HEXCEL Investor Briefing July 2022 Risks, | --- | --- | |-----------------|-------| | | | | | | | Uncertainties | | | and Other | | | Factors with | | | Respect to | | | Forward-Looking | | | Statements | | | Disclaimer | | Certain statements contained in this presentation constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements that are not of historical fact constitute "forward-looking statements" and accordingly, involve estimates ...

Part I: Financial Information [Condensed Consolidated Financial Statements](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Hexcel Corporation's unaudited condensed consolidated financial statements, highlighting significant year-over-year performance improvement [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets and liabilities remained at **$2,819.4 million**, with current assets increasing by **$75.6 million** and stockholders' equity slightly decreasing | (In millions) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $691.9 | $616.3 | | **Total assets** | **$2,819.4** | **$2,819.4** | | **Total current liabilities** | $271.2 | $247.6 | | **Total liabilities** | $1,339.1 | $1,333.9 | | **Total stockholders' equity** | $1,480.3 | $1,485.5 | | **Total liabilities and stockholders' equity** | **$2,819.4** | **$2,819.4** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported strong year-over-year growth, with Q2 2022 net sales increasing **22.7%** to **$393.0 million** and net income surging to **$44.7 million** | (In millions, except per share data) | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $393.0 | $320.3 | $783.6 | $630.6 | | **Operating income** | $63.8 | $16.2 | $93.9 | $6.0 | | **Net income (loss)** | $44.7 | $2.2 | $62.5 | $(11.8) | | **Diluted net income (loss) per share** | $0.53 | $0.03 | $0.74 | $(0.14) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities for H1 2022 decreased to **$18.3 million** due to increased working capital, while investing activities used **$16.2 million** | (In millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $18.3 | $38.9 | | **Capital expenditures** | $(37.9) | $(9.2) | | **Proceeds from sale of asset** | $21.2 | - | | **Net cash used for investing activities** | $(16.2) | $(9.2) | | **Net cash used for financing activities** | $(26.6) | $(16.6) | | **Net (decrease) increase in cash** | $(28.5) | $12.0 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of financial statement items, including revenue disaggregation, segment performance, debt structure, and environmental liabilities - In Q2 2022, the company sold its Dublin, California facility, receiving approximately **$21.2 million** in net proceeds and recording a gain of **$19.4 million**[21](index=21&type=chunk) | Sales by Market (In millions) | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | | **Commercial Aerospace Sales** | $446.5 | $301.3 | | **Space & Defense Sales** | $230.1 | $218.6 | | **Industrial Sales** | $107.0 | $110.7 | - Total debt stood at **$812.5 million** as of June 30, 2022, with **$636 million** of undrawn availability under its **$750 million** senior unsecured credit facility[33](index=33&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - Aggregate environmental-related accruals increased to **$7.1 million** as of June 30, 2022, from **$2.1 million** at year-end 2021, primarily related to the Lower Passaic River site[67](index=67&type=chunk) [Management's Discussion and Analysis (MD&A)](index=18&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial results, highlighting a strong recovery driven by the Commercial Aerospace market, improved liquidity, and dividend reinstatement [Business and Financial Overview](index=18&type=section&id=Business%20and%20Financial%20Overview) Hexcel manufactures advanced composite materials, experiencing Commercial Aerospace recovery despite ongoing challenges from logistics, supply chains, and inflation - The company operates in a single industry, Advanced Composites, with two reportable segments: Composite Materials and Engineered Products[76](index=76&type=chunk) - The Commercial Aerospace market recovery continued into Q2 2022, though challenges from global logistics, supply chains, and inflationary pressures persist[77](index=77&type=chunk) - The company is monitoring the Russia-Ukraine conflict for potential impacts on inflation, energy costs, and raw material availability[78](index=78&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) The company reported significant year-over-year growth, with Q2 2022 net sales up **22.7%** and operating income increasing to **$63.8 million** | Sales by Market (Q2 2022 vs Q2 2021) | % Change | % Change (Constant Currency) | | :--- | :--- | :--- | | **Commercial Aerospace** | +48.1% | +49.5% | | **Space & Defense** | +4.7% | +7.0% | | **Industrial** | -10.4% | -3.5% | - Gross margin improved to **22.8%** in Q2 2022 from **19.3%** in Q2 2021, primarily due to higher sales and greater capacity utilization leading to improved cost absorption[89](index=89&type=chunk) - Q2 2022 operating income was **$63.8 million** (**16.2%** of sales) compared to **$16.2 million** (**5.1%** of sales) in Q2 2021, driven by higher sales, strong gross margins, and an asset sale gain[93](index=93&type=chunk) [Financial Condition and Liquidity](index=21&type=section&id=Financial%20Condition%20and%20Liquidity) The company maintains a solid liquidity position with **$99.2 million** in cash and **$636 million** available credit, despite negative free cash flow in H1 2022 - As of June 30, 2022, the company had **$99.2 million** in cash and **$636 million** in undrawn availability under its **$750 million** credit facility[98](index=98&type=chunk)[100](index=100&type=chunk) - Free cash flow (non-GAAP) was negative **$19.6 million** for H1 2022, compared to positive **$29.7 million** in H1 2021, due to higher working capital usage and capital expenditures[104](index=104&type=chunk)[115](index=115&type=chunk) - Capital expenditures increased to **$37.9 million** in H1 2022 from **$9.2 million** in H1 2021, driven by construction projects in Salt Lake City, Utah, and Morocco[105](index=105&type=chunk) - The Board of Directors declared a quarterly dividend of **$0.10 per share** on July 25, 2022[103](index=103&type=chunk) [Non-GAAP Financial Measures](index=22&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures to provide insight into ongoing operational performance, excluding items like asset sale gains and restructuring costs | (In millions) | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | **GAAP operating income** | $63.8 | $16.2 | $93.9 | $6.0 | | **Adjusted operating income (non-GAAP)** | $44.7 | $19.3 | $75.8 | $21.2 | | (per share) | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | **GAAP diluted EPS** | $0.53 | $0.03 | $0.74 | $(0.14) | | **Adjusted diluted EPS (non-GAAP)** | $0.33 | $0.08 | $0.55 | $(0.02) | [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in its market risk profile from the 2021 Annual Report, except for ongoing effects of COVID-19 and the Russia-Ukraine conflict - There have been no material changes in market risk from the 2021 Form 10-K, other than the continued broad effects of COVID-19 and the Russia-Ukraine conflict[121](index=121&type=chunk) [Controls and Procedures](index=24&type=section&id=ITEM%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022[122](index=122&type=chunk) - No material changes in internal control over financial reporting were identified during the second quarter of 2022[123](index=123&type=chunk) Part II: Other Information [Legal Proceedings](index=25&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in routine litigation and environmental matters, including its designation as a Potentially Responsible Party for the Lower Passaic River Superfund site - The company is a Potentially Responsible Party (PRP) in the environmental remediation of the Lower Passaic River Superfund site[62](index=62&type=chunk)[63](index=63&type=chunk) - As of June 30, 2022, aggregate environmental-related accruals were **$7.1 million**, a significant increase from **$2.1 million** at the end of 2021[67](index=67&type=chunk) [Risk Factors](index=25&type=section&id=ITEM%201A.%20Risk%20Factors) The company states no material changes to risk factors from its 2021 Annual Report on Form 10-K, directing investors to that filing for comprehensive discussion - There have been no material changes in the Company's risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021[125](index=125&type=chunk) [Exhibits](index=26&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including management compensation agreements and required CEO/CFO certifications - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[129](index=129&type=chunk)

Hexcel Corporation (NYSE:HXL) Q1 2022 Earnings Conference Call April 26, 2022 10:00 AM ET Company Participants Patrick Winterlich - CFO Nick Stanage - Chairman, President and CEO Kurt Goddard - VP, IR Conference Call Participants Michael Ciarmoli - Truist Securities Ken Herbert - RBC Myles Walton - UBS Sheila Kahyaoglu - Jefferies Mike Sison - Wells Fargo John McNulty - BMO Capital Markets David Strauss - Barclays Pete Skibitski - Alembic Global Phil Gibbs - KeyBanc Capital Markets Richard Safran - Seaport ...

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 March 31, 2022 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) (State or Other Jurisdiction of Incorporation or Organization) ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) Hexcel Corporation is a global leader in advanced lightweight composites, serving the Commercial Aerospace, Space & Defense, and Industrial markets - Hexcel is a global leader in advanced lightweight composites technology with a product range including carbon fiber, prepregs, honeycomb, and composite structures for aerospace, defense, and industrial use[12](index=12&type=chunk) - The company operates through two reportable segments: Composite Materials and Engineered Products[14](index=14&type=chunk) - The COVID-19 pandemic significantly impacted operations, with lower demand due to reduced aircraft build rates and supply chain destocking, though signs of recovery began in **2021** including increased domestic air travel[15](index=15&type=chunk)[16](index=16&type=chunk) [Composite Materials Segment](index=3&type=section&id=Composite%20Materials) This segment, Hexcel's largest, manufactures and sells carbon fibers, fabrics, prepregs, adhesives, and honeycomb core for various applications - This segment manufactures core products like carbon fibers (HexTow®), fabrics (HexForce®), prepregs (HexPly®), structural adhesives (HexBond®), and honeycomb (HexWeb®)[18](index=18&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) Composite Materials Segment Net Sales | Year | Net Sales (in millions) | % of Total Company Sales | | :--- | :--- | :--- | | **2021** | **$1,019.4** | ~**80%** | | **2020** | **$1,185.9** | ~**80%** | | **2019** | **$1,863.1** | ~**80%** | - Key customers for this segment include Airbus, Boeing, General Electric, Lockheed Martin, Safran, and Vestas[31](index=31&type=chunk) [Engineered Products Segment](index=6&type=section&id=Engineered%20Products) This segment produces composite structures, precision machined honeycomb parts, and RF/EMI absorbing materials, primarily for the aerospace industry - This segment manufactures composite structures, engineered honeycomb parts, and RF interference control materials for aerospace applications[36](index=36&type=chunk)[37](index=37&type=chunk) Engineered Products Segment Net Sales | Year | Net Sales (in millions) | % of Total Company Sales | | :--- | :--- | :--- | | **2021** | **$305.3** | ~**20%** | | **2020** | **$316.5** | ~**20%** | | **2019** | **$492.6** | ~**20%** | - The segment holds a **50%** ownership in the Aerospace Composites Malaysia Sdn Bhd (ACM) joint venture with Boeing; as of January **1**, **2022**, Hexcel no longer purchases semi-finished components from ACM but continues to accrue **50%** of ACM's net income[38](index=38&type=chunk) [Markets and Customers](index=7&type=section&id=Markets%20and%20Customers) Hexcel serves Commercial Aerospace, Space & Defense, and Industrial markets, with Airbus and Boeing as its largest customers 2021 Net Sales by Market | Market | % of 2021 Net Sales | | :--- | :--- | | Commercial Aerospace | **50%** | | Space & Defense | **33%** | | Industrial | **17%** | Sales to Significant Customers (% of Total Net Sales) | Customer (and subcontractors) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Airbus | **33%** | **33%** | **39%** | | Boeing | **16%** | **19%** | **25%** | - Demand in the wind energy sub-market declined in **2021** due to commoditization and a technology shift from prepreg to infusion processes[57](index=57&type=chunk) - The F-**35** program is the largest in the Space & Defense market, representing less than **25%** of the market's revenue[53](index=53&type=chunk) [Operations and Strategy](index=9&type=section&id=Operations%20and%20Strategy) Hexcel maintains vertically integrated operations, focuses on research and technology, and is committed to environmental sustainability - The company is vertically integrated, producing its own PAN precursor for carbon fiber production, and in **2021**, it internally consumed **55-60%** of the carbon fiber it produced[60](index=60&type=chunk)[61](index=61&type=chunk) - Hexcel acknowledges risks from supply disruptions and material shortages due to global transportation issues and market volatility, and is working with key suppliers to mitigate impacts[64](index=64&type=chunk) - The company is focused on environmental sustainability, with initiatives like solar power projects at several manufacturing sites and efforts to reduce waste and emissions[68](index=68&type=chunk)[69](index=69&type=chunk) - As of December **31**, **2021**, the company employed **4,863** full-time employees and contract workers, an increase from **4,647** at the end of **2020**[83](index=83&type=chunk) [Risk Factors](index=13&type=page&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the ongoing COVID-19 pandemic, customer concentration, supply chain disruptions, international operations, environmental regulations, and cybersecurity threats - **COVID-19 Pandemic:** The pandemic continues to adversely affect the business through reduced demand for commercial aircraft, supply chain disruptions, and potential workforce impacts from health measures[91](index=91&type=chunk)[93](index=93&type=chunk) - **Customer Concentration:** A significant decline in business with Airbus or Boeing, who represented **33%** and **16%** of **2021** sales respectively, could materially harm operating results[101](index=101&type=chunk) - **Supply Chain & Raw Materials:** Profitability is dependent on the price and supply of raw materials like acrylonitrile and carbon fiber; the company experienced minor supply disruptions in **2021** and anticipates they may continue[112](index=112&type=chunk) - **International Operations:** With **59%** of customer sales outside the U.S. in **2021**, the company is exposed to risks from currency fluctuations, trade policies (tariffs), and geopolitical instability[114](index=114&type=chunk)[115](index=115&type=chunk) - **Environmental & ESG:** The company faces risks from evolving environmental laws, climate change impacts on operations, and increasing stakeholder focus on ESG matters, which could increase costs and damage reputation if not managed effectively[118](index=118&type=chunk)[120](index=120&type=chunk)[125](index=125&type=chunk) - **Cybersecurity:** The company depends heavily on IT systems and faces sophisticated cyberattacks, where a breach could lead to data loss, operational stoppages, and reputational harm[123](index=123&type=chunk) [Unresolved Staff Comments](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[135](index=135&type=chunk) [Properties](index=22&type=section&id=Item%202.%20Properties) Hexcel owns and leases manufacturing facilities and offices globally, with corporate headquarters in Stamford, Connecticut, and major manufacturing sites across the U.S. and internationally - The company's principal corporate offices are leased in Stamford, Connecticut, while principal research and technology labs are located in California, Utah, England, and France[137](index=137&type=chunk) - Hexcel operates numerous manufacturing facilities in the U.S. and internationally, including sites in Arizona, Alabama, Utah, France, England, Spain, Germany, and China[140](index=140&type=chunk) - The wind energy prepreg production facility in Windsor, Colorado was closed in November **2020** and is currently held for sale[140](index=140&type=chunk) [Legal Proceedings](index=22&type=section&id=Item%203.%20Legal%20Proceedings) Hexcel is involved in various legal proceedings, primarily environmental matters, including the Lower Passaic River Superfund site, with an environmental remediation accrual of **$2.1 million** as of December **31**, **2021** - The company is named as a Potentially Responsible Party (PRP) for the Lower Passaic River Superfund site in New Jersey due to a former manufacturing site[399](index=399&type=chunk) - In June **2018**, Occidental Chemical Corporation (OCC) filed a suit against Hexcel and ~**120** other parties for cost recovery related to the Lower Passaic River cleanup[402](index=402&type=chunk) Environmental Remediation Reserve Activity (in millions) | Year | Beginning Balance | Cash Expenditures | Ending Balance | | :--- | :--- | :--- | :--- | | **2021** | **$2.4** | **$(0.3)** | **$2.1** | | **2020** | **$2.5** | **$(0.1)** | **$2.4** | | **2019** | **$2.7** | **$(0.2)** | **$2.5** | [Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[142](index=142&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Hexcel's common stock trades on the NYSE under HXL, with dividends and stock repurchases suspended in April **2020** due to the pandemic but dividends reinstated in January **2022** - Common stock is traded on the NYSE under the symbol HXL[144](index=144&type=chunk) - Dividend payments and stock repurchases were suspended in April **2020** in response to the COVID-19 pandemic, with the dividend reinstated commencing with the first quarter of **2022**[145](index=145&type=chunk) - As of January **31**, **2022**, there were **449** holders of record of the company's common stock[146](index=146&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In **2021**, Hexcel's net sales decreased to **$1,324.7 million** due to the pandemic, but operating income and gross margin improved, with the company generating **$123.8 million** in free cash flow Financial Highlights (GAAP) | Metric (in millions) | 2021 | 2020 | | :--- | :--- | :--- | | Net Sales | **$1,324.7** | **$1,502.4** | | Gross Margin % | **18.9%** | **16.0%** | | Operating Income | **$51.8** | **$14.1** | | Net Income | **$16.1** | **$31.7** | Non-GAAP Financial Measures | Metric (in millions) | 2021 | 2020 | | :--- | :--- | :--- | | Adjusted Operating Income | **$70.0** | **$72.0** | | Adjusted Net Income | **$23.2** | **$20.6** | | Free Cash Flow | **$123.8** | **$213.7** | - The company received **$10.5 million** in **2021** under the Aviation Manufacturing Jobs Protection (AMJP) program and anticipates receiving the remaining approved funds of up to **$20.9 million** in **2022**[177](index=177&type=chunk)[206](index=206&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Consolidated net sales for **2021** decreased **11.8%** to **$1,324.7 million**, with declines across all markets, yet gross margin improved to **18.9%** due to favorable sales mix and cost reductions 2021 vs 2020 Sales Change by Market (Constant Currency) | Market | % Change | | :--- | :--- | | Commercial Aerospace | (**19.1%**) | | Space & Defense | (**3.4%**) | | Industrial | (**7.3%**) | - Gross margin improved to **18.9%** in **2021** from **16.0%** in **2020**, attributed to a favorable sales mix towards carbon fiber and benefits from cost reduction actions[191](index=191&type=chunk) - SG&A expenses increased to **$135.0 million** (**10.2%** of sales) in **2021** from **$121.1 million** (**8.1%** of sales) in **2020**, mainly due to higher employee-related costs as temporary pandemic cost reductions ended[192](index=192&type=chunk) - Other operating expenses decreased to **$18.2 million** in **2021** from **$57.9 million** in **2020**, as **2020** included higher restructuring costs and expenses from the terminated merger with Woodward Inc[194](index=194&type=chunk) [Financial Condition and Liquidity](index=34&type=section&id=Financial%20Condition%20and%20Liquidity) Hexcel maintained a solid liquidity position in **2021** with **$127.7 million** in cash and **$625 million** undrawn credit, reducing total debt to **$823.3 million** and complying with amended credit facility covenants Key Balance Sheet & Cash Flow Items (in millions) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | **$127.7** | **$103.3** | | Total Debt | **$823.3** | **$926.4** | | Net Cash from Operating Activities (2021 vs 2020) | **$151.7** | **$264.3** | - The company amended its credit facility in January **2021**, temporarily replacing the maximum leverage ratio with a minimum liquidity requirement of **$250 million** through Q1 **2022** and reducing revolving commitments to **$750 million**[202](index=202&type=chunk)[312](index=312&type=chunk) - Financing activities in **2021** included a **$103 million** repayment of the senior unsecured credit facility[209](index=209&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management identifies critical accounting policies requiring significant judgment, including income taxes, retirement benefits, and impairment testing of long-lived assets and goodwill - **Income Taxes:** Involves significant estimates for deferred tax asset realizability, requiring a valuation allowance when recovery is not more likely than not; as of Dec **31**, **2021**, the company had uncertain tax positions related to returns from **2013** onward[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - **Retirement Benefits:** Accounting for pension and postretirement plans requires actuarial models with key assumptions for discount rates, expected return on assets, and compensation growth, which are set annually[219](index=219&type=chunk)[221](index=221&type=chunk) - **Long-Lived Assets and Goodwill:** Assets are reviewed for impairment when events indicate the carrying amount may not be recoverable, with this assessment requiring estimates of future undiscounted cash flows and fair value[227](index=227&type=chunk)[228](index=228&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Hexcel is exposed to market risks from currency exchange rates, interest rates, and commodity prices, using derivatives to hedge these exposures - The company is exposed to market risks from foreign currency exchange rates (primarily Euro and British pound), interest rates, and commodity prices[230](index=230&type=chunk) - A sensitivity analysis showed a hypothetical **10%** adverse movement in FX rates would impact **2021** operating income by ~**$3.7 million** with hedges in place, versus ~**$21.9 million** without hedges[237](index=237&type=chunk) - As of December **31**, **2021**, the company had foreign currency forward exchange contracts with an aggregate notional amount of **$316.4 million** to hedge forecasted transactions through June **2023**[393](index=393&type=chunk) - The company held commodity swap agreements with a notional value of **$18.9 million** as of Dec **31**, **2021**, to hedge against price fluctuations in raw materials like propylene[396](index=396&type=chunk) [Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Hexcel's audited consolidated financial statements for **2021**, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with notes and an unqualified audit opinion [Consolidated Financial Statements](index=45&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present Hexcel's financial position and results of operations, showing total assets of **$2,819.4 million** and net income of **$16.1 million** for **2021** Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | **$616.3** | **$535.9** | | Total Assets | **$2,819.4** | **$2,917.8** | | Total Current Liabilities | **$247.6** | **$183.1** | | Total Liabilities | **$1,333.9** | **$1,407.6** | | Total Stockholders' Equity | **$1,485.5** | **$1,510.2** | Consolidated Statement of Operations Highlights (in millions) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Sales | **$1,324.7** | **$1,502.4** | **$2,355.7** | | Gross Margin | **$250.1** | **$239.7** | **$640.4** | | Operating Income | **$51.8** | **$14.1** | **$425.2** | | Net Income | **$16.1** | **$31.7** | **$306.6** | | Diluted EPS | **$0.19** | **$0.38** | **$3.57** | [Notes to the Consolidated Financial Statements](index=49&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on Hexcel's accounting policies and financial data, covering debt, retirement plans, income taxes, revenue recognition, restructuring, stock-based compensation, contingencies, and segment information - **Debt (Note 6):** Total debt as of Dec **31**, **2021** was **$823.3 million**, consisting primarily of a **$125 million** balance on the senior unsecured credit facility, **$300 million** of **4.7%** senior notes due **2025**, and **$400 million** of **3.95%** senior notes due **2027**[310](index=310&type=chunk) - **Retirement Plans (Note 8):** The company maintains various defined benefit and defined contribution plans, with net periodic pension expense of **$17.8 million** in **2021**, and European and U.S. defined benefit plans having deficits of **$9.1 million** and **$24.0 million**, respectively[337](index=337&type=chunk)[339](index=339&type=chunk) - **Segment Information (Note 18):** In **2021**, the Composite Materials segment had operating income of **$88.1 million** on **$1,019.4 million** in sales, while the Engineered Products segment had operating income of **$20.2 million** on **$305.3 million** in sales[414](index=414&type=chunk) - **Geographic Data (Note 18):** In **2021**, **52%** of net sales were generated from manufacturing facilities in the United States, with the remaining **48%** from international locations, and **59%** of sales delivered to international customers[415](index=415&type=chunk)[114](index=114&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=23&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[150](index=150&type=chunk) [Controls and Procedures](index=23&type=section&id=Item%209A.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of December **31**, **2021**, with no material changes in internal control over financial reporting during Q4 **2021** - The CEO and CFO concluded that disclosure controls and procedures were effective as of December **31**, **2021**[151](index=151&type=chunk) - No material changes to internal control over financial reporting occurred during the fourth quarter of **2021**[152](index=152&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=24&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[157](index=157&type=chunk) [Executive Compensation](index=24&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[158](index=158&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=24&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[159](index=159&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=24&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[160](index=160&type=chunk) [Principal Accountant Fees and Services](index=24&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[161](index=161&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=25&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Annual Report on Form **10-K** - This section provides a list of all financial statements, schedules, and exhibits filed with the Form **10-K**[163](index=163&type=chunk) - Key exhibits listed include the Credit Agreement (**10.1**), various incentive stock and compensation plans (**10.5**, **10.7**), and certifications by the CEO and CFO (**31.1**, **31.2**)[165](index=165&type=chunk)[167](index=167&type=chunk) [Form 10-K Summary](index=29&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that no Form **10-K** summary is provided - None[168](index=168&type=chunk)

Financial Data and Key Metrics Changes - Fourth quarter sales reached $360 million, a nearly 22% increase compared to Q4 2020, with adjusted diluted EPS of $0.16 compared to a negative $0.18 last year [15][18] - For the full year 2021, sales totaled $1.325 billion, down 12.6% year-over-year in constant currency, but adjusted diluted EPS improved to $0.27 from $0.25 in 2020 [18][19] - Gross margin for Q4 was 19.2%, up from 10.3% in Q4 2020, driven by higher sales and improved efficiency [37] Business Line Data and Key Metrics Changes - Commercial Aerospace sales in Q4 were $199.7 million, up 58.7% year-over-year, driven by increased sales in narrow-body, wide-body, and business jets [35] - Space & Defense sales were $105.9 million, a decrease of 10.8% from Q4 2020, impacted by softer space sales and lower military rotorcraft sales [35] - Industrial sales totaled $54.7 million, increasing 12.8% year-over-year, with strength in automotive and recreation markets [36] Market Data and Key Metrics Changes - Commercial Aerospace represented approximately 56% of total Q4 sales, while Space & Defense accounted for 29% and Industrial for 15% [35] - For the full year, Commercial Aerospace sales were about $668 million, a decline of about 19% compared to 2020, while Space & Defense sales were approximately $435 million, reflecting a 3% year-over-year decline [20][23] Company Strategy and Development Direction - The company is focused on a steep growth trajectory in 2022, addressing challenges such as supply chain constraints and inflationary pressures [12][13] - Hexcel is transitioning to more advanced composite production technologies, moving less complex work to a joint venture with Boeing, which is expected to enhance margins [22][96] - The company has reinstated a dividend, reflecting confidence in its recovery and growth prospects [32][43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong growth in 2022, driven by recovery in air travel and increased demand for lightweight composite materials [12][51] - The company anticipates challenges from inflation and supply chain issues but remains focused on efficiency and productivity to control its destiny [52][53] - Future growth is expected to be supported by strong order activity in Commercial Aerospace and ongoing demand in Space & Defense [21][70] Other Important Information - The company is guiding for 2022 sales between $1.50 billion and $1.63 billion, with adjusted EPS of $1 to $1.24 and free cash flow exceeding $145 million [25][44] - Hexcel is moving away from providing specific platform shipset values for Commercial Aerospace programs, opting instead for shipset ranges to better reflect value propositions [26][28] Q&A Session Summary Question: How should we think about excess capacity and idle assets tied to the widebody side of the business? - Management indicated that idle assets are being methodically brought back online as demand increases, with no new assets needed in the foreseeable future [56][58] Question: Can you update us on your research efforts for high volume out of autoclave parts? - Management confirmed ongoing development of advanced materials that can be cured outside of autoclave, which will penetrate narrowbody markets [63] Question: What is the outlook for Space & Defense sales in 2022? - Management expects about 8% year-over-year growth, driven by programs like the F-35 and CH-53K, despite some softness in legacy programs [68][70] Question: How will free cash flow be utilized moving forward? - Management plans to use free cash flow for dividends, potential M&A opportunities, and possibly stock buybacks once covenants are cleared [72][76] Question: What is the impact of working capital as revenue ramps back up? - Management acknowledged that as sales grow, working capital will increase, but they aim to manage it efficiently [83] Question: How does the transition of work to the joint venture impact EBIT? - The transition involved moving lower-margin work to the joint venture, but management expects to replace it with higher-margin programs at the Kent facility [96][99]

HEXCEL Investor Briefing October 2021 Risks, | --- | --- | |-----------------|-------| | | | | | | | Uncertainties | | | and Other | | | Factors with | | | Respect to | | | Forward-Looking | | | Statements | | | Disclaimer | | Certain statements contained in this presentation constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements that are not of historical fact constitute "forward-looking statements" and accordingly, involve estima ...

Financial Data and Key Metrics Changes - Overall sales in Q3 2021 were $334 million, an increase from $287 million in Q3 2020, reflecting strong earnings performance as sales recover and margins expand [14][30] - Aerospace sales reached $167 million, representing a nearly 30% increase compared to Q3 2020, driven by stronger narrowbody demand [14][26] - Gross margin for Q3 was 19.8%, significantly up from 4.7% in Q3 2020, benefiting from a strong fiber-rich sales mix and reduced overhead costs [30][34] Business Line Data and Key Metrics Changes - Commercial Aerospace accounted for approximately 50% of Q3 sales, with a 29.8% increase year-over-year [26] - Space & Defense sales totaled $110.4 million, a 1.4% increase from the same period in 2020, with strength in fixed-wing aircraft and commercial helicopters [27] - Industrial sales were $56.2 million, an 11.7% increase compared to Q3 2020, although wind energy sales declined over 31% due to softer demand [28][19] Market Data and Key Metrics Changes - The U.S. is expected to lift its international travel ban in November, which is anticipated to boost demand for air travel and aircraft orders [13] - The company is closely monitoring supply chain constraints and inflationary pressures, particularly in energy and freight costs [10][11] Company Strategy and Development Direction - The company has completed its restructuring and is now focused on leveraging its advanced composite technology to meet increasing demand for lightweight materials [8][48] - Plans for expansion include doubling the size of the engineered core facility in Morocco by early 2023 and establishing a new center for research and technology excellence in Salt Lake City [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a sustained recovery in aerospace, supported by growing OEM backlogs and production rate increases [48] - The company remains cautious about the uncertain market environment and is focused on cost control and cash management [47] Other Important Information - The effective tax rate for Q3 2021 was 38.3%, influenced by the pandemic and the mix of results across different countries [36] - Free cash flow for Q3 2021 was $19.5 million, with year-to-date free cash flow at $49.2 million, despite modest increases in working capital [39] Q&A Session Summary Question: Can you give us a split of raw materials and labor, and what percentage of your raw materials you've hedged? - Management clarified that acrylonitrile is the primary commodity hedged, and they have long-term contracts for key aerospace resins to mitigate cost pressures [56] Question: What are your thoughts on the 2022 revenue consensus? - Management is optimistic about growth in 2022, particularly in narrowbody aircraft, and believes the consensus estimate is reasonable [59] Question: Can you remind me of your sales mix in terms of carbon fiber versus honeycomb? - Management indicated that while they do not disclose specific product line sales, carbon fiber sales have been growing and are expected to continue [67] Question: How do you view the new industrial applications? - Management sees these as sustainable opportunities that will continue to grow, rather than placeholders while waiting for aerospace recovery [86] Question: What is the expected impact of the Kent relocation of work? - Management confirmed that the transfer of work from the Kent facility to a joint venture will reduce revenue but is expected to be manageable [98]

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, 2021 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) (State or Other Jurisdiction of Incorporation or Organizat ...

HEXCEL Investor Briefing July 2021 Risks, | --- | --- | |-----------------|-------| | | | | | | | Uncertainties | | | and Other | | | Factors with | | | Respect to | | | Forward-Looking | | | Statements | | | Disclaimer | | Certain statements contained in this presentation constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements that are not of historical fact constitute "forward-looking statements" and accordingly, involve estimates ...