10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2019

or

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

For the transition period from                      to                    

Commission File Number 1-8472

Hexcel Corporation

(Exact name of registrant as specified in its charter)

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

Two Stamford Plaza

281 Tresser Boulevard

Stamford, Connecticut 06901-3238

(Address of principal executive offices and zip code)

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01	HXL	New York Stock Exchange

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

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

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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

Class	Outstanding at October 15, 2019
COMMON STOCK	84,378,114

HEXCEL CORPORATION AND SUBSIDIARIES

INDEX

			Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)
	•	Condensed Consolidated Balance Sheets — September 30, 2019 and December 31, 2018	3
	•	Condensed Consolidated Statements of Operations — The three and nine months ended September 30, 2019 and 2018	4
	•	Condensed Consolidated Statements of Comprehensive Income — The three and nine months ended September 30, 2019 and 2018	4
	•	Condensed Consolidated Statements of Cash Flows — The nine months ended September 30, 2019 and 2018	5
	•	Condensed Consolidated Statements of Stockholders’ Equity — The three and nine months ended September 30, 2019 and 2018	6
	•	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		25
ITEM 4.	Controls and Procedures		25
PART II.	OTHER INFORMATION		25
ITEM 1.	Legal Proceedings		25
ITEM 1A.	Risk Factors		25
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		26
ITEM 6.	Exhibits		27
	SIGNATURE		28

2

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
	(Unaudited)
	September 30,			December 31,
(In millions)	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	47.0		$	32.7
Accounts receivable, net		288.9			260.9
Inventories, net		352.2			297.8
Contract assets		56.4			50.5
Prepaid expenses and other current assets		27.1			33.9
Total current assets		771.6			675.8
Property, plant and equipment		3,014.5			2,902.1
Less accumulated depreciation		(1,090.8	)		(1,025.6	)
Net property, plant and equipment		1,923.7			1,876.5
Goodwill and other intangible assets		279.4			142.3
Investments in affiliated companies		45.8			48.7
Other assets		134.7			80.8
Total assets	$	3,155.2		$	2,824.1
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings	$	9.3		$	9.4
Accounts payable		164.5			161.9
Accrued compensation and benefits	70.6			75.8
Accrued liabilities		102.6			79.6
Total current liabilities		347.0			326.7
Commitments and contingencies (see Note 14)
Long-term debt		1,115.2			947.4
Retirement obligations		41.9			42.0
Other non-current liabilities		233.3			186.0
Total liabilities		1,737.4			1,502.1
Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares authorized, 109.3 shares and 108.5 shares  issued at September 30, 2019 and December 31, 2018, respectively		1.1			1.1
Additional paid-in capital		826.7			798.3
Retained earnings		1,920.0			1,726.5
Accumulated other comprehensive loss		(161.1	)		(108.0	)
		2,586.7			2,417.9
Less – Treasury stock, at cost, 24.7 shares at September 30, 2019, and 23.7 shares at December 31, 2018, respectively.		(1,168.9	)		(1,095.9	)
Total stockholders' equity		1,417.8			1,322.0
Total liabilities and stockholders' equity	$	3,155.2		$	2,824.1

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

3

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

	(Unaudited)					(Unaudited)
	Quarter Ended September 30,					Nine Months Ended September 30,
(In millions, except per share data)	2019			2018		2019		2018
Net sales	$	572.5		$	540.5	$	1,791.4	$	1,628.1
Cost of sales		414.6			397.5		1,297.5		1,197.7
Gross margin		157.9			143.0		493.9		430.4
Selling, general and administrative expenses		33.8			32.6		122.8		114.3
Research and technology expenses		14.2			13.9		43.3		40.7
Operating income		109.9			96.5		327.8		275.4
Interest expense, net		11.0			10.6		34.9		27.3
Income before income taxes, and equity in earnings/(loss) from affiliated companies		98.9			85.9		292.9		248.1
Provision for income taxes		18.2			7.8		62.4		41.9
Income before equity in earnings/(loss) from affiliated companies		80.7			78.1		230.5		206.2
Equity in earnings/(loss) from affiliated companies		(0.4	)		2.0		2.9		4.3
Net income	$	80.3		$	80.1	$	233.4	$	210.5
Basic net income per common share	$	0.94		$	0.92	$	2.74	$	2.37
Diluted net income per common share	$	0.93		$	0.91	$	2.71	$	2.35
Dividends per share	$	0.17		$	0.15	$	0.47	$	0.40
Weighted-average common shares:
Basic		85.1			87.0		85.1		88.6
Diluted		86.1			88.1		86.1		89.7

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

	(Unaudited)						(Unaudited)
	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Net Income	$	80.3		$	80.1		$	233.4		$	210.5
Currency translation adjustments		(33.1	)		(0.4	)		(37.3	)		(26.2	)
Net unrealized pension and other benefit actuarial gains (losses)  and prior service credits (net of tax)		0.3			(0.6	)	―				(0.1	)
Net unrealized (losses) gains on financial instruments (net of tax)		(10.2	)		0.2			(15.8	)		(11.9	)
Total other comprehensive income		(43.0	)		(0.8	)		(53.1	)		(38.2	)
Comprehensive income	$	37.3		$	79.3		$	180.3		$	172.3

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

4

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

	(Unaudited)
	Nine Months Ended September 30,
(In millions)	2019			2018
Cash flows from operating activities
Net income	$	233.4		$	210.5
Reconciliation to net cash provided by operating activities:
Depreciation and amortization		107.1			90.8
Amortization related to financing		1.1			1.2
Deferred income taxes		9.3			27.5
Equity in earnings from affiliated companies		(2.9	)		(4.3	)
Stock-based compensation		15.9			14.0
Changes in assets and liabilities:
Increase in accounts receivable		(29.5	)		(27.7	)
Increase in inventories		(56.8	)		(32.1	)
Increase in prepaid expenses and other current assets		(12.5	)		(5.0	)
Increase in accounts payable/accrued liabilities		15.1			0.2
Other – net		(2.9	)		3.3
Net cash provided by operating activities		277.3			278.4
Cash flows from investing activities
Capital expenditures		(162.7	)		(150.2	)
Acquisition of business		(163.2	)		(0.7	)
Net cash used for investing activities		(325.9	)		(150.9	)
Cash flows from financing activities
Repayments of Euro term loan		(9.0	)		(4.2	)
Borrowing from senior unsecured credit facility - 2024		478.0		―
Repayment of senior unsecured credit facility - 2024		(99.0	)	―
Borrowing from senior unsecured credit facility - 2021		345.0			662.0
Repayment of senior unsecured credit facility - 2021		(547.0	)		(477.0	)
Repayment of finance lease obligation and other debt, net		(0.6	)		0.3
Issuance costs related to senior credit facility		(2.2	)	―
Dividends paid		(39.9	)		(35.5	)
Repurchase of stock		(66.9	)		(282.8	)
Activity under stock plans		6.4			0.4
Net cash provided by (used in) financing activities		64.8			(136.8	)
Effect of exchange rate changes on cash and cash equivalents		(1.9	)		(3.6	)
Net increase (decrease) in cash and cash equivalents		14.3			(12.9	)
Cash and cash equivalents at beginning of period		32.7			60.1
Cash and cash equivalents at end of period	$	47.0		$	47.2
Supplemental data:
Accrual basis additions to plant, property and equipment	$	160.9		$	133.5

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

5

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

For the Nine Months Ended September 30, 2019 and 2018

			Additional		Accumulated			Other						Total
			Paid-In		Retained			Comprehensive			Treasury			Stockholders’
(In millions)	Par		Capital		Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2017	$	1.1	$	774.3	$	1,496.1		$	(45.0	)	$	(731.4	)	$	1,495.1
Net income	—		—		61.6			—			—				61.6
Dividends paid on common stock	—		—			(11.2	)	—			—				(11.2	)
Impact of new accounting pronouncements			—			2.2		1.6			—				3.8
Change in other comprehensive income – net of tax	—		—		—				35.6		—				35.6
Stock based compensation	—			13.4	—			—				(5.7	)		7.7
Acquisition of treasury stock	—		—		—			—				(30.1	)		(30.1	)
Balance, March 31, 2018	$	1.1	$	787.7	$	1,548.7		$	(7.8	)	$	(767.2	)	$	1,562.5
Net income	—		—			68.8		—			—				68.8
Dividends paid on common stock	—		—			(11.3	)	—			—				(11.3	)
Change in other comprehensive income – net of tax	—		—		—				(73.0	)	—				(73.0	)
Stock based compensation	—			4.3	—			—				(0.6	)		3.7
Acquisition of treasury stock	—		—		—			—				(150.9	)		(150.9	)
Balance, June 30, 2018	$	1.1	$	792.0	$	1,606.2		$	(80.8	)	$	(918.7	)	$	1,399.8
Net income	—		—			80.1		—			—				80.1
Dividends paid on common stock	—		—			(13.0	)	—			—				(13.0	)
Change in other comprehensive income – net of tax	—		—		—				(0.8	)	—				(0.8	)
Stock based compensation	—			3.2	—			—				(0.2	)		3.0
Acquisition of treasury stock	—		—		—			—				(101.8	)		(101.8	)
Balance, September 30, 2018	$	1.1	$	795.2	$	1,673.3		$	(81.6	)	$	(1,020.7	)	$	1,367.3
			Additional		Accumulated			Other						Total
			Paid-In		Retained			Comprehensive			Treasury			Stockholders’
(In millions)	Par		Capital		Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2018	$	1.1	$	798.3	$	1,726.5		$	(108.0	)	$	(1,095.9	)	$	1,322.0
Net income	—		—			72.2		—			—				72.2
Dividends paid on common stock	—		—			(12.7	)	—			—				(12.7	)
Change in other comprehensive income – net of tax	—		—		—				(5.9	)	—				(5.9	)
Stock based compensation	—			13.5	—			—				(5.5	)		8.0
Acquisition of treasury stock	—		—		—			—				(11.2	)		(11.2	)
Balance, March 31, 2019	$	1.1	$	811.8	$	1,786.0		$	(113.9	)	$	(1,112.6	)	$	1,372.4
Net income	—		—			80.9		—			—				80.9
Dividends paid on common stock	—		—			(12.8	)	—			—				(12.8	)
Change in other comprehensive income – net of tax	—		—		—				(4.2	)	—				(4.2	)
Stock based compensation	—			6.1	—			—			—				6.1
Balance, June 30, 2019	$	1.1	$	817.9	$	1,854.1		$	(118.1	)	$	(1,112.6	)	$	1,442.4
Net income	—		—			80.3		—			—				80.3
Dividends paid on common stock	—		—			(14.4	)	—			—				(14.4	)
Change in other comprehensive income – net of tax	—		—		—				(43.0	)	—				(43.0	)
Stock based compensation	—			8.8	—			—				(0.6	)		8.2
Acquisition of treasury stock	—		—		—			—				(55.7	)		(55.7	)
Balance, September 30, 2019	$	1.1	$	826.7	$	1,920.0		$	(161.1	)	$	(1,168.9	)	$	1,417.8

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

6

HEXCEL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Significant Accounting Policies

In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying Condensed Consolidated Financial Statements are those of Hexcel Corporation.  Refer to Note 1 to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of our significant accounting policies. Significant changes to our accounting policies subsequent to the filing of our Form 10-K, relate solely to the adoption of Accounting Standard Codification (“ASC”) Topic 842, Leases, (“ASC 842”) are discussed below in Recent Accounting Pronouncements as well as in Note 4.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC. In the opinion of management, the Condensed Consolidated Financial Statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholder’s equity for the interim periods presented.  The Condensed Consolidated Balance Sheet as of December 31, 2018 was derived from the audited 2018 Consolidated Balance Sheet.  Interim results are not necessarily indicative of results expected for any other interim period or for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2018 Annual Report on Form 10-K. Within the Unaudited Condensed Consolidated Balance Sheets as of December 31, 2018, property, plant and equipment and the related accumulated depreciation have been grossed up to conform to the current year presentation.

Investments in Affiliated Companies

We have a 50% equity investment in Aerospace Composites Malaysia Sdn. Bhd. and a 25% equity investment in Hexcut Services SAS.  These investments are accounted for using the equity method of accounting.      

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). This standard requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of leases with a duration of one year or less. We adopted the provisions of this standard on January 1, 2019, using the modified transition method which allows companies to recognize existing leases at the adoption date without requiring comparable presentation. As a result of the adoption of this standard we recognized approximately $50 million of right of use assets and related liabilities for operating leases that existed prior to January 1, 2019. These right of use assets were recorded in non-current other assets, and the related liabilities were recorded in current accrued liabilities and other non-current liabilities. See Note 4 - Leases, for more details.

In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU 2018-14), Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We do not expect this new standard to have a significant impact to our disclosures.

7

Note 2 — Net Income per Common Share

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2019		2018		2019		2018
Basic net income per common share:
Net income	$	80.3	$	80.1	$	233.4	$	210.5
Weighted average common shares outstanding		85.1		87.0		85.1		88.6
Basic net income per common share	$	0.94	$	0.92	$	2.74	$	2.37
Diluted net income per common share:
Net income		80.3		80.1		233.4		210.5
Weighted average common shares outstanding — Basic		85.1		87.0		85.1		88.6
Plus incremental shares from assumed conversions:
Restricted stock units		0.4		0.5		0.4		0.4
Stock options		0.6		0.6		0.6		0.7
Weighted average common shares outstanding — Dilutive		86.1		88.1		86.1		89.7
Diluted net income per common share	$	0.93	$	0.91	$	2.71	$	2.35

Total shares underlying stock options of 0.1 million, were excluded from the computation of diluted net income per share for both the three and nine months ended September 30, 2019, as they were anti-dilutive.  Total shares underlying stock options of 0.2 million were excluded from the computation of diluted net income per share for both the three and nine months ended September 30, 2018, as they were anti-dilutive. 

Note 3 — Inventories

(In millions)	September 30, 2019		December 31, 2018
Raw materials	$	182.6	$	131.4
Work in progress		39.7		43.6
Finished goods		129.9		122.8
Total Inventory	$	352.2	$	297.8

Note 4 — Leases

The Company regularly enters into operating leases for certain buildings, equipment, parcels of land, and vehicles. As of January 1, 2019, we adopted the provisions of ASC 842, accounting for leases.  Accordingly, we capitalized all agreements with terms for more than one year, where a right of use asset was identified. In connection with the adoption of ASC 842 on January 1, 2019 we elected certain practical expedients available under ASC 842-10-65-1 that provide certain concessions to ease the burden of transition, such as the treatment of indirect lease costs, and service contracts which may contain embedded leases. In addition, we elected certain expedients not related to the transition, such as the election to capitalize lease and non-lease components of an agreement as a single component for purposes of simplicity, with the exception of those related to equipment and machinery.

Generally, amounts capitalized represent the present value of minimum lease payments over the term, and the duration is equivalent to the base agreement, however, management used certain assumptions when determining the value and duration of leases.  These assumptions include, but are not limited to, the probability of renewing a lease term, certain future events impacting lease payments, as well as fair values not explicit in an agreement. Such assumptions impacted the duration of many of our building leases, as well as certain of our equipment leases.

8

In determining the lease renewal, management considered the need and ability to substitute a given asset, as well as certain conditions such as related contractual obligations to our customers (i.e. a contractual obligation of a customer requiring certain manufacturing proximities). In determining fair value, management considered the stand alone value of an asset in an ordinary market as well as incurring certain costs to terminate an agreement.  Most of our leases do not include variable payments but contain scheduled escalations. Any lease payments tied to certain future indexes are adjusted on a go forward basis as those indexes become known.

At September 30, 2019, we had approximately $67.5 million of right of use assets recorded in non-current other assets, and $67.5 million of related liabilities, $55.0 million of which was included in other non-current liabilities with the current portion in accrued liabilities. The weighted average of the remaining lease terms was approximately 9 years.

We discount the future lease payments of our leases using the prevailing rates extended to us by our lenders relevant to the period of inception. These rates are comprised of LIBOR plus a stated spread less a component related to collateralization.  The rates are relative to the duration of the lease at inception and the country to which the lease agreement pertains to.  The weighted average interest rate used in calculating the fair values listed above was 2.9%.

The following table lists the schedule of cash payments related to right of use assets by year:

(In millions)
Remainder of 2019	$	3.1
2020		12.6
2021		11.0
2022		9.1
2023		8.5
Thereafter		36.0
Total	$	80.3

Operating lease expense recognized during the quarter and nine months ending September 30, 2019, relating to right of use assets, was $2.7 million and $8.2 million, respectively, and was recorded in cost of goods sold as well as in operating expenses, in our Condensed Consolidated Statements of Operations. Expense related to operating leases which have a duration of a year or less were not material for the same period. Finance leases at September 30, 2019 were immaterial.

Note 5 — Retirement and Other Postretirement Benefit Plans

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

Defined Benefit Retirement Plans

Net Periodic Benefit Costs

Net periodic benefit costs of our defined benefit retirement plans for the three and nine months ended September 30, 2019 and 2018 were as follows:

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.2	$	0.9	$	0.8
Interest cost		0.2		0.1		0.5		0.4
Net amortization	—			0.1	—			0.1
Net periodic benefit cost	$	0.5	$	0.4	$	1.4	$	1.3

9

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet for U.S. nonqualified defined benefit retirement plans:
Accrued liabilities	$	0.9	$	0.9
Other non-current liabilities		18.0		17.2
	$	18.9	$	18.1

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
European Defined Benefit Retirement Plans
Service cost	$	0.3		$	0.3		$	0.8		$	0.8
Interest cost		1.1			1.2			3.3			3.4
Expected return on plan assets		(2.1	)		(2.4	)		(6.5	)		(7.1	)
Net amortization and deferral	—			—				0.2			0.2
Net periodic benefit credit	$	(0.7	)	$	(0.9	)	$	(2.2	)	$	(2.7	)

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet for European defined benefit retirement plans:
Other assets	$	47.1	$	42.6
Accrued liabilities		0.3		0.4
Other non-current liabilities		18.1		18.8
Total accrued benefit	$	18.4	$	19.2

All costs related to our pensions are included as a component of operating income in our Condensed Consolidated Statements of Operations. For the three month periods ended September 30, 2019 and 2018, amounts unrelated to service costs were a benefit of $0.8 million and $1.0 million, respectively.  For the nine months ended September 30, 2019 and 2018, amounts unrelated to the service costs were a benefit of $2.5 million and $3.0 million, respectively. 

Contributions

We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred.  We have contributed approximately $0.5 million in the first nine months of 2019 to cover unfunded benefits.  We expect to contribute a total of $0.9 million in 2019 to cover unfunded benefits.  We contributed $4.4 million to our U.S. non-qualified defined benefit retirement plans during the first nine months of 2018.

We contributed $3.3 million and $3.8 million to our European defined benefit retirement plans during the nine months ended September 30, 2019 and 2018, respectively.  We plan to contribute approximately $5.0 million during 2019 to our European plans.

Postretirement Health Care and Life Insurance Benefit Plans

We recorded $0.2 million of net amortization gain deferral for the quarter ended September 30, 2019 and $0.7 million and $0.9 million for the nine months ended September 30, 2019 and 2018, respectively. There were no amounts related to the amortization gain deferral recorded during the three months ended September 30, 2018. Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarter and the nine months ended September 30, 2019 and 2018 were immaterial.

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.5	$	0.5
Other non-current liabilities	2.7		2.8
Total accrued benefit	$	3.2	$	3.3

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Amounts contributed in connection with our postretirement plans were immaterial for both the nine months ended September 30, 2019 and September 30, 2018. We periodically fund our postretirement plans to pay covered expenses as they are incurred. We expect to contribute less than $0.5 million in 2019 to cover unfunded benefits.

Note 6 –– Debt

(In millions)	September 30, 2019			December 31, 2018
Current portion of finance lease	$	0.6		$	0.3
Current portion of Euro term loan		8.7			9.1
Current portion of debt		9.3			9.4
Non-current portion of Euro term loan		40.3			51.4
Senior unsecured credit facility		379.0			202.0
4.7% senior notes --- due 2025		300.0			300.0
3.95% senior notes --- due 2027		400.0			400.0
Senior notes --- original issue discount		(1.8	)		(2.0	)
Senior notes --- deferred financing costs		(4.3	)		(4.8	)
Non-current portion of finance lease and other debt		2.0			0.8
Long-term debt		1,115.2			947.4
Total debt	$	1,124.5		$	956.8

In June 2019, the Company refinanced its senior unsecured credit facility (“the Facility”), increasing borrowing capacity from $700 million to $1 billion. The maturity of the Facility is June 2024. The refinancing provides for a reduction in interest costs, as well as less restrictive covenants. The initial interest rate for the Facility is LIBOR + 1.0%. The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.50%, depending upon the better of the Company’s leverage ratio or the credit rating. As of September 30, 2019, total borrowings under the Facility were $379 million, which approximates fair value. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50 million. Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of September 30, 2019, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $621 million. The weighted average interest rate for the Facility was 4.17% for the nine months ended September 30, 2019.

The Facility agreement contains financial and other covenants, including, but not limited to customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default.

In 2017, the Company issued $400 million in aggregate principal amount of 3.95% Senior Unsecured Notes due in 2027. The interest rate on these senior notes may be increased 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 5.95%. The effective interest rate for nine months ended September 30, 2019 was 3.88% inclusive of approximately a 0.25% benefit of treasury locks. Based on quoted prices the fair value of the senior unsecured notes due in 2027 was $415.8 million at September 30, 2019.

In 2016, we entered into a €60 million term loan.  The loan has two tranches of which the first tranche for €25 million has a rate of Euribor +1.2% and a final maturity date of June 30, 2023, and a second tranche for €35 million has a rate of Euribor +1.25% with a final maturity date of June 30, 2024. The loans are payable in annual installments that began on June 30, 2017, for the first tranche, and on June 30, 2019, for the second. There is a zero percent floor on the Euribor. Amounts outstanding under this loan at September 30, 2019 were $49.0 million which approximates fair value under the market approach.    

In 2015, the Company issued $300 million in aggregate principal amount of 4.7% Senior Unsecured Notes due in 2025. The interest rate on these senior notes may be increased by 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 6.7%.  The effective interest rate for the nine months ended September 30, 2019 was 4.83%. Based on quoted prices, the fair value of these notes was $324.1 million at September 30, 2019.

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Note 7 — Derivative Financial Instruments

Interest Rate Swap and Interest Lock Agreements

At September 30, 2019 the Company had interest rate swaps related to European debt obligations which had a combined notional value of approximately €44.9 million. These derivatives swapped floating rate obligations for fixed rate obligations at a weighted average rate of 0.52% against Euribor in Euros.  The swaps amortize through the final maturities of the obligations, on June 30, 2023 and June 30, 2024, in annual installments. The derivatives are accounted for as cash flow hedges of the floating rate term loans.  To ensure the swaps were highly effective, all of the critical terms of the swap matched the terms of the bank loans.  The fair value of the interest rate swaps was a liability of $0.7 million at September 30, 2019, and $0.5 million at December 31, 2018.

The Company had treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 3.95% Senior Unsecured Notes. These hedges were designated as cash flow hedges therefore any change in fair value was recorded as a component of other comprehensive income. As part of the issuance of these notes, we net settled the derivatives and therefore the previously deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The effect of these treasury locks reduced the effective interest rate on these notes by approximately 0.25%.  

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 2022, which we account for as cash flow hedges. The aggregate notional amount of these contracts was $439.6 million and $416.5 million at September 30, 2019 and December 31, 2018, respectively.  The purpose of these contracts is to hedge a portion of the forecasted transactions of our 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, losses of $16.9 million and $25.7 million were recorded in other comprehensive income (“OCI”) for the three and nine months ended September 30, 2019 and losses of $0.6 million and $13.1 million for the three and nine months ended September 30, 2018.  We classified the carrying amount of these contracts of $0.3 million in other assets and $31.6 million in other liabilities, of which $9.7 million is recorded in non-current liabilities, on the Condensed Consolidated Balance Sheets at September 30, 2019 and $1.3 million in other assets and $15.3 million in other liabilities at December 31, 2018.  We recognized net losses of $3.8 million and $8.4 million in gross margin during the three and nine months ended September 30, 2019 and net losses of $0.9 million and net gains of $2.5 million for the three and nine months ended September 30, 2018.  

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 re-measurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the quarters ended September 30, 2019 and 2018, we recognized net foreign exchange losses of $1.3 million and $0.1 million, respectively, in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2019 and 2018, we recognized net foreign exchange losses of $1.9 million and $4.1 million, respectively. The net foreign exchange impact recognized from these hedges offset the translation exposure of these transactions. The carrying amount of the contracts for derivatives not designated as hedging instruments was $0.2 million classified in other assets and $0.4 million in other liabilities at September 30, 2019, and $0.3 million in other assets at December 31, 2018, in the Condensed Consolidated Balance Sheets.

 The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and nine months ended September 30, 2019 and September 30, 2018 was as follows:

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Unrealized (losses) gains at beginning of period, net of tax	$	(13.8	)	$	(3.1	)	$	(10.6	)	$	8.6
Losses (gains) reclassified to net sales		3.0			0.7			6.5			(1.6	)
Decrease in fair value		(12.9	)		(0.3	)		(19.6	)		(9.7	)
Unrealized losses at end of period, net of tax	$	(23.7	)	$	(2.7	)	$	(23.7	)	$	(2.7	)

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Unrealized losses of $16.3 million recorded in accumulated other comprehensive loss, net of tax of $5.2 million, as of September 30, 2019, are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.

Commodity Swap Agreements

On occasion we enter into commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile).  As of September 30, 2019, we had commodity swap agreements with a notional value of $20.1 million. The swaps mature monthly through September 2021. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items. The fair value of the commodity swap agreements was a liability of $4.6 million at September 30, 2019.

Note 8 — Income Taxes

The effective tax rate was 18.4% compared to 9.1% for the quarter ended September 30, 2019 and 2018, respectively. The current quarter benefited primarily from tax credits identified during the quarter of $3.0 million. The third quarter of 2018 included discrete benefits of $9.6 million primarily related to a change in accounting method and release of a valuation allowance in a foreign jurisdiction. The effective tax rate for the nine months ended September 30, 2019 and 2018 was 21.3% and 16.9%, respectively, as the 2018 period also included a $1.3 million discrete benefit related to the release of reserves for uncertain tax positions. Excluding these discrete benefits the effective tax rates were 22.3% and 21.3%. All periods benefited from deductions associated with share based compensation payments. Our underlying estimated effective income tax rate is expected to remain at 24%.

Note 9 — Fair Value Measurements

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

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

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

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

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

We have no assets or liabilities that utilize Level 1 inputs. However, we have derivative instruments classified as liabilities and assets which utilize Level 2 inputs, and one liability that utilizes 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 $0.5 million and $37.3 million, respectively, at September 30, 2019.  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 Condensed Consolidated Balance Sheets.

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

• Interest rate swaps — valued using LIBOR yield curves at the reporting date. Fair value was a liability of $0.7 million at September 30, 2019.

• Foreign exchange derivative assets and liabilities — valued using quoted forward prices at the reporting date. Fair value of assets and liabilities at September 30, 2019 was $0.5 million and $32.0 million, respectively.

• Commodity raw materials — valued using quoted forward prices at the reporting date. Fair value of liabilities at September 30, 2019 was $4.6 million.

Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in the quarter ended September 30, 2019 that would reduce the receivable amount owed, if any, to the Company.

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Liabilities classified as Level 3 — we have a liability for $3.1 million, which represents contingent consideration that was recognized in connection with the Company’s Oxford Performance Materials, Inc. acquisition. This amount was estimated based on certain contractual stipulations which require payments to be made to the seller in the future based upon the achievement of certain results. We used forecasted results which were discounted using an internally derived discount rate. Future amounts payable may differ from this estimate by the difference between the actual and forecasted results. The amount of interest related to this liability accreted during the quarter and nine months ended September 30, 2019 was not material.  

Note 10 — Revenue

Our revenue is primarily derived from the sale of inventory under long-term agreements with our customers. We have determined that individual purchase orders (“PO”), whose terms and conditions taken with a master agreement, create the ASC 606 contracts which are generally short-term in nature.  For those sales, which are not tied to a long-term agreement, we generate a PO that is subject to our standard terms and conditions. In instances where our customers acquire our goods related to government contracts, the contracts are typically subject to terms similar, or equal to, the Federal Acquisition Regulation Part 52.249-2.  This regulation contains a termination for convenience clause (“T for C”), which requires that the customer pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit.

We recognize revenue over time for those agreements that have T for C, and where the products being produced have no alternative use.  As our production cycle is typically six months or less, it is expected that goods related to the revenue recognized over time will be shipped and billed within the next twelve months. Less than half of our agreements contain provisions which would require revenue to be recognized over time.

We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the three and nine months ended September 30, 2019 and 2018:

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
Consolidated Net Sales	$	572.5	$	540.5	$	1,791.4	$	1,628.1
Commercial Aerospace	385.9		373.1			1,217.9		1,139.6
Space & Defense		109.8		90.4		329.4		272.2
Industrial	76.8			77.0	244.1		216.3

Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled.  Contract assets are included in our Condensed Consolidated Balance Sheets as a component of current assets. The activity related to contract assets for the nine months ended September 30, 2019 is as follows:

`
(In millions)	Composite Material			Engineered Products			Total
Balance at December 31, 2018	$	12.9		$	37.6		$	50.5
Net revenue billed		(1.4	)		4.6			3.2
Balance at March 31, 2019		11.5			42.2			53.7
Net revenue billed		1.7			4.3			6.0
Balance at June 30, 2019		13.2			46.5			59.7
Net revenue billed		(1.7	)		(1.6	)		(3.3	)
Balance at September 30, 2019	$	11.5		$	44.9		$	56.4

Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional.  

Note 11 — Segment Information

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

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Financial information for our operating segments for the quarter and nine months ended September 30, 2019 and 2018 were as follows:

	(Unaudited)
	Composite		Engineered		Corporate &
(In millions)	Materials		Products		Other (a)			Total
Third Quarter 2019
Net sales to external customers	$	448.0	$	124.5	$	—		$	572.5
Intersegment sales		23.3	—			(23.3	)		—
Total sales	$	471.3	$	124.5	$	(23.3	)	$	572.5
Operating income		100.1		20.3		(10.5	)		109.9
Depreciation and amortization		30.7		3.7		—			34.4
Stock-based compensation		1.2		0.2		1.0			2.4
Accrual basis additions to capital expenditures		51.0		2.3		—			53.3
Third Quarter 2018
Net sales to external customers	$	432.8	$	107.7	$	—		$	540.5
Intersegment sales		17.2		—		(17.2	)		—
Total sales	$	450.0	$	107.7	$	(17.2	)	$	540.5
Operating income		92.5		15.5		(11.5	)		96.5
Depreciation and amortization		28.9		2.3		—			31.2
Stock-based compensation		1.2		0.2		0.6			2.0
Accrual basis additions to capital expenditures		41.4		2.1		—			43.5
Nine Months Ended September 30, 2019
Net sales to external customers	$	1,419.7	$	371.7	$	—		$	1,791.4
Intersegment sales		64.0		0.1		(64.1	)		—
Total sales	$	1,483.7	$	371.8	$	(64.1	)	$	1,791.4
Operating income		324.4		51.4		(48.0	)		327.8
Depreciation and amortization		95.7		11.3		0.1			107.1
Stock-based compensation		6.4		1.4		8.1			15.9
Accrual basis additions to capital expenditures		156.8		4.1		—			160.9
Nine Months Ended September 30, 2018
Net sales to external customers	$	1,323.2	$	304.9	$	—		$	1,628.1
Intersegment sales		56.7		—		(56.7	)		—
Total sales	$	1,379.9	$	304.9	$	(56.7	)	$	1,628.1
Operating income		276.6		41.3		(42.5	)		275.4
Depreciation and amortization		83.9		6.8		0.1			90.8
Stock-based compensation		5.7		1.0		7.3			14.0
Accrual basis additions to capital expenditures		130.1		3.4		—			133.5

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

Goodwill and Intangible Assets	Composite			Engineered
(In millions)	Materials			Products			Total
Balance at December 31, 2018	$	98.2		$	44.1		$	142.3
Amortization Expense		(1.6	)		(3.8	)		(5.4	)
Additions		—			145.1			145.1
Currency translation adjustments		(2.6	)	—				(2.6	)
Balance at September 30, 2019	$	94.0		$	185.4		$	279.4

The addition to goodwill and intangible assets is due to the acquisition of ARC Technologies LLC, discussed in Note 13. At September 30, 2019, the balance of goodwill and intangible assets was $187.8 million and $91.6 million, respectively. No impairments have been recorded against these amounts.

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Note 12 — Accumulated Other Comprehensive Loss

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the Condensed Consolidated Statements of Operations. The components of accumulated other comprehensive loss as of September 30, 2019 and December 31, 2018 were as follows:

(In millions)	Unrecognized Net Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2018	$	(15.4	)	$	(5.8	)	$	(86.8	)	$	(108.0	)
Other comprehensive loss before reclassifications		0.6			(23.2	)		(37.3	)		(59.9	)
Amounts reclassified from accumulated other comprehensive loss		(0.6	)		7.4		—				6.8
Other comprehensive loss	—				(15.8	)		(37.3	)		(53.1	)
Balance at September 30, 2019	$	(15.4	)	$	(21.6	)	$	(124.1	)	$	(161.1	)

(1) Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

The amounts of net gains reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs component of accumulated other comprehensive loss for the three and nine months ended September 30, 2019, were $0.2 million with no material tax impact and $0.8 million less taxes of $0.2 million, respectively. The amounts reclassified to earnings from the change in fair value of the derivatives component of accumulated other comprehensive loss for the three and nine months ended September 30, 2019 were net losses of $3.8 million less taxes of $0.9 million and $8.4 million less taxes of $1.9 million, respectively, related to foreign currency forward exchange contracts and $0.8 million less taxes of $0.2 million and $2.4 million less taxes of $0.6 million, respectively, related to commodity swaps. We also recorded net gains of $0.3 million less taxes of less than $0.1 million and $1.1 million less taxes of $0.2 million related to interest rate swaps, in the three and nine month periods ended September 30, 2019, respectively. 

Note 13 — Acquisitions

During the first quarter of 2019, we acquired all of the outstanding equity interests in ARC Technologies LLC, a leading supplier of customer RF/EMI and microwave absorbing composite materials for military, aerospace and industrial applications, for $163.2 million. This acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations. 

In connection with the acquisition, the Company recognized $82.1 million of goodwill, and approximately $63.0 million of intangible assets which are included in our Engineered Products segment.

Note 14 — Commitments and Contingencies

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. While it is impossible to predict the ultimate resolution of litigation, investigations and claims asserted against us, we believe, based upon our examination of currently available information, our experience to date, and advice from legal counsel, that, after taking into account our existing insurance coverage and amounts already provided for, the currently pending legal proceedings against us will not have a material adverse impact on our Condensed Consolidated Statements of Operations, Balance Sheets or Cash Flows.

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Environmental Matters

We have been named as a potentially responsible party (“PRP”) with respect to the below 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 the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) 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 environmental matters will not be material.

Lower Passaic River Study Area

Hexcel together with approximately 48 other PRPs that comprise the Lower Passaic Cooperating Parties Group (the “CPG”), are subject to a May 2007 Administrative Order on Consent (“AOC”) with the EPA requiring the CPG to perform a Remedial Investigation/Feasibility Study of environmental conditions of a 17-mile stretch of the Passaic River in New Jersey (the “Lower Passaic River”). We were included in the CPG based on our operations at our former manufacturing site in Lodi, New Jersey.        

In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower eight miles of the Lower Passaic River at an expected cost ranging from $0.97 billion to $2.07 billion. This estimate does not include any costs related to a future remedy for the upper nine miles of the Lower Passaic River. In August 2017, the EPA appointed an independent third party allocation expert to make recommendations on the relative liability of approximately 120 identified non-government PRP’s, which is not expected to be completed until 2021.

In October 2016, pursuant to a settlement agreement with the EPA, Occidental Chemical Corporation (“OCC”), one of the PRPs, commenced performance of the remedial design required by the ROD, reserving its right of cost contribution from all other PRPs. In June 2018, OCC filed suit against approximately 120 parties, including Hexcel, in the U.S. District Court of the District of New Jersey seeking cost recovery and contribution under CERCLA related to the Lower Passaic River. On July 31, 2019, the court dismissed certain of OCC’s cost-recovery claims and, on August 14, 2019, Hexcel filed its answer to the complaint, which included counterclaims against OCC. On September 13, 2019, OCC filed its answer to Hexcel’s counterclaims and asserted new cost-recovery and contribution counterclaims against Hexcel and other defendants. We do not know whether this litigation will impact the EPA’s allocation process or the ultimate outcome of the matter.

The accrual was $2.0 million as of September 30, 2019 and $2.1 million at December 31, 2018. Given the uncertainty associated with the many elements of the Superfund process for the Lower Passaic River, the amounts accrued may not be indicative of the amounts for which we will ultimately be responsible.

Omega Chemical Corporation Superfund Site, Whittier, California

We are a PRP at a former chemical waste site in Whittier, California. The PRPs at Omega have established The Omega Chemical Site PRP Organized Group, (the “OPOG”), and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. OPOG has attributed to Hexcel either 1.25% or 2.18% of the waste tonnage (dependent on the specific location within the Omega Chemical Site) sent to the site.  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 ROD. The OPOG members have been served notice by the EPA as PRPs who will be required to be involved in the remediation of the regional groundwater contamination in that vicinity as well.  As a member of OPOG, 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. The total accrued liability relating to potential liability for both the Omega site and regional groundwater remedies was $0.3 million at September 30, 2019 and at December 31, 2018.

Summary of Environmental Reserves

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lower Passaic River and other sites are accrued in the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, our aggregate environmental related accruals were $2.5 million and $2.7 million, respectively, of which $0.6 million and $0.8 million, respectively, was included in accrued liabilities with the remainder included in non-current liabilities.  As related to certain environmental matters the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued, for 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 $16 million higher at September 30, 2019.

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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.

Product Warranty

We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the nine months ended September 30, 2019, and accrued warranty cost, included in “accrued liabilities” in the Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018, were as follows:

	Product
(In millions)	Warranties
Balance as of December 31, 2018	$	4.8
Warranty expense		2.4
Deductions and other		(0.3	)
Balance as of March 31, 2019		6.9
Warranty expense		0.6
Deductions and other		(1.0	)
Balance as of June 30, 2019		6.5
Warranty expense		(0.1	)
Deductions and other		0.2
Balance as of September 30, 2019	$	6.6

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

Business Overview

We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, RF/EMI and microwave absorbing materials, 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, recreational products and other industrial applications.

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

On January 3, 2019, we acquired ARC Technologies, LLC (“ARC”), a leading supplier of custom RF/EMI and microwave absorbing composite materials for military, aerospace and industrial applications.  The acquisition strengthens our existing advanced materials portfolio in structural composites and thermoplastics.

We have two segments, Composite Materials and Engineered Products. The Composite Materials segment is comprised of our carbon fiber, specialty reinforcements, resins, prepregs and other fiber-reinforced matrix materials, honeycomb core product lines and pultruded profiles.  The Engineered Products segment is comprised of lightweight high strength composite structures, RF/EMI and microwave absorbing materials, engineered core and specialty machined honeycomb products with added functionality.

Net sales for the quarter were $572.5 million, 5.9% greater (6.6% in constant currency) than the $540.5 million reported for the third quarter of 2018.  The increase in sales for the quarter was driven by strong growth in Space & Defense including sales attributable to the ARC acquisition.

Commercial Aerospace sales of $385.9 million increased 3.4% (3.6% in constant currency) for the quarter as compared to the third quarter of 2018.  The third quarter benefited from increased growth for most programs with particularly strong performance for the A320neo and the B787 tempered by reduced demand from the Boeing 737 MAX program.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were up 16.8% for the third quarter of 2019 as compared to 2018 driven by strong business jet sales.

Space & Defense sales of $109.8 million increased 21.5% (22.7% in constant currency) for the quarter as compared to the third quarter of 2018 including sales attributable to the ARC acquisition. Growth in the F-35 Joint Strike Fighter (“JSF”) was the primary driver.

Total Industrial sales of $76.8 million for the third quarter of 2019 were in line with the third quarter of 2018 (an increase of 2.7% in constant currency). Wind energy sales improved 6.9% (10.2% in constant currency) compared to the prior year period.

Gross margin for the third quarter of 2019 was 27.6% as compared to 26.5% for the third quarter of 2018, as 2018 was negatively impacted by several headwinds including acrylonitrile (AN) and wind energy resin pricing.

Selling, general and administrative expenses for the third quarter of 2019 were comparable as a percentage of sales to the prior year period as we maintained tight cost control.  Research and technology expenses for the third quarter of 2019 were about 2% higher than the comparable 2018 period, as we continued to invest in advance composite technology and innovation.

Operating cash flow for the first nine months of 2019 was $277.3 million compared to $278.4 million in 2018. Working capital increased resulting in a cash use of $83.7 million in 2019 as compared to a use of $64.6 million in 2018 reflecting growth in the underlying business. For the first nine months of 2019, capital expenditures were $162.7 million as compared to $150.2 million in the first nine months of 2018.  Free cash flow (defined as cash provided by operating activities less capital expenditures) for the nine months ended September 30, 2019 was $114.6 million versus $128.2 million in the comparable period of 2018.

Accrual basis additions to capital expenditures were $160.9 million for the first nine months of 2019 and $133.5 million in 2018. We expect accrual basis capital expenditures to be in the $170 million to $190 million range for 2019.

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Financial Overview

Results of Operations

	Quarter Ended September 30,									Nine Months Ended September 30,
(In millions, except per share data)	2019			2018			% Change			2019			2018			% Change
Net sales	$	572.5		$	540.5			5.9	%	$	1,791.4		$	1,628.1			10.0	%
Net sales change in constant currency								6.6	%								11.2	%
Operating income	$	109.9		$	96.5			13.9	%	$	327.8		$	275.4			19.0	%
As a percentage of net sales		19.2	%		17.9	%					18.3	%		16.9	%
Net income		80.3		80.1				0.2	%	233.4			210.5				10.9	%
Diluted net income per common share	$	0.93		$	0.91			2.2	%	$	2.71		$	2.35			15.3	%

The Company’s performance measurements include net income adjusted for special items and free cash flow, which are non-GAAP measures. Management believes these non-GAAP measurements are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results. These non-GAAP measurements are not recognized in accordance with generally accepted accounting principles and should not be viewed as an alternative to a GAAP measure of performance.  The following is a reconciliation from GAAP to non-GAAP amounts.

	Quarter Ended September 30,										Nine Months Ended September 30,
	2019					2018					2019					2018
(In millions, except per diluted share data)	Net Income			Tax Rate %		Net Income			Tax Rate %		Net Income			Tax Rate %		Net Income			Tax Rate %
GAAP net income	$	80.3			18.4	$	80.1			9.1	$	233.4			21.3	$	210.5			16.9
Discrete tax benefits (a)		(3.0	)		3.0		(9.6	)		11.2		(3.0	)		1.0		(10.9	)		4.4
Adjusted net income (non-GAAP)	$	77.3			21.4	$	70.5			20.3	$	230.4			22.3	$	199.6			21.3
Adjusted diluted net income per share (non-GAAP)	$	0.90				$	0.80				$	2.68				$	2.23
(a) The quarter ended September 30, 2019 benefited primarily from tax credits identified during the quarter of $3.0 million.  The third quarter of 2018 included discrete benefits of $9.6 million primarily related to a change in accounting method and release of a valuation allowance in a foreign jurisdiction.  The nine months ended September 30, 2018 also included a discrete benefit of $1.3 million from the release of reserves for uncertain tax positions.

	Nine Months Ended September 30,
(In millions)	2019			2018
Net cash provided by operating activities	$	277.3		$	278.4
Less: Capital expenditures		(162.7	)		(150.2	)
Free cash flow (non-GAAP)	$	114.6		$	128.2

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Net Sales

The following table summarizes net sales to third-party customers by segment and end market for the three and nine months ended September 30, 2019 and 2018:

	Quarter Ended September 30,							Nine Months Ended September 30,
(In millions)	2019		2018		% Change			2019		2018		% Change
Consolidated Net Sales	$	572.5	$	540.5		5.9	%	$	1,791.4	$	1,628.1		10.0	%
Commercial Aerospace		385.9		373.1		3.4	%		1,217.9		1,139.6		6.9	%
Space & Defense		109.8		90.4		21.5	%		329.4		272.2		21.0	%
Industrial	76.8			77.0		(0.3	)%		244.1	216.3			12.9	%
Composite Materials	$	448.0	$	432.8		3.5	%	$	1,419.7	$	1,323.2		7.3	%
Commercial Aerospace		294.5		285.7		3.1	%		941.6		889.5		5.9	%
Space & Defense		78.9		70.1		12.6	%		236.2		217.4		8.6	%
Industrial	74.6			77.0		(3.1	)%		241.9	216.3			11.8	%
Engineered Products	$	124.5	$	107.7		15.6	%	$	371.7	$	304.9		21.9	%
Commercial Aerospace	91.4		87.4			4.6	%	276.3		250.1			10.5	%
Space & Defense		30.9		20.3		52.2	%		93.2		54.8		70.1	%
Industrial		2.2		—	N/M				2.2		—	N/M

Sales by Segment

Composite Materials: Net sales of $448.0 million in the third quarter of 2019 increased $15.2 million from the $432.8 million in sales for the prior year quarter, driven by strong growth in Space & Defense from the JSF program. Net sales of $1,419.7 million for the nine months ended September 30, 2019 increased 7.3% compared to the same period last year. Commercial Aerospace sales during 2019 benefited from increased production rates and higher composite content on the new narrow-body planes, as well as the A350 and B787 programs. Space & Defense sales primarily benefited from growth in the JSF program. Wind energy sales were up in 2019 as the transition to new generation blades that are longer with a higher composite content started in mid-2018.  

Engineered Products: Net sales of $124.5 million in the third quarter of 2019 increased $16.8 million from the $107.7 million for 2018. Net sales of $371.7 million for the first nine months of 2019 increased 21.9% primarily reflecting the ARC acquisition and growth from the A320neo.

Sales by Market

Commercial Aerospace sales of $385.9 million increased 3.4% (3.6% in constant currency) for the quarter as compared to the third quarter of 2018.  The third quarter benefited from increased growth for most programs with particularly strong performance for the A320neo and B787 tempered by reduced demand from the 737MAX. The 6.9% growth for the first nine months of 2019 was driven by narrow-body build rate increases and the completion of the transition to the Neo and MAX configurations, as well as the A350 and B787 programs.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were up 16.8% for the third quarter and 9.9% for the first nine months of 2019 as compared to 2018 driven by strong business jet sales.

Space & Defense sales of $109.8 million increased 21.5% (22.7% in constant currency) for the quarter as compared to the third quarter of 2018 and of $329.4 million increased 21.0% (22.6% in constant currency) for the first nine months of 2019 including sales attributable to the ARC acquisition. Growth in the JSF was the primary driver along with other fixed-wing programs.

Total Industrial sales of $76.8 million for the third quarter of 2019 were in line with the third quarter of 2018 (an increase of 2.7% in constant currency). Wind energy sales improved 6.9% (10.2% in constant currency) compared to the prior year period, a slower rate of growth than recent quarters, as the transition to the new generation of composite blades started in mid-2018. Industrial sales for the nine months ended September 30, 2019 were $244.1 million, which were 18.0% higher in constant currency than the sales in the first nine months of 2018 driven by an almost 40% increase in wind energy sales.

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Gross Margin

	Quarter Ended September 30,									Nine Months Ended September 30,
(In millions)	2019			2018			% Change			2019			2018			% Change
Gross margin	$	157.9		$	143.0			10.4	%	$	493.9		$	430.4			14.8	%
Percentage of sales		27.6	%		26.5	%					27.6	%		26.4	%

Gross margin for the third quarter was 27.6% compared to 26.5% in the third quarter of 2018 and 27.6% and 26.4% for the first nine months of 2019 and 2018, respectively. The 2018 periods were negatively impacted by several headwinds including AN and wind energy resin pricing.

Operating Expenses

	Quarter Ended September 30,									Nine Months Ended September 30,
(In millions)	2019			2018			% Change			2019			2018			% Change
SG&A expense	$	33.8		$	32.6			3.7	%	$	122.8		$	114.3			7.4	%
Percentage of sales		5.9	%		6.0	%					6.9	%		7.0	%
R&T expense	$	14.2		$	13.9			2.2	%	$	43.3		$	40.7			6.4	%
Percentage of sales		2.5	%		2.6	%					2.4	%		2.5	%

Selling, general and administrative expenses for the third quarter and first nine months of 2019, as a percentage of sales, were comparable to the 2018 levels as we maintained tight cost control. Research and technology expense increased for the third quarter and first nine months of 2019 as we continue to invest in innovative composite products and solutions to support our customers and next-generation products.  

Operating Income

	Quarter Ended September 30									Nine Months Ended September 30,
(In millions)	2019			2018			% Change			2019			2018			% Change
Consolidated operating income	$	109.9		$	96.5			13.9	%	$	327.8		$	275.4			19.0	%
Operating margin		19.2	%		17.9	%					18.3	%		16.9	%
Composite Materials		100.1			92.5			8.2	%		324.4		276.6				17.3	%
Operating margin		21.2	%		20.6	%					21.9	%		20.0	%
Engineered Products		20.3		15.5				31.0	%		51.4		41.3				24.5	%
Operating margin		16.3	%		14.4	%					13.8	%		13.5	%
Corporate & Other		(10.5	)		(11.5	)		(8.7	)%		(48.0	)		(42.5	)		12.9	%

Operating income for the third quarters of 2019 and 2018 was $109.9 million and $96.5 million, respectively. Operating income for the first nine months of 2019 and 2018 was $327.8 million and $275.4 million, respectively. Exchange rates favorably impacted the third quarter of 2019 by approximately 10 basis points and the first nine months of 2019 by approximately 35 basis points as compared to 2018. Depreciation and amortization expense for the first nine months of 2019 was $16.3 million higher than the comparable period for 2018.

Interest Expense, Net

	Quarter Ended September 30							Nine Months Ended September 30,
(In millions)	2019		2018		% Change			2019		2018		% Change
Interest expense, net	$	11.0	$	10.6		3.8	%	$	34.9	$	27.3		27.8	%

Interest expense for the third quarter and nine months ended September 30, 2019 increased as compared to the same period last year primarily due to higher debt levels as a result of the ARC acquisition.

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Provision for Income Taxes

	Quarter Ended September 30						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Income tax expense	$	18.2		$	7.8		$	62.4		$	41.9
Effective tax rate		18.4	%		9.1	%		21.3	%		16.9	%

The effective tax rate for the current quarter was 18.4% compared to 9.1% for the quarter ended September 30, 2018 and 21.3% for the first nine months of 2019 compared to 16.9% for the first nine months of 2018. The three months ended September 30, 2019 included a $3.0 million benefit primarily due to tax credits identified in the quarter. The quarter ended September 30, 2018 included discrete benefits of $9.6 million primarily related to a change in tax accounting method and the release of a valuation allowance in a foreign jurisdiction. The nine months ended September 30, 2018 also included a discrete benefit of $1.3 million related to the release of a reserve for uncertain tax positions. All periods benefited from deductions associated with share based compensation payments. Our underlying estimated effective income tax rate is expected to remain at 24%.  

Financial Condition

Liquidity: As of September 30, 2019, our total debt, net of cash, was $1,077.5 million, as compared to $924.1 million at December 31, 2018.  The increase in debt in the first nine months of 2019 primarily reflects the ARC acquisition. At September 30, 2019, total borrowings under our $1 billion Senior Unsecured Revolving Credit Facility (“the Facility”) were $379 million. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50.0 million.  Any outstanding letters of credit reduce the amount available for borrowing under the Facility.  As of September 30, 2019, we had not issued any letters of credit under the Facility, resulting in undrawn availability under the Facility of $621 million.  

The Facility agreement contains financial and other covenants, including, but not limited customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default.

We expect to meet our short-term liquidity requirements (including capital expenditures) through net cash from operating activities, cash on hand and the Facility.  As of September 30, 2019, 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 2024 when the Facility expires.

Operating Activities: Net cash provided by operating activities was $277.3 million for the first nine months of 2019 and $278.4 million for the comparable 2018 period. The change in working capital was a use of $83.7 million in 2019 as compared to $64.6 million in 2018, driven by growth in the underlying business.

Investing Activities: Net cash used for investing activities was $325.9 million and $150.9 million in the first nine months of 2019 and 2018, respectively. The 2019 period included $163.2 million for the ARC acquisition. Capital expenditures were $162.7 million and $150.2 million in 2019 and 2018, respectively.

Financing Activities: Financing activities provided $64.8 million of cash in the first nine months of 2019, and were a use of $136.8 million in the same period in 2018.  This increase in cash provided was primarily due to amounts borrowed from our Facility to fund the ARC acquisition. We returned $106.8 million to stockholders from stock repurchases and dividends in 2019 compared to $318.3 million in 2018.

Financial Obligations and Commitments: As of September 30, 2019, the current portion of debt included $8.7 million related to the Euro term loan. The next significant scheduled debt maturity will not occur until 2024, when the Facility matures.  Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect reported amounts of assets, liabilities, revenues, expenses and related disclosures.  We base our assumptions, estimates and judgments on historical experience, current trends and other factors management believes to be relevant at the time our condensed consolidated financial statements are prepared.  On a regular basis, management reviews accounting policies, assumptions, estimates and judgments

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to ensure our financial statements are presented fairly and in accordance with U.S. GAAP.  However, because future events and their effects cannot be determined with certainty, actual results may differ from our assumptions and estimates, and such differences could be material.

We describe our significant accounting policies and critical accounting estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Significant changes to our accounting policies subsequent to the filing of our Form 10-K, relate  to the adoption of Topic 842, Leases, as discussed in Notes 1 and 4 to our financial statements.

Commitments and Contingencies

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. We estimate and accrue our liabilities 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 and our remaining costs associated with our responsibility to remediate the Lower Passaic River in New Jersey and other sites are accrued in the Condensed Consolidated Balance Sheets. As of September 30, 2019, our aggregate environmental related accruals were $2.5 million, of which $0.6 million was included in accrued liabilities, with the remainder included in non-current liabilities. As related to certain environmental matters, the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued at the high end of the range of possible outcomes, for those sites where we are able to estimate our liability, our accrual would have been approximately $16 million higher.  These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required changes in the apportionment of costs among responsible parties, the amount of insurance coverage and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter. 

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. 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, Boeing and others; (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 have been completed; (d) expectations of composite content on new commercial aircraft programs and our share of those requirements; (e) expectations of growth in revenues from space and defense applications, including whether certain programs might be curtailed or discontinued; (f) expectations regarding growth in sales for wind energy, recreation, automotive 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 of capacity expansions and qualification of new products; (i) expectations regarding our ability to maintain and improve margins as we add new facilities and in view of the current economic environment; (j) expectations regarding the outcome of legal matters or the impact of changes in laws or regulations; (k) our projections regarding our income tax rate and the realizability of net operating loss and tax credit carryforwards; and (l) the anticipated impact of the above factors and various market risks on our expectations of financial results for 2019 and beyond. 

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: reductions in sales to any significant customers, particularly Airbus, Boeing or Vestas, including any reduction in sales to Boeing related to a decrease in production volume of the 737 MAX; changes in sales mix; changes in current pricing and cost levels; changes in aerospace delivery rates; changes in government defense procurement budgets; changes in military aerospace program technology; timely new product development or introduction; industry capacity; increased competition; availability and cost of raw materials; supply chain disruptions; inability to install, staff and

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qualify necessary capacity or achievement of planned manufacturing improvements; cybersecurity breaches or intrusions; currency exchange rate fluctuations; changes in political, social and economic conditions, including but not limited to, the effect of change in global trade policies and the exit of the U.K. from the European Union; work stoppages or other labor disruptions; and the unexpected outcome of legal matters or impact of changes in laws or regulations.

Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. As a result, the foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with the Securities and Exchange Commission. For additional information regarding certain factors that may cause our actual results to differ from those expected or anticipated see the information under the caption “Risk Factors” which is located in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.  We do not undertake an obligation to update our forward-looking statements or risk factors to reflect future events or circumstances, except as otherwise required by law.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

There are no material changes in market risk from the information provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of September 30, 2019, and with the participation of the Company's management 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, as amended, 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 three months ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The information required by Item 1 is contained within Note 14 on pages 16 through 18 of this Form 10-Q and is incorporated herein by reference.

ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect our business, financial condition or future results. With the exception of the below risk factor, there were no material changes in the Company’s risk factors from the aforementioned 10-K. In addition, future uncertainties may increase the magnitude of these adverse effects or give rise to additional material risks not now contemplated.

If we fail to comply with government procurement laws and regulations, we could lose business and be liable for various penalties or sanctions.

        We must comply with laws and regulations relating to the formation, administration, and performance of U.S. government contracts, including the government security requirements and government export control laws and regulations. In complying with these laws and regulations, we may incur significant costs, and non-compliance may result in the imposition of fines and penalties, including contractual damages. If we fail to comply with these laws and regulations or if a government audit, review, or investigation uncovers improper or illegal activities, we may be subject to civil penalties, criminal penalties, or administrative sanctions, including suspension or debarment from contracting with the U.S. government.

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

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May  Yet Be Purchased Under the Plans or Programs
July 1 – July 31, 2019	22,050	$	83.34	22,050	$	371,757,269
August 1 – August 31, 2019	410,804		80.52	410,804		338,677,974
September 1 – September 30, 2019	251,449		82.87	251,449		317,841,050
Total	684,303	$	81.48	684,303	$	317,841,050 (1)

(1) On May 7, 2018, we announced that our Board authorized us to repurchase an additional $500 million of our outstanding common stock of which $317.8 million was still available at September 30, 2019.

ITEMS 3, 4, and 5 are not applicable, and therefore have been omitted.

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ITEM 6. Exhibits

EXHIBIT INDEX

Exhibit No.	Description
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.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 104	XBRL Instance Document: The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Calculation Linkbase XBRL Taxonomy Extension Definition Linkbase XBRL Taxonomy Extension Label Linkbase XBRL Taxonomy Extension Presentation Linkbase Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101.

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Signature

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

	Hexcel Corporation
October 21, 2019	/s/ Kimberly Hendricks
(Date)	Kimberly Hendricks
	Senior Vice President, Corporate Controller and
	Chief Accounting Officer

28

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Nick L. Stanage, certify that:

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

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

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

4. The registrant’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 registrant 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 registrant, 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 registrant’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 registrant’s internal control over financial reporting that occurred during the most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

October 21, 2019	/s/ Nick L. Stanage
(Date)	Nick L. Stanage
	Chairman of the Board of Directors,
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Patrick Winterlich, certify that:

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

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

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

4. The registrant’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 registrant 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 registrant, 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 registrant’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 registrant’s internal control over financial reporting that occurred during the most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

October 21, 2019	/s/ Patrick Winterlich
(Date)	Patrick Winterlich
	Executive Vice President and
	Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hexcel Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2019 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 the Company, and Patrick Winterlich, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

October 21, 2019	/s/ Nick L. Stanage
(Date)	Nick L. Stanage
	Chairman of the Board of Directors,
	Chief Executive Officer and President
October 21, 2019	/s/ Patrick Winterlich
(Date)	Patrick Winterlich
	Executive 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.

XML

Fair Value Measurements - Additional Information (Details)	9 Months Ended
	Sep. 30, 2019 USD ($) item Liability
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Number of counterparties, which experienced significant downgrades | item	0
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets	$ 0
Liabilities	$ 0
Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value measurement with unobservable inputs reconciliation, number of liabilities | Liability	1
Level 3 | OPM, Inc. Acquisition
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Acquisition of fair value liabilities, contingent consideration	$ 3,100,000
Level 2 | Fair Value Measured on Recurring Basis
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative assets	500,000
Derivative liabilities	37,300,000
Level 2 | Fair Value Measured on Recurring Basis | Interest Rate Swap Agreements
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative liabilities	$ 700,000
Derivative Liability, Measurement Input [Extensible List]	hxl:MeasurementInputLIBORYieldCurvesMember
Level 2 | Fair Value Measured on Recurring Basis | Foreign Currency Forward Exchange Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative assets	$ 500,000
Derivative Asset, Measurement Input [Extensible List]	hxl:MeasurementInputLIBORYieldCurvesMember
Derivative liabilities	$ 32,000,000.0
Derivative Liability, Measurement Input [Extensible List]	us-gaap:MeasurementInputQuotedPriceMember
Level 2 | Fair Value Measured on Recurring Basis | Commodity Swap Agreements
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative liabilities	$ 4,600,000
Derivative Liability, Measurement Input [Extensible List]	us-gaap:MeasurementInputQuotedPriceMember

XML

Retirement and Other Postretirement Benefit Plans - Schedule of Amounts Recognized on Balance Sheet (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Amounts recognized on the balance sheet:
Other non-current liabilities	$ 41.9	$ 42.0
Defined Benefit Retirement Plans | U.S.
Amounts recognized on the balance sheet:
Accrued liabilities	0.9	0.9
Other non-current liabilities	18.0	17.2
Total accrued benefit	$ 18.9	$ 18.1
Defined Benefit Plan, Tax Status [Extensible List]	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember
Defined Benefit Retirement Plans | European
Amounts recognized on the balance sheet:
Other assets	$ 47.1	$ 42.6
Accrued liabilities	0.3	0.4
Other non-current liabilities	18.1	18.8
Total accrued benefit	18.4	19.2
Postretirement Health Care and Life Insurance Benefit Plans
Amounts recognized on the balance sheet:
Accrued liabilities	0.5	0.5
Other non-current liabilities	2.7	2.8
Total accrued benefit	$ 3.2	$ 3.3

XML

Debt - Additional Information (Details) € in Millions, $ in Millions	1 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 EUR (€) tranche	Dec. 31, 2015 USD ($)	May 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Borrowings		$ 1,115.2					$ 947.4
Term loan
Debt Instrument [Line Items]
Debt instrument, interest rate terms		The loan has two tranches of which the first tranche for €25 million has a rate of Euribor +1.2% and a final maturity date of June 30, 2023, and a second tranche for €35 million has a rate of Euribor +1.25% with a final maturity date of June 30, 2024. The loans are payable in annual installments that began on June 30, 2017, for the first tranche, and on June 30, 2019, for the second. There is a zero percent floor on the Euribor.
Face value | €				€ 60
Number of tranches | tranche				2
Debt instrument, payment terms		annual
Term loan | Euribor
Debt Instrument [Line Items]
Debt instrument, floor rate				0.00%
Level 2 | Term loan
Debt Instrument [Line Items]
Outstanding amount under loan		$ 49.0
Maximum
Debt Instrument [Line Items]
Interest coverage ratio required to be maintained		375.00%
Minimum
Debt Instrument [Line Items]
Interest coverage ratio required to be maintained		350.00%
Senior unsecured credit facility- revolving loan due 2024
Debt Instrument [Line Items]
Debt instrument expiration period	2024-06
Debt instrument, interest rate terms	The initial interest rate for the Facility is LIBOR + 1.0%. The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.50%, depending upon the better of the Company’s leverage ratio or the credit rating.
Credit facility interest rate basis	LIBOR + 1.0%.
Spread on variable interest rate basis	1.00%
Maximum amount available under credit facility agreement to issue letters of credit		$ 50.0
Letters of credit issued under credit facility		0.0
Undrawn availability under credit facility		$ 621.0
Weighted average interest rate		4.17%
Debt instrument, covenant terms		As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions.
Senior unsecured credit facility- revolving loan due 2024 | Level 2
Debt Instrument [Line Items]
Borrowings		$ 379.0
Senior unsecured credit facility- revolving loan due 2024 | Maximum
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 1,000.0					$ 700.0
Credit facility interest rate basis	LIBOR + 1.50%
Spread on variable interest rate basis	1.50%
Debt instrument covenant increase in interest coverage ratio		425.00%
Senior unsecured credit facility- revolving loan due 2024 | Minimum
Debt Instrument [Line Items]
Credit facility interest rate basis	LIBOR + 0.875%
Spread on variable interest rate basis	0.875%
3.95% senior unsecured notes due 2027
Debt Instrument [Line Items]
Face value			$ 400.0
Debt instrument, interest rate		3.95%	3.95%
Debt instrument, maturity year			2027
Increase in senior notes interest rate			0.25%
Effective interest rate		3.88%
3.95% senior unsecured notes due 2027 | Treasury Lock | Interest Lock Agreement
Debt Instrument [Line Items]
Percentage of effective interest rate benefit		0.25%
3.95% senior unsecured notes due 2027 | Level 2
Debt Instrument [Line Items]
Fair value of senior unsecured notes		$ 415.8
3.95% senior unsecured notes due 2027 | Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate			5.95%
Tranche one | Term loan
Debt Instrument [Line Items]
Spread on variable interest rate basis				1.20%
Face value | €				€ 25
Variable interest rate basis		Euribor +1.2%
Debt instrument, maturity date		Jun. 30, 2023
Beginning date of first required loan payment		Jun. 30, 2017
Tranche two | Term loan
Debt Instrument [Line Items]
Spread on variable interest rate basis				1.25%
Face value | €				€ 35
Variable interest rate basis		Euribor +1.25%
Debt instrument, maturity date		Jun. 30, 2024
Beginning date of first required loan payment		Jun. 30, 2019
4.7% senior unsecured notes due 2025
Debt Instrument [Line Items]
Face value					$ 300.0
Debt instrument, interest rate					4.70%
Debt instrument, maturity year					2025
Increase in senior notes interest rate					0.25%
Effective interest rate		4.83%
4.7% senior unsecured notes due 2025 | Level 2
Debt Instrument [Line Items]
Fair value of senior unsecured notes		$ 324.1
4.7% senior unsecured notes due 2025 | Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate					6.70%

XML

Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of Cash Payments Related to Right of Use Assets

The following table lists the schedule of cash payments related to right of use assets by year:

(In millions)
Remainder of 2019	$	3.1
2020		12.6
2021		11.0
2022		9.1
2023		8.5
Thereafter		36.0
Total	$	80.3

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 14 — Commitments and Contingencies

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. While it is impossible to predict the ultimate resolution of litigation, investigations and claims asserted against us, we believe, based upon our examination of currently available information, our experience to date, and advice from legal counsel, that, after taking into account our existing insurance coverage and amounts already provided for, the currently pending legal proceedings against us will not have a material adverse impact on our Condensed Consolidated Statements of Operations, Balance Sheets or Cash Flows.

Environmental Matters

We have been named as a potentially responsible party (“PRP”) with respect to the below 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 the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) 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 environmental matters will not be material.

Lower Passaic River Study Area

Hexcel together with approximately 48 other PRPs that comprise the Lower Passaic Cooperating Parties Group (the “CPG”), are subject to a May 2007 Administrative Order on Consent (“AOC”) with the EPA requiring the CPG to perform a Remedial Investigation/Feasibility Study of environmental conditions of a 17-mile stretch of the Passaic River in New Jersey (the “Lower Passaic River”). We were included in the CPG based on our operations at our former manufacturing site in Lodi, New Jersey.        

In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower eight miles of the Lower Passaic River at an expected cost ranging from $0.97 billion to $2.07 billion. This estimate does not include any costs related to a future remedy for the upper nine miles of the Lower Passaic River. In August 2017, the EPA appointed an independent third party allocation expert to make recommendations on the relative liability of approximately 120 identified non-government PRP’s, which is not expected to be completed until 2021.

In October 2016, pursuant to a settlement agreement with the EPA, Occidental Chemical Corporation (“OCC”), one of the PRPs, commenced performance of the remedial design required by the ROD, reserving its right of cost contribution from all other PRPs. In June 2018, OCC filed suit against approximately 120 parties, including Hexcel, in the U.S. District Court of the District of New Jersey seeking cost recovery and contribution under CERCLA related to the Lower Passaic River. On July 31, 2019, the court dismissed certain of OCC’s cost-recovery claims and, on August 14, 2019, Hexcel filed its answer to the complaint, which included counterclaims against OCC. On September 13, 2019, OCC filed its answer to Hexcel’s counterclaims and asserted new cost-recovery and contribution counterclaims against Hexcel and other defendants. We do not know whether this litigation will impact the EPA’s allocation process or the ultimate outcome of the matter.

The accrual was $2.0 million as of September 30, 2019 and $2.1 million at December 31, 2018. Given the uncertainty associated with the many elements of the Superfund process for the Lower Passaic River, the amounts accrued may not be indicative of the amounts for which we will ultimately be responsible.

Omega Chemical Corporation Superfund Site, Whittier, California

We are a PRP at a former chemical waste site in Whittier, California. The PRPs at Omega have established The Omega Chemical Site PRP Organized Group, (the “OPOG”), and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. OPOG has attributed to Hexcel either 1.25% or 2.18% of the waste tonnage (dependent on the specific location within the Omega Chemical Site) sent to the site.  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 ROD. The OPOG members have been served notice by the EPA as PRPs who will be required to be involved in the remediation of the regional groundwater contamination in that vicinity as well.  As a member of OPOG, 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. The total accrued liability relating to potential liability for both the Omega site and regional groundwater remedies was $0.3 million at September 30, 2019 and at December 31, 2018.

Summary of Environmental Reserves

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lower Passaic River and other sites are accrued in the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, our aggregate environmental related accruals were $2.5 million and $2.7 million, respectively, of which $0.6 million and $0.8 million, respectively, was included in accrued liabilities with the remainder included in non-current liabilities.  As related to certain environmental matters the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued, for 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 $16 million higher at September 30, 2019.

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.

Product Warranty

We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the nine months ended September 30, 2019, and accrued warranty cost, included in “accrued liabilities” in the Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018, were as follows:

	Product
(In millions)	Warranties
Balance as of December 31, 2018	$	4.8
Warranty expense		2.4
Deductions and other		(0.3	)
Balance as of March 31, 2019		6.9
Warranty expense		0.6
Deductions and other		(1.0	)
Balance as of June 30, 2019		6.5
Warranty expense		(0.1	)
Deductions and other		0.2
Balance as of September 30, 2019	$	6.6

XML

Revenue (Tables)

9 Months Ended

Sep. 30, 2019

Revenue From Contract With Customer [Abstract]

Schedule of Revenue By Market

The following table details our revenue by market for the three and nine months ended September 30, 2019 and 2018:

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
Consolidated Net Sales	$	572.5	$	540.5	$	1,791.4	$	1,628.1
Commercial Aerospace	385.9		373.1			1,217.9		1,139.6
Space & Defense		109.8		90.4		329.4		272.2
Industrial	76.8			77.0	244.1		216.3

Schedule of Activity Related to Contract Assets

The activity related to contract assets for the nine months ended September 30, 2019 is as follows:

`
(In millions)	Composite Material			Engineered Products			Total
Balance at December 31, 2018	$	12.9		$	37.6		$	50.5
Net revenue billed		(1.4	)		4.6			3.2
Balance at March 31, 2019		11.5			42.2			53.7
Net revenue billed		1.7			4.3			6.0
Balance at June 30, 2019		13.2			46.5			59.7
Net revenue billed		(1.7	)		(1.6	)		(3.3	)
Balance at September 30, 2019	$	11.5		$	44.9		$	56.4

XML

Revenue

9 Months Ended

Sep. 30, 2019

Revenue From Contract With Customer [Abstract]

Revenue

Note 10 — Revenue

Our revenue is primarily derived from the sale of inventory under long-term agreements with our customers. We have determined that individual purchase orders (“PO”), whose terms and conditions taken with a master agreement, create the ASC 606 contracts which are generally short-term in nature.  For those sales, which are not tied to a long-term agreement, we generate a PO that is subject to our standard terms and conditions. In instances where our customers acquire our goods related to government contracts, the contracts are typically subject to terms similar, or equal to, the Federal Acquisition Regulation Part 52.249-2.  This regulation contains a termination for convenience clause (“T for C”), which requires that the customer pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit.

We recognize revenue over time for those agreements that have T for C, and where the products being produced have no alternative use.  As our production cycle is typically six months or less, it is expected that goods related to the revenue recognized over time will be shipped and billed within the next twelve months. Less than half of our agreements contain provisions which would require revenue to be recognized over time.

We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the three and nine months ended September 30, 2019 and 2018:

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
Consolidated Net Sales	$	572.5	$	540.5	$	1,791.4	$	1,628.1
Commercial Aerospace	385.9		373.1			1,217.9		1,139.6
Space & Defense		109.8		90.4		329.4		272.2
Industrial	76.8			77.0	244.1		216.3

Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled.  Contract assets are included in our Condensed Consolidated Balance Sheets as a component of current assets. The activity related to contract assets for the nine months ended September 30, 2019 is as follows:

`
(In millions)	Composite Material			Engineered Products			Total
Balance at December 31, 2018	$	12.9		$	37.6		$	50.5
Net revenue billed		(1.4	)		4.6			3.2
Balance at March 31, 2019		11.5			42.2			53.7
Net revenue billed		1.7			4.3			6.0
Balance at June 30, 2019		13.2			46.5			59.7
Net revenue billed		(1.7	)		(1.6	)		(3.3	)
Balance at September 30, 2019	$	11.5		$	44.9		$	56.4

Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional.  

XML

Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Debt

Note 6 –– Debt

(In millions)	September 30, 2019			December 31, 2018
Current portion of finance lease	$	0.6		$	0.3
Current portion of Euro term loan		8.7			9.1
Current portion of debt		9.3			9.4
Non-current portion of Euro term loan		40.3			51.4
Senior unsecured credit facility		379.0			202.0
4.7% senior notes --- due 2025		300.0			300.0
3.95% senior notes --- due 2027		400.0			400.0
Senior notes --- original issue discount		(1.8	)		(2.0	)
Senior notes --- deferred financing costs		(4.3	)		(4.8	)
Non-current portion of finance lease and other debt		2.0			0.8
Long-term debt		1,115.2			947.4
Total debt	$	1,124.5		$	956.8

In June 2019, the Company refinanced its senior unsecured credit facility (“the Facility”), increasing borrowing capacity from $700 million to $1 billion. The maturity of the Facility is June 2024. The refinancing provides for a reduction in interest costs, as well as less restrictive covenants. The initial interest rate for the Facility is LIBOR + 1.0%. The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.50%, depending upon the better of the Company’s leverage ratio or the credit rating. As of September 30, 2019, total borrowings under the Facility were $379 million, which approximates fair value. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50 million. Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of September 30, 2019, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $621 million. The weighted average interest rate for the Facility was 4.17% for the nine months ended September 30, 2019.

The Facility agreement contains financial and other covenants, including, but not limited to customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default.

In 2017, the Company issued $400 million in aggregate principal amount of 3.95% Senior Unsecured Notes due in 2027. The interest rate on these senior notes may be increased 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 5.95%. The effective interest rate for nine months ended September 30, 2019 was 3.88% inclusive of approximately a 0.25% benefit of treasury locks. Based on quoted prices the fair value of the senior unsecured notes due in 2027 was $415.8 million at September 30, 2019.

In 2016, we entered into a €60 million term loan.  The loan has two tranches of which the first tranche for €25 million has a rate of Euribor +1.2% and a final maturity date of June 30, 2023, and a second tranche for €35 million has a rate of Euribor +1.25% with a final maturity date of June 30, 2024. The loans are payable in annual installments that began on June 30, 2017, for the first tranche, and on June 30, 2019, for the second. There is a zero percent floor on the Euribor. Amounts outstanding under this loan at September 30, 2019 were $49.0 million which approximates fair value under the market approach.    

In 2015, the Company issued $300 million in aggregate principal amount of 4.7% Senior Unsecured Notes due in 2025. The interest rate on these senior notes may be increased by 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 6.7%.  The effective interest rate for the nine months ended September 30, 2019 was 4.83%. Based on quoted prices, the fair value of these notes was $324.1 million at September 30, 2019.

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Leases - Schedule of Cash Payments Related to Right of Use Assets (Details) $ in Millions	Sep. 30, 2019 USD ($)
Operating Lease Liabilities Payments Due [Abstract]
Remainder of 2019	$ 3.1
2020	12.6
2021	11.0
2022	9.1
2023	8.5
Thereafter	36.0
Total	$ 80.3

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of Operating Segment Reporting Information

Financial information for our operating segments for the quarter and nine months ended September 30, 2019 and 2018 were as follows:

	(Unaudited)
	Composite		Engineered		Corporate &
(In millions)	Materials		Products		Other (a)			Total
Third Quarter 2019
Net sales to external customers	$	448.0	$	124.5	$	—		$	572.5
Intersegment sales		23.3	—			(23.3	)		—
Total sales	$	471.3	$	124.5	$	(23.3	)	$	572.5
Operating income		100.1		20.3		(10.5	)		109.9
Depreciation and amortization		30.7		3.7		—			34.4
Stock-based compensation		1.2		0.2		1.0			2.4
Accrual basis additions to capital expenditures		51.0		2.3		—			53.3
Third Quarter 2018
Net sales to external customers	$	432.8	$	107.7	$	—		$	540.5
Intersegment sales		17.2		—		(17.2	)		—
Total sales	$	450.0	$	107.7	$	(17.2	)	$	540.5
Operating income		92.5		15.5		(11.5	)		96.5
Depreciation and amortization		28.9		2.3		—			31.2
Stock-based compensation		1.2		0.2		0.6			2.0
Accrual basis additions to capital expenditures		41.4		2.1		—			43.5
Nine Months Ended September 30, 2019
Net sales to external customers	$	1,419.7	$	371.7	$	—		$	1,791.4
Intersegment sales		64.0		0.1		(64.1	)		—
Total sales	$	1,483.7	$	371.8	$	(64.1	)	$	1,791.4
Operating income		324.4		51.4		(48.0	)		327.8
Depreciation and amortization		95.7		11.3		0.1			107.1
Stock-based compensation		6.4		1.4		8.1			15.9
Accrual basis additions to capital expenditures		156.8		4.1		—			160.9
Nine Months Ended September 30, 2018
Net sales to external customers	$	1,323.2	$	304.9	$	—		$	1,628.1
Intersegment sales		56.7		—		(56.7	)		—
Total sales	$	1,379.9	$	304.9	$	(56.7	)	$	1,628.1
Operating income		276.6		41.3		(42.5	)		275.4
Depreciation and amortization		83.9		6.8		0.1			90.8
Stock-based compensation		5.7		1.0		7.3			14.0
Accrual basis additions to capital expenditures		130.1		3.4		—			133.5

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

Schedule of Goodwill and Intangible Assets by Segment

Goodwill and Intangible Assets	Composite			Engineered
(In millions)	Materials			Products			Total
Balance at December 31, 2018	$	98.2		$	44.1		$	142.3
Amortization Expense		(1.6	)		(3.8	)		(5.4	)
Additions		—			145.1			145.1
Currency translation adjustments		(2.6	)	—				(2.6	)
Balance at September 30, 2019	$	94.0		$	185.4		$	279.4

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Net Income per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic net income per common share:
Net income	$ 80.3	$ 80.9	$ 72.2	$ 80.1	$ 68.8	$ 61.6	$ 233.4	$ 210.5
Weighted average common shares outstanding - Basic (in shares)	85.1			87.0			85.1	88.6
Basic net income per common share	$ 0.94			$ 0.92			$ 2.74	$ 2.37
Diluted net income per common share:
Net income	$ 80.3			$ 80.1			$ 233.4	$ 210.5
Weighted average common shares outstanding - Basic (in shares)	85.1			87.0			85.1	88.6
Plus incremental shares from assumed conversions:
Restricted stock units (in shares)	0.4			0.5			0.4	0.4
Stock options (in shares)	0.6			0.6			0.6	0.7
Weighted average common shares outstanding -Dilutive (in shares)	86.1			88.1			86.1	89.7
Diluted net income per common share	$ 0.93			$ 0.91			$ 2.71	$ 2.35

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Accumulated Other Comprehensive Loss - Schedule of Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions		3 Months Ended						9 Months Ended
		Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Accumulated Other Comprehensive Income Loss [Line Items]
Balance		$ 1,442.4	$ 1,372.4	$ 1,322.0	$ 1,399.8	$ 1,562.5	$ 1,495.1	$ 1,322.0	$ 1,495.1
Other comprehensive loss before reclassifications								(59.9)
Amounts reclassified from accumulated other comprehensive loss								6.8
Total other comprehensive income		(43.0)	(4.2)	(5.9)	(0.8)	(73.0)	35.6	(53.1)	(38.2)
Balance		1,417.8	1,442.4	1,372.4	1,367.3	1,399.8	1,562.5	1,417.8	1,367.3
Accounting Standards Update 2018-02
Accumulated Other Comprehensive Income Loss [Line Items]
Total other comprehensive income								(53.1)
Unrecognized Defined Benefit and Postretirement Plan Costs
Accumulated Other Comprehensive Income Loss [Line Items]
Balance				(15.4)				(15.4)
Other comprehensive loss before reclassifications								0.6
Amounts reclassified from accumulated other comprehensive loss								(0.6)
Balance		(15.4)						(15.4)
Change in Fair Value of Derivatives Products
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	[1]			(5.8)				(5.8)
Other comprehensive loss before reclassifications	[1]							(23.2)
Amounts reclassified from accumulated other comprehensive loss	[1]							7.4
Total other comprehensive income	[1]							(15.8)
Balance	[1]	(21.6)						(21.6)
Foreign Currency Translation
Accumulated Other Comprehensive Income Loss [Line Items]
Balance				(86.8)				(86.8)
Other comprehensive loss before reclassifications								(37.3)
Total other comprehensive income								(37.3)
Balance		(124.1)						(124.1)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income Loss [Line Items]
Balance		(118.1)	(113.9)	(108.0)	(80.8)	(7.8)	(45.0)	(108.0)	(45.0)
Total other comprehensive income		(43.0)	(4.2)	(5.9)	(0.8)	(73.0)	35.6
Balance		$ (161.1)	$ (118.1)	$ (113.9)	$ (81.6)	$ (80.8)	$ (7.8)	$ (161.1)	$ (81.6)

[1] Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

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Revenue - Schedule of Activity Related to Contract Assets (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019
Change in Contract with Customer Asset [Line Items]
Balance at December 31, 2018	$ 59.7	$ 53.7	$ 50.5
Net revenue billed	(3.3)	6.0	3.2
Balance at March 31, 2019	56.4	59.7	53.7
Composite Materials
Change in Contract with Customer Asset [Line Items]
Balance at December 31, 2018	13.2	11.5	12.9
Net revenue billed	(1.7)	1.7	(1.4)
Balance at March 31, 2019	11.5	13.2	11.5
Engineered Products
Change in Contract with Customer Asset [Line Items]
Balance at December 31, 2018	46.5	42.2	37.6
Net revenue billed	(1.6)	4.3	4.6
Balance at March 31, 2019	$ 44.9	$ 46.5	$ 42.2

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Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions	Total	Par	Additional Paid-In Capital	Accumulated Retained Earnings	Other Comprehensive Income (Loss)	Treasury Stock
Balance at Dec. 31, 2017	$ 1,495.1	$ 1.1	$ 774.3	$ 1,496.1	$ (45.0)	$ (731.4)
Increase (Decrease) in Stockholders' Equity
Net income	61.6			61.6
Dividends paid on common stock	(11.2)			(11.2)
Impact of new accounting pronouncements	3.8			2.2	1.6
Change in other comprehensive income – net of tax	35.6				35.6
Stock based compensation	7.7		13.4			(5.7)
Acquisition of treasury stock	(30.1)					(30.1)
Balance at Mar. 31, 2018	1,562.5	1.1	787.7	1,548.7	(7.8)	(767.2)
Balance at Dec. 31, 2017	1,495.1	1.1	774.3	1,496.1	(45.0)	(731.4)
Increase (Decrease) in Stockholders' Equity
Net income	210.5
Change in other comprehensive income – net of tax	(38.2)
Balance at Sep. 30, 2018	1,367.3	1.1	795.2	1,673.3	(81.6)	(1,020.7)
Balance at Mar. 31, 2018	1,562.5	1.1	787.7	1,548.7	(7.8)	(767.2)
Increase (Decrease) in Stockholders' Equity
Net income	68.8			68.8
Dividends paid on common stock	(11.3)			(11.3)
Change in other comprehensive income – net of tax	(73.0)				(73.0)
Stock based compensation	3.7		4.3			(0.6)
Acquisition of treasury stock	(150.9)					(150.9)
Balance at Jun. 30, 2018	1,399.8	1.1	792.0	1,606.2	(80.8)	(918.7)
Increase (Decrease) in Stockholders' Equity
Net income	80.1			80.1
Dividends paid on common stock	(13.0)			(13.0)
Change in other comprehensive income – net of tax	(0.8)				(0.8)
Stock based compensation	3.0		3.2			(0.2)
Acquisition of treasury stock	(101.8)					(101.8)
Balance at Sep. 30, 2018	1,367.3	1.1	795.2	1,673.3	(81.6)	(1,020.7)
Balance at Dec. 31, 2018	1,322.0	1.1	798.3	1,726.5	(108.0)	(1,095.9)
Increase (Decrease) in Stockholders' Equity
Net income	72.2			72.2
Dividends paid on common stock	(12.7)			(12.7)
Change in other comprehensive income – net of tax	(5.9)				(5.9)
Stock based compensation	8.0		13.5			(5.5)
Acquisition of treasury stock	(11.2)					(11.2)
Balance at Mar. 31, 2019	1,372.4	1.1	811.8	1,786.0	(113.9)	(1,112.6)
Balance at Dec. 31, 2018	1,322.0	1.1	798.3	1,726.5	(108.0)	(1,095.9)
Increase (Decrease) in Stockholders' Equity
Net income	233.4
Change in other comprehensive income – net of tax	(53.1)
Balance at Sep. 30, 2019	1,417.8	1.1	826.7	1,920.0	(161.1)	(1,168.9)
Balance at Mar. 31, 2019	1,372.4	1.1	811.8	1,786.0	(113.9)	(1,112.6)
Increase (Decrease) in Stockholders' Equity
Net income	80.9			80.9
Dividends paid on common stock	(12.8)			(12.8)
Change in other comprehensive income – net of tax	(4.2)				(4.2)
Stock based compensation	6.1		6.1
Balance at Jun. 30, 2019	1,442.4	1.1	817.9	1,854.1	(118.1)	(1,112.6)
Increase (Decrease) in Stockholders' Equity
Net income	80.3			80.3
Dividends paid on common stock	(14.4)			(14.4)
Change in other comprehensive income – net of tax	(43.0)				(43.0)
Stock based compensation	8.2		8.8			(0.6)
Acquisition of treasury stock	(55.7)					(55.7)
Balance at Sep. 30, 2019	$ 1,417.8	$ 1.1	$ 826.7	$ 1,920.0	$ (161.1)	$ (1,168.9)

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Commitments and Contingencies - Schedule of Product Warranty (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019
Changes in accrued product warranty cost
Balance at the beginning of the period	$ 6.5	$ 6.9	$ 4.8
Warranty expense	(0.1)	0.6	2.4
Deductions and other	0.2	(1.0)	(0.3)
Balance at the end of the period	$ 6.6	$ 6.5	$ 6.9

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000.0	200,000,000.0
Common stock, shares issued	109,300,000	108,500,000
Treasury stock, shares	24,700,000	23,700,000

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Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 9 — Fair Value Measurements

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

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

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

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

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

We have no assets or liabilities that utilize Level 1 inputs. However, we have derivative instruments classified as liabilities and assets which utilize Level 2 inputs, and one liability that utilizes 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 $0.5 million and $37.3 million, respectively, at September 30, 2019.  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 Condensed Consolidated Balance Sheets.

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

• Interest rate swaps — valued using LIBOR yield curves at the reporting date. Fair value was a liability of $0.7 million at September 30, 2019.

• Foreign exchange derivative assets and liabilities — valued using quoted forward prices at the reporting date. Fair value of assets and liabilities at September 30, 2019 was $0.5 million and $32.0 million, respectively.

• Commodity raw materials — valued using quoted forward prices at the reporting date. Fair value of liabilities at September 30, 2019 was $4.6 million.

Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in the quarter ended September 30, 2019 that would reduce the receivable amount owed, if any, to the Company.

Liabilities classified as Level 3 — we have a liability for $3.1 million, which represents contingent consideration that was recognized in connection with the Company’s Oxford Performance Materials, Inc. acquisition. This amount was estimated based on certain contractual stipulations which require payments to be made to the seller in the future based upon the achievement of certain results. We used forecasted results which were discounted using an internally derived discount rate. Future amounts payable may differ from this estimate by the difference between the actual and forecasted results. The amount of interest related to this liability accreted during the quarter and nine months ended September 30, 2019 was not material.  

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Retirement and Other Postretirement Benefit Plans

9 Months Ended

Sep. 30, 2019

Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract]

Retirement and Other Postretirement Benefit Plans

Note 5 — Retirement and Other Postretirement Benefit Plans

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

Defined Benefit Retirement Plans

Net Periodic Benefit Costs

Net periodic benefit costs of our defined benefit retirement plans for the three and nine months ended September 30, 2019 and 2018 were as follows:

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.2	$	0.9	$	0.8
Interest cost		0.2		0.1		0.5		0.4
Net amortization	—			0.1	—			0.1
Net periodic benefit cost	$	0.5	$	0.4	$	1.4	$	1.3

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet for U.S. nonqualified defined benefit retirement plans:
Accrued liabilities	$	0.9	$	0.9
Other non-current liabilities		18.0		17.2
	$	18.9	$	18.1

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
European Defined Benefit Retirement Plans
Service cost	$	0.3		$	0.3		$	0.8		$	0.8
Interest cost		1.1			1.2			3.3			3.4
Expected return on plan assets		(2.1	)		(2.4	)		(6.5	)		(7.1	)
Net amortization and deferral	—			—				0.2			0.2
Net periodic benefit credit	$	(0.7	)	$	(0.9	)	$	(2.2	)	$	(2.7	)

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet for European defined benefit retirement plans:
Other assets	$	47.1	$	42.6
Accrued liabilities		0.3		0.4
Other non-current liabilities		18.1		18.8
Total accrued benefit	$	18.4	$	19.2

All costs related to our pensions are included as a component of operating income in our Condensed Consolidated Statements of Operations. For the three month periods ended September 30, 2019 and 2018, amounts unrelated to service costs were a benefit of $0.8 million and $1.0 million, respectively.  For the nine months ended September 30, 2019 and 2018, amounts unrelated to the service costs were a benefit of $2.5 million and $3.0 million, respectively. 

Contributions

We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred.  We have contributed approximately $0.5 million in the first nine months of 2019 to cover unfunded benefits.  We expect to contribute a total of $0.9 million in 2019 to cover unfunded benefits.  We contributed $4.4 million to our U.S. non-qualified defined benefit retirement plans during the first nine months of 2018.

We contributed $3.3 million and $3.8 million to our European defined benefit retirement plans during the nine months ended September 30, 2019 and 2018, respectively.  We plan to contribute approximately $5.0 million during 2019 to our European plans.

Postretirement Health Care and Life Insurance Benefit Plans

We recorded $0.2 million of net amortization gain deferral for the quarter ended September 30, 2019 and $0.7 million and $0.9 million for the nine months ended September 30, 2019 and 2018, respectively. There were no amounts related to the amortization gain deferral recorded during the three months ended September 30, 2018. Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarter and the nine months ended September 30, 2019 and 2018 were immaterial.

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.5	$	0.5
Other non-current liabilities	2.7		2.8
Total accrued benefit	$	3.2	$	3.3

Amounts contributed in connection with our postretirement plans were immaterial for both the nine months ended September 30, 2019 and September 30, 2018. We periodically fund our postretirement plans to pay covered expenses as they are incurred. We expect to contribute less than $0.5 million in 2019 to cover unfunded benefits.

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Schedule of Components of Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss as of September 30, 2019 and December 31, 2018 were as follows:

(In millions)	Unrecognized Net Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2018	$	(15.4	)	$	(5.8	)	$	(86.8	)	$	(108.0	)
Other comprehensive loss before reclassifications		0.6			(23.2	)		(37.3	)		(59.9	)
Amounts reclassified from accumulated other comprehensive loss		(0.6	)		7.4		—				6.8
Other comprehensive loss	—				(15.8	)		(37.3	)		(53.1	)
Balance at September 30, 2019	$	(15.4	)	$	(21.6	)	$	(124.1	)	$	(161.1	)

(1) Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

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Net Income per Common Share - Additional Information (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share [Abstract]
Anti-dilutive securities excluded from computation of earnings per share amount (in shares)	0.1	0.2	0.1	0.2

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Retirement and Other Postretirement Benefit Plans - Schedule of Net Periodic Benefit Costs of Defined Benefit Retirement Plans (Details) - Defined Benefit Retirement Plans - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
U.S.
Net periodic benefit costs of defined benefit retirement plans
Service cost	$ 0.3	$ 0.2	$ 0.9	$ 0.8
Interest cost	0.2	0.1	0.5	0.4
Net amortization and deferral		0.1		0.1
Net periodic benefit (credit) cost	$ 0.5	$ 0.4	$ 1.4	$ 1.3
Defined Benefit Plan, Tax Status [Extensible List]	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember
European
Net periodic benefit costs of defined benefit retirement plans
Service cost	$ 0.3	$ 0.3	$ 0.8	$ 0.8
Interest cost	1.1	1.2	3.3	3.4
Expected return on plan assets	(2.1)	(2.4)	(6.5)	(7.1)
Net amortization and deferral			0.2	0.2
Net periodic benefit (credit) cost	$ (0.7)	$ (0.9)	$ (2.2)	$ (2.7)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities
Net income	$ 233.4	$ 210.5
Reconciliation to net cash provided by operating activities:
Depreciation and amortization	107.1	90.8
Amortization related to financing	1.1	1.2
Deferred income taxes	9.3	27.5
Equity in earnings from affiliated companies	(2.9)	(4.3)
Stock-based compensation	15.9	14.0
Changes in assets and liabilities:
Increase in accounts receivable	(29.5)	(27.7)
Increase in inventories	(56.8)	(32.1)
Increase in prepaid expenses and other current assets	(12.5)	(5.0)
Increase in accounts payable/accrued liabilities	15.1	0.2
Other – net	(2.9)	3.3
Net cash provided by operating activities	277.3	278.4
Cash flows from investing activities
Capital expenditures	(162.7)	(150.2)
Acquisition of business	(163.2)	(0.7)
Net cash used for investing activities	(325.9)	(150.9)
Cash flows from financing activities
Repayments of Euro term loan	(9.0)	(4.2)
Repayment of finance lease obligation and other debt, net	(0.6)	0.3
Issuance costs related to senior credit facility	(2.2)
Dividends paid	(39.9)	(35.5)
Repurchase of stock	(66.9)	(282.8)
Activity under stock plans	6.4	0.4
Net cash provided by (used in) financing activities	64.8	(136.8)
Effect of exchange rate changes on cash and cash equivalents	(1.9)	(3.6)
Net increase (decrease) in cash and cash equivalents	14.3	(12.9)
Cash and cash equivalents at beginning of period	32.7	60.1
Cash and cash equivalents at end of period	47.0	47.2
Supplemental data:
Accrual basis additions to plant, property and equipment	160.9	133.5
Senior unsecured credit facility - due 2024
Cash flows from financing activities
Borrowing from senior unsecured credit facility	478.0
Repayment of senior unsecured credit facility	(99.0)
Senior unsecured credit facility - due 2021
Cash flows from financing activities
Borrowing from senior unsecured credit facility	345.0	662.0
Repayment of senior unsecured credit facility	$ (547.0)	$ (477.0)

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Commitments and Contingencies - Additional Information (Details)	1 Months Ended		9 Months Ended
	Aug. 31, 2017 PRP	Mar. 31, 2016 USD ($) mi	Sep. 30, 2019 USD ($) entity mi	Dec. 31, 2018 USD ($)
Loss Contingencies [Line Items]
Accrual for environmental loss contingencies			$ 2,500,000	$ 2,700,000
Aggregate environmental related accruals included in current accrued liabilities			600,000	800,000
Amount which is better estimate within range			0	0
Remediation accrual balance if accrued at high end of the range of possible outcomes			16,000,000
Omega Chemical Corporation Superfund Site, Whittier | California
Loss Contingencies [Line Items]
Accrual for environmental loss contingencies			$ 300,000	300,000
Minimum | Omega Chemical Corporation Superfund Site, Whittier | California
Loss Contingencies [Line Items]
Contribution to waste tonnage (as a percent)			1.25%
Maximum | Omega Chemical Corporation Superfund Site, Whittier | California
Loss Contingencies [Line Items]
Contribution to waste tonnage (as a percent)			2.18%
Lower Passaic River
Loss Contingencies [Line Items]
Number of entities, in addition to Hexcel, who received a directive from the New Jersey Department of Environmental Protection | entity			48
Length of river to perform a Remedial Investigation/Feasibility Study (“RI/FS”) of environmental conditions | mi			17
Number of identified non governmental potentially responsible parties | PRP	120
Accrual for environmental loss contingencies			$ 2,000,000.0	$ 2,100,000
Lower Passaic River | Minimum
Loss Contingencies [Line Items]
Portion of the river for which Record of Decision setting forth the EPA's selected remedy (in miles) | mi		8
Expected cost of capping and dredging of the lower eight miles of the river by EPA		$ 970,000,000
Lower Passaic River | Maximum
Loss Contingencies [Line Items]
Portion of the river for which Record of Decision setting forth the EPA's selected remedy (in miles) | mi		9
Expected cost of capping and dredging of the lower eight miles of the river by EPA		$ 2,070,000,000.00

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Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 47.0	$ 32.7
Accounts receivable, net	288.9	260.9
Inventories, net	352.2	297.8
Contract assets	56.4	50.5
Prepaid expenses and other current assets	27.1	33.9
Total current assets	771.6	675.8
Property, plant and equipment	3,014.5	2,902.1
Less accumulated depreciation	(1,090.8)	(1,025.6)
Net property, plant and equipment	1,923.7	1,876.5
Goodwill and other intangible assets	279.4	142.3
Investments in affiliated companies	45.8	48.7
Other assets	134.7	80.8
Total assets	3,155.2	2,824.1
Current liabilities:
Short-term borrowings	9.3	9.4
Accounts payable	164.5	161.9
Accrued compensation and benefits	70.6	75.8
Accrued liabilities	102.6	79.6
Total current liabilities	347.0	326.7
Commitments and contingencies (see Note 14)
Long-term debt	1,115.2	947.4
Retirement obligations	41.9	42.0
Other non-current liabilities	233.3	186.0
Total liabilities	1,737.4	1,502.1
Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares authorized, 109.3 shares and 108.5 shares issued at September 30, 2019 and December 31, 2018, respectively	1.1	1.1
Additional paid-in capital	826.7	798.3
Retained earnings	1,920.0	1,726.5
Accumulated other comprehensive loss	(161.1)	(108.0)
Total stockholders' equity including treasury stock value	2,586.7	2,417.9
Less – Treasury stock, at cost, 24.7 shares at September 30, 2019, and 23.7 shares at December 31, 2018, respectively.	(1,168.9)	(1,095.9)
Total stockholders' equity	1,417.8	1,322.0
Total liabilities and stockholders' equity	$ 3,155.2	$ 2,824.1

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Segment Information - Additional Information (Details)	9 Months Ended
	Sep. 30, 2019 USD ($)
Segment Reporting [Abstract]
Goodwill	$ 187,800,000
Intangible assets	91,600,000
Goodwill and intangible asset impairment	$ 0

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Revenue - Schedule of Revenue by Market (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Consolidated Net Sales	$ 572.5	$ 540.5	$ 1,791.4	$ 1,628.1
Commercial Aerospace
Disaggregation Of Revenue [Line Items]
Consolidated Net Sales	385.9	373.1	1,217.9	1,139.6
Space & Defense
Disaggregation Of Revenue [Line Items]
Consolidated Net Sales	109.8	90.4	329.4	272.2
Industrial
Disaggregation Of Revenue [Line Items]
Consolidated Net Sales	$ 76.8	$ 77.0	$ 244.1	$ 216.3

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Retirement and Other Postretirement Benefit Plans - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Defined Benefit Retirement Plans
Amounts recognized on the balance sheet:
Amounts unrelated to service costs, benefit	$ 800,000	$ 1,000,000.0	$ 2,500,000	$ 3,000,000.0
Defined Benefit Retirement Plans | U.S.
Amounts recognized on the balance sheet:
Employer contribution to defined benefit retirement plans			500,000	4,400,000
Expected employer contribution in full current year	$ 900,000		$ 900,000
Net amortization gain deferral		$ (100,000)		$ (100,000)
Defined Benefit Plan, Tax Status [Extensible List]	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember
Defined Benefit Retirement Plans | European
Amounts recognized on the balance sheet:
Employer contribution to defined benefit retirement plans			$ 3,300,000	$ 3,800,000
Expected employer contribution in full current year	$ 5,000,000.0		5,000,000.0
Net amortization gain deferral			(200,000)	(200,000)
Postretirement Health Care and Life Insurance Benefit Plans
Amounts recognized on the balance sheet:
Net amortization gain deferral	200,000	$ 0	700,000	$ 900,000
Postretirement Health Care and Life Insurance Benefit Plans | Maximum
Amounts recognized on the balance sheet:
Expected employer contribution in full current year	$ 500,000		$ 500,000

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Derivative Financial Instruments - Additional Information (Details) € in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) item	Sep. 30, 2018 USD ($)	Sep. 30, 2019 EUR (€)	Dec. 31, 2018 USD ($)	Dec. 31, 2017
Derivative [Line Items]
Foreign currency unrealized losses expected to be reclassified into earnings over next twelve months	$ (16,300,000)		$ (16,300,000)
Foreign currency unrealized gains expected to be reclassified into earnings over next twelve months, tax	$ 5,200,000		$ 5,200,000
3.95% senior unsecured notes due 2027
Derivative [Line Items]
Debt instrument, interest rate	3.95%		3.95%		3.95%		3.95%
Interest Rate Swap Agreements
Derivative [Line Items]
Derivative fixed interest rate (as a percent)	0.52%		0.52%		0.52%
Carrying value / fair value of derivative liabilities included in other liabilities	$ 700,000		$ 700,000			$ 500,000
Interest Rate Swap Agreements | Designated as Hedging Instrument
Derivative [Line Items]
Floating rate obligation | €					€ 44.9
Interest Rate Swap Agreements | EUR
Derivative [Line Items]
Variable interest rate basis			Euribor
Interest Rate Swap Final Maturity Period One
Derivative [Line Items]
Final maturity date of swap amortization			Jun. 30, 2023
Interest Rate Swap Final Maturity Period Two
Derivative [Line Items]
Final maturity date of swap amortization			Jun. 30, 2024
Treasury Lock | Interest Lock Agreement | 3.95% senior unsecured notes due 2027
Derivative [Line Items]
Percentage of reduction in effective interest rate on senior notes			0.25%
Foreign Currency Forward Exchange Contracts
Derivative [Line Items]
Number of credit contingency features | item			0
Foreign Currency Forward Exchange Contracts | Cash Flow Hedging
Derivative [Line Items]
Gains (losses) in other comprehensive income, effective portion	16,900,000	$ 600,000	$ 25,700,000	$ 13,100,000
Foreign Currency Forward Exchange Contracts | Designated as Hedging Instrument
Derivative [Line Items]
Carrying value / fair value of derivative liabilities included in other liabilities	31,600,000		31,600,000			15,300,000
Notional amount	439,600,000		439,600,000			416,500,000
Carrying value / fair value of derivative assets included in other assets	300,000		300,000			1,300,000
Carrying value / fair value of derivative liabilities included in non-current liabilities	9,700,000		9,700,000
Foreign Currency Forward Exchange Contracts | Designated as Hedging Instrument | Cash Flow Hedging
Derivative [Line Items]
Net gain (loss) recognized in gross margin	(3,800,000)	(900,000)	(8,400,000)	2,500,000
Foreign Currency Forward Exchange Contracts | Not Designated as Hedging Instrument
Derivative [Line Items]
Carrying value / fair value of derivative liabilities included in other liabilities	400,000		400,000
Carrying value / fair value of derivative assets included in other assets	200,000		200,000			$ 300,000
Foreign exchange net losses on derivative contracts not designated as hedges	1,300,000	$ 100,000	1,900,000	$ 4,100,000
Commodity Swap Agreements
Derivative [Line Items]
Carrying value / fair value of derivative liabilities included in other liabilities	4,600,000		4,600,000
Notional amount	$ 20,100,000		$ 20,100,000

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Revenue - Additional Information (Details)	9 Months Ended
	Sep. 30, 2019
Revenue From Contract With Customer [Abstract]
Revenue recognition, description of timing	As our production cycle is typically six months or less, it is expected that goods related to the revenue recognized over time will be shipped and billed within the next twelve months.

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Change in Fair Value of Foreign Currency Forward Exchange Contracts Under Hedge Designations

 The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and nine months ended September 30, 2019 and September 30, 2018 was as follows:

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Unrealized (losses) gains at beginning of period, net of tax	$	(13.8	)	$	(3.1	)	$	(10.6	)	$	8.6
Losses (gains) reclassified to net sales		3.0			0.7			6.5			(1.6	)
Decrease in fair value		(12.9	)		(0.3	)		(19.6	)		(9.7	)
Unrealized losses at end of period, net of tax	$	(23.7	)	$	(2.7	)	$	(23.7	)	$	(2.7	)

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Inventories (Tables)

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventories

(In millions)	September 30, 2019		December 31, 2018
Raw materials	$	182.6	$	131.4
Work in progress		39.7		43.6
Finished goods		129.9		122.8
Total Inventory	$	352.2	$	297.8

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Acquisitions

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Acquisitions

Note 13 — Acquisitions

During the first quarter of 2019, we acquired all of the outstanding equity interests in ARC Technologies LLC, a leading supplier of customer RF/EMI and microwave absorbing composite materials for military, aerospace and industrial applications, for $163.2 million. This acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations. 

In connection with the acquisition, the Company recognized $82.1 million of goodwill, and approximately $63.0 million of intangible assets which are included in our Engineered Products segment.

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Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Millions	Sep. 30, 2019	Jan. 01, 2019
Significant Accounting Policies [Line Items]
Operating lease, right of use assets	$ 67.5
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	us-gaap:OtherAssetsNoncurrent
Operating lease, liabilities	$ 67.5
Accounting Standards Update 2016-02
Significant Accounting Policies [Line Items]
Operating lease, right of use assets		$ 50.0
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]		us-gaap:OtherAssetsNoncurrent
Operating lease, liabilities		$ 50.0
Operating Lease, Liability, Statement of Financial Position [Extensible List]		hxl:AccruedLiabilitiesCurrentAndOtherLiabilitiesNonCurrent
Aerospace Composites Malaysia Sdn. Bhd.
Significant Accounting Policies [Line Items]
Interest in affiliated company, accounted for using equity method of accounting (as a percent)	50.00%
Hexcut Services SAS
Significant Accounting Policies [Line Items]
Interest in affiliated company, accounted for using equity method of accounting (as a percent)	25.00%

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Leases - Additional Information - (Details) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)
Lessee Lease Description [Line Items]
Operating lease, right of use assets	$ 67.5	$ 67.5
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	us-gaap:OtherAssetsNoncurrent	us-gaap:OtherAssetsNoncurrent
Operating lease, liabilities	$ 67.5	$ 67.5
Operating lease, non-current liabilities	$ 55.0	$ 55.0
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilitiesNoncurrent	us-gaap:OtherLiabilitiesNoncurrent
Operating lease, weighted average remaining lease terms	9 years	9 years
Operating lease, weighted average interest rate	2.90%	2.90%
Cost of Goods Sold and Operating Expenses
Lessee Lease Description [Line Items]
Operating lease expense	$ 2.7	$ 8.2

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 7 — Derivative Financial Instruments

Interest Rate Swap and Interest Lock Agreements

At September 30, 2019 the Company had interest rate swaps related to European debt obligations which had a combined notional value of approximately €44.9 million. These derivatives swapped floating rate obligations for fixed rate obligations at a weighted average rate of 0.52% against Euribor in Euros.  The swaps amortize through the final maturities of the obligations, on June 30, 2023 and June 30, 2024, in annual installments. The derivatives are accounted for as cash flow hedges of the floating rate term loans.  To ensure the swaps were highly effective, all of the critical terms of the swap matched the terms of the bank loans.  The fair value of the interest rate swaps was a liability of $0.7 million at September 30, 2019, and $0.5 million at December 31, 2018.

The Company had treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 3.95% Senior Unsecured Notes. These hedges were designated as cash flow hedges therefore any change in fair value was recorded as a component of other comprehensive income. As part of the issuance of these notes, we net settled the derivatives and therefore the previously deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The effect of these treasury locks reduced the effective interest rate on these notes by approximately 0.25%.  

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 2022, which we account for as cash flow hedges. The aggregate notional amount of these contracts was $439.6 million and $416.5 million at September 30, 2019 and December 31, 2018, respectively.  The purpose of these contracts is to hedge a portion of the forecasted transactions of our 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, losses of $16.9 million and $25.7 million were recorded in other comprehensive income (“OCI”) for the three and nine months ended September 30, 2019 and losses of $0.6 million and $13.1 million for the three and nine months ended September 30, 2018.  We classified the carrying amount of these contracts of $0.3 million in other assets and $31.6 million in other liabilities, of which $9.7 million is recorded in non-current liabilities, on the Condensed Consolidated Balance Sheets at September 30, 2019 and $1.3 million in other assets and $15.3 million in other liabilities at December 31, 2018.  We recognized net losses of $3.8 million and $8.4 million in gross margin during the three and nine months ended September 30, 2019 and net losses of $0.9 million and net gains of $2.5 million for the three and nine months ended September 30, 2018.  

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 re-measurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the quarters ended September 30, 2019 and 2018, we recognized net foreign exchange losses of $1.3 million and $0.1 million, respectively, in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2019 and 2018, we recognized net foreign exchange losses of $1.9 million and $4.1 million, respectively. The net foreign exchange impact recognized from these hedges offset the translation exposure of these transactions. The carrying amount of the contracts for derivatives not designated as hedging instruments was $0.2 million classified in other assets and $0.4 million in other liabilities at September 30, 2019, and $0.3 million in other assets at December 31, 2018, in the Condensed Consolidated Balance Sheets.

 The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and nine months ended September 30, 2019 and September 30, 2018 was as follows:

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Unrealized (losses) gains at beginning of period, net of tax	$	(13.8	)	$	(3.1	)	$	(10.6	)	$	8.6
Losses (gains) reclassified to net sales		3.0			0.7			6.5			(1.6	)
Decrease in fair value		(12.9	)		(0.3	)		(19.6	)		(9.7	)
Unrealized losses at end of period, net of tax	$	(23.7	)	$	(2.7	)	$	(23.7	)	$	(2.7	)

Unrealized losses of $16.3 million recorded in accumulated other comprehensive loss, net of tax of $5.2 million, as of September 30, 2019, are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.

Commodity Swap Agreements

On occasion we enter into commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile).  As of September 30, 2019, we had commodity swap agreements with a notional value of $20.1 million. The swaps mature monthly through September 2021. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items. The fair value of the commodity swap agreements was a liability of $4.6 million at September 30, 2019.

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Inventories

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Inventories

Note 3 — Inventories

(In millions)	September 30, 2019		December 31, 2018
Raw materials	$	182.6	$	131.4
Work in progress		39.7		43.6
Finished goods		129.9		122.8
Total Inventory	$	352.2	$	297.8

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Segment Information

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Information

Note 11 — Segment Information

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

Financial information for our operating segments for the quarter and nine months ended September 30, 2019 and 2018 were as follows:

	(Unaudited)
	Composite		Engineered		Corporate &
(In millions)	Materials		Products		Other (a)			Total
Third Quarter 2019
Net sales to external customers	$	448.0	$	124.5	$	—		$	572.5
Intersegment sales		23.3	—			(23.3	)		—
Total sales	$	471.3	$	124.5	$	(23.3	)	$	572.5
Operating income		100.1		20.3		(10.5	)		109.9
Depreciation and amortization		30.7		3.7		—			34.4
Stock-based compensation		1.2		0.2		1.0			2.4
Accrual basis additions to capital expenditures		51.0		2.3		—			53.3
Third Quarter 2018
Net sales to external customers	$	432.8	$	107.7	$	—		$	540.5
Intersegment sales		17.2		—		(17.2	)		—
Total sales	$	450.0	$	107.7	$	(17.2	)	$	540.5
Operating income		92.5		15.5		(11.5	)		96.5
Depreciation and amortization		28.9		2.3		—			31.2
Stock-based compensation		1.2		0.2		0.6			2.0
Accrual basis additions to capital expenditures		41.4		2.1		—			43.5
Nine Months Ended September 30, 2019
Net sales to external customers	$	1,419.7	$	371.7	$	—		$	1,791.4
Intersegment sales		64.0		0.1		(64.1	)		—
Total sales	$	1,483.7	$	371.8	$	(64.1	)	$	1,791.4
Operating income		324.4		51.4		(48.0	)		327.8
Depreciation and amortization		95.7		11.3		0.1			107.1
Stock-based compensation		6.4		1.4		8.1			15.9
Accrual basis additions to capital expenditures		156.8		4.1		—			160.9
Nine Months Ended September 30, 2018
Net sales to external customers	$	1,323.2	$	304.9	$	—		$	1,628.1
Intersegment sales		56.7		—		(56.7	)		—
Total sales	$	1,379.9	$	304.9	$	(56.7	)	$	1,628.1
Operating income		276.6		41.3		(42.5	)		275.4
Depreciation and amortization		83.9		6.8		0.1			90.8
Stock-based compensation		5.7		1.0		7.3			14.0
Accrual basis additions to capital expenditures		130.1		3.4		—			133.5

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

Goodwill and Intangible Assets	Composite			Engineered
(In millions)	Materials			Products			Total
Balance at December 31, 2018	$	98.2		$	44.1		$	142.3
Amortization Expense		(1.6	)		(3.8	)		(5.4	)
Additions		—			145.1			145.1
Currency translation adjustments		(2.6	)	—				(2.6	)
Balance at September 30, 2019	$	94.0		$	185.4		$	279.4

The addition to goodwill and intangible assets is due to the acquisition of ARC Technologies LLC, discussed in Note 13. At September 30, 2019, the balance of goodwill and intangible assets was $187.8 million and $91.6 million, respectively. No impairments have been recorded against these amounts.

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Condensed Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Net sales	$ 572.5	$ 540.5	$ 1,791.4	$ 1,628.1
Cost of sales	414.6	397.5	1,297.5	1,197.7
Gross margin	157.9	143.0	493.9	430.4
Selling, general and administrative expenses	33.8	32.6	122.8	114.3
Research and technology expenses	14.2	13.9	43.3	40.7
Operating income	109.9	96.5	327.8	275.4
Interest expense, net	11.0	10.6	34.9	27.3
Income before income taxes, and equity in earnings/(loss) from affiliated companies	98.9	85.9	292.9	248.1
Provision for income taxes	18.2	7.8	62.4	41.9
Income before equity in earnings/(loss) from affiliated companies	80.7	78.1	230.5	206.2
Equity in earnings/(loss) from affiliated companies	(0.4)	2.0	2.9	4.3
Net income	$ 80.3	$ 80.1	$ 233.4	$ 210.5
Basic net income per common share	$ 0.94	$ 0.92	$ 2.74	$ 2.37
Diluted net income per common share	0.93	0.91	2.71	2.35
Dividends per share	$ 0.17	$ 0.15	$ 0.47	$ 0.40
Weighted-average common shares:
Basic	85.1	87.0	85.1	88.6
Diluted	86.1	88.1	86.1	89.7

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Significant Accounting Policies

Note 1 — Significant Accounting Policies

In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying Condensed Consolidated Financial Statements are those of Hexcel Corporation.  Refer to Note 1 to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of our significant accounting policies. Significant changes to our accounting policies subsequent to the filing of our Form 10-K, relate solely to the adoption of Accounting Standard Codification (“ASC”) Topic 842, Leases, (“ASC 842”) are discussed below in Recent Accounting Pronouncements as well as in Note 4.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC. In the opinion of management, the Condensed Consolidated Financial Statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholder’s equity for the interim periods presented.  The Condensed Consolidated Balance Sheet as of December 31, 2018 was derived from the audited 2018 Consolidated Balance Sheet.  Interim results are not necessarily indicative of results expected for any other interim period or for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2018 Annual Report on Form 10-K. Within the Unaudited Condensed Consolidated Balance Sheets as of December 31, 2018, property, plant and equipment and the related accumulated depreciation have been grossed up to conform to the current year presentation.

Investments in Affiliated Companies

We have a 50% equity investment in Aerospace Composites Malaysia Sdn. Bhd. and a 25% equity investment in Hexcut Services SAS.  These investments are accounted for using the equity method of accounting.      

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). This standard requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of leases with a duration of one year or less. We adopted the provisions of this standard on January 1, 2019, using the modified transition method which allows companies to recognize existing leases at the adoption date without requiring comparable presentation. As a result of the adoption of this standard we recognized approximately $50 million of right of use assets and related liabilities for operating leases that existed prior to January 1, 2019. These right of use assets were recorded in non-current other assets, and the related liabilities were recorded in current accrued liabilities and other non-current liabilities. See Note 4 - Leases, for more details.

In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU 2018-14), Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We do not expect this new standard to have a significant impact to our disclosures.

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Accumulated Other Comprehensive Loss - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Unrecognized Net Defined Plan Costs
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on unrecognized net defined benefit and postretirement plan costs	$ 0.2
Reclassification adjustment from AOCI on unrecognized net defined benefit and postretirement plan costs, before tax		$ 0.8
Reclassification adjustment from AOCI on unrecognized net defined benefit and postretirement plan costs, tax		0.2
Change in Fair Value of Derivatives Products | Foreign Currency Forward Exchange Contracts
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on derivatives, net gains	(3.8)	(8.4)
Reclassification adjustment from AOCI on derivatives, tax benefit	0.9	1.9
Change in Fair Value of Derivatives Products | Commodity Swap Agreements
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on derivatives, net gains	0.8	2.4
Reclassification adjustment from AOCI on derivatives, tax benefit	0.2	0.6
Change in Fair Value of Derivatives Products | Interest Rate Swap Agreements
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on derivatives, net gains	0.3	1.1
Reclassification adjustment from AOCI on derivatives, tax benefit	$ 0.1	$ 0.2

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Segment Information - Schedule of Operating Segment Reporting Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information [Line Items]
Total sales	$ 572.5	$ 540.5	$ 1,791.4	$ 1,628.1
Operating income	109.9	96.5	327.8	275.4
Depreciation and amortization	34.4	31.2	107.1	90.8
Stock-based compensation	2.4	2.0	15.9	14.0
Accrual basis additions to capital expenditures	53.3	43.5	160.9	133.5
Corporate & Other and Intersegment Elimination
Segment Reporting Information [Line Items]
Total sales	(23.3)	(17.2)	(64.1)	(56.7)
Operating income	(10.5)	(11.5)	(48.0)	(42.5)
Depreciation and amortization			0.1	0.1
Stock-based compensation	1.0	0.6	8.1	7.3
Composite Materials
Segment Reporting Information [Line Items]
Total sales	448.0	432.8	1,419.7	1,323.2
Composite Materials | Intersegment Elimination
Segment Reporting Information [Line Items]
Total sales	23.3	17.2	64.0	56.7
Composite Materials | Operating Segments
Segment Reporting Information [Line Items]
Total sales	471.3	450.0	1,483.7	1,379.9
Operating income	100.1	92.5	324.4	276.6
Depreciation and amortization	30.7	28.9	95.7	83.9
Stock-based compensation	1.2	1.2	6.4	5.7
Accrual basis additions to capital expenditures	51.0	41.4	156.8	130.1
Engineered Products
Segment Reporting Information [Line Items]
Total sales	124.5	107.7	371.7	304.9
Engineered Products | Intersegment Elimination
Segment Reporting Information [Line Items]
Total sales			0.1
Engineered Products | Operating Segments
Segment Reporting Information [Line Items]
Total sales	124.5	107.7	371.8	304.9
Operating income	20.3	15.5	51.4	41.3
Depreciation and amortization	3.7	2.3	11.3	6.8
Stock-based compensation	0.2	0.2	1.4	1.0
Accrual basis additions to capital expenditures	$ 2.3	$ 2.1	$ 4.1	$ 3.4

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Debt - Schedule of Debt and Capital Lease Obligations (Parenthetical) (Details)	9 Months Ended
	Sep. 30, 2019
4.7% senior notes due 2025
Debt Instrument [Line Items]
Debt instrument, interest rate	4.70%
Debt instrument, maturity year	2025
3.95% senior notes due 2027
Debt Instrument [Line Items]
Debt instrument, interest rate	3.95%
Debt instrument, maturity year	2027

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Income Taxes - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)	18.40%	9.10%	21.30%	16.90%
Benefit from tax credits	$ 3.0
Tax benefit from the release of valuation allowance in a foreign jurisdiction and reserves for uncertain tax positions		$ 9.6		$ 1.3
Effective income tax rate excluding discrete benefits (as a percent)			22.30%	21.30%
Estimated effective income tax rate			24.00%

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Retirement and Other Postretirement Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2019

Defined Benefit Retirement Plans

Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of Net Periodic Benefit Costs of Defined Benefit Retirement Plans

	Quarter Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
European Defined Benefit Retirement Plans
Service cost	$	0.3		$	0.3		$	0.8		$	0.8
Interest cost		1.1			1.2			3.3			3.4
Expected return on plan assets		(2.1	)		(2.4	)		(6.5	)		(7.1	)
Net amortization and deferral	—			—				0.2			0.2
Net periodic benefit credit	$	(0.7	)	$	(0.9	)	$	(2.2	)	$	(2.7	)

Schedule of Amounts Recognized on Balance Sheet

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet for European defined benefit retirement plans:
Other assets	$	47.1	$	42.6
Accrued liabilities		0.3		0.4
Other non-current liabilities		18.1		18.8
Total accrued benefit	$	18.4	$	19.2

Defined Benefit Retirement Plans | Non-qualified

Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of Net Periodic Benefit Costs of Defined Benefit Retirement Plans

Net periodic benefit costs of our defined benefit retirement plans for the three and nine months ended September 30, 2019 and 2018 were as follows:

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.2	$	0.9	$	0.8
Interest cost		0.2		0.1		0.5		0.4
Net amortization	—			0.1	—			0.1
Net periodic benefit cost	$	0.5	$	0.4	$	1.4	$	1.3

Schedule of Amounts Recognized on Balance Sheet

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet for U.S. nonqualified defined benefit retirement plans:
Accrued liabilities	$	0.9	$	0.9
Other non-current liabilities		18.0		17.2
	$	18.9	$	18.1

Postretirement Health Care and Life Insurance Benefit Plans

Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of Amounts Recognized on Balance Sheet

Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarter and the nine months ended September 30, 2019 and 2018 were immaterial.

(In millions)	September 30, 2019		December 31, 2018
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.5	$	0.5
Other non-current liabilities	2.7		2.8
Total accrued benefit	$	3.2	$	3.3

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC. In the opinion of management, the Condensed Consolidated Financial Statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholder’s equity for the interim periods presented.  The Condensed Consolidated Balance Sheet as of December 31, 2018 was derived from the audited 2018 Consolidated Balance Sheet.  Interim results are not necessarily indicative of results expected for any other interim period or for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2018 Annual Report on Form 10-K. Within the Unaudited Condensed Consolidated Balance Sheets as of December 31, 2018, property, plant and equipment and the related accumulated depreciation have been grossed up to conform to the current year presentation.

Investments in Affiliated Companies

Investments in Affiliated Companies

We have a 50% equity investment in Aerospace Composites Malaysia Sdn. Bhd. and a 25% equity investment in Hexcut Services SAS.  These investments are accounted for using the equity method of accounting.      

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). This standard requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of leases with a duration of one year or less. We adopted the provisions of this standard on January 1, 2019, using the modified transition method which allows companies to recognize existing leases at the adoption date without requiring comparable presentation. As a result of the adoption of this standard we recognized approximately $50 million of right of use assets and related liabilities for operating leases that existed prior to January 1, 2019. These right of use assets were recorded in non-current other assets, and the related liabilities were recorded in current accrued liabilities and other non-current liabilities. See Note 4 - Leases, for more details.

In August 2018, the FASB issued Accounting Standards Update No. 2018-14 (ASU 2018-14), Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We do not expect this new standard to have a significant impact to our disclosures.

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Debt - Schedule of Debt and Capital Lease Obligations (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Current portion of finance lease	$ 0.6	$ 0.3
Current portion of Euro term loan	8.7	9.1
Current portion of debt	9.3	9.4
Non-current portion of Euro term loan	40.3	51.4
Long-term debt	1,115.2	947.4
Non-current portion of finance lease and other debt	2.0	0.8
Total debt	1,124.5	956.8
Senior unsecured credit facility
Debt Instrument [Line Items]
Long-term debt	379.0	202.0
4.7% senior notes due 2025
Debt Instrument [Line Items]
Senior notes	300.0	300.0
4.7% senior notes due 2025 and 3.95% senior notes due 2027
Debt Instrument [Line Items]
Senior notes --- original issue discount	(1.8)	(2.0)
Senior notes --- deferred financing costs	(4.3)	(4.8)
3.95% senior notes due 2027
Debt Instrument [Line Items]
Senior notes	$ 400.0	$ 400.0

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Derivative Financial Instruments - Schedule of Change in Fair Value of Foreign Currency Forward Exchange Contracts Under Hedge Designations (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Derivative [Line Items]
Balance		$ 1,442.4	$ 1,399.8	$ 1,322.0	$ 1,495.1
Balance		1,417.8	1,367.3	1,417.8	1,367.3
Designated as Hedging Instrument
Derivative [Line Items]
Balance	[1]			(5.8)
Balance	[1]	(21.6)		(21.6)
Designated as Hedging Instrument | Foreign Currency Forward Exchange Contracts
Derivative [Line Items]
Balance		(13.8)	(3.1)	(10.6)	8.6
Losses (gains) reclassified to net sales		3.0	0.7	6.5	(1.6)
Decrease in fair value		(12.9)	(0.3)	(19.6)	(9.7)
Balance		$ (23.7)	$ (2.7)	$ (23.7)	$ (2.7)

[1] Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

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Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Debt and Capital Lease Obligations

(In millions)	September 30, 2019			December 31, 2018
Current portion of finance lease	$	0.6		$	0.3
Current portion of Euro term loan		8.7			9.1
Current portion of debt		9.3			9.4
Non-current portion of Euro term loan		40.3			51.4
Senior unsecured credit facility		379.0			202.0
4.7% senior notes --- due 2025		300.0			300.0
3.95% senior notes --- due 2027		400.0			400.0
Senior notes --- original issue discount		(1.8	)		(2.0	)
Senior notes --- deferred financing costs		(4.3	)		(4.8	)
Non-current portion of finance lease and other debt		2.0			0.8
Long-term debt		1,115.2			947.4
Total debt	$	1,124.5		$	956.8

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Net Income per Common Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Summary of Earnings Per Share Basic and Diluted

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2019		2018		2019		2018
Basic net income per common share:
Net income	$	80.3	$	80.1	$	233.4	$	210.5
Weighted average common shares outstanding		85.1		87.0		85.1		88.6
Basic net income per common share	$	0.94	$	0.92	$	2.74	$	2.37
Diluted net income per common share:
Net income		80.3		80.1		233.4		210.5
Weighted average common shares outstanding — Basic		85.1		87.0		85.1		88.6
Plus incremental shares from assumed conversions:
Restricted stock units		0.4		0.5		0.4		0.4
Stock options		0.6		0.6		0.6		0.7
Weighted average common shares outstanding — Dilutive		86.1		88.1		86.1		89.7
Diluted net income per common share	$	0.93	$	0.91	$	2.71	$	2.35

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Schedule of Product Warranty

We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the nine months ended September 30, 2019, and accrued warranty cost, included in “accrued liabilities” in the Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018, were as follows:

	Product
(In millions)	Warranties
Balance as of December 31, 2018	$	4.8
Warranty expense		2.4
Deductions and other		(0.3	)
Balance as of March 31, 2019		6.9
Warranty expense		0.6
Deductions and other		(1.0	)
Balance as of June 30, 2019		6.5
Warranty expense		(0.1	)
Deductions and other		0.2
Balance as of September 30, 2019	$	6.6

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Inventories - Schedule of Inventories (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 182.6	$ 131.4
Work in progress	39.7	43.6
Finished goods	129.9	122.8
Total Inventory	$ 352.2	$ 297.8

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

Note 12 — Accumulated Other Comprehensive Loss

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the Condensed Consolidated Statements of Operations. The components of accumulated other comprehensive loss as of September 30, 2019 and December 31, 2018 were as follows:

(In millions)	Unrecognized Net Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2018	$	(15.4	)	$	(5.8	)	$	(86.8	)	$	(108.0	)
Other comprehensive loss before reclassifications		0.6			(23.2	)		(37.3	)		(59.9	)
Amounts reclassified from accumulated other comprehensive loss		(0.6	)		7.4		—				6.8
Other comprehensive loss	—				(15.8	)		(37.3	)		(53.1	)
Balance at September 30, 2019	$	(15.4	)	$	(21.6	)	$	(124.1	)	$	(161.1	)

(1) Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

The amounts of net gains reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs component of accumulated other comprehensive loss for the three and nine months ended September 30, 2019, were $0.2 million with no material tax impact and $0.8 million less taxes of $0.2 million, respectively. The amounts reclassified to earnings from the change in fair value of the derivatives component of accumulated other comprehensive loss for the three and nine months ended September 30, 2019 were net losses of $3.8 million less taxes of $0.9 million and $8.4 million less taxes of $1.9 million, respectively, related to foreign currency forward exchange contracts and $0.8 million less taxes of $0.2 million and $2.4 million less taxes of $0.6 million, respectively, related to commodity swaps. We also recorded net gains of $0.3 million less taxes of less than $0.1 million and $1.1 million less taxes of $0.2 million related to interest rate swaps, in the three and nine month periods ended September 30, 2019, respectively. 

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 8 — Income Taxes

The effective tax rate was 18.4% compared to 9.1% for the quarter ended September 30, 2019 and 2018, respectively. The current quarter benefited primarily from tax credits identified during the quarter of $3.0 million. The third quarter of 2018 included discrete benefits of $9.6 million primarily related to a change in accounting method and release of a valuation allowance in a foreign jurisdiction. The effective tax rate for the nine months ended September 30, 2019 and 2018 was 21.3% and 16.9%, respectively, as the 2018 period also included a $1.3 million discrete benefit related to the release of reserves for uncertain tax positions. Excluding these discrete benefits the effective tax rates were 22.3% and 21.3%. All periods benefited from deductions associated with share based compensation payments. Our underlying estimated effective income tax rate is expected to remain at 24%.

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Note 4 — Leases

The Company regularly enters into operating leases for certain buildings, equipment, parcels of land, and vehicles. As of January 1, 2019, we adopted the provisions of ASC 842, accounting for leases.  Accordingly, we capitalized all agreements with terms for more than one year, where a right of use asset was identified. In connection with the adoption of ASC 842 on January 1, 2019 we elected certain practical expedients available under ASC 842-10-65-1 that provide certain concessions to ease the burden of transition, such as the treatment of indirect lease costs, and service contracts which may contain embedded leases. In addition, we elected certain expedients not related to the transition, such as the election to capitalize lease and non-lease components of an agreement as a single component for purposes of simplicity, with the exception of those related to equipment and machinery.

Generally, amounts capitalized represent the present value of minimum lease payments over the term, and the duration is equivalent to the base agreement, however, management used certain assumptions when determining the value and duration of leases.  These assumptions include, but are not limited to, the probability of renewing a lease term, certain future events impacting lease payments, as well as fair values not explicit in an agreement. Such assumptions impacted the duration of many of our building leases, as well as certain of our equipment leases.

In determining the lease renewal, management considered the need and ability to substitute a given asset, as well as certain conditions such as related contractual obligations to our customers (i.e. a contractual obligation of a customer requiring certain manufacturing proximities). In determining fair value, management considered the stand alone value of an asset in an ordinary market as well as incurring certain costs to terminate an agreement.  Most of our leases do not include variable payments but contain scheduled escalations. Any lease payments tied to certain future indexes are adjusted on a go forward basis as those indexes become known.

At September 30, 2019, we had approximately $67.5 million of right of use assets recorded in non-current other assets, and $67.5 million of related liabilities, $55.0 million of which was included in other non-current liabilities with the current portion in accrued liabilities. The weighted average of the remaining lease terms was approximately 9 years.

We discount the future lease payments of our leases using the prevailing rates extended to us by our lenders relevant to the period of inception. These rates are comprised of LIBOR plus a stated spread less a component related to collateralization.  The rates are relative to the duration of the lease at inception and the country to which the lease agreement pertains to.  The weighted average interest rate used in calculating the fair values listed above was 2.9%.

The following table lists the schedule of cash payments related to right of use assets by year:

(In millions)
Remainder of 2019	$	3.1
2020		12.6
2021		11.0
2022		9.1
2023		8.5
Thereafter		36.0
Total	$	80.3

Operating lease expense recognized during the quarter and nine months ending September 30, 2019, relating to right of use assets, was $2.7 million and $8.2 million, respectively, and was recorded in cost of goods sold as well as in operating expenses, in our Condensed Consolidated Statements of Operations. Expense related to operating leases which have a duration of a year or less were not material for the same period. Finance leases at September 30, 2019 were immaterial.

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Net Income per Common Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Net Income per Common Share

Note 2 — Net Income per Common Share

	Quarter Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2019		2018		2019		2018
Basic net income per common share:
Net income	$	80.3	$	80.1	$	233.4	$	210.5
Weighted average common shares outstanding		85.1		87.0		85.1		88.6
Basic net income per common share	$	0.94	$	0.92	$	2.74	$	2.37
Diluted net income per common share:
Net income		80.3		80.1		233.4		210.5
Weighted average common shares outstanding — Basic		85.1		87.0		85.1		88.6
Plus incremental shares from assumed conversions:
Restricted stock units		0.4		0.5		0.4		0.4
Stock options		0.6		0.6		0.6		0.7
Weighted average common shares outstanding — Dilutive		86.1		88.1		86.1		89.7
Diluted net income per common share	$	0.93	$	0.91	$	2.71	$	2.35

Total shares underlying stock options of 0.1 million, were excluded from the computation of diluted net income per share for both the three and nine months ended September 30, 2019, as they were anti-dilutive.  Total shares underlying stock options of 0.2 million were excluded from the computation of diluted net income per share for both the three and nine months ended September 30, 2018, as they were anti-dilutive. 

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Acquisitions - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2019	Sep. 30, 2019	Sep. 30, 2018
Business Acquisition [Line Items]
Business acquisition, cash paid		$ 163.2	$ 0.7
Goodwill		187.8
ARC Technologies LLC
Business Acquisition [Line Items]
Business acquisition, cash paid	$ 163.2
ARC Technologies LLC | Engineered Products
Business Acquisition [Line Items]
Goodwill		82.1
Recognized intangiable assets and liabilities		$ 63.0

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Segment Information - Schedule of Goodwill and Intangible Assets by Segment (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($)
Changes in the carrying amount of gross goodwill and other purchased intangibles
Balance at the beginning of the period	$ 142.3
Amortization Expense	(5.4)
Additions	145.1
Currency translation adjustments	(2.6)
Balance at the end of the period	279.4
Composite Materials
Changes in the carrying amount of gross goodwill and other purchased intangibles
Balance at the beginning of the period	98.2
Amortization Expense	(1.6)
Currency translation adjustments	(2.6)
Balance at the end of the period	94.0
Engineered Products
Changes in the carrying amount of gross goodwill and other purchased intangibles
Balance at the beginning of the period	44.1
Amortization Expense	(3.8)
Additions	145.1
Balance at the end of the period	$ 185.4

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net Income	$ 80.3	$ 80.1	$ 233.4	$ 210.5
Currency translation adjustments	(33.1)	(0.4)	(37.3)	(26.2)
Net unrealized pension and other benefit actuarial gains (losses) and prior service credits (net of tax)	0.3	(0.6)		(0.1)
Net unrealized (losses) gains on financial instruments (net of tax)	(10.2)	0.2	(15.8)	(11.9)
Total other comprehensive income	(43.0)	(0.8)	(53.1)	(38.2)
Comprehensive income	$ 37.3	$ 79.3	$ 180.3	$ 172.3

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 15, 2019
Cover [Abstract]
Entity Registrant Name	HEXCEL CORP /DE/
Entity Central Index Key	0000717605
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		84,378,114
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity File Number	1-8472
Entity Tax Identification Number	94-1109521
Entity Address, Address Line One	Two Stamford Plaza
Entity Address, Address Line Two	281 Tresser Boulevard
Entity Address, City or Town	Stamford
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06901-3238
City Area Code	(203)
Local Phone Number	969-0666
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Document Quarterly Report	true
Document Transition Report	false
Title of 12(b) Security	Common stock, par value $0.01
Trading Symbol	HXL
Security Exchange Name	NYSE