013 European Defined Benefit Retirement Plans Maximum	Dec. 31, 2012 European Defined Benefit Retirement Plans Maximum	Dec. 31, 2011 European Defined Benefit Retirement Plans Maximum	Dec. 31, 2013 United Kingdom defined benefit plan (the U.K. Plan)	Dec. 31, 2013 Retiree Medical Plans
Assumptions used to estimate the actuarial present value of benefit obligations
Discount rates (as a percent)				2.00%	3.20%	0.10%		4.00%		3.80%	2.75%	3.85%				3.00%	3.25%	4.50%	4.60%	4.50%	4.75%
Rate of increase in compensation (as a percent)			3.00%		3.00%		3.00%		5.80%				3.00%	3.00%	3.00%
Expected long-term rate of return on plan assets (as a percent)																4.00%	4.00%	4.25%	6.50%	6.50%	6.50%
Impact of one-percentage-point increase and a one-percentage-point decrease in the expected long-term rate of return and discount rate on periodic pension expense in next fiscal year
One-percentage-point increase in expected long-term rate of return																						$ (1.4)
One-percentage-point increase in discount rate			(0.1)																			(0.2)
One-percentage-point decrease in expected long-term rate of return																						1.4
One-percentage-point decrease in discount rate			0.3																			0.4
Impact of one-percentage-point increase and a one-percentage-point decrease in the discount rate on retirement obligation as of December 31, 2013
One-percentage-point increase in discount rate			(1.1)																			(21.2)	(0.4)
One-percentage-point decrease in discount rate			1.2																			26.8	0.4
Assumed annual rate of increase in the per capita cost of covered health care benefits for non-medical care (as a percent)	8.00%
Assumed annual rate of increase in the per capita cost of covered health care benefits for medical care (as a percent)	6.00%
Assumed annual rate of increase in the per capita cost of covered health care benefits for dental and vision care (as a percent)	5.00%
Ultimate annual rate of increase in the per capita cost of covered health care benefits for medical care (as a percent)	4.50%
Ultimate annual rate of increase in the per capita cost of covered health care benefits for dental and vision care (as a percent)	5.00%
Impact of a one-percentage-point increase in the assumed health care cost trend on postretirement benefit obligation	0.2	0.2
Impact of a one-percentage-point decrease in the assumed health care cost trend on postretirement benefit obligation	$ 0.2	$ 0.2

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Debt

12 Months Ended

Dec. 31, 2013

Debt

Debt

Note 5 - Debt

(In millions)	December 31, 2013		December 31, 2012
Foreign operation’s working capital line of credit	$	3.0	$	4.8
Current maturities of capital lease and other obligations	—		1.8
Current maturities of term loan	—		10.0
Short-term borrowings and current maturities of long-term debt	3.0		16.6
Senior secured credit facility —revolving loan due 2018	292.0		—
Senior secured credit facility —term loan due 2015	—		75.0
Senior secured credit facility — revolving loan due 2015	—		165.0
Long-term debt	292.0		240.0
Total debt	$	295.0	$	256.6

Estimated Fair Values of Notes Payable

We did not have any notes payable outstanding at December 31, 2013.

Senior Secured Credit Facility

In June 2013 we entered into a new $600 million senior secured revolving credit facility which matures in June 2018.  The new facility replaces the Company’s previous senior secured credit facility ($82.5 million term loan and a $360 million revolving loan) that would have expired in July 2015.  At the current leverage ratio the new rate is LIBOR + 1.25% or 75 basis points lower than the prior facility.  In addition to the lower interest rates and fees on undrawn balances, the new facility provides greater flexibility. The proceeds from the new facility were used to repay all amounts, and terminate all commitments outstanding under the Company’s credit agreement and to pay fees and expenses in connection with the refinancing.  As a result of the refinancing, the Company accelerated certain unamortized financing costs of the credit facility being replaced and the deferred expense on related interest rate swaps incurring a pretax charge of $1.0 million in the second quarter of 2013.

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

Additionally, at December 31, 2013 we have interest rate swaps totaling approximately $150 million that expire before September 2016.  These interest rate swaps are designated as cash flow hedges to our term loan.  The interest rate swaps trade LIBOR for a fixed rate at an average rate of 0.81567%.

6.75% Senior Subordinated Notes, due 2015

On February 1, 2005, we issued $225 million of 6.75% senior subordinated notes due 2015.  The notes were unsecured senior subordinated obligations of Hexcel Corporation.  Interest accrued at the rate of 6.75% per annum and were payable semi-annually in arrears on February 1 and August 1.

In June 2012 and February 2011, we redeemed $73.5 million and $150 million of these notes at a call premium of 1.125% and 2.25%, respectively, and purchased $1.5 million of notes on the open market.  The redemptions were primarily funded by a $75 million and $135 million add-on to the Facility in 2012 and December 2010.  As a result of the redemptions, we accelerated the unamortized financing costs of the senior subordinated notes being redeemed and expensed the call premium incurring a pretax charge of $1.1 million (after tax of $0.01 per diluted share) and $4.9 million (after tax of $0.03 per diluted share) in 2012 and 2011, respectively.

Other Credit Facility

We have a $10.0 million borrowing facility for working capital needs of our Chinese entity with an outstanding balance of $3.0 million on December 31, 2013.  The facility contains a $10.0 million revolving credit line.  These funds can only be used locally, and accordingly, we do not include this facility in our borrowing capacity disclosures.  The facility is guaranteed by Hexcel Corporation, but is uncommitted and cancellable by the lender at any time.

Aggregate Maturities of Debt

The table below reflects aggregate scheduled maturities of debt as of December 31, 2013.

Payable during the years ending December 31:	(In millions)
2014	$	3.0
2015	—
2016	—
2017	—
2018	292.0
Total debt	$	295.0

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Leasing Arrangements

12 Months Ended

Dec. 31, 2013

Leasing Arrangements

Leasing Arrangements

Note 6 - Leasing Arrangements

On February 1, 2013 we exercised our purchase option on a capital lease for a building.  In March 2013 we sold the building.  The related assets, accumulated depreciation, and related liability balances under capital leasing arrangements, as of December 31, 2012 and 2011, were:

(In millions)	2012			2011
Property, plant and equipment	$	3.7		$	3.7
Less accumulated depreciation	(1.6		)	(1.6		)
Net property, plant and equipment	$	2.1		$	2.1
Capital lease obligations	$	1.8		$	2.0
Less current maturities	(1.8		)	(0.2		)
Long-term capital lease obligations, net	$	—		$	1.8

Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.  We recognize rental expense on operating leases straight-line over the term of a lease.  Total rental expense was $16.1 million in 2013, $15.4 million in 2012 and $15.2 million in 2011.

Scheduled future minimum lease payments as of December 31, 2013 were:

(In millions)
Payable during the years ending December 31:	Operating Leases
2014	9.1
2015	5.3
2016	4.1
2017	2.2
2018	1.8
Thereafter	9.3
Total minimum lease payments	$	31.8

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes

Income Taxes

Note 8 - Income Taxes

Income before income taxes and the provision for income taxes, for the three years ended December 31, 2013, were as follows:

(In millions)	2013		2012		2011
Income before income taxes:
U.S.	$	149.8	$	137.4	$	106.3
International	112.8		100.3		69.2
Total income before income taxes	$	262.6	$	237.7	$	175.5
Provision for income taxes:
Current:
U.S.	$	30.5	$	36.9	$	10.6
International	29.2		20.7		7.6
Current provision for income taxes	59.7		57.6		18.2
Deferred:
U.S.	13.1		10.4		24.4
International	3.2		6.1		(1.0		)
Deferred provision for income taxes	16.3		16.5		23.4
Total provision for income taxes	$	76.0	$	74.1	$	41.6

A reconciliation of the provision for income taxes at the U.S. federal statutory income tax rate of 35% to the effective income tax rate, for the three years ended December 31, 2013, is as follows:

(In millions)	2013			2012			2011
Provision for taxes at U.S. federal statutory rate	$	91.9		$	83.2		$	61.5
State and local taxes, net of federal benefit	2.0			2.2			2.2
Foreign effective rate differential	(12.5		)	(10.3		)	(8.4		)
Research and Development tax credits	(2.8		)	(0.7		)	(2.0		)
Other	(2.6		)	0.5			(0.2		)
Tax Settlement	—			0.2			(5.5		)
Change in valuation allowance	—			(1.0		)	(6.0		)
Total provision for income taxes	$	76.0		$	74.1		$	41.6

The 2013 tax provision includes a benefit for U.S. Research and Development (“R&D”) tax credits comprised of the current year R&D tax credit and a catch-up adjustment for the prior year R&D tax credit which was excluded from last years’ provision due to the expiration of the tax credit at December 31, 2011.  The current R&D tax credit expired December 31, 2013.

Included in the 2011 provision were certain tax benefits relating to the reversal of valuation allowances on net operating losses in certain foreign jurisdictions and U.S. foreign tax credit carryforwards as it became more likely than not that these deferred tax assets would be realized.  The 2011 provision also reflects the favorable impact of a tax audit settlement in one of the foreign jurisdictions.

As of December 31, 2013 and 2012, we did not have a U.S. income tax provision for undistributed earnings of international subsidiaries.  We do not currently have any specific plans to repatriate funds from our international subsidiaries; however we may do so in the future if a dividend can be remitted with no material tax impact.  Such earnings are considered to be permanently reinvested.  Estimating the tax liability that would result if these earnings were repatriated is not practicable at this time.

Deferred Income Taxes

Deferred income taxes result from tax attributes including foreign tax credits, net operating loss carryforwards and temporary differences between the recognition of items for income tax purposes and financial reporting purposes.  Principal components of deferred income taxes as of December 31, 2013 and 2012 are:

(In millions)	2013			2012
Assets
Net operating loss carryforwards	$	63.6		$	56.2
Unfunded pension liability and other postretirement obligations	16.0			15.3
Advanced payments from foreign affiliates	28.9			22.3
Tax credit carryforwards	11.2			35.4
Stock based compensation	14.4			12.6
Other comprehensive income	6.0			14.0
Reserves and other	18.9			14.7
Subtotal	159.0			170.5
Valuation allowance	(62.3		)	(49.4		)
Total assets	$	96.7		$	121.1
Liabilities
Accelerated depreciation	(63.4		)	(50.1		)
Accelerated amortization	(9.2		)	(8.2		)
Other	(0.8		)	(0.2		)
Total liabilities	$	(73.4	)	$	(58.5	)
Net deferred tax asset	$	23.3		$	62.6

Deferred tax assets and deferred tax liabilities as presented in the consolidated balance sheets as of December 31, 2013 and 2012 are as follows and are recorded in prepaid expenses and other current assets, deferred tax assets, other accrued liabilities and other non-current liabilities in the consolidated balance sheets:

(In millions)	2013			2012
Current deferred tax assets, net	$	63.3		$	62.5
Current deferred tax liability, net	(1.4		)	(0.2		)
Long-term deferred tax assets, net	10.3			15.4
Long-term deferred tax liability, net	(48.9		)	(15.1		)
Net deferred tax assets	$	23.3		$	62.6

In July 2013, the FASB issued ASU No. 2013-11, which requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward on a jurisdictional basis.  ASU 2013-11 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2014.  Early adoption is permitted and the Company has chosen to adopt ASU 2013-11 in the fourth quarter of 2013. The adoption of this standard resulted in a reduction of the Company’s long term deferred tax assets by $21.4 million.

The deferred tax assets for the respective periods were assessed for recoverability and, where applicable, a valuation allowance was recorded to reduce the total deferred tax asset to an amount that will, more likely than not, be realized in the future. The net change in the total valuation allowance for the years ended December 31, 2013 and 2012 was an increase of $12.9 million and $10.0 million, respectively.  The valuation allowance as of December 31, 2013 and 2012 relates primarily to net operating loss carryforwards of our foreign subsidiaries, and certain state net operating loss carryforwards for which we have determined, based upon historical results and projected future book and taxable income levels, that a valuation allowance should continue to be maintained.

Although realization is not assured, we have concluded that it is more-likely-than-not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The amount of the net deferred tax assets considered realizable, however, could be reduced in the near term if actual future income or income tax rates are lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.

Net Operating Loss & Tax Credit Carryforwards

At December 31, 2013, we had tax credit carryforwards for U.S. tax purposes of $28.8 million available to offset future income taxes.  These credits will begin to expire if not utilized in 2014.

We also had net operating loss carryforwards for foreign income tax purposes of $231.8 million, for which there are valuation allowances of $214.8 million as of December 31, 2013.  Our foreign net operating losses can be carried forward without limitation in Belgium, Luxembourg and U.K.  The carryforward period in Spain and China is limited to 18 and 5 years, respectively.  We have a full valuation allowance against certain foreign net operating losses for which the Company believes it is not more likely than not that the net operating losses will be utilized.

Uncertain Tax Positions

Our unrecognized tax benefits at December 31, 2013, relate to various Foreign and U.S. jurisdictions.

The following table summarizes the activity related to our unrecognized tax benefits:

	Unrecognized Tax Benefits
(In millions)	2013			2012			2011
Balance as of January 1,	$	32.6		$	12.5		$	20.1
Additions based on tax positions related to the current year	5.2			1.7			1.5
Additions/(reductions) for tax positions of prior years	5.7			19.0			(1.1		)
Decreases relating to settlements with tax authorities	—			—			(6.7		)
Expiration of the statute of limitations for the assessment of taxes	(1.3		)	(0.8		)	(1.6		)
Other, including currency translation	0.5			0.2			0.3
Balance as of December 31,	$	42.7		$	32.6		$	12.5

Included in the unrecognized tax benefits of $42.7 million at December 31, 2013 was $39 million of tax benefits that, if recognized, would impact our annual effective tax rate.  In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations. The Company recognized $0.7 million, $0.1 million, ($0.1) million of interest expense (income) related to the above unrecognized tax benefits in 2013, 2012 and 2011, respectively.  The Company had accrued interest of approximately $1.6 million and $0.9 million as of December 31, 2013 and 2012, respectively.  During 2013 we did not reverse any interest and in 2012, we reversed $0.1 million related to the unrecognized tax benefits.

We are subject to taxation in the U.S. and various states and foreign jurisdictions.  The U.S. tax returns have been audited through 2007.  Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Austria (2007 onward), Belgium (2011 onward), France (2011 onward), Spain (2004 onward) and U.K. (2011 onward).  We are currently under examination in certain of the foreign jurisdictions.

As of December 31, 2013, we had uncertain tax positions for which it is reasonably possible that amounts of unrecognized tax benefits could significantly change over the next year.  These uncertain tax positions relate to our tax returns from 2004 onward, some of which are currently under examination by certain European tax authorities.  During 2011, the Company settled an audit with foreign tax authorities in one of the jurisdictions under examination.  The favorable settlement resulted in a reduction of uncertain tax benefits of approximately $5.5 million which was recognized in 2011.  As of December 31, 2013, the Company has not classified any of the unrecognized tax benefits as a current liability as it does not expect to settle any of the tax positions under examinations in various jurisdictions within the next twelve months.

We expect that the amount of unrecognized tax benefits will continue to change in the next twelve months as a result of ongoing tax deductions, the resolution of audits and the passing of the statute of limitations. We are unable to make a reliable estimate of the eventual cash flows of the $42.7 million of unrecognized tax benefits.

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Capital Stock (Details 2) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	6 Months Ended	12 Months Ended			1 Months Ended
	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jan. 31, 2014 Subsequent event	Jul. 31, 2013 Maximum	Dec. 31, 2012 Maximum
Capital Stock
Additional authorized amount of outstanding common stock to be repurchased							$ 150	$ 50
Authorized amount to repurchase outstanding common stock	40
Aggregate shares repurchased	896,653	1,573,588	2,600,000	300,000	500,000
Total cost of shares repurchased		$ 50.0	$ 89.5	$ 8.1	$ 4.9
Repurchased shares settled						148,990

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Stock-Based Compensation (Details 2) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Assumptions used in determining the estimated fair value of stock options
Dividends paid	$ 0	$ 0	$ 0
Non-qualified stock options
Summary of option activity
Vesting period	5 years 11 months 16 days	6 years 3 months 4 days	6 years 5 months 12 days	5 years 1 month 28 days
Expiration from date of grant	10 years
Outstanding at the beginning of the period	3.3	3.4	4.5
Options granted	0.3	0.5	0.6
Options exercised	(0.6)	(0.6)	(1.6)
Options expired or forfeited			(0.1)
Outstanding at the end of the period	3.0	3.3	3.4	4.5
Weighted-Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 15.67	$ 13.55	$ 10.84
Options granted (in dollars per share)	$ 28.27	$ 25.03	$ 19.19
Options exercised (in dollars per share)	$ 14.44	$ 10.41	$ 8.17
Options expired or forfeited (in dollars per share)		$ 21.82	$ 12.93
Outstanding at the end of the period (in dollars per share)	$ 17.30	$ 15.67	$ 13.55	$ 10.84
Weighted-Average Remaining Contractual Life
Weighted-Average Remaining Contractual Life	5 years 11 months 16 days	6 years 3 months 4 days	6 years 5 months 12 days	5 years 1 month 28 days
Other disclosures
Aggregate intrinsic value of outstanding options	82.5	37.4
Aggregate intrinsic value of exercisable options	66.9	29.5
Total intrinsic value of options exercised	10.9	9.1
Total number of options exercisable (in shares)	2.2	2.2
Weighted average exercise price of options exercisable (in dollars per share)	$ 14.09	$ 13.57
Total unrecognized compensation cost on nonvested options	$ 1.6	$ 2.1
Information about outstanding non-qualified stock options
Exercise price, low end of range (in dollars per share)	$ 7.83
Exercise price, high end of range (in dollars per share)	$ 28.27
Number of Options Outstanding	3.0
Weighted Average Remaining Life	5 years 11 months 16 days
Weighted average exercise price of options Outstanding (in dollars per share)	$ 17.30
Number of Options Exercisable (in shares)	2.2
Weighted average exercise price of options exercisable (in dollars per share)	$ 14.09
Assumptions used in determining the estimated fair value of stock options
Risk-free interest rate (as a percent)	1.08%	0.83%	1.88%
Expected option life, Executive	6 years 3 months 25 days	5 years 5 months 8 days	4 years 10 months 2 days
Expected option life, Non-Executive	4 years 9 months 18 days	4 years 5 months 12 days	4 years 8 months 16 days
Volatility (as a percent)	40.12%	45.76%	44.08%
Weighted-average fair value per option granted	$ 11.07	$ 10.24	$ 7.65
Period of historical option activity considered to determine expected option life	10 years
Number of separate employee groups	2
Non-qualified stock options | Minimum
Other disclosures
Period over which unrecognized compensation costs will be recognized	1 year
Non-qualified stock options | Maximum
Other disclosures
Period over which unrecognized compensation costs will be recognized	3 years
Non-qualified stock options | Range of exercise prices $7.83 - $10.90
Information about outstanding non-qualified stock options
Exercise price, low end of range (in dollars per share)	$ 7.83
Exercise price, high end of range (in dollars per share)	$ 10.90
Number of Options Outstanding	1.1
Weighted Average Remaining Life	5 years 7 months 2 days
Weighted average exercise price of options Outstanding (in dollars per share)	$ 9.38
Number of Options Exercisable (in shares)	1.1
Weighted average exercise price of options exercisable (in dollars per share)	$ 9.38
Non-qualified stock options | Range of exercise prices $14.51 - $21.11
Information about outstanding non-qualified stock options
Exercise price, low end of range (in dollars per share)	$ 14.51
Exercise price, high end of range (in dollars per share)	$ 21.11
Number of Options Outstanding	1.0
Weighted Average Remaining Life	4 years 11 months 19 days
Weighted average exercise price of options Outstanding (in dollars per share)	$ 18.54
Number of Options Exercisable (in shares)	0.8
Weighted average exercise price of options exercisable (in dollars per share)	$ 17.45
Non-qualified stock options | Range of exercise prices $22.00 - $28.27
Information about outstanding non-qualified stock options
Exercise price, low end of range (in dollars per share)	$ 22.00
Exercise price, high end of range (in dollars per share)	$ 28.27
Number of Options Outstanding	0.9
Weighted Average Remaining Life	7 years 6 months 29 days
Weighted average exercise price of options Outstanding (in dollars per share)	$ 25.79
Number of Options Exercisable (in shares)	0.3
Weighted average exercise price of options exercisable (in dollars per share)	$ 23.54

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Capital Stock (Details)	3 Months Ended	6 Months Ended	12 Months Ended
	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Common stock:
Balance, beginning of year		102,400,000	102,400,000	101,000,000	99,500,000
Activity under stock plans			1,600,000	1,400,000	1,500,000
Balance, end of year	104,000,000		104,000,000	102,400,000	101,000,000
Treasury stock:
Balance, beginning of year		2,500,000	2,500,000	2,200,000	2,200,000
Issued under stock plans					(500,000)
Repurchased	896,653	1,573,588	2,600,000	300,000	500,000
Balance, end of year	5,100,000		5,100,000	2,500,000	2,200,000
Common stock outstanding	98,900,000		98,900,000	99,900,000	98,800,000

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Debt (Tables)

12 Months Ended

Dec. 31, 2013

Debt

Schedule of debt and capital lease obligations

(In millions)	December 31, 2013		December 31, 2012
Foreign operation’s working capital line of credit	$	3.0	$	4.8
Current maturities of capital lease and other obligations	—		1.8
Current maturities of term loan	—		10.0
Short-term borrowings and current maturities of long-term debt	3.0		16.6
Senior secured credit facility —revolving loan due 2018	292.0		—
Senior secured credit facility —term loan due 2015	—		75.0
Senior secured credit facility — revolving loan due 2015	—		165.0
Long-term debt	292.0		240.0
Total debt	$	295.0	$	256.6

Schedule of the aggregate scheduled maturities of debt

Payable during the years ending December 31:	(In millions)
2014	$	3.0
2015	—
2016	—
2017	—
2018	292.0
Total debt	$	295.0

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Inventories (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Inventories
Raw materials	$ 103.4	$ 95.0
Work in progress	62.2	51.2
Finished goods	99.7	86.6
Total inventories	$ 265.3	$ 232.8

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

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, health and safety matters.  We estimate and accrue our liabilities resulting from such matters based on a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs.  Such estimates are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

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

Environmental Matters

We are subject to various U.S. and international federal, state and local environmental, and health and safety laws and regulations.  We are also subject to liabilities arising under the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”), the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and similar state and international laws and regulations that impose responsibility for the control, remediation and abatement of air, water and soil pollutants and the manufacturing, storage, handling and disposal of hazardous substances and waste.

We have been named as a potentially responsible party (“PRP”) with respect to several hazardous waste disposal sites that we do not own or possess, which are included on, or proposed to be included on, the Superfund National Priority List of the U.S. Environmental Protection Agency (“EPA”) or on equivalent lists of various state governments.  Because CERCLA allows for joint and several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs.  We believe, based on the amount and nature of our waste, 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 been remediating this site in accordance with a State approved plan and continue to do so under the New Jersey Licensed Site Remediation Professional program.  Hexcel has completed the primary remediation activities and we are in the process of conducting testing to support a monitored natural attenuation (MNA) program.  The accrual is $1.7 million at December 31, 2013.

Lower Passaic River Study Area

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

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.  At a case management conference held in March 2013, the Court announced that most third-party defendants had reached a tentative settlement with the State of New Jersey which, if approved by the Court, would end the state court litigation as to participating third-party defendants.  We committed to join the settlement and if the settlement is approved by the Court, we would pay New Jersey $0.3 million.  This amount was accrued in the first quarter of 2013.  In December 2013, the Court entered the settlement and entered an order dismissing participating third-party defendants from the litigation.  We have paid our settlement amount into escrow pending any appeal of the Court’s orders.  The scope of Hexcel’s continued involvement in the litigation depends on whether the settlement becomes final and no longer subject to appeal.

Kent, Washington Site

We were party to a cost-sharing agreement regarding the operation of certain environmental remediation systems necessary to satisfy a post-closure care permit issued to a previous owner of our Kent, Washington site by the EPA.  Under the terms of the cost-sharing agreement, we were obligated to reimburse the previous owner for a portion of the cost of the required remediation activities.  The previous owner, who also continues to own an adjacent site, has installed certain remediation and isolation technologies and is operating those in accordance with an order agreed with the State of Washington.  This isolation is expected to ultimately prevent further migration of contaminants to our site and enable us to perform a cleanup of our site.  We and the Washington Department of Ecology have reached an agreed order to perform certain cleanup activities on our site by certain deadlines, and we are in full compliance with the order as modified.  The total accrued liability related to this matter was $0.8 million at December 31, 2013.

Omega Chemical Corporation Superfund Site, Whittier, CA

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

Environmental remediation reserve activity for the three years ended December 31, 2013 was as follows:

	For the year ended December 31,
(In millions)	2013			2012			2011
Beginning remediation accrual balance	$	6.6		$	5.0		$	7.3
Current period expenses	0.9			5.0			3.4
Cash expenditures	(3.6		)	(3.4		)	(5.7		)
Ending remediation accrual balance	$	3.9		$	6.6		$	5.0
Capital expenditures for environmental matters	$	4.6		$	2.4		$	4.1

Environmental Summary

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 December 31, 2013 and 2012, our aggregate environmental related accruals were $3.9 million and $6.6 million, respectively.  As of December 31, 2013 and 2012, $3.4 million and $4.2 million, respectively, were included in current other accrued liabilities, with the remainder included in other non-current liabilities.  As related to certain environmental matters, except for the Lodi site, the accruals were estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued, for those sites where we are able to estimate our liability, at the high end of the range of possible outcomes, our accrual would have been $6.5 million and $9.2 million at December 31, 2013 and 2012, respectively.

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 $3.6 million and $3.4 million for the years ended December 31, 2013 and 2012, respectively.  In addition, our operating costs relating to environmental compliance charged directly to expense were $13.5 million and $13.1 million for the years ended December 31, 2013 and 2012. 

Product Warranty

Warranty expense for the years ended December 31, 2013, 2012 and 2011, and accrued warranty cost, included in “other accrued liabilities” in the consolidated balance sheets were as follows:

(In millions)	Product Warranties
Balance as of December 31, 2010	$	4.3
Warranty expense	2.0
Deductions and other	(0.6		)
Balance as of December 31, 2011	$	5.7
Warranty expense	2.2
Deductions and other	(2.8		)
Balance as of December 31, 2012	$	5.1
Warranty expense	1.2
Deductions and other	(1.8		)
Balance as of December 31, 2013	$	4.5

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Non-operating Expense

12 Months Ended

Dec. 31, 2013

Non-operating Expense

Non-operating Expense

Note 18 — Non-operating Expense

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

In June 2012 and February 2011, we redeemed $73.5 million and $150 million of our 6.75% senior subordinated notes at a call premium of 1.125% and 2.25%, respectively.  As a result of the redemption, we accelerated the unamortized financing costs of the senior subordinated notes redeemed and expensed the call premium incurring a pretax charge of $1.1 million and $4.9 million, in 2012 and 2011, respectively.

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Significant Accounting Policies (Details 2) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Debt financing costs
Deferred financing cost net of accumulated amortization	$ 5.0	$ 4.6
Product Warranty
Warranty expense	$ 1.2	$ 2.2	$ 2.0
Building and improvements | Minimum
Property, plant and equipment
Useful life	10 years
Building and improvements | Maximum
Property, plant and equipment
Useful life	40 years
Machinery and equipment | Minimum
Property, plant and equipment
Useful life	3 years
Machinery and equipment | Maximum
Property, plant and equipment
Useful life	25 years
Machinery and equipment | Useful lives
Property, plant and equipment
Useful life		25 years	20 years
Other machinery and equipment | Useful lives
Property, plant and equipment
Useful life		20 years
Other machinery and equipment | Useful lives | Minimum
Property, plant and equipment
Useful life			10 years
Other machinery and equipment | Useful lives | Maximum
Property, plant and equipment
Useful life			12 years

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Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2013

Derivative Financial Instruments

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

(In millions)	2013			2012			2011
Unrealized gains (losses) at beginning of period	$	2.4		$	(4.5	)	$	(0.2	)
(Losses) gains reclassified to net sales	(0.3		)	2.4			(2.2		)
Increase (decrease) in fair value, net of tax of $2.8 million, $1.9 million and ($0.8) million in 2013, 2012 and 2011 respectively	5.1			4.5			(2.1		)
Unrealized gains (losses) at end of period	$	7.2		$	2.4		$	(4.5	)

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Consolidated Statements of Comprehensive Income (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Consolidated Statements of Comprehensive Income
Net income	$ 187.9	$ 164.3	$ 135.5
Other comprehensive income (loss)
Currency translation adjustments	19.6	11.7	(10.1)
Net unrealized pension and other benefit actuarial gains (losses) and prior service credits, net of tax	16.9	(10.8)	(5.0)
Net unrealized gains (losses) on financial instruments, net of tax	6.1	7.0	(9.6)
Other comprehensive income (loss)	42.6	7.9	(24.7)
Comprehensive income	$ 230.5	$ 172.2	$ 110.8

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Inventories

12 Months Ended

Dec. 31, 2013

Inventories

Inventories

Note 2 — Inventories

	December 31,
(In millions)	2013		2012
Raw materials	$	103.4	$	95.0
Work in progress	62.2		51.2
Finished goods	99.7		86.6
Total inventories	$	265.3	$	232.8

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Retirement and Other Postretirement Benefit Plans (Details 2) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Retirement and Other Postretirement Benefit Plans
Total plan assets invested in active corporate bond funds (as a percent)	100.00%	100.00%
Curtailment gain			$ (5.7)
Net Periodic Pension Expense
Defined benefit retirement plans	7.3	5.4	(0.3)
Union sponsored multi-employer pension plan	1.6	1.2	0.9
Retirement savings plans-matching contributions	3.0	3.3	2.9
Retirement savings plans-profit sharing contributions	6.7	7.6	8.0
Net periodic expense	18.6	17.5	11.5
Net periodic benefit costs of defined benefit retirement plans
Curtailment gain			(5.7)
Net periodic benefit cost	7.3	5.4	(0.3)
Change in plan assets:
Fair value of plan assets - beginning of year	128.3
Fair value of plan assets - end of year	149.3	128.3
U.S. Non-qualified Defined Benefit Retirement Plans
Retirement and Other Postretirement Benefit Plans
Expected employer contribution in next fiscal year	23.8
Net Periodic Pension Expense
Defined benefit retirement plans	6.5	4.7	4.2
Net periodic benefit costs of defined benefit retirement plans
Service cost	1.7	1.3	1.5
Interest cost	0.8	1.1	1.1
Net amortization and deferral	4.0	2.3	1.6
Net periodic benefit cost	6.5	4.7	4.2
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net loss (gain)	1.0	3.1
Amortization of actuarial losses	(3.9)	(2.2)
Amortization of prior service credit (cost)	(0.1)	(0.1)
Total recognized in other comprehensive income (pre-tax)	(3.0)	0.8
Estimated net actuarial loss to be recognized as a component of net periodic pension cost	2.4
Change in benefit obligation:
Benefit obligation - beginning of year	38.6	33.4
Service cost	1.7	1.3	1.5
Interest cost	0.8	1.1	1.1
Actuarial loss (gain)	1.1	3.1
Benefits and expenses paid	(0.3)	(0.3)
Benefit obligation - end of year	41.9	38.6	33.4
Change in plan assets:
Employer contribution to defined benefit retirement plans	0.3	0.3
Benefits and expenses paid	(0.3)	(0.3)
Amounts recognized on the balance sheet:
Current liabilities	23.8	0.3
Other non-current liabilities	18.1	38.3
Total accrued benefit	41.9	38.6
Amounts recognized in Accumulated Other Comprehensive Income:
Actuarial net (loss) gain	(7.3)	(10.2)
Prior service cost	(0.1)	(0.2)
Total amounts recognized in accumulated other comprehensive (loss) income	(7.4)	(10.4)
Total accumulated benefit obligation	40.9	38.0
Defined benefit retirement plans and postretirement benefit plans included within accrued compensation and benefits	24.8	1.3
Defined benefit retirement plans and postretirement benefit plans included within other non-current liabilities	39.6	81.9
Expected benefit payments for the plans
2014	23.8
2015	4.5
2016	2.2
2017	1.1
2018	1.4
2019-2023	10.2
Aggregate expected benefit payments	43.2
U.S. Postretirement Plans
Retirement and Other Postretirement Benefit Plans
Expected employer contribution in next fiscal year	0.6
Net Periodic Pension Expense
Defined benefit retirement plans	(0.2)	(0.2)	0.1
Net periodic benefit costs of defined benefit retirement plans
Interest cost	0.2	0.3	0.4
Net amortization and deferral	(0.4)	(0.5)	(0.3)
Net periodic benefit cost	(0.2)	(0.2)	0.1
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net loss (gain)	(1.6)	0.1
Amortization of actuarial losses	0.4	0.5
Total recognized in other comprehensive income (pre-tax)	(1.2)	0.6
Change in benefit obligation:
Benefit obligation - beginning of year	8.1	8.0
Interest cost	0.2	0.3	0.4
Plan participants' contributions	0.1	0.1
Actuarial loss (gain)	(1.6)	0.1
Benefits and expenses paid	(0.4)	(0.4)
Benefit obligation - end of year	6.4	8.1	8.0
Change in plan assets:
Employer contribution to defined benefit retirement plans	0.3	0.3
Plan participants' contributions	0.1	0.1
Benefits and expenses paid	(0.4)	(0.4)
Amounts recognized on the balance sheet:
Current liabilities	0.6	0.6
Other non-current liabilities	5.8	7.5
Total accrued benefit	6.4	8.1
Amounts recognized in Accumulated Other Comprehensive Income:
Actuarial net (loss) gain	4.3	3.1
Total amounts recognized in accumulated other comprehensive (loss) income	4.3	3.1
Expected benefit payments for the plans
2014	0.6
2015	0.7
2016	0.7
2017	0.6
2018	0.7
2019-2023	2.9
Aggregate expected benefit payments	6.2
European Defined Benefit Retirement Plans
Retirement and Other Postretirement Benefit Plans
Curtailment gain			(5.7)
Service credits recognized as a curtailment gain per diluted share (in dollars per share)	$ 0.04
Net Periodic Pension Expense
Defined benefit retirement plans	0.8	0.7	(4.5)
Net periodic benefit costs of defined benefit retirement plans
Service cost	0.7	0.5	1.1
Interest cost	6.9	6.6	7.2
Expected return on plan assets	(8.0)	(7.3)	(7.8)
Net amortization and deferral	1.2	0.9	0.7
Curtailment gain			(5.7)
Net periodic benefit cost	0.8	0.7	(4.5)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net loss (gain)	(16.5)	12.1
Amortization of actuarial losses	(1.3)	(0.9)
Effect of foreign exchange	0.2	1.9
Total recognized in other comprehensive income (pre-tax)	(17.6)	13.1
Change in benefit obligation:
Benefit obligation - beginning of year	164.8	139.8
Service cost	0.7	0.5	1.1
Interest cost	6.9	6.6	7.2
Plan participants' contributions	0.1	0.1
Actuarial loss (gain)	(8.3)	15.2
Benefits and expenses paid	(4.9)	(3.7)
Currency translation adjustments	3.5	6.3
Benefit obligation - end of year	162.7	164.8	139.8
Change in plan assets:
Fair value of plan assets - beginning of year	128.3	110.8
Actual return on plan assets	16.2	10.3
Employer contribution to defined benefit retirement plans	5.9	5.7
Plan participants' contributions	0.1	0.1
Benefits and expenses paid	(4.9)	(3.7)
Currency translation adjustments	3.7	5.1
Fair value of plan assets - end of year	149.3	128.3	110.8
Amounts recognized on the balance sheet:
Noncurrent Assets	2.7
Current liabilities	0.4	0.4
Other non-current liabilities	15.7	36.1
Total accrued benefit	16.1	36.5
Amounts recognized in Accumulated Other Comprehensive Income:
Actuarial net (loss) gain	(32.2)	(49.7)
Prior service cost	(0.1)	(0.1)
Total amounts recognized in accumulated other comprehensive (loss) income	(32.3)	(49.8)
Total accumulated benefit obligation	17.5	160.6
Accumulated benefit obligation in excess of plan assets	11.0	32.3
Expected benefit payments for the plans
2014	3.8
2015	4.0
2016	5.0
2017	5.7
2018	6.8
2019-2023	37.1
Aggregate expected benefit payments	62.4
European Defined Benefit Retirement Plans | Minimum
Retirement and Other Postretirement Benefit Plans
Expected long-term weighted average rate of return for next fiscal year (as a percent)	3.25%
European Defined Benefit Retirement Plans | Maximum
Retirement and Other Postretirement Benefit Plans
Expected long-term weighted average rate of return for next fiscal year (as a percent)	4.50%
United Kingdom defined benefit plan (the U.K. Plan)
Retirement and Other Postretirement Benefit Plans
Total plan assets invested in active corporate bond funds (as a percent)	57.00%
Expected long-term weighted average rate of return for next fiscal year (as a percent)	6.50%
Curtailment gain	5.7
Service credits recognized as a curtailment gain per diluted share (in dollars per share)	$ 0.04
Net periodic benefit costs of defined benefit retirement plans
Curtailment gain	$ 5.7

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Derivative Financial Instruments (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended			1 Months Ended					12 Months Ended					12 Months Ended										12 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2012	Dec. 31, 2011	Sep. 30, 2013 Interest Rate Swap Agreements item	Jun. 30, 2013 Interest Rate Swap Agreements	Dec. 31, 2013 Interest Rate Swap Agreements	Jun. 30, 2012 Interest Rate Swap Agreements	Dec. 31, 2010 Interest Rate Swap Agreements	Dec. 31, 2013 Interest Rate Swap Agreements U.S. dollars	Dec. 31, 2013 Foreign Currency Forward Exchange Contracts	Dec. 31, 2012 Foreign Currency Forward Exchange Contracts	Dec. 31, 2011 Foreign Currency Forward Exchange Contracts	Dec. 31, 2013 Cash flow hedges Interest Rate Swap Agreements	Dec. 31, 2013 Cash flow hedges Foreign Currency Forward Exchange Contracts	Dec. 31, 2012 Cash flow hedges Foreign Currency Forward Exchange Contracts	Dec. 31, 2011 Cash flow hedges Foreign Currency Forward Exchange Contracts	Dec. 31, 2013 Designated as Hedging Instrument Interest Rate Swap Agreements	Jun. 30, 2013 Designated as Hedging Instrument Interest Rate Swap Agreements	Dec. 31, 2012 Designated as Hedging Instrument Interest Rate Swap Agreements	Jun. 30, 2012 Designated as Hedging Instrument Interest Rate Swap Agreements	Dec. 31, 2010 Designated as Hedging Instrument Interest Rate Swap Agreements	Dec. 31, 2013 Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts	Dec. 31, 2012 Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts	Dec. 31, 2013 Designated as Hedging Instrument Cash flow hedges Foreign Currency Forward Exchange Contracts	Dec. 31, 2012 Designated as Hedging Instrument Cash flow hedges Foreign Currency Forward Exchange Contracts	Dec. 31, 2011 Designated as Hedging Instrument Cash flow hedges Foreign Currency Forward Exchange Contracts	Dec. 31, 2013 Not Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts	Dec. 31, 2012 Not Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts	Dec. 31, 2011 Not Designated as Hedging Instrument Foreign Currency Forward Exchange Contracts
Derivative Financial Instruments
Floating rate obligation																				$ 75	$ 98
Fixed interest rate (as a percent)						81.567%	0.6725%	1.03%					0.81567%
Variable rate basis									LIBOR
Notional amount													150.0				150.0	98.0				187.1	201.2
Swap charges related to derivatives					0.4
Amount paid on termination and settlement of swaps				0.5
Number of derivative contracts entered				3
Carrying value / fair value of derivative assets included in other assets																						11.5	3.6				2.6	3.1
Carrying value / fair value of derivative liabilities included in other liabilities																	0.6		1.0			0.6	1.6				0.1	0.5
Gains (losses) in other comprehensive income, effective portion														7.9	6.4	2.9
Recorded in gross margin																								0.4	(3.1)	3.1
Number of credit contingency features	0
Net gains (losses) on derivative contracts not designated as hedges																											7.6	5.3	(4.8)
Accumulated other comprehensive income, change in fair value of foreign currency forward exchange contracts under hedge designations
Unrealized gains (losses) at beginning of period	2.2									2.4	(4.5)	(0.2)
(Losses) gains reclassified to net sales										(0.3)	2.4	(2.2)
Increase (decrease) in fair value, net of tax of $2.8 million, $1.9 million and ($0.8) million in 2013, 2012 and 2011 respectively										5.1	4.5	(2.1)
Unrealized gains (losses) at end of period, net of tax	8.2	2.2								7.2	2.4	(4.5)
Increase (decrease) in fair value, tax amount	2.8	1.9	(0.8)
Foreign currency unrealized gains expected to be reclassified into earnings over next twelve months	4.8
Foreign currency unrealized gains expected to be reclassified into earnings over next twelve months, tax	$ 2.3

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Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Fair Value Measurements

Fair Value Measurements

Note 19 — Fair Value Measurements

The fair values of our financial instruments are classified into one of the following categories:

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

· Level 2: Observable inputs other than quoted prices in 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 our own and counterparty credit risk.  At December 31, 2013 and 2012, we did not have any assets or liabilities that utilize Level 3 inputs.

For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value.  The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). The fair value of these assets and liabilities was approximately $14.0 million and $1.3 million, and approximately $6.6 million and $2.7 million respectively at December 31, 2013 and 2012.  In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the consolidated balance sheet.

Below is a summary of valuation techniques for all Level 2 financial assets and liabilities:

· Interest rate swap — valued using LIBOR yield curves at the reporting date.  Fair value was a liability of $0.6 million at December 31, 2013.

· Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date.  Fair value of assets and liabilities at December 31, 2013 was $14.0 million and $0.7 million, respectively.

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

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Segment Information (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net sales and long-lived assets
Net sales	$ 426.8	$ 412.3	$ 422.6	$ 416.5	$ 387.3	$ 391.6	$ 399.2	$ 400.1	$ 1,678.2	$ 1,578.2	$ 1,392.4
Consolidated long-lived assets	1,151.70				972.20				1,151.70	972.20	779.50
United States
Net sales and long-lived assets
Consolidated long-lived assets	854.60				733.50				854.60	733.50	568.20
United States | Net sales by Geography
Net sales and long-lived assets
Net sales									871.0	801.4	721.5
United States | Net Sales by External Customers
Net sales and long-lived assets
Net sales									765.2	719.4	615.7
International
Net sales and long-lived assets
Consolidated long-lived assets	297.10				238.70				297.10	238.70	211.30
International | Net sales by Geography
Net sales and long-lived assets
Net sales									807.2	776.8	670.9
International | Net Sales by External Customers
Net sales and long-lived assets
Net sales									913.0	858.8	776.7
France
Net sales and long-lived assets
Consolidated long-lived assets	55.80				37.90				55.80	37.90	36.00
France | Net sales by Geography
Net sales and long-lived assets
Net sales									321.1	302.9	257.6
France | Net Sales by External Customers
Net sales and long-lived assets
Net sales									146.1	144.4	132.3
Germany | Net Sales by External Customers
Net sales and long-lived assets
Net sales									135.2	128.2	87.7
Spain
Net sales and long-lived assets
Consolidated long-lived assets	73.20				68.20				73.20	68.20	60.50
Spain | Net sales by Geography
Net sales and long-lived assets
Net sales									164.8	150.6	142.6
Spain | Net Sales by External Customers
Net sales and long-lived assets
Net sales									154.7	123.9	120.8
Austria | Net sales by Geography
Net sales and long-lived assets
Net sales									96.2	105.0	95.5
United Kingdom
Net sales and long-lived assets
Consolidated long-lived assets	92.60				83.80				92.60	83.80	68.40
United Kingdom | Net sales by Geography
Net sales and long-lived assets
Net sales									110.9	114.7	102.1
United Kingdom | Net Sales by External Customers
Net sales and long-lived assets
Net sales									81.4	82.2	80.2
Other
Net sales and long-lived assets
Consolidated long-lived assets	75.50				48.80				75.50	48.80	46.40
Other | Net sales by Geography
Net sales and long-lived assets
Net sales									114.2	103.6	73.1
Other | Net Sales by External Customers
Net sales and long-lived assets
Net sales									$ 395.6	$ 380.1	$ 355.7

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Capital Stock (Tables)

12 Months Ended

Dec. 31, 2013

Capital Stock

Schedule of common stock outstanding

(Number of shares in millions)	2013	2012	2011
Common stock:
Balance, beginning of year	102.4	101.0	99.5
Activity under stock plans	1.6	1.4	1.5
Balance, end of year	104.0	102.4	101.0
Treasury stock:
Balance, beginning of year	2.5	2.2	2.2
Issued under stock plans	—	—	(0.5	)
Repurchased	2.6	0.3	0.5
Balance, end of year	5.1	2.5	2.2
Common stock outstanding	98.9	99.9	98.8

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Derivative Financial Instruments

12 Months Ended

Dec. 31, 2013

Derivative Financial Instruments

Derivative Financial Instruments

Note 12 — Derivative Financial Instruments

Interest Rate Swap Agreements

In June 2012 and in 2010, we entered into agreements to swap $75 million and $98 million, respectively, of floating rate obligations for fixed rate obligations at 0.6725% and 1.03% against LIBOR in U.S. dollars.  Both swaps were scheduled to mature in March 2014.  As a result of our refinancing of the bank loan, we de-designated the notional $98 million swap which resulted in a charge of $0.4 million.   In September, we terminated the swap and settled for cash of $0.5 million.  Also in September, we entered into three new interest rate swaps, whereby we pay a fixed rate in exchange for floating LIBOR.  The maturity dates of the new swaps are from March 2016 to September 2016 at an average rate of 0.81567%.

All swaps are accounted for as cash flow hedges of our floating rate bank loans.  To ensure the swaps were highly effective, all of the principal terms of the swaps matched the terms of the bank loans.  The remaining balance of the swaps at December 31, 2013 was approximately $150 million.  The fair value of all interest rate swaps was a liability of $0.6 million and $1.0 million at December 31, 2013 and 2012, respectively.

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 June 2016.  The aggregate notional amount of these contracts was $187.1 million and $201.2 million at December 31, 2013 and December 31, 2012, respectively.  The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers.  These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates.  The effective portion of the hedges was a gain of $7.9 million, $6.4 million and $2.9 million, for the years ended December 31, 2013, 2012 and 2011, respectively and are recorded in other comprehensive income (“OCI”).  At December 31, 2013, $11.5 million of the carrying amount of these contracts was classified in other assets and $0.6 million in other liabilities on the consolidated balance sheets and $3.6 million in other assets and $1.6 million classified in other liabilities at December 31, 2012.  During the years ended December 31, 2013, 2012 and 2011, we recognized a net gain of $0.4 million, a net loss of $3.1 million and a net gain of $3.1 million, respectively, recorded in gross margin.  For the three years ended December 31, 2013, 2012 and 2011, hedge ineffectiveness was immaterial.

In addition, we enter into foreign exchange forward contracts which are not designated as hedges.  These are used to provide an offset to transactional gains or losses arising from the remeasurement of non-functional monetary assets and liabilities such as accounts receivable.  The change in the fair value of the derivatives is recorded in the statement of operations.  There are no credit contingency features in these derivatives.  During the years ended December 31, 2013, 2012 and 2011, we recognized a net foreign exchange gain of $7.6 million, a gain of $5.3 million, and a loss of $4.8 million, respectively, in the consolidated statements of operations. The carrying amount of the contracts for asset and liability derivatives not designated as hedging instruments was $2.6 million classified in other assets and $0.1 million in other liabilities and $3.1 million classified in other assets and $0.1 million in other liabilities on the December 31, 2013 and 2012 consolidated balance sheets, respectively.

The activity in “accumulated other comprehensive income (loss)” related to foreign currency forward exchange contracts for the years ended December 31, 2013, 2012 and 2011 was as follows:

(In millions)	2013			2012			2011
Unrealized gains (losses) at beginning of period	$	2.4		$	(4.5	)	$	(0.2	)
(Losses) gains reclassified to net sales	(0.3		)	2.4			(2.2		)
Increase (decrease) in fair value, net of tax of $2.8 million, $1.9 million and ($0.8) million in 2013, 2012 and 2011 respectively	5.1			4.5			(2.1		)
Unrealized gains (losses) at end of period	$	7.2		$	2.4		$	(4.5	)

Unrealized gains of $4.8 million recorded in “accumulated other comprehensive income,” net of tax of $2.3 million, as of December 31, 2013 are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.  The impact of credit risk adjustments was immaterial for the three years.