Management’s discussion and analysis of the Company’s financial condition and results of operations for the year ended December 31, 2025, and comparison to the year ended December 31, 2024 should be read in conjunction with the consolidated financial statements and notes of this Annual Report on Form 10-K.
For discussion and analysis of financial condition and results of operations for 2024 compared to 2023 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K, filed with the SEC on February 5, 2025, which is incorporated by reference into this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Business Overview
For the Years Ended December 31,
(In millions)
Net sales
Gross margin %
Operating income
Operating income %
Interest expense, net
Income tax expense
Net income
Business Trends
Since 2022, the Commercial Aerospace market and our business have seen signs of recovery from the economic impacts of the COVID-19 pandemic, driven by growth in air travel and an increase in aircraft build rates. The post-recovery period, however, has had many challenges across the markets Hexcel operates in, including delays in aircraft production rates, related to, among other impacts, global logistics, supply chain issues, economic conditions, inflationary pressures, tariff impacts, and effects from geopolitical issues and conflicts. While these challenges have had and may continue to have further negative impacts on our operations, supply chain, transportation networks and customers, all of which have and may continue to compress our financial results, we see positive indicators for a sustained recovery in commercial aircraft production and strong demand in the defense and space market as global defense budgets continue to increase as a result of an uncertain geopolitical environment and the development of new platforms.
Beginning with the first quarter of 2025, sales are being reported for two markets, Commercial Aerospace, unchanged from past practice, and a new sales category titled Defense, Space & Other, which combines the previous Space & Defense market and the Industrial market. Sales amounts for the year ended December 31, 2024 have been reclassified for comparative purposes.
In 2025, our Commercial Aerospace sales decreased 4.0% compared to 2024 primarily due to lower sales for certain Airbus and Boeing programs, partially offset by increased Other Commercial Aerospace sales driven by strength in regional jets. The demand for new commercial aircraft continues to be principally driven by airline passenger traffic (measured by revenue passenger miles) and the replacement rate for existing aircraft. The Commercial Aerospace industry continues to utilize a greater proportion of advanced composite materials with each new generation of aircraft.
Defense, Space & Other sales in 2025 increased 5.4% compared to 2024. Year over year growth was led by military helicopters, including the Black Hawk and CH-53-K, as well as other military aircraft structures, launchers and satellites.
Results of Operations
We have two reportable segments: Composite Materials and Engineered Products. Although these segments provide customers with different products and services, they often overlap within our two end business markets: Commercial Aerospace and Defense, Space & Other. Therefore, we also find it meaningful to evaluate the sales of our segments through these business markets. Further discussion and additional financial information about our segments may be found in Note 18 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.
Net Sales: Consolidated net sales of $1,893.9 million for 2025 decreased by less than 1% compared to 2024.
The following table summarizes net sales to third-party customers by segment and end market in 2025 and 2024:
(In millions)
Commercial
Aerospace
Defense, Space & Other
Total
2025 Net Sales
Composite Materials
Engineered Products
Total
2024 Net Sales
Composite Materials
Engineered Products
Total
Sales by Segment
Composite Materials: Net sales of $1,516.2 million for the year ended December 31, 2025 decreased $14.8 million or 1.0% from the prior year. Commercial Aerospace sales decreased 2.8% in 2025 as compared to 2024 primarily driven by lower sales for certain Airbus and Boeing programs. Defense, Space & Other sales for 2025 increased by 2.5% over the prior year primarily driven by higher sales of launchers.
Engineered Products: For the year ended December 31, 2025, net sales of $377.7 million increased $5.7 million or 1.5% as compared to the prior year, driven by a 13.4% increase in Defense, Space & Other sales driven by military helicopters and aircraft structures, partially offset by a 10.4% decrease in Commercial Aerospace sales attributable to softness in select Boeing and other commercial aerospace programs.
Sales by Market
Commercial Aerospace: Net sales of $1,146.9 million decreased 4.0% for the year ended December 31, 2025 as compared to the year ended December 31, 2024 primarily due to lower sales for the Airbus A350, Boeing 787 and 737 MAX, partially offset by increased Airbus A320neo sales. Other Commercial Aerospace sales increased reflecting growth in regional jets.
Defense, Space & Other: For the year ended December 31, 2025, net sales of $747.0 million increased 5.4% as compared to the year ended December 31, 2024. The increase was due to strength in domestic and international helicopter programs including the Black Hawk, CH-53K, and a European fighter program as well as growth in launchers and satellites.
2025 Consolidated Results Compared to 2024
Gross Margin: Gross margin for 2025 was $434.8 million or 23.0% of net sales as compared to $469.8 million or 24.7% of net sales in 2024. Lower margins for 2025 as compared to the prior year were due to sales mix, tariffs, and inventory reduction actions which drove unfavorable cost leverage.
Selling, General and Administrative (“SG&A”) Expenses: SG&A expenses for 2025 were $169.0 million or 8.9% of net sales as compared to $176.6 million or 9.3% of net sales for 2024. The $7.6 million decrease in SG&A expenses in 2025 compared to 2024 was primarily due to lower employee-related costs partially offset by higher professional fees.
Research and Technology (“R&T”) Expenses: R&T expenses for 2025 were $56.4 million or 3.0% of net sales and in 2024 were $57.1 million or 3.0% of net sales. The year-over-year decrease of $0.7 million was primarily attributable to lower material and supplies costs.
Other operating expense: For the year ended December 31, 2025, other operating expense was $37.8 million which included charges of $28.2 million related to the closure of the Belgium facility, $4.5 million for the divestitures of the Austria and Hartford, Connecticut businesses and a $3.9 million non-income tax charge related to the net value of a foreign entity. Other operating expense for the year ended December 31, 2024 of $50.0 million included $47.7 million of asset impairments and other charges primarily associated with the divestiture of the Austria business and $2.3 million of restructuring costs.
Operating income: Operating income for the year ended December 31, 2025 was $171.6 million as compared to $186.1 million for the year ended December 31, 2024. Operating income as a percent of sales was 9.1% and 9.8% in 2025 and 2024, respectively . The decrease in operating income in 2025 compared to 2024 was driven by lower margins, partially offset by lower SG&A expenses and Other operating expense as mentioned above.
Depreciation and amortization expense of $122.3 million for the year ended December 31, 2025 decreased $1.7 million from the year ended December 31, 2024.
Other income: Other non-operating income for the year ended December 31, 2025 of $1.1 million included settlement and curtailment gains related to our U.S. and Belgium retirement plans, partially offset by debt extinguishment costs. We did not incur other non-operating income in 2024.
Interest expense: Interest expense was $37.7 million and $31.2 million for the years ended December 31, 2025 and 2024, respectively, with the year over year increase due to higher average debt levels.
Income tax expense: For the years ended December 31, 2025 and 2024, we had a tax provision of $25.6 million and $22.8 million, respectively.
Net income: Net income was $109.4 million or $1.37 per diluted share for the year ended December 31, 2025 compared to net income of $132.1 million or $1.59 per diluted share for the year ended December 31, 2024. The decrease in 2025 was driven by lower margins.
Financial Condition
In 2025, we ended the year with total debt, net of cash, of $922.0 million and generated $230.5 million of operating cash resulting in $157.2 million of free cash flow (cash provided by operating activities less cash paid for capital expenditures). We expect our cash flow needs for fiscal year 2026 will be funded by cash generated from our operations as well as available borrowings under our Senior Unsecured Revolving Credit Facility (the “Facility”) as needed.
We have a portfolio of derivatives related to currencies, interest rates and commodities. We monitor our counterparties, and we only use those rated investment grade.
Liquidity
Our cash on hand at December 31, 2025 was $71.0 million, as compared to $125.4 million at December 31, 2024. Of the total cash on hand at December 31, 2025, $39.9 million was held by our foreign locations. As of December 31, 2025 total debt was $993.0 million, as compared to $700.7 million at December 31, 2024. As of December 31, 2025, we were in compliance with all debt covenants.
As of December 31, 2025, total outstanding borrowings under the Facility were $295.0 million. The credit agreement for the Facility 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 December 31, 2025, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $455.0 million.
Short-term liquidity requirements consist primarily of normal recurring operating expenses and working capital needs, capital expenditures, dividend payments, debt obligations and debt service requirements. We expect to meet our short-term liquidity requirements through net cash from operating activities, cash on hand and the Facility. As of December 31, 2025, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until February 2027 when our 3.95% Senior Unsecured Notes are due.
For more information regarding debt, including the Facility, see Note 6, Debt, to the accompanying consolidated financial statements of this Annual Report on Form 10-K.
On October 22, 2025, the Board approved an additional $600 million share repurchase plan (the "2025 Share Repurchase Plan"). Also on October 22, 2025, as part of the 2025 Share Repurchase Plan, the Company entered into accelerated share repurchase agreements (the "ASR") to purchase an aggregate of $350 million of the Company's common stock . In connection with the ASR, on October 21, 2025, the Company provided notice to the lenders pursuant to the Credit Agreement to borrow $350.0 million under the Facility to fund the initial settlement of the ASR.
The remaining authorization under the 2025 Share Repurchase Plan at December 31, 2025 was $380.6 million. On January 28, 2026, our Board of Directors declared a quarterly dividend of $0.18 per share payable to stockholders of record as of February 9, 2026, with a payment date of February 17, 2026.
Operating Activities : We generated $230.5 million in cash from operating activities during 2025, a decrease of $59.4 million from 2024. The decrease in the current year was primarily due to lower net income and use of cash for long term assets and liabilities including amounts related to retirement plans. Working capital was of slight use of cash for both 2025 and 2024. Working capital for the year ended December 31, 2025 reflects higher accounts receivable and lower accruals, offset by lower inventories.
Investing Activities: Net cash used for investing activities was $76.0 million in 2025 compared to $87.0 million in 2024. Capital expenditures for 2025 were $73.3 million compared to $87.0 million in 2024. Payments related to the divestiture of the Austria and Hartford businesses were $2.7 million in 2025.
Financing Activities: Net cash used for financing activities was $212.3 million in 2025 as compared to $301.7 million in 2024. In 2025, borrowings were $480.0 million, while repayments were $185.0 million. During 2025, the Company issued $300.0 million in aggregate principal amount of 5.875% Senior Unsecured Notes due in 2035 and in conjunction with this issuance, the Company redeemed the $300.0 million in aggregate principal amount of 4.7% Senior Unsecured Notes that were due in August 2025. In 2024, borrowings and repayments were both $160.0 million. Dividend payments to shareholders were $53.9 million and $49.3 million in the years ended December 31, 2025 and 2024, respectively. Repurchases of common stock totaled $454.3 million and $252.2 million in the years ended December 31, 2025 and 2024, respectively.
Financial Obligations and Commitments: The next significant scheduled debt maturity will not occur until February 2027 when our 3.95% Senior Unsecured Notes are due. In addition, certain sales and administrative offices, data processing equipment, vehicles and manufacturing equipment, land and facilities are leased under operating leases.
The following table summarizes the scheduled maturities as of December 31, 2025 of financial obligations and expiration dates of commitments for the years ended 2026 through 2030 and thereafter.
(In millions)
Thereafter
Total
Senior unsecured credit facility due 2028
5.875% senior notes due 2035
3.95% senior notes due 2027
Purchase obligations
Subtotal
Operating leases
Total financial obligations
Interest payments
Estimated benefit plan contributions
Total commitments
As of December 31, 2025, we had $1.4 million of unrecognized tax benefits. This represents tax benefits associated with various tax positions taken, or expected to be taken, on domestic tax returns that have not been recognized in our financial statements due to uncertainty regarding their resolution. The resolution or settlement of these tax positions with the taxing authorities is at various stages.
For further information regarding our financial obligations and commitments, see Notes 6, 7, 8 and 16 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures, including sales and expenses measured in constant dollars (prior year sales and expenses measured at current year exchange rates); operating income, net income and diluted earnings per share adjusted for items included in operating expense and non-operating expenses; and free cash flow. Management believes these non-GAAP measures are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results and comparisons to prior periods. These adjustments can represent significant charges or credits that we believe are important to an understanding of Hexcel’s overall operating results in the periods presented. Such non-GAAP measures are not determined in accordance with generally accepted accounting principles and should not be viewed in isolation or as an alternative to or substitutes for GAAP measures of performance.
Our calculation of these measures may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating our performance. Reconciliations to adjusted operating income, adjusted net income, adjusted diluted net income per share and free cash flow are provided below.
Year Ended December 31,
(In millions)
GAAP operating income
Other operating expense (1)
Adjusted operating income (Non-GAAP)
Year Ended December 31,
(In millions, except per diluted share data)
Net
Income
EPS
Net
Income
EPS
GAAP net income
Other operating expense, net of tax (1)
Other income, net of tax (2)
Tax expense (benefit) (3)
Adjusted net income (Non-GAAP)
Year Ended December 31,
(In millions)
Net cash provided by operating activities
Less: Capital expenditures
Free cash flow (Non-GAAP)
The year ended December 31, 2025 included charges related to the closure of the Welkenraedt, Belgium facility, the divestitures of our Neumarkt, Austria and Hartford, Connecticut businesses and a non-income tax charge related to the net value of a foreign entity. The year ended December 31, 2024 included asset impairments, charges primarily associated with the divestiture of our Neumarkt, Austria business and restructuring costs.
The year ended December 31, 2025 included curtailment and settlement gains related to the U.S. and Belgium retirement plans as well as debt extinguishment costs.
The year ended December 31, 2025 included a tax charge for a valuation allowance related to the closure of the Welkenraedt, Belgium facility, the release of FIN 48 reserves and provision adjustments related to the finalization of prior year tax returns. Tax benefit for the year ended December 31, 2024 included a provision adjustment to finalize prior year tax returns and benefits associated with our R&T expenditures.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared based upon the selection and application of accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions about future events that affect amounts reported in our financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be significant to the financial statements. The accounting policies below are those we believe are the most critical to the preparation of our financial statements and require the most difficult, subjective, and complex judgments. Our other accounting policies are described in the accompanying Notes to the consolidated financial statements of this Annual Report on Form 10-K.
Income Taxes
We have operations in several countries throughout the world where we are subject to income and similar taxes. The estimation of income tax amounts often involves the interpretation of complex regulations and tax laws. In addition, estimations also must consider the impact foreign taxes may have on domestic taxes, as well as the analysis of the realizability of deferred tax assets, tax audit
findings and uncertain tax positions. Although we believe our tax accruals are adequate, differences may occur in the future, depending on the resolution of pending and new tax matters.
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided against a deferred tax asset when it is more likely than not that all or some portion of the deferred tax asset will not be realized. The determination of the required valuation allowance and the amount, if any, of deferred tax assets to be recognized involves significant estimates regarding the timing and amount of reversal of taxable temporary differences, future taxable income, and the implementation of tax planning strategies. In particular, ASC 740, Income Taxes, requires that all available positive and negative evidence be weighed to determine whether a valuation allowance should be recorded.
We are subject to taxation in the U.S. and various states and foreign jurisdictions. The amount of income taxes we pay are subject to ongoing audits by federal, state and foreign tax authorities, which may result in proposed assessments. Our estimate for the potential outcome for any uncertain tax issue is judgmental. We assess our income tax positions, and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. We recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations. If we do not believe that it is more likely than not that a tax benefit will be sustained, no tax benefit is recognized. As of December 31, 2025, we had uncertain tax positions for which it is reasonably possible that amounts of unrecognized tax benefits could significantly change over the next year. These uncertain tax positions relate to our tax returns from 2022 onward.
For further discussion, see Note 9, Income taxes, to the accompanying consolidated financial statements of this Annual Report on Form 10-K.
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, or in our existing insurance coverage, that could cause the actual liability to exceed the estimates, or may require adjustments to the recorded liability balances in the future. For further discussion, see Note 16, Commitments and Contingencies, to the accompanying consolidated financial statements of this Annual Report on Form 10-K.
Market Risks
As a result of our global operating and financing activities, we are exposed to various market risks that may affect our consolidated results of operations and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates, which impact the U.S. dollar value of transactions, assets and liabilities denominated in foreign currencies and fluctuations in interest rates, which impact the amount of interest we must pay on certain debt instruments. Our primary currency exposures are in Europe, where we have significant business activities. To a lesser extent, we are also exposed to fluctuations in the prices of certain commodities, such as electricity, natural gas, acrylonitrile, aluminum, and certain chemicals. In addition, we have several contracts with both suppliers and customers that contain pricing adjustments based on the price of oil outside of a specified band.
We attempt to net individual exposures, when feasible, taking advantage of natural offsets. In addition, we employ or may employ interest rate, commodity and foreign currency financial instruments for the purpose of hedging certain specifically identified interest rate, commodity, and currency exposures. The use of these financial instruments is intended to mitigate some of the risks associated with fluctuations in interest rates, commodities and currency exchange rates but does not eliminate such risks. We do not use financial instruments for trading or speculative purposes.
Interest Rate Risks
Outstanding balances that exist under our Facility are included in our long-term debt bear interest at variable rates. From time to time we have entered into interest rate swap agreements to change the underlying mix of variable and fixed interest rate debt. These interest rate swap agreements have modified the percentage of total debt that is exposed to changes in market interest rates. Assuming a 10% favorable and a 10% unfavorable change in the underlying weighted average interest rates of our variable rate debt and swap agreements, interest expense for 2025 of $37.7 million would not be materially impacted.
Foreign Currency Exchange Risks
As of December 31, 2025, we operated ten manufacturing facilities in Europe and Africa which generated approximately 47% of our 2025 consolidated net sales. Our European business activities primarily involve three major currencies — the U.S. dollar, the British pound sterling, and the Euro. We also conduct business and sell products to customers throughout the world. Most of the sales in these countries are denominated in U.S. dollars and they have local currency expenses. Currency risk for the Africa location is not considered material.
In 2025, our European subsidiaries had third-party sales of $0.9 billion of which approximately 68% were denominated in U.S. dollars, 31% were denominated in Euros and 1% were denominated in British pounds sterling. While we seek to reduce the exposure of our European subsidiaries to their sales in non-functional currencies through the purchase of raw materials in the same currency as that of the product sale, the net contribution of these sales to cover the costs of the subsidiary in its functional currency will vary with changes in foreign exchange rates, and as a result, so will vary the European subsidiaries’ percentage margins and profitability. For revenues denominated in the functional currency of the subsidiary, changes in foreign currency exchange rates increase or decrease the value of these revenues in U.S. dollars, but do not affect the profitability of the subsidiary in its functional currency. The value of our investments in these countries could be impacted by changes in currency exchange rates over time and could impact our ability to profitably compete in international markets.
We attempt to net individual functional currency positions of our various European subsidiaries, to take advantage of natural offsets and reduce the need to employ foreign currency forward exchange contracts. We attempt to hedge some, but not necessarily all, of the net exposures of our European subsidiaries resulting from sales they make in non-functional currencies. The benefit of such hedges varies with time and the foreign exchange rates at which the hedges are set. For example, when the Euro strengthened against the U.S. dollar, the benefit of new hedges placed was much less than the value of hedges they replaced that were entered into when the U.S. dollar was stronger. We may place additional foreign currency hedges when the dollar strengthens against the Euro or British pound. We do not seek to hedge the value of our European subsidiaries’ functional currency sales and profitability in U.S. dollars. We also enter into short-term foreign currency forward exchange contracts, usually with a term of ninety days or less, to hedge net currency exposures. Any unrealized gain or loss on these foreign currency forward exchange contracts would be offset by corresponding decreases or increases, respectively, of the underlying transaction being hedged.
We have performed a sensitivity analysis as of December 31, 2025 using a modeling technique that measures the changes in the fair values arising from a hypothetical 10% adverse movement in the levels of foreign currency exchange rates relative to the U.S. dollar with all other variables held constant. The analysis includes all of our foreign currency hedge contracts. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would have an approximately $0.4 million impact on our 2025 operating income. However, it should be noted that over time as the adverse movement (in our case a weaker dollar as compared to the Euro or the British pound sterling) continues and new hedges are layered in at the adverse rate, the impact would be more significant. For example, had we not had any hedges in place for 2025, a 10% adverse movement would have reduced our operating income by approximately $29.8 million.
Foreign Currency Forward Exchange Contracts
A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British pound sterling. We entered into contracts to exchange U.S. dollars for Euros and British pound sterling through June 2028. The aggregate notional amount of these contracts was $403.4 million at December 31, 2025. The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. For the three years ended December 31, 2025, hedge ineffectiveness was immaterial. Cash flows associated with these contracts are classified within net cash provided by operating activities of continuing operations.
For further discussion, see Note 15, Derivative Financial Instruments, to the accompanying consolidated financial statements of this Annual Report on Form 10-K.
Consolidated Financial Statements and Supplementary Data
Description
Page
Management’s Responsibility for Consolidated Financial Statements
Management’s Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Financial Statements of Hexcel Corporation and Subsidiaries:
Consolidated Balance Sheets as of December 31, 2025 and 2024
Consolidated Statements of Operations for each of the three years ended December 31, 2025, 2024 and 202 3
Consolidated Statements of Comprehensive Income (Loss) for each of the three years ended December 31, 2025, 2024 and 2023
Consolidated Statements of Stockholders’ Equity for each of the three years ended December 31, 2025, 2024 and 2023
Consolidated Statements of Cash Flows for each of the three years ended December 31, 2025, 2024, and 2023
Notes to the Consolidated Financial Statements
M anagement’s Responsibility for Consolidated Financial Statements
Hexcel management has prepared and is responsible for the consolidated financial statements and the related financial data contained in this report. These financial statements, which include estimates, were prepared in accordance with accounting principles generally accepted in the United States of America. Management uses its best judgment to ensure that such statements reflect fairly the consolidated financial position, results of operations and cash flows of the Company.
The Audit Committee of the Board of Directors reviews and monitors the consolidated financial statements and accounting policies of Hexcel. These financial statements and policies are reviewed regularly by management and such financial statements are audited by our independent registered public accounting firm, Ernst & Young LLP. The Audit Committee, composed solely of outside directors, meets periodically, separately, and jointly, with management and the independent registered public accounting firm.
Management’s Report on Internal Control Over Financial Reporting
Hexcel management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Hexcel management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013) . Based on our assessment, management concluded that, as of December 31, 2025, our internal control over financial reporting was effective.
The effectiveness of Hexcel’s internal control over financial reporting, as of December 31, 2025, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report that appears on page 45.
REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Hexcel Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Hexcel Corporation and Subsidiaries’ (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 11, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
Description of the Matter
The Company’s revenue was $1,893.9 million for the year ended December 31, 2025. As explained in Notes 1 and 11 to the consolidated financial statements, revenue is predominately derived from a single performance obligation under long-term agreements with customers and pricing is fixed and determinable. The majority of revenue is recognized at a point in time when the customer has obtained control of the product.
The principal consideration for our determination that performing procedures relating to revenue recognition is a critical audit matter is the extensive audit effort in performing procedures related to the Company’s revenue recognition.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to revenue recognition.
Our procedures included, among others, (i) assessing the completeness, accuracy, and existence of revenue recognized by testing the correlation of revenue to accounts receivable and cash, (ii) testing a sample of revenue transactions by obtaining and inspecting source documents, including purchase orders, invoices, proof of shipment and cash receipts and (iii) confirming a sample of outstanding customer invoice balances, and for confirmations not returned, obtaining and inspecting source documents, including invoices, proof of shipment, and subsequent cash receipts, where applicable. We also evaluated the Company’s revenue recognition disclosures included in Notes 1 and 11.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Stamford, Connecticut
February 11, 2026
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Hexcel Corporation
Opinion on Internal Control over Financial Reporting
We have audited Hexcel Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Hexcel Corporation and subsidiaries’ (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 11, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 11, 2026
Hexcel Corporation and Subsidiaries
Consolidated Ba lance Sheets
As of December 31,
(In millions)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Contract assets
Prepaid expenses and other current assets
Assets held for sale
Total current assets
Property, plant and equipment
Less accumulated depreciation
Property, plant and equipment, net
Goodwill and other intangible assets
Investments in affiliated companies
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings
Accounts payable
Accrued compensation and benefits
Financial instruments
Accrued liabilities
Liabilities held for sale
Total current liabilities
Long-term debt
Retirement obligations
Deferred income taxes
Other non-current liabilities
Total liabilities
Stockholders' equity:
Common stock, $ 0.01 par value, 200.0 shares authorized, 112.1 shares and 111.6 shares
issued at December 31, 2025 and 2024, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less – Treasury stock, at cost, 36.4 shares at December 31, 2025 and 30.6 shares
at December 31, 2024
Total stockholders' equity
Total liabilities and stockholders' equity
The accompanying notes are an integral part of these consolidated financial statements.
Hexcel Corporation and Subsidiaries
Consolidated Statem ents of Operations
For the Years Ended December 31,
(In millions, except per share data)
Net sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and technology expenses
Other operating expense
Operating income
Interest expense, net
Other (income) expense
Income before income taxes, and equity in earnings from affiliated companies
Income tax expense
Income before equity in earnings
Equity in earnings from affiliated companies
Net income
Basic net income per common share:
Diluted net income per common share:
Weighted-average common shares:
Basic
Diluted
Hexcel Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Years Ended December 31,
(In millions)
Net Income
Currency translation adjustments
Net unrealized pension and other benefit actuarial
loss and prior service credits (net of tax)
Net unrealized gains (losses) on financial instruments (net of tax)
Total other comprehensive income (loss)
Comprehensive income
The accompanying notes are an integral part of these consolidated financial statements.
Hexcel Corporation and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31, 2025, 2024 and 2023
Common Stock
Accumulated
Additional
Other
Total
Paid-In
Retained
Comprehensive
Treasury
Stockholders'
(In millions)
Par
Capital
Earnings
Loss
Stock
Equity
Balance, December 31, 2022
Net income
Dividends on common stock ($ 0.50 per share)
Repurchases of common stock
Change in other comprehensive loss – net of tax
Stock-based activity
Balance, December 31, 2023
Net income
Dividends on common stock ($ 0.60 per share)
Repurchases of common stock
Change in other comprehensive income – net of tax
Stock-based activity
Balance, December 31, 2024
Net income
Dividends on common stock ($ 0.68 per share)
Repurchases of common stock
Change in other comprehensive loss – net of tax
Stock-based activity
Year Ended December 31, 2025
The accompanying notes are an integral part of these consolidated financial statements.
Hexcel Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(In millions)
Cash flows from operating activities
Net income
Reconciliation to net cash provided by operating activities:
Depreciation and amortization
Amortization of deferred financing costs and debt discount
Deferred income taxes
Equity in earnings from affiliated companies
Stock-based compensation
Restructuring expenses, net of payments
Debt extinguishment costs
Loss on divestiture of assets
Pension settlement
Gain on sale of assets
Impairment of assets
Loss (gain) on sale of investments
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
Decrease (increase) in inventories
(Increase) decrease in prepaid expenses and other current assets
(Decrease) increase in accounts payable/accrued liabilities
Other – net
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures
Payments on divestiture of assets
Proceeds from sale of assets
Proceeds from sale of investments
Net cash used for investing activities
Cash flows from financing activities
Borrowing from senior unsecured credit facility - 2028
Repayment of senior unsecured credit facility - 2028
Borrowing from senior unsecured credit facility - 2024
Repayment of senior unsecured credit facility - 2024
Redemption of 4.7% senior notes due 2025
Proceeds from issuance of 5.875% senior notes due 2035
Repayment of finance lease obligation and other debt, net
Issuance costs related to senior credit facility
Dividends paid
Repurchase of stock
Activity under stock plans
Net cash used for financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental data:
Cash paid during the year for:
Interest, net of capitalized interest
Income Taxes
Accrual basis additions to property, plant and equipment
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Significant Accounting Policies
Nature of Operations
Hexcel Corporation and its subsidiaries (herein referred to as “Hexcel”, “the Company”, “we”, “us”, or “our”), is a global leader in advanced lightweight composites technology. We propel the future of flight and transportation through excellence in advanced material lightweighting solutions that create a better world for us all. Our broad product range includes carbon fiber, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, resins, engineered core and composite structures for use in commercial aerospace, defense and space, and industrial applications.
We serve international markets through manufacturing facilities, sales offices and representatives located in the Americas, Europe, Asia Pacific, India, and Africa. We also had a presence in Malaysia where we were a partner in a joint venture which manufactures composite structures for Commercial Aerospace applications. In December 2023, we sold our 50 % interest in the joint venture and received net proceeds of approximately $ 44.7 million and recorded a loss on the sale of $ 3.0 million (including the write-off of approximately $ 9.0 million in currency translation adjustments) which was included in Other expense in the Consolidated Statements of Operations for the year ended December 31, 2023.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Hexcel Corporation and its subsidiaries after elimination of all intercompany accounts, transactions, and profits. Results for the years ended 2023 included our 50 % equity ownership investment in the joint venture in Malaysia which was accounted for using the equity method of accounting. As mentioned above, we sold our interest in the joint venture in December 2023.
Basis of Presentation
The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") and are in conformity with U.S. generally accepted accounting principles ("GAAP"). Our fiscal year end is December 31st. Unless otherwise stated, all years and dates refer to our fiscal year.
Assets and Liabilities Held for Sale
During the third quarter of 2025, the Company completed the divestiture of its Austria operations for which we had previously announced, during the fourth quarter of 2024, that we were exploring strategic options and undergoing a process to find a suitable successor.
As of December 31, 2024, the assets and liabilities of the Austria operations were classified as held for sale. The table below presents the carrying amounts of the assets and liabilities:
December 31,
(In millions)
Accounts receivable
Inventories
Assets held for sale
Accounts payable
Accrued liabilities
Other non-current liabilities
Liabilities held for sale
Use of Estimates
Preparation of the accompanying consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and all highly liquid investments with an original maturity of three months or less when purchased. Our cash equivalents are held in money market investments with strong sponsor organizations which are monitored on a continuous basis.
Inventories
Inventories are stated at the lower of cost or net realizable value, with cost determined using a standard rate per unit of finished goods when the plant is operating at normal or planned capacity. Inventory is reported at its estimated net realizable value based upon our historical experience with inventory becoming obsolete due to age, changes in technology and other factors. Inventory cost consists of materials, labor, and manufacturing related overhead associated with the purchase and production of inventories.
Property, Plant and Equipment
Property, plant and equipment, including capitalized interest applicable to major project expenditures, is recorded at cost. Asset and accumulated depreciation accounts are eliminated for dispositions, with resulting gains or losses reflected in earnings. Depreciation of plant and equipment is provided generally using the straight-line method over the estimated useful lives of the various assets. The estimated useful lives range from 10 to 40 years for buildings and improvements and from 3 to 25 years for machinery and equipment. Repairs and maintenance are expensed as incurred, while major replacements and betterments are capitalized and depreciated over the remaining useful life of the related asset.
Leases
The Company regularly enters into operating leases for certain buildings, equipment, parcels of land, and vehicles and accounts for such leases under the provisions of Accounting Standards Codification (“ASC”) 842, accounting for leases. Accordingly, we capitalize all agreements with terms for more than one year, where a right of use asset was identified. 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 uses 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 addition, we elected certain expedients, 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.
In determining the lease renewal, management considers 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 considers 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.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets of an acquired business. Goodwill is tested for impairment at the reporting unit level annually, in the fourth quarter, or when events or changes in circumstances indicate that goodwill might be impaired. The Company performed a qualitative assessment (“Step Zero”) and determined that it was more likely than not that the fair values of our reporting units were not less than their carrying values and it was not necessary to perform a quantitative goodwill impairment test.
We amortize the cost of other intangibles over their estimated useful lives unless such lives are deemed indefinite. We have indefinite lived intangible assets which are not amortized but are tested annually for impairment during the fourth quarter of each year, or when events or changes in circumstances indicate the potential for impairment. If the carrying amount of the indefinite lived intangible exceeds the fair value, it is written down to its fair value, which is calculated using a discounted cash flow model.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including property, plant and equipment and definite-lived intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. These indicators include, but are not limited to: a significant decrease in the market price of a long-lived asset, a significant change in the extent or
manner in which a long-lived asset is used or its physical condition, a significant adverse change in legal factors or business climate that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount expected for the acquisition or construction of a long-lived asset, a current period operating or cash flow loss combined with a history of losses associated with a long-lived asset and a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated life.
Software Development Costs
Costs incurred to develop software for internal use and for software accessed through the cloud in a hosting arrangement are accounted for under ASC 350-40, “Internal-Use Software.” All costs relating to the preliminary project stage and the post-implementation/operation stage are expensed as incurred. Costs incurred during the application development stage are capitalized and amortized over the useful life of the software or the noncancelable term of the hosting arrangement, which can range from three to ten years . The amortization of capitalized costs commences after testing has been completed, the software/module/component is ready for its intended use and is not dependent on the completion on any other modules/components.
Debt Financing Costs
Debt financing costs are deferred and amortized to interest expense over the life of the related debt. We capitalize financing fees related to our revolving credit facility and record them as a non-current asset in our Consolidated Balance Sheets. Financing fees related to our bonds and notes are capitalized and recorded as a non-current contra liability in our Consolidated Balance Sheets. See Note 6, Debt, for further information on debt financing costs.
Share-Based Compensation
The fair value of Restricted Stock Units (“RSUs”) is equal to the market price of our stock at date of grant and is amortized to expense ratably over the vesting period. Performance restricted stock units (“PRSUs”) are a form of RSUs in which the number of shares ultimately received depends on the extent to which we achieve a specified performance target. The fair value of the PRSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized straight-line over the total vesting period. A change in the performance measure expected to be achieved is recorded as an adjustment in the period in which the change occurs. We use the Black-Scholes model to calculate the fair value for all stock option grants, based on the inputs relevant on the date granted, such as the market value of our shares, prevailing risk-free interest rate, etc. The value of the portion of the award, after considering potential forfeitures, that is ultimately expected to vest is recognized as expense in our consolidated statements of operations on a straight-line basis over the requisite service periods. The value of RSUs, PRSUs and non-qualifying options awards for retirement eligible employees is expensed on the grant date as they are fully vested.
Currency Translation
The assets and liabilities of international subsidiaries are translated into U.S. dollars at year-end exchange rates, and revenues and expenses are translated at average exchange rates during the year. Cumulative currency translation adjustments are included in “accumulated other comprehensive loss” in the stockholders’ equity section of the Consolidated Balance Sheets.
Revenue Recognition
Revenue is predominantly derived from a single performance obligation under long-term agreements with our customers and pricing is fixed and determinable. The majority of our revenue is recognized at a point in time when the customer has obtained control of the product. We have determined that individual purchase orders (“PO”), whose terms and conditions taken with a master agreement, create the revenue 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.
Revenue is recognized over time for customer contracts that contain a termination for convenience clause (“T for C") and where the products produced do not have an alternative use. For revenue recognized over time, we estimate the amount of revenue earned at a given point during the production cycle based on certain costs factors such as raw materials and labor incurred to date, plus a reasonable profit, which is known as the cost-to-cost input method.
Our revenue recognition policy recognizes the following practical expedients allowed under ASC 606:
Payment terms with our customers which are one year or less, are not considered a performance obligation.
Shipping and handling fees and costs incurred in connection with products sold are recorded in cost of sales in our Consolidated Statements of Operations and are not considered a performance obligation to our customers.
Our performance obligations on our orders are generally satisfied within one year from a given reporting date therefore we omit disclosure of the transaction price allocated to remaining performance obligations on open orders.
Product Warranty
We provide for an estimated amount of product warranty at the point a claim is probable and estimable. This estimated amount is provided by product and based on current facts, circumstances, and historical warranty experience.
Research and Technology
Significant costs are incurred each year in connection with research and technology (“R&T”) programs that are expected to contribute to future earnings. Such costs are related to the development and, in certain instances, the qualification and certification of new and improved products and their uses. R&T costs are expensed as incurred.
Income Taxes
We provide for income taxes using the asset and liability approach . Under this approach, deferred income tax assets and liabilities reflect tax net operating loss and credit carryforwards and the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets require a valuation allowance when it is not more likely than not, based on the evaluation of positive and negative evidence, that the deferred tax assets will be realized. The realization of deferred tax assets is dependent upon the timing and magnitude of future taxable income prior to the expiration of the deferred tax assets’ attributes. When events and circumstances dictate, we evaluate the realizability of our deferred tax assets and the need for a valuation allowance by forecasting future taxable income. Investment tax credits are recorded on a flow-through basis, which reflects the credit in net income as a reduction of the provision for income taxes in the same period as the credit is realized for federal income tax purposes. In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the Consolidated Statements of Operations.
Concentration of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of trade accounts receivable. Two customers and their related subcontractors accounted for approximatel y 52 % of our annual net sales in 2025, 55 % in 2024 and 54 % in 2023. Refer to Note 18 for further information on significant customers. We perform ongoing credit evaluations of our customers’ financial condition but generally do not require collateral or other security to support customer receivables. We establish an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other financial information.
Derivative Financial Instruments
We use various financial instruments, including foreign currency forward exchange contracts, commodity, and interest rate agreements, to manage our exposure to market fluctuations by generating cash flows that offset, in relation to their amount and timing, the cash flows of certain foreign currency denominated transactions, commodities or underlying debt instruments. We mark our foreign exchange forward contracts to fair value. When the derivatives qualify, we designate our foreign currency forward exchange contracts as cash flow hedges against forecasted foreign currency denominated transactions and report the changes in fair value of the instruments in “accumulated other comprehensive loss” until the underlying hedged transactions affect income. We designate our interest rate agreements as fair value or cash flow hedges against specific debt instruments and recognize interest differentials as adjustments to interest expense as the differentials may occur; the fair value of the interest rate swaps is recorded in other assets or other non-current liabilities with a corresponding amount to “accumulated other comprehensive loss”. We do not use financial instruments for trading or speculative purposes.
In accordance with accounting guidance, we recognize all derivatives as either assets or liabilities on our Consolidated Balance Sheets and measure those instruments at fair value.
Self-insurance
We are self-insured up to specific levels for certain medical and health insurance and workers’ compensation plans. Accruals are established based on actuarial assumptions and historical claim experience and include estimated amounts for incurred but not reported claims.
Recently Adopted Accounting Standards
During the fourth quarter of 2025, the Company adopted Accounting Standards Updated ("ASU") No. 2023-09 , Income Taxes (Topic 240) , which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign and (3) income tax expense or benefit from continuing operations disaggregated by Federal, state, and foreign. The update also requires entities to disclose their income tax payments to various jurisdictions. For further information please see Note 9 Income Taxes, in the Notes to the Consolidated Financial Statements.
Recently Issued Accounting Standards
In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. This guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statement disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Recognition and Measurement of Internal-Use Software Costs. The amendment modernizes the accounting for internal-use software and enhances the disclosure requirements. The guidance is effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statement disclosures.
In November 2025, the FASB issued ASU 2025‑09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The amendments are intended to further align hedge accounting with the economic results of an entity’s risk‑management activities. The standard is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The amended guidance is intended to expand the population of hedged risks eligible for aggregation in a single group or pool, thereby reducing cost, complexity, and the risk of unintuitive missed forecasts in the application of these hedging strategies. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025‑11, Interim Reporting (Topic 270): Narrow‑Scope Improvements. The amendments clarify the applicability of ASC 270 and reorganize interim disclosure requirements to improve navigability and consistency across interim reporting periods. The amendments are not intended to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements. The amendments are effective for interim reporting periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact on its interim financial reporting processes and related disclosures.
New Tax Legislation
On July 4, 2025, the U.S. President signed into law H.R.1, the legislation commonly known as the One Big Beautiful Bill (“OBBB”). This legislation extended, modified, or made permanent many of the tax provisions which were initially enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017. The OBBB contains a number of tax provisions including, but not limited to, immediate expensing of domestic research and experimental expenditures, modifications to the limitation on business interest, bonus depreciation modifications, as well as international tax provision modifications. These tax provisions apply to either tax years beginning after December 31, 2024 or December 31, 2025. Please see Note 9, Income Taxes, in the Notes to the Consolidated Financial Statements for additional information.
Note 2 — Inventories
December 31,
(In millions)
Raw materials
Work in progress
Finished goods
Total inventory
Note 3— Accounts Receivable
December 31,
(In millions)
Accounts receivable
Allowance for doubtful accounts
Accounts receivable, net
Bad debt expense was immaterial for all years presented.
Note 4 — Net Property, Plant and Equipment
December 31,
(In millions)
Land
Buildings
Equipment
Construction in progress
Finance lease
Property, plant and equipment
Less accumulated depreciation
Net property, plant and equipment
Depreciation expense related to property, plant and equipment for the years ended December 31, 2025, 2024 and 2023, was $ 116.7 million, $ 117.5 million and $ 118.0 m illion, respectively. Capitalized interes t of $ 15.2 millio n, $ 10.7 million, and $ 6.7 million for 2025, 2024 and 2023, respectively, was included in construction in progress. Capitalized costs associated with software accessed through a hosting arrangement were $ 27.6 million for 2025, $ 17.6 million for 2024, and $ 7.4 million for 2023 and are included within other assets on the Consolidated Balance Sheet.
Note 5 — Goodwill and Purchased Intangible Assets
Changes in the carrying amount of gross goodwill and other purchased intangibles for the years ended December 31, 2025 and 2024, by segment, are as follows:
(In millions)
Composite
Materials
Engineered
Products
Total
Balance as of December 31, 2023
Amortization expense
Intangible Asset Impairment
Currency translation adjustments and other
Balance as of December 31, 2024
Amortization expense
Intangible Asset Impairment
Currency translation adjustments and other
Balance as of December 31, 2025
We performed our annual impairment review of goodwill as of November 30, 2025 and determined that it was more likely than not that the fair values of our reporting units are above their carrying values and that no impairment exists. The goodwill and intangible asset balances as of December 31, 2025 included $ 6.6 million of indefinite-lived intangible assets, $ 41.6 million of a definite-lived intangible asset (net of accumulated amortization of $ 48.2 million) and $ 191.6 million of goodwill. Of the $ 191.6 million of goodwill, $ 76.2 million is allocated to the Composite Materials segment and $ 115.4 million to the Engineered Products segment.
The weighted average remaining life of the finite lived intangible assets is 8 years . Amortization related to the definite lived intangible assets for the next five years and thereafter is as follows:
(In millions)
Thereafter
Total
Note 6– Debt
December 31,
December 31,
(In millions)
Current portion of finance lease
Current portion of debt
Senior unsecured credit facility - due 2028
4.7 % senior notes — due 2025
3.95 % senior notes — due 2027
5.875 % senior notes --- due 2035
Senior notes — original issue discount
Senior notes — deferred financing costs
Non-current portion of finance leases and other
Long-term debt
Total debt
Senior Unsecured Credit Facility
On April 25, 2023 , the Company entered into a new credit agreement (the “Credit Agreement”) to refinance its senior unsecured revolving credit facility (the “Facility”). Under the terms of the Credit Agreement the borrowing capacity remained at $ 750 million. The Facility matures in April 2028 .
Borrowings under the Facility bear interest, at the Company's option, for Secured Overnight Financing Rate ("SOFR") borrowings at (i) an Adjusted Term SOFR rate (subject to a 0.00% floor), where such “Adjusted Term SOFR” rate is equal to the Term SOFR rate for the applicable interest period plus 0.10 %, plus the Applicable Margin or (ii) for base rate borrowings, the greatest of (a) the prime rate, (b) the federal funds rate plus 0.50 % and (c) the Adjusted Term SOFR rate (subject to a 0.00% floor) for a one-month interest period plus 1.00 %, in each case plus the Applicable Margin. The “Applicable Margin” initially was 1.125 % for SOFR rate borrowings and 0.125 % for base rate borrowings, and after September 30, 2023, can fluctuate, determined by reference to the more favorable to the Company of its (i) public debt rating and (ii) consolidated leverage ratio, as specified in the Credit Agreement. Up to $ 50.0 million of the Facility may be used for letters of credit. The Credit Agreement enables the Company, from time to time, to add term loans or to increase the revolving credit commitment in an aggregate amount not to exceed $ 500 million.
The Credit Agreement contains customary covenants that place restrictions on, among other things, the incurrence of debt by any subsidiaries of the Company, granting of liens and sale of all or substantially all of the assets of the Company and its subsidiaries taken as a whole. The Credit Agreement also contains financial covenants that require the Company to maintain a minimum interest coverage ratio and a maximum consolidated net leverage ratio. As of December 31, 2025, we were in compliance with all debt covenants .
On October 22, 2025, the Company entered into a $ 350.0 million accelerated share repurchase program which was funded through the Facility.
As of December 31, 2025, net borrowings under the Facility were $ 295.0 million, which approximated fair value. Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of December 31, 2025, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $ 455.0 million. The weighted average interest rate for the Facility was 5.34 % for the year ended December 31, 2025.
The balance of unamortized deferred financing costs related to the Facility was $ 1.4 million at December 31, 2025 and $ 2.0 m illion at December 31, 2024.
3.95% Senior Notes
In 2017, the Company issued $ 400.0 million in aggregate principal amount of 3.95 % Senior Unsecured Notes due February 15, 2027 . The interest rate on these senior notes may be increased by 0.25 % each time a credit rating applicable to the notes is downgraded. The maximum rate is 5.95 %. The effective interest rate for 2025 was 4.0 % inclusive of an approximately 0.25 % benefit of treasury locks. The fair value of the senior notes due in 2027 based on quoted prices utilizing Level 2 inputs (as defined in Note 19) was $ 399.2 million at Decemb er 31, 2025. The balance of unamortized deferred financing costs and debt discount related to the senior notes was $ 0.6 million at Dec ember 31, 2025 and $ 1.1 million at December 31, 2024.
5.875% Senior Notes
During the first quarter of 2025, the Company issued $ 300.0 million in aggregate principal amount of 5.875 % Senior Unsecured Notes due in 2035. The interest rate on these senior notes may be increased by 0.25 % each time a credit rating applicable to the notes is downgraded. The maximum rate is 7.875 %. Interest on the notes will be payable semiannually in arrears on February 26 and August 26 of each year, which began on August 26, 2025. The effective interest rate for 2025 was 6.0 % inclusive of an approximately 0.10 % benefit of treasury locks. The issuance of these senior notes resulted in the Company incurring financing fees of $ 3.9 million that have been deferred and will be recognized over the term of the senior notes. The fair value of the senior notes due in 2035 based on quoted prices utilizing Level 2 inputs (as defined in Note 19) was $ 315.5 million at Decemb er 31, 2025.
In conjunction with the issuance of the 5.875 % Senior Unsecured Notes, the Company redeemed the $ 300.0 million in aggregate principal amount of 4.7 % Senior Unsecured Notes that were due in August 2025. The redemption of these senior notes resulted in debt extinguishment co sts of $ 0.4 milli on which were recorded in Other expense on the Consolidated Statements of Operations for the year ended December 31, 2025.
Note 7 — Leases
At December 31, 2025, we had approximately $ 25.7 million of right of use assets recorded in non-current other assets, and $ 25.7 million of related liabilities, $ 18.7 million of which was included in other non-current liabilities with the current portion o f $ 7.0 million included in accrued liabilities. The weighted average of the remaining lease terms was approximately 5 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 SOFR 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 of origin. The weighted average interest rate used in calculating the fair values listed above was 4.2 %.
The following table lists the schedule of future undiscounted cash payments related to right of use assets by year:
(In millions)
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease payments
Operating lease expense recognized during the years ended December 31, 2025, 2024 and 2023, wa s $ 16.1 million, $ 15.3 million and $ 16.1 million, respectively. Expense related to operating leases which have a duration of a year or less were not material. Expenses for finance leases for the years ended December 31, 2025, 2024 and 2023 were not material.
(In millions)
Balance Sheet Classification
Operating lease ROU assets
Other assets
Operating lease current liabilities
Accrued liabilities
Operating lease long-term liabilities
Other non-current liabilities
Total operating lease liabilities
Finance lease, gross
Property, plant & equipment, net
Finance lease accumulated depreciation
Property, plant & equipment, net
Finance lease, net
Finance lease current liabilities
Accrued liabilities
Finance lease long-term liabilities
Long-term debt
Total finance lease liabilities
Note 8 — Retirement and Other Postretirement Benefit Plans
We maintain qualified defined benefit retirement plans covering certain current and former European employees, as well as nonqualified defined benefit retirement plans, and retirement savings plans covering certain eligible U.S. and European employees and participate in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliations. In addition, we provide certain postretirement health care and life insurance benefits to eligible U.S. retirees.
Defined Benefit Retirement Plans
We have nonqualified defined benefit retirement plans covering certain current and former employees that are funded as benefits are incurred. Expense related to the defined benefit retirement plans for the three years ended December 31, 2025 was $ 1.9 million, $ 1.6 million, and $ 5.7 million, respectively. The amounts for the year ended December 31, 2023 do not include a non-cash charge of $ 70.5 million related to the completion of the buy-out of the UK pension plan and a gain of $ 1.9 million related to excess assets from the UK pension plan that reverted back to the Company.
Multi-Employer Plan
The Company is party to a multi-employer pension plan covering certain U.S. employees with union affiliations. The plan is the Western Metal Industry Pension Fund, (“the Plan”). The Plan’s employer identification number is 91-6033499; the Plan number is 001. In 2025, 2024 and 2023 the Plan reported Hexcel Corporation as being an employer that contributed greater th an 5 % of the Plan’s total contributions. The collective bargaining agreement was renewed on October 1, 2025 for a five-year term. The Plan has been listed in “critical status” and has been operating in accordance with a Rehabilitation Plan since 2010. The Plan, as amended under the Rehabilitation Plan, reduced the adjustable benefits of the participants, and levied a surcharge on employer contributions. Expense related to the multi-employer plan for the three years ended December 31, 2025 was $ 1.7 million, $ 1.7 million, and $ 1.5 million, respectively.
Retirement Savings Plan
Under the defined contribution retirement savings plans, eligible employees can make contributions up to certain thresholds of their annual compensation. The Company also makes matching contributions each year. Expense related to the matching contributions for the defined contribution plans for the three years ended December 31, 2025 was $ 20.4 million, $ 22.7 million, and $ 20.1 million, respectively.
Postretirement Plans
In addition to defined benefit and retirement savings plan benefits, we also provide certain postretirement health care and life insurance benefits to eligible retirees. Depending upon the plan, benefits are available to eligible employees who retire after meeting certain age and service requirements and were employed by Hexcel as of February 1996. Our funding policy for the postretirement health care and life insurance benefit plans is generally to pay covered expenses as they are incurred.
Non-Qualified Deferred Compensation Plan
Under the deferred compensation plan, eligible U.S. employees may make tax-deferred contributions that cannot be made under the 401(k) Plan because of Internal Revenue Service limitations. We match 50 % of a participant’s contributions up to 6 % of the participant's excess compensation pay as well as provide the same fixed and profit-sharing contributions as provided under the 401(k) plan.
We have elected to fund our deferred compensation obligation through a rabbi trust. The rabbi trust is subject to creditor claims in the event of insolvency, but the assets held in the rabbi trust are not available for general corporate purposes. Amounts in the rabbi trust are invested in a number of funds based on the funds available under our 401(k) plan, other than the Hexcel stock fund. The securities are carried at fair value and are included in other assets on the Consolidated Balance Sheets. We record trading gains and losses in general and administrative expenses on the Consolidated Statements of Operations, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect our exposure to liabilities for payment under the deferred compensation plan.
Net Periodic Pension Expense
The measurement date used to determine the benefit obligations and plan assets of the defined benefit retirement and postretirement plans was December 31, 2025. All costs related to our pensions are included as a component of operating income in our Consolidated Statements of Operations.
During 2025, the Company paid $ 16.5 million to settle certain plans. As of December 31, 2025, the total benefit obligation was $ 21.0 million, and the fair value of plan assets was $ 4.0 million, resulting in a net projected benefit obligation ("PBO") of $ 17.0 million ($ 2.4 million recorded in current liabilities and $ 14.6 million in other non-current liabilities). As of December 31, 2024 the total benefit obligation was $ 37.8 million, and the fair value of plan assets was $ 4.0 million, resulting in a net PBO of $ 33.8 million ($ 17.4 million recorded in current liabilities and $ 16.4 million in other non-current liabilities).
Note 9 — Income Taxes
During the fourth quarter of 2025, the Company adopted ASU No. 2023-09 , Income Taxes (Topic 240): Improvements to Income Tax Disclosures, which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign and (3) income tax expense or benefit from continuing operations disaggregated by Federal, state, and foreign. The update also requires entities to disclose their income tax payments (net of refunds) disaggregated by Federal, state, and foreign.
Income before income taxes and the provision for income taxes, for the three years ended December 31, 2025, were as follows:
(In millions)
Income before income taxes:
International
Total income before income taxes
Income tax expense (benefit):
Current:
State
International
Current income tax expense
Deferred:
State
International
Deferred income tax benefit
Total income tax expense
A reconciliation of the provision for income taxes at the U.S. federal statutory income tax rate of 21.0 % to the effective income tax rate, for the years ended December 31, 2025, 2024 and 2023 is as follows:
(Dollar amounts in millions)
Amount
Percent
Amount
Percent
Amount
Percent
U.S. Federal Statutory Tax Rate
State and local income tax, net of federal income tax effect (1)
Foreign tax effects
Austria
Valuation allowance
Foreign exchange difference
Other
Belgium
Valuation allowance
Other
Morocco
Valuation allowance
Other
United Kingdom
Tax Incentives
Pension plan settlement
Other
Luxembourg
Other foreign jurisdictions
Effect of changes in tax laws or rates enacted in the current period
Effect of cross-border tax laws
Foreign-derived intangible income
Foreign currency loss
R&D related tax impacts
Other effects of cross-border tax laws
Tax credits
R&D tax credits
Changes in valuation allowances
Nontaxable or nondeductible items
Employee benefits and related
Other nontaxable or nondeductible items
Changes in unrecognized tax benefits
Effective tax rate
(1) State taxes in Connecticut and Utah contributed to the majority of the tax effect in this category for the year ended December 31, 2025. State taxes in California and Utah contributed to the majority of the tax effect in this category for the year ended December 31, 2024. State taxes in Massachusetts and Utah contributed to the majority of the tax effect in this category for the year ended December 31, 2023.
We do no t provide for additional income or withholding taxes for any undistributed foreign earnings as we do not currently have any specific plans to repatriat e funds from our international subsidiaries; however, we may do so in the future if a dividend can be remitted with no material tax impact. As of December 31, 2025, we have approximately $ 204.0 million of unremitted foreign earnings that we intend to keep indefinitely reinvested. Addi tionally, due to withholding tax, basis computations and other tax related considerations, it is not practicable to estimate any taxes to be provided on outside basis differences at this time.
The table below provides income taxes paid (net of refunds received) for the years ended December 31, 2025, 2024 and 2023:
(In millions)
Jurisdiction
Federal
State
California
Connecticut
Other
Foreign
Spain
Luxembourg
Other
Total income taxes paid/(refund)
The Organization for Economic Cooperation and Development (“OECD”) Pillar Two global minimum tax rules, requiring a minimum effective tax rate of 15 %, are effective for tax years beginning on or after January 1, 2024. Under Pillar Two, a top-up tax will be required for certain jurisdictions whose effective tax rate falls below the 15 % minimum rate. Although the U.S. has not yet enacted legislation to adopt Pillar Two, nearly all European Union member states have enacted the Pillar Two legislation. After considering the applicable tax law changes associated with Pillar Two legislation, we determined there was no material impact to our provision for income taxes for the 12 months ended December 31, 2025. The Company will continue to monitor for additional guidance and legislative changes related to Pillar Two in the jurisdictions where we operate.
Deferred Income Taxes
Deferred income taxes result from tax attributes including foreign tax credits, net operating loss carryforwards and temporary differences between the recognition of items for income tax purposes and financial reporting purposes. Principal components of deferred income taxes as of December 31, 2025 and 2024 are:
(In millions)
Assets
Net operating loss carryforwards
Tax credit carryforwards
Stock-based compensation
Other comprehensive income
Inventory reserves
Right of use liability
Capitalized research and development expenditures
Reserves and other
Subtotal
Valuation allowance
Total assets
Liabilities
Accelerated depreciation
Accelerated amortization
Right of use asset
Other
Total liabilities
Net deferred tax liabilities
Deferred tax assets and deferred tax liabilities as presented in the Consolidated Balance Sheets as of December 31, 2025 and 2024 are as follows and are recorded in other assets and deferred income taxes in the Consolidated Balance Sheets:
(In millions)
Long-term deferred tax assets, net
Long-term deferred tax liability, net
Net deferred tax liabilities
The deferred tax assets for the respective periods were assessed for recoverability and, where applicable, a valuation allowance was recorded to reduce the total deferred tax asset to an amount that will, more likely than not, be realized in the future. The valuation allowance as of December 31, 2025 relates to certain U.S. and foreign tax attributes for which we have determined, based upon historical results and projected future book and taxable income levels, that a valuation allowance should continue to be maintained. The valuation allowance decreased by $ 3.0 million in 2025 primarily as a result of changes in the realization of deferred tax assets in a foreign jurisdiction. The net change in the total valuation allowance for the years ended December 31, 2025 and 2024, was a decrease of $ 3.0 million and an increase of $ 6.2 million, respectively .
Although realization is not assured, we have concluded that it is more likely than not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The amount of the net deferred tax assets considered realizable, however, could be reduced in the near term if actual future income or income tax rates are lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.
Net Operating Loss & Tax Credit Carryforwards
At December 31, 2025, we had tax credit carryforwards for U.S. state tax purposes of $ 11.4 million available to offset future income taxes. These credits will begin to expire if not utilized in 2026. We also had net operating loss carryforwards for U.S. state and foreign income tax purposes of $ 2.8 million and $ 333.2 million, respectively, for which there were foreign valuation allowances of $ 11.7 million as of December 31, 2025. Our foreign net operating losses can be carried forward without limitation in Belgium, Germany, France, Luxembourg, Morocco, and the U.K. We have a valuation allowance against certain foreign net operating losses for which the Company believes it is not more likely than not that the net operating losses will be utilized.
Uncertain Tax Positions
Our unrecognized tax benefits at December 31, 2025 relate to U.S. federal and various state jurisdictions.
The following table summarizes the activity related to our unrecognized tax benefits.
Unrecognized Tax Benefits
(In millions)
Balance as of January 1,
Additions based on tax positions related to the current year
Expiration of the statute of limitations for the assessment of taxes
Balance as of December 31,
We had unrecognized tax benefits of $ 1.4 million at December 31, 2025, of which $ 1.4 million, if recognized, would impact our annual effective tax rate. In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the Consolidated Statements of Operations. The Company did not recognize any interest expense or penalties related to the above unrecognized tax benefits in 2025 and 2024. The Company had no accrued interest as of December 31, 2025 and 2024.
We are subject to taxation in the U.S. and various states and foreign jurisdictions. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years. Years in major jurisdictions that remain open to examination are the U.S. (2022 onward for Federal purposes and 2021 onward for state purposes), Austria (2020 onward), Belgium (2016 onward), France (2022 onward), Spain (2021 onward), Germany (2022 onward), Luxembourg (2020 onward), and the U.K. (2021 onward). We are currently under examination in certain state and foreign tax jurisdictions.
Note 10 — Capital Stock
Common Stock Outstanding
Common stock outstanding as of December 31, 2025, 2024 and 2023 was as follows:
(Number of shares in millions)
Common stock:
Balance, beginning of year
Activity under stock plans
Balance, end of year
Treasury stock:
Balance, beginning of year
Repurchased
Balance, end of year
Common stock outstanding
On February 19, 2024, the Board approved a $ 300 million share repurchase plan (the “2024 Share Repurchase Plan”). As of December 31, 2025, the 2024 Share Repurchase Plan was fully utilized. The repurchases of the Company’s common stock under the 2024 Share Repurchase Plan were made in open market transactions, block transactions, privately negotiated purchase transactions or other purchase techniques at the discretion of management based upon consideration of market, business, legal, accounting, and other factors.
On October 22, 2025, the Board approved an additional $ 600 million share repurchase plan (the "2025 Share Repurchase Plan"), and, as part of the 2025 Share Repurchase Plan, the Company entered into accelerated share repurchase agreements (the "ASR") to purchase an aggregate of $ 350 million of the Company's common stock. On October 24, 2025, the Company paid Bank of America, N.A. (“Bank of America”) and Goldman Sachs & Co. LLC (together with Bank of America, the “Counterparties”) an aggregate amount of $ 350 million and received an initial delivery of approximately 3.95 million shares of the Company's common stock, representing 80 % of the shares expected to be repurchased under the ASR agreement, at a price of $ 70.95 per share. The final number of shares to be repurchased will be based on the average of the daily volume-weighted average prices of the Company’s common stock during the term of the ASR Agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreements. Upon final settlement of the ASR, under certain circumstances, each of the Counterparties may be required to deliver additional shares of common stock, or the Company may be required to deliver shares of common stock or to make a cash payment, at its election, to the Counterparties. The final settlement of each transaction under the ASR Agreements is scheduled to occur in the first quarter of 2026 and in each case may be accelerated at the option of the applicable Counterparty.
In connection with the ASR, on October 21, 2025, the Company provided notice to the lenders pursuant to the Credit Agreement to borrow $ 350.0 million under the Facility to fund the initial settlement of the ASR.
During the year ended December 31, 2025, we repurchased 5,720,616 share s of common stock, including the shares purchased pursuant to the ASR, under both repurchase plans at a cost of $ 454.3 million, including sales commissions and excise taxes, leaving approximate ly $ 380.6 millio n available for additional repurchases under the 2025 Share Repurchase Plan. The acquisition of these shares was accounted for under the treasury stock method.
Dividends per share of common stock for 2025 and 2024 were $ 0.68 a nd $ 0.60 , respectively. For the years ended December 31, 2025 and 2024, we paid $ 53.9 million and $ 49.3 million in dividends for each year, respectively.
Note 11 — Revenue
Our revenue is primarily derived from the sale of inventory under long-term contracts with our customers. The majority of our revenue is recognized at a point in time. 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, which contains a termination for convenience clause ("T for C") that requires the customer to 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 contracts that have a T for C clause and where the products being produced have no alternative use. As our production cycle is typically nine 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.
We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the years ended December 31, 2025, 2024 and 2023:
(In millions)
Consolidated Net Sales
Commercial Aerospace
Defense, Space & Other
Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled. Contract assets are included in our Consolidated Balance Sheets as a component of current assets. The activity related to contract assets is as follows:
Composite
Engineered
(In millions)
Materials
Products
Total
Opening adjustment - January 1, 2023
Net revenue billed
Balance at December 31, 2023
Net revenue billed
Balance at December 31, 2024
Net revenue billed
Balance at December 31, 2025
Contract assets as of December 31, 2025, will be billed and reclassified to accounts receivable during 2026. Accounts receivable, net, includes amounts billed to customers where the right to payment is unconditional.
Note 12 — Restructuring
We recognized restructuring charges of $ 28.4 million for the year ended December 31, 2025 primarily related to severance and impairments. Anticipated future cash payments as of December 31, 2025 were $ 5.5 million.
We recognized restructuring charges of $ 2.3 million and $ 0.8 million for the years ended December 31, 2024 and December 31, 2023, respectively, primarily related to severance and asset impairments. Restructuring charges are recorded in Other Operating Expense on the Consolidated Statements of Operations.
December 31,
Restructuring
Cash
December 31,
(In Millions)
Charge
FX Impact
Paid
Non-Cash
Employee termination
Impairment and other
Total
December 31,
Restructuring
Cash
December 31,
(In Millions)
Charge
FX Impact
Paid
Non-Cash
Employee termination
Impairment and other
Total
December 31,
Restructuring
Cash
December 31,
(In Millions)
Charge
FX Impact
Paid
Non-Cash
Employee termination
Impairment and other
Total
Note 13 — Stock-Based Compensation
The following table details the stock-based compensation expense by type of award for the years ended December 31, 2025, 2024 and 2023:
(In millions)
Non-qualified stock options
Restricted stock, service based (“RSUs”)
Restricted stock, performance based (“PRSUs”)
Employee stock purchase plan
Stock-based compensation expense
Tax benefit from stock exercised and converted during the period
Non-Qualified Stock Options
Non-qualified stock options (“NQOs”) have been granted to our employees and directors under our stock compensation plan. Options granted generally vest over three years and expire ten years from the date of grant.
A summary of option activity under the plan for the three years ended December 31, 2025 is as follows:
Number of
Weighted-
Remaining
Options
Average
Contractual Life
(In millions)
Exercise Price
(in years)
Outstanding at December 31, 2022
Options granted
Options exercised
Outstanding at December 31, 2023
Options granted
Options exercised
Outstanding at December 31, 2024
Options granted
Options exercised
Outstanding at December 31, 2025
Year Ended December 31,
(In millions, except weighted average exercise price)
Aggregate intrinsic value of outstanding options
Aggregate intrinsic value of exercisable options
Total intrinsic value of options exercised
Total number of options exercisable
Weighted average exercise price of options exercisable
Total unrecognized compensation cost on non-vested options (a)
Unrecognized compensation cost relates to non-vested stock options and is expected to be recognized over the remaining vesting period ranging from one year to three years .
Valuation Assumptions in Estimating Fair Value
We estimated the fair value of stock options at the grant date using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2025, 2024 and 2023:
Risk-free interest rate
Expected option life (in years)
Dividend yield
Volatility
Weighted-average fair value per option granted
The weighted-average expected life is derived from the average midpoint between the vesting and the contractual term and considers the effect of both the inclusion and exclusion of post-vesting cancellations during the ten-year period. Expected volatility is calculated based on a blend of both historic volatility of our common stock and implied volatility of our traded options. We weigh both volatility inputs equally and utilize the average as the volatility input for the Black-Scholes calculation. The risk-free interest rate for the expected term is based on the U.S. Treasury yield curve in effect at the time of grant and corresponding to the expected term.
Restricted Stock Units — Service Based
As of December 31, 2025, a total of 387,418 shares of service based restricted stock units were outstanding, which vest based on years of service under the 2003 and 2013 incentive stock plan. RSUs are granted to key employees, executives, and directors of the Company. The fair value of the RSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized on a straight-line basis over the requisite service period. The stock-based compensation expense recognized is based on an estimate of shares ultimately expected to vest, and therefore it has been reduced for estimated forfeitures. The total compensation expense related to awards granted to retirement-eligible employees is recognized on the grant date.
The table presented below provides a summary of the Company’s RSU activity for the years ended December 31, 2025, 2024 and 2023:
RSUs
Weighted-Average
Number of (In millions)
Fair Value Grant Date
Outstanding at December 31, 2022
RSUs granted
RSUs issued
Outstanding at December 31, 2023
RSUs granted
RSUs issued
Outstanding at December 31, 2024
RSUs granted
RSUs issued
Outstanding at December 31, 2025
As of December 31, 2025, there was total unrecognized compensation cost related to non-vested RSUs of $ 7.2 million, which is to be recognized over the remaining vesting period ranging from one year to three years .
Restricted Stock Units — Performance Based
As of December 31, 2025, a total of 418,475 shares of performance based restricted stock units were outstanding under the 2003 and 2013 incentive stock plan. The total amount of PRSUs that will ultimately vest is based on the achievement of various financial performance targets set forth by the Company’s Compensation Committee on the date of grant. PRSUs are based on a three-year performance period. The stock-based compensation expense related to awards granted to retirement-eligible employees is expensed on the grant date and is trued up as projections change. The fair value of the PRSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized straight-line over the total three-year period. A change in the performance measure expected to be achieved is recorded as an adjustment in the period in which the change occurs.
The table presented below provides a summary, of the Company’s PRSU activity, at original grant amounts, for the years ended December 31, 2025, 2024, and 2023:
Weighted-
Number of
Average
PRSUs
Grant Date
(In millions)
Fair Value
Outstanding at December 31, 2022
PRSUs granted
PRSUs issued
PRSUs cancelled
Outstanding at December 31, 2023
PRSUs granted
PRSUs issued
PRSUs cancelled
Outstanding at December 31, 2024
PRSUs granted
PRSUs issued
PRSUs cancelled
Outstanding at December 31, 2025
As of December 31, 2025, there was total unrecognized compensation cost related to non-vested PRSUs o f $ 5.6 millio n, which is to be recognized over the remaining vesting period ranging from one year to three years . The final amount of compensation cost to be recognized is dependent upon our financial performance.
Stock-Based Compensation Cash Activity
During 2025, 2024, and 2023 cash received from stock option exercises w as $ 5.8 million , $ 7.1 million and $ 7.8 million, respectively. We used $ 5.0 million, $ 11.3 million and $ 3.2 million in cash related to the shares withheld to satisfy employee tax obligations for RSUs and PRSUs converted during the years ended December 31, 2025, 2024 and 2023, respectively.
We classify the cash flows resulting from these tax benefits as financing cash flows. We either issue new shares of our common stock or utilize treasury shares upon the exercise of stock options or the conversion of stock units.
Shares Authorized for Grant
In 2019, an amendment to the Hexcel Corporation 2013 Incentive Stock Plan (the “Plan”) was adopted that increased the number of shares of the Company’s common stock authorized for issuance under the Plan by 3,300,000 shares. As of December 31, 2025, an aggregate o f 1.9 million shares were authorized for future grant under our stock plan, which covers stock options, RSUs, PRSUs and at the discretion of Hexcel, could result in the issuance of other types of stock-based awards.
Employee Stock Purchase Plan (“ESPP”)
The Company offers an ESPP, which allowed for eligible employees to contribute up to 10 % of their base earnings, to a maximum of $ 25,000 in a calendar year, toward the quarterly purchase of our common stock at a purchase price equal to 85 % of the fair market value of the common stock. There were 101,387 , 80,589 , and 73,809 ESPP shares purchased in 2025, 2024 and 2023, respectively.
Note 14 — Net Income Per Common Share
Computations of basic and diluted net income per common share for the years ended December 31, 2025, 2024 and 2023, are as follows:
(In millions, except per share data)
Basic net income per common share:
Net income
Weighted average common shares outstanding
Basic net income per common share
Diluted net income per common share:
Weighted average common shares outstanding — Basic
Plus incremental shares from assumed conversions:
Restricted stock units
Stock options
Weighted average common shares outstanding — Dilutive
Dilutive net income per common share
Anti-dilutive shares outstanding, excluded from computation
Note 15 — Derivative Financial Instruments
The Company entered into treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 5.875 % Senior Unsecured Notes. These hedges were designated as cash flow hedges, thus any change in fair value was recorded as a component of other comprehensive income. As part of the issuance of our 5.875 % Senior Unsecured Notes, we net settled these derivatives for $ 3.6 million in cash and the deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The remaining balance of deferred gains as of December 31, 2025 was approximately $ 3.3 million. The effect of the settled treasury locks reduces the effective interest rate of the senior notes by approximately 0.10 %.
Cross Currency and Interest Rate Swap Agreements
In November 2020, we entered into a cross currency and interest rate swap which was designated as a cash flow hedge of a € 270 million, 5 -year amortizing, intercompany loan between one of our European subsidiaries and the U.S. parent company. Changes in the spot exchange rate were recorded to the general ledger and offset the fair value re-measurement of the hedged item. The net difference in the interest rates coupons was recorded as a credit to interest expense. The derivative swapped € 270 million bearing interest at a fixed rate of 0.30 % for $ 319.9 million at a fixed rate interest of 1.115 %. The interest coupons settled semi-annually . The principal amortized each year on November 15, as follows: for years 1 through 4, beginning November 15, 2021, € 50 million versus $ 59.2 million, and the final settlement on November 15, 2025 of € 70 million versus $ 82.9 million.
Foreign Currency Forward Exchange Contracts
A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British pound sterling. We have entered into contracts to exchange U.S. dollars for Euros and British pound sterling through June 2028. The aggregate notional amount of these contracts was $ 403.4 million at December 31, 2025 and $ 386.4 million at December 31, 2024. The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. The effective portion of the hedges was gains of $ 33.6 million, losses of $ 19.3 million, and gains of $ 10.5 million, for the years ended December 31, 2025, 2024 and 2023, respectively, and are recorded in other comprehensive (loss) income.
The fair values of outstanding derivative financial instruments as of December 31, 2025 and December 31, 2024 were as follows:
Prepaid and Other Current Assets
Other Assets
Current Liabilities
Non-Current Liabilities
(In millions)
December 31, 2025
December 31, 2024
December 31, 2025
December 31, 2024
December 31, 2025
December 31, 2024
December 31, 2025
December 31, 2024
Derivative Products
Foreign currency forward exchange contracts
Undesignated hedges
Commodity swaps
Cross currency and interest rate swap
Total Derivative Products
During the years ended December 31, 2025 and 2024, the net impact for the hedges recognized in sales was a gain of $ 8.9 million and a loss of $ 1.5 million, respectively. For the two years ended December 31, 2025 and 2024, hedge ineffectiveness was immaterial.
In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the remeasurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the years ended December 31, 2025, 2024 and 2023, we recognized net foreign exchange losses of $ 1.8 million, gains of $ 4.0 million, and gains of $ 1.4 million, respectively, in the Consolidated Statements of Operations. The carrying amount of the contracts for asset and liability derivatives not designated as hedging instruments was $ 0.1 million of current liabilities on our Consolidated Balance Sheets at December 31, 2025.
The activity, net of tax, in accumulated other comprehensive loss related to foreign currency forward exchange contracts for the years ended December 31, 2025, 2024 and 2023 was as follows:
(In millions)
Unrealized gain (loss) at beginning of period, net of tax
Loss reclassified to net sales
(Decrease) increase in fair value
Unrealized gain (loss) at end of period, net of taxes
Unrealized gains of $ 10.6 million recorded in accumulated other comprehensive loss, net of tax of $ 2.8 million, as of December 31, 2025 are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded. The impact of credit risk adjustments was immaterial for the three years.
Commodity Swap Agreements
We use commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile). As of December 31, 2025, the Company had commodity swap agreements with a notional value of $ 11.4 million. The swaps mature monthly through October 2027. 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 $ 4.2 million (of which $ 0.5 million was recorded in long term liabilities) at December 31, 2025 and a liability of $ 1.3 millio n (of which $ 0.3 million was recorded in long term liabilities) at December 31, 2024.
Note 16 — 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 are neither probable and/or reasonably estimable of having a material impact on our consolidated results of operations, financial position or cash flows .
Environmental Matters
We have been named as a potentially responsible party (“PRP”) with respect to the below and other 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 the hazardous waste at issue, and the number of other financially viable PRPs at each site, 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. 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 PRPs for the lower eight miles of the Lower Passaic River. In December 2020, the allocator issued its non-binding report on PRP liability (including Hexcel’s) to the EPA. In October 2021, the EPA released a ROD selecting an interim remedy for the upper nine miles of the Lower Passaic River at an expected additional cost ranging from $ 308.7 million to $ 661.5 million.
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 for the lower eight miles of the Lower Passaic River, 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. In July 2019, the court granted in part and denied in part the defendants’ motion to dismiss. In August 2020, the court granted defendants’ motion for summary judgment for certain claims. Discovery for the remaining claims has been stayed indefinitely based on agreement of the parties. On February 24, 2021, Hexcel and certain other defendants filed a third-party complaint against the Passaic Valley Sewerage Commission and certain New Jersey municipalities seeking recovery of Passaic-related cleanup costs incurred by defendants, as well as contribution for any cleanup costs incurred by OCC for which the court deems the defendants liable. In March 2023, the EPA issued a Unilateral Administrative Order (“UAO”) to OCC ordering OCC to commence remedial design work for the interim remedy for the cleanup of the upper nine miles of the Lower Passaic River. On March 24, 2023, OCC filed suit against Hexcel and approximately 38 other parties claiming cost recovery under CERCLA for future costs related to its compliance with the UAO. On January 5, 2024, the U.S. District Court stayed the foregoing claim initiated by OCC until the completion of the Passaic-related Consent Decree process.
On December 16, 2022, the EPA lodged a Consent Decree with the U.S. District Court for the District of New Jersey requesting court approval of a $ 150 million settlement of the EPA’s CERCLA claims against Hexcel and 83 other PRPs for costs related to alleged contamination of the upper and lower portions of the Lower Passaic River. The 84 PRPs have collectively placed $ 150 million in escrow, pending District Court approval of the Consent Decree. In December 2024, the District Court granted the issuance of the Consent Decree, however, this decision has been appealed. Briefing on the appeal was completed in January 2026.
Environmental remediation reserve activity for the three years ended December 31, 2025, 2024 and 2023 was as follows:
(In millions)
Beginning remediation accrual balance
Current period expenses
Cash expenditures
Ending remediation accrual balance
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 Consolidated Balance Sheets. As of December 31, 2025 and December 31, 2024, our aggregate environmental related accruals were $ 0.1 milli on and $ 0.3 million, respectively. These amounts were included in non-current liabilities.
These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required, changes in the apportionment of costs among responsible parties and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.
Product Warranty
Warranty expense for the years ended December 31, 2025, 2024 and 2023 and accrued warranty cost, included in “other accrued liabilities” in the Consolidated Balance Sheets were as follows:
Product
(In millions)
Warranties
Balance as of December 31, 2022
Warranty expense
Deductions and other
Balance as of December 31, 2023
Warranty expense
Deductions and other
Balance as of December 31, 2024
Warranty expense
Deductions and other
Balance as of December 31, 2025
Purchase Obligations
At December 31, 2025, purchase commitments were $ 18.4 million for 2026, $ 14.2 million for 2027, $ 6.3 million for 2028, $ 5.7 million for 2029, $ 5.6 million for 2030, and $ 38.1 million thereafter.
Note 17 — Accumulated Other Comprehensive Loss
Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the Consolidated Statements of Operations.
The components of accumulated other comprehensive loss as of December 31, 2025 and 2024 were as follows:
Unrecognized
Net Defined
Benefit
Change in
Fair Value
of Derivatives
Foreign
Currency
(In millions)
Plan Costs
Products
Translation
Total
Balance at December 31, 2023
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
loss
Other comprehensive income (loss)
Balance at December 31, 2024
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other comprehensive
loss
Other comprehensive loss
Balance at December 31, 2025
The amount of net (gains) losses reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs and derivative products components of accumulated other comprehensive loss for the years ended December 31, 2025, 2024 and 2023 were as follows:
Year Ended December 31, 2025
Year Ended December 31, 2024
Year Ended December 31, 2023
(In millions)
Pre-tax (gain) loss
Net of tax (gain) loss
Pre-tax (gain) loss
Net of tax (gain) loss
Pre-tax (gain) loss
Net of tax (gain) loss
Defined Benefit and Postretirement Plan Costs
Derivative Products
Foreign currency forward exchange contracts
Commodity swaps
Interest rate swaps
Total Derivative Products
Note 18 — Segment Information
We report two segments, Composite Materials and Engineered Products. Corporate and certain other expenses are not allocated to the segments, except to the extent that the expense can be directly attributable to the segment. Corporate & Other is shown to reconcile to Hexcel’s consolidated results. Hexcel’s Chief Executive Officer and President, Thomas C. Gentile III, is the Company’s Chief Operating Decision-Maker ("CODM"). He assesses the performance of the Company’s entire business, as well as the individual segments, and is the ultimate decision maker in allocating resources within the Company. The CODM has leadership teams, organized along the various functions/lines of our business, with whom he regularly reviews and assesses segment operations and performance.
The financial results for our segments are prepared using a management approach, which is consistent with the basis and manner in which we internally segregate financial information for the purpose of assisting in making internal operating decisions. We evaluate the performance of our segments based on operating income, and generally account for intersegment sales based on arm’s length prices. Specifically, the CODM uses operating income to evaluate income generated from segment assets (return on assets) and to make decisions such as whether and where to reinvest profits back into the business.
In addition to the product line-based segmentation of our business, we also monitor sales into our principal end markets as a means to understanding demand for our products.
The following tables present financial information on our segments as of December 31, 2025, 2024 and 2023 and for the years then ended.
Composite
Engineered
Corporate &
(In millions)
Materials
Products
Other (a)
Total
Year Ended December 31, 2025
Net sales to external customers
Intersegment sales
Total sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and technology expenses
Other operating expense
Operating income (loss)
Year Ended December 31, 2024
Net sales to external customers
Intersegment sales
Total sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and technology expenses
Other operating expense
Operating income (loss)
Year Ended December 31, 2023
Net sales to external customers
Intersegment sales
Total sales
Cost of sales
Gross margin
Selling, general and administrative expenses
Research and technology expenses
Other operating expense
Operating income (loss)
(In millions)
Composite
Materials
Engineered
Products
Corporate &
Other
Total
Depreciation and amortization
Equity in earnings (losses) from affiliated companies
Segment assets
Investments in affiliated companies
Accrual basis additions to property, plant and equipment
Stock-based compensation
Geographic Data
Net sales and long-lived assets, by geographic area, consisted of the following for the three years ended December 31, 2025, 2024 and 2023:
(In millions)
Net Sales by Geography (a):
United States
International
France
Spain
Germany
United Kingdom
Austria
Other
Total international
Total consolidated net sales
Net Sales to External Customers (b):
United States
International
Germany
France
Spain
United Kingdom
Other
Total international
Total consolidated net sales
Long-lived Assets (c):
United States
International
France
United Kingdom
Spain
Other
Total international
Total consolidated long-lived assets
Net sales by geography based on the location in which the product sold was manufactured.
Net sales to external customers based on the location to which the product sold was delivered.
Long-lived assets primarily consist of property, plant and equipment, net and goodwill at December 31, 2025, 2024 and 2023. Also included are right of use assets related to operating leases.
Significant Customers
Approximately 39 %, 40 % and 39 % of our 2025, 2024 and 2023 net sales, respectively, were to Airbus and its subcontractors and approximately 13 %, 15 % and 15 % of our 2025, 2024 and 2023 net sales, respectively, were to Boeing and its subcontractors.
Note 19— Fair Value Measurements
The fair values of our financial instruments are classified into one of the following categories:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable inputs other than quoted prices in active markets but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider our own and counterparty credit risk.
We have no assets or liabilities that utilize Level 3 inputs.
For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value. The estimated cash flows and the discount factors used in the valuation model are based on observable inputs and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the Consolidated Balance Sheet.
Below is a summary of valuation techniques for all Level 2 financial assets and liabilities:
Cross Currency and Interest Rate Swap Agreements — valued using the USD Secured Overnight Financing Rate (“SOFR”) curves and quoted forward foreign exchange prices at the reporting date.
Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date.
Commodity swap agreements — valued using quoted forward commodity prices at the reporting date.
For more information regarding fair values for our financial assets and liabilities, see Note 15, Derivative Financial Instruments, to the accompanying consolidated financial statements of this Annual Report on Form 10-K.
Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in 2025 that would reduce the receivable amount owed, if any, to the Company.
