10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

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

For the Quarter Ended March 31, 2011

or

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

For the transition period from                     to                   

Commission File Number 1-8472

Hexcel Corporation

(Exact name of registrant as specified in its charter)

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

Two Stamford Plaza

281 Tresser Boulevard

Stamford, Connecticut 06901-3238

(Address of principal executive offices and zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

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

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o

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

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

Class	Outstanding at April 20, 2011
COMMON STOCK	97,938,751

HEXCEL CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)
	·   Condensed Consolidated Balance Sheets — March 31, 2011 and December 31, 2010	3
	·   Condensed Consolidated Statements of Operations — The Quarters Ended March 31, 2011 and 2010	4
	·   Condensed Consolidated Statements of Cash Flows — The Quarters Ended March 31, 2011 and 2010	5
	·   Notes to Condensed Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	20
ITEM 4.	Controls and Procedures	20
PART II.	OTHER INFORMATION	21
ITEM 1.	Legal Proceedings	21
ITEM 1A.	Risk Factors	21
ITEM 6.	Exhibits and Reports on Form 8-K	21
SIGNATURE		22

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PART I.  FINANCIAL INFORMATION

ITEM 1.  Condensed Consolidated Financial Statements (Unaudited)

Hexcel Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

	(Unaudited)
(In millions, except per share data)	March 31, 2011			December 31, 2010
Assets
Current assets:
Cash and cash equivalents	$	50.6		$	117.2
Accounts receivable, net	210.0			173.9
Inventories, net	198.7			169.9
Prepaid expenses and other current assets	44.2			36.7
Total current assets	503.5			497.7
Property, plant and equipment	1,106.0			1,063.9
Less accumulated depreciation	(487.2		)	(465.6		)
Property, plant and equipment, net	618.8			598.3
Goodwill and intangible assets	56.7			56.2
Investments in affiliated companies	20.7			19.9
Deferred tax assets	55.1			63.6
Other assets	22.1			22.4
Total assets	$	1,276.9		$	1,258.1
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	11.4		$	27.6
Accounts payable	107.8			83.0
Accrued liabilities	89.3			95.3
Total current liabilities	208.5			205.9
Long-term notes payable and capital lease obligations	268.4			304.6
Other non-current liabilities	81.0			88.2
Total liabilities	557.9			598.7
Stockholders’ equity:
Common stock, $0.01 par value, 200.0 shares authorized,100.0 and 99.5 shares issued at March 31, 2011 and December 31, 2010, respectively	1.0			1.0
Additional paid-in capital	562.9			552.3
Retained earnings	174.8			148.4
Accumulated other comprehensive income (loss)	8.7			(15.1		)
	747.4			686.6
Less — Treasury stock, at cost, 2.1 and 2.2 shares at March 31, 2011 and December 31, 2010, respectively	(28.4		)	(27.2		)
Total stockholders’ equity	719.0			659.4
Total liabilities and stockholders’ equity	$	1,276.9		$	1,258.1

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

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Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

	(Unaudited)
	Quarter Ended March 31,
(In millions, except per share data)	2011			2010
Net sales	$	331.6		$	263.0
Cost of sales	248.6			196.9
Gross margin	83.0			66.1
Selling, general and administrative expenses	32.9			31.4
Research and technology expenses	8.6			7.4
Other operating (income) expense	(5.7		)	3.5
Operating income	47.2			23.8
Interest expense, net	4.2			6.6
Non-operating expense	4.9			—
Income before income taxes and equity in earnings of affiliated companies	38.1			17.2
Provision for income taxes	12.2			1.5
Income before equity in earnings of affiliated companies	25.9			15.7
Equity in earnings of affiliated companies	0.5			0.1
Net income	$	26.4		$	15.8
Net income per common share:
Basic	$	0.27		$	0.16
Diluted	$	0.26		$	0.16
Weighted average common shares outstanding:
Basic	98.2			97.3
Diluted	100.4			99.0

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

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Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

	(Unaudited)
	Quarter Ended March 31,
(In millions)	2011			2010
Cash flows from operating activities
Net income	$	26.4		$	15.8
Reconciliation to net cash provided by operating activities:
Depreciation and amortization	14.1			12.0
Amortization of debt discount and deferred financing costs and call premium expense	5.4			1.5
Deferred income taxes	9.3			(0.6		)
Equity in earnings from affiliated companies	(0.5		)	(0.1		)
Stock-based compensation	6.4			5.7
Pension curtailment gain	(5.7		)	—
Excess tax benefits on stock-based compensation	(2.0		)	(0.4		)
Changes in assets and liabilities:
Increase in accounts receivable	(30.1		)	(15.7		)
Increase in inventories	(24.3		)	(13.6		)
Increase in prepaid expenses and other current assets	(1.0		)	(1.2		)
Increase in accounts payable and accrued liabilities	24.7			1.5
Other - net	(5.8		)	(2.0		)
Net cash provided by operating activities	16.9			2.9
Cash flows from investing activities
Capital expenditures and deposits for capital purchases	(35.9		)	(12.6		)
Net cash used for investing activities	(35.9		)	(12.6		)
Cash flows from financing activities
Borrowings from senior secured credit facility	135.0			—
Repayment of 6.75% senior subordinated notes	(150.0		)	—
Repayment of senior secured credit facility	(35.0		)	—
Call premium payment for 6.75% senior subordinated notes	(3.4		)	—
(Repayments) borrowings from credit line	(1.3		)	0.8
Repayment of senior secured credit facility — term loan	(1.2		)	(30.0		)
Repayments of capital lease obligations and other debt, net	(0.1		)	(0.1		)
Activity under stock plans	3.1			(0.8		)
Net cash used in financing activities	(52.9		)	(30.1		)
Effect of exchange rate changes on cash and cash equivalents	5.3			(4.6		)
Net decrease in cash and cash equivalents	(66.6		)	(44.4		)
Cash and cash equivalents at beginning of period	117.2			110.1
Cash and cash equivalents at end of period	$	50.6		$	65.7
Supplemental data:
Accrual basis additions to property, plant and equipment	$	25.2		$	6.9

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

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HEXCEL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Significant Accounting Policies

In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying condensed consolidated financial statements are those of Hexcel Corporation. Refer to Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2010 for a discussion of our significant accounting policies.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC.

In the opinion of management, the condensed consolidated financial statements include all normal recurring adjustments as well as any non-recurring adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. The condensed consolidated balance sheet as of December 31, 2010 was derived from the audited 2010 consolidated balance sheet. Interim results are not necessarily indicative of results expected for any other interim period or for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 10, 2011.

Investments in Affiliated Companies

We have a 50% equity ownership investment in an Asian joint venture Asian Composites Manufacturing Sdn. Bhd.  In accordance with recently issued accounting standards we have determined that this investment is not a variable interest entity.  As such, we account for our share of the earnings of this affiliated company using the equity method of accounting.

Note 2 — Net Income per Common Share

	Quarter Ended March 31,
(In millions, except per share data)	2011		2010
Basic net income per common share:
Net income	$	26.4	$	15.8
Weighted average common shares outstanding	98.2		97.3
Basic net income per common share	$	0.27	$	0.16
Diluted net income per common share:
Weighted average common shares outstanding — Basic	98.2		97.3
Plus incremental shares from assumed conversions:
Restricted stock units	0.8		0.7
Stock options	1.4		1.0
Weighted average common shares outstanding — Dilutive	100.4		99.0
Diluted net income per common share	$	0.26	$	0.16

Total shares underlying stock options of 1.0 million and 1.2 million were excluded from the computation of diluted net income per share for the quarter ended March 31, 2011 and March 31, 2010, respectively, as they were anti-dilutive.

Note 3 — Other Operating (Income) Expense

Effective January 31, 2011, credited service for the participants in our U.K. plan was frozen.  This resulted in recognizing

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$5.7 million of prior unrecognized service credits as a curtailment gain and also reduced the projected plan obligation by $1.6 million. The first quarter of 2010 included a pre-tax charge of $3.5 million for additional environmental reserves primarily to enhance the remediation system to accelerate the remediation of our former Lodi, New Jersey manufacturing facility sold in 1986 (see note 13).

Note 4 — Other Non-Operating Expense

In February 2011, we redeemed $150 million of our $225 million 6.75% senior subordinated notes at a call premium of 2.25%.  As a result of the redemption, we accelerated the unamortized financing costs of the senior subordinated notes redeemed and expensed the call premium incurring a pretax charge of $4.9 million.

Note 5 — Inventories, net

(In millions)	March 31, 2011			December 31, 2010
Raw materials	$	83.2		$	71.6
Work in progress	47.6			40.7
Finished goods	91.7			80.4
Total inventories, gross	$	222.5		$	192.7
Inventory allowances	(23.8		)	(22.8		)
Total inventories, net	$	198.7		$	169.9

Note 6 — Retirement and Other Postretirement Benefit Plans

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

Defined Benefit Retirement Plans

Net Periodic Benefit Costs

Net periodic benefit costs of our defined benefit retirement plans for the quarters ended March 31, 2011 and 2010 were as follows:

	Quarter Ended March 31,
(In millions)	2011		2010
U.S. Non-qualified Defined Benefit Retirement Plans
Service cost	$	0.2	$	0.3
Interest cost	0.3		0.3
Net amortization and deferral	0.3		0.1
Net periodic benefit cost	$	0.8	$	0.7

	March 31, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.9	$	0.9
Other non-current liabilities	27.3		26.9
Total accrued benefit	$	28.2	$	27.8

	Quarter Ended March 31,
	2011			2010
European Defined Benefit Retirement Plans
Service cost	$	0.7		$	1.0
Interest cost	1.8			1.9
Expected return on plan assets	(1.9		)	(1.6		)
Net amortization and deferral	0.2			0.3
Curtailment gain	(5.7		)	—
Net periodic benefit (income)` cost	$	(4.9	)	$	1.6

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	March 31, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	3.1	$	0.5
Other non-current liabilities	18.6		26.7
Total accrued benefit	$	21.7	$	27.2

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

Contributions

We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred. Under the provisions of these non-qualified plans, we expect to contribute $0.9 million in 2011 to cover unfunded benefits. We contributed $0.6 million to our U.S. non-qualified defined benefit retirement plans during the 2010 fiscal year.

We contributed $1.4 million and $0.8 million to our European defined benefit retirement plans in the first quarters of 2011 and 2010, respectively. We plan to contribute approximately $7.4 million during 2011 to these European plans.  We contributed $9.0 million to our European plans during the 2010 fiscal year.

Postretirement Health Care and Life Insurance Benefit Plans

Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarters ended March 31, 2011 and 2010 were as follows:

	Quarter Ended March 31,
(In millions)	2011			2010
Postretirement Health Care and Life Insurance Benefit Plans
Interest cost	$	0.4		$	0.1
Net amortization and deferral	(0.3		)	—
Net periodic benefit cost	$	0.1		$	0.1

	March 31, 2011		December 31, 2010
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.8	$	0.8
Other non-current liabilities	8.7		8.6
Total accrued benefit	$	9.5	$	9.4

In connection with our postretirement plans, we contributed less than $0.1 million in the first quarter of 2011 and $0.1 million in the first quarter of 2010.  We periodically fund our postretirement plans to pay covered expenses as they are incurred.  Under the provisions of these post retirement plans, we expect to contribute approximately $0.8 million in 2011 to cover unfunded benefits.  We contributed $0.4 million to our postretirement plans during the 2010 fiscal year.

Note 7 — Notes Payable and Capital Lease Obligations

(In millions)	March 31, 2011		December 31, 2010
Working capital line of credit — China	$	5.9	$	7.1
Current maturities of capital lease and other obligations	0.5		0.5
Current maturities of term loan	5.0		5.0
Current maturities of 6.75% senior subordinated notes due 2015	—		15.0
Notes payable and current maturities of long-term liabilities	11.4		27.6
Senior secured credit facility — term loan due 2015	91.3		92.5
Senior secured credit facility — revolving loan due 2015	100.0		—
6.75% senior subordinated notes due 2015	75.0		210.0
Capital lease and other obligations	2.1		2.1
Long-term notes payable and capital lease obligations	268.4		304.6
Total notes payable and capital lease obligations	$	279.8	$	332.2

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Estimated Fair Values of Notes Payable

The approximate, aggregate fair value of our notes payable as of March 31, 2011 and December 31, 2010 were as follows:

(In millions)	March 31, 2011		December 31, 2010
6.75% senior subordinated notes, due 2015	$	77	$	226
Senior secured credit facility — term loan due 2015	97		98

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

Note 8 — Derivative Financial Instruments

Interest Rate Swap Agreements

In the fourth quarter 2010, we entered into an agreement to swap $98 million of a floating rate obligation for a fixed rate obligation at an average of 1.03% against LIBOR in U.S. dollars.  The swap is scheduled to mature on March 31, 2014, and was accounted for as a cash flow hedge of our floating rate bank loan. To ensure the swap was highly effective, all the principal terms of the swap matched the terms of the bank loan.  The fair value of the interest rate swap was an asset of $1.0 million at March 31, 2011 and $0.7 million at December 31, 2010.

Cross-Currency Interest Rate Swap Agreement

In September 2006, we entered into a cross-currency interest rate swap agreement to hedge a portion of our net Euro investment in Hexcel SASU (France).  This agreement is accounted for as a hedge of the foreign currency exposure of a net investment in a foreign operation and to the extent it is effective, gains and losses are recorded as an offset in the cumulative translation account (“CTA”), the same account in which translation gains and losses on the investment in Hexcel SASU are recorded.  All other changes, including any difference in current interest, are excluded from the assessment of effectiveness and are included in operating income as a component of interest expense.  The agreement has a notional value of $63.4 million, a term of five years, and is scheduled to mature on September 20, 2011.  We receive interest in U.S. dollars quarterly and pay interest in Euros on the same day.  U.S. interest is based on the three month LIBOR.  Euro interest is based on the three month EURIBOR.  The fair value of the swap at March 31, 2011 and December 31, 2010 was a liability of $7.1 million and $3.0 million, respectively.  A net credit to interest expense of $0.2 million and a net charge of $0.5 million related to the excluded portion of the derivative were recorded in 2011 and 2010, respectively.  Net charges to interest expense of $0.2 million and $0.1 million related to the interest coupons were recorded during 2011 and 2010, respectively.  The net amount of gains/losses included in the CTA adjustment during the 2011 and 2010 reporting periods were a loss of $4.2 million and a gain of $4.4 million, respectively.  The impact of applying prescribed credit risk adjustments was immaterial.

Foreign Currency Forward Exchange Contracts

A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British Pound Sterling.  We entered into contracts to exchange U.S. dollars for Euros and British Pound Sterling through May 2013.  The aggregate notional amount of these contracts was $119.9 million and $124.2 million at March 31, 2011 and December 31, 2010, respectively.  The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers.  These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates.  The effective portion of the hedges was a gain of $4.8 million and a net loss of $5.7 million for the quarters ended March 31, 2011 and 2010, respectively, and are recorded in OCI.  We exclude the forward points of $0.5 million from the effectiveness assessment for the current year. The carrying amount of these contracts was $5.9 million classified in other assets and $0.3 million in other liabilities on the Consolidated Balance Sheets at March 31, 2011 and $2.3 million in other assets and $2.6 million classified in other liabilities at December 31, 2010.  During the quarters ended March 31, 2011 and 2010 we recognized net losses of $0.5 million and $1.6 million, respectively, recorded in sales and cost of sales.  For the quarters ended March 31, 2011 and 2010, hedge ineffectiveness was immaterial.  Cash flows associated with these contracts are classified within net cash provided by operating activities of continuing operations.

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In addition, we enter into foreign exchange forward contracts which are not designated as hedges.  These are used to provide an offset to transactional gains or losses arising from the remeasurement of non-functional monetary assets and liabilities such as accounts receivable.  The change in the fair value of the derivatives is recorded in the statement of operations.  There are no credit contingency features in these derivatives.  During the quarters ended March 31, 2011 and 2010, we recognized net foreign exchange gains of $5.0 million and foreign exchange losses of $3.0 million, respectively, in the Consolidated Statements of Operations.  The carrying amount of the contracts for asset and liability derivatives not designated as hedging instruments was $2.9 million classified in other assets and $0.3 million classified in other assets and $1.7 million in other liabilities on the March 31, 2011 and December 31, 2010 Consolidated Balance Sheets, respectively

The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters ended March 31, 2011 and 2010 was as follows:

	Quarter Ended March 31,
(In millions)	2011			2010
Unrealized losses at beginning of period	$	(0.2	)	$	(1.4	)
Losses reclassified to net sales	0.4			1.1
Increase (decrease) in fair value	3.6			(4.2		)
Unrealized gains (losses) at end of period	$	3.8		$	(4.5	)

As of March 31, 2011, unrealized gains recorded in “accumulated other comprehensive income,” net of tax, total $3.8 million, of which $3.2 million are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.

Note 9 — Income Taxes

The income tax provision for the quarter ended March 31, 2011 was $12.2 million, an effective rate of 32.0%.  The income tax provision for the quarter ended March 31, 2010 was $1.5 million.  The first quarter of 2010 reflects $3.5 million of New Clean Energy Manufacturing Tax Credits awarded to us in January 2010 for qualifying capital investments incurred at our Colorado facility in 2009.  Excluding this credit, our tax rate would have been 29.1%.

Note 10 — Comprehensive Income (Loss)

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the condensed consolidated statements of operations.  The components of comprehensive income for the quarters ended March 31, 2011 and 2010 were as follows:

	Quarter Ended March 31,
(In millions)	2011		2010
Net income	$	26.4	$	15.8
Currency translation adjustments	17.8		(17.2		)
Change in pension and other postretirement obligations	0.7		1.4
Net unrealized gains (losses) on financial instruments	5.3		(3.0		)
Comprehensive income (loss)	$	50.2	$	(3.0	)

Note 11 — Fair Value Measurements

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

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

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

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

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

We do not have any significant assets or liabilities that utilize Level 3 inputs. In addition, we have no assets or liabilities that utilize Level 1 inputs.  For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value.  The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position).  The fair value of these assets and liabilities was approximately $9.8 million and $7.4 million, respectively at March 31, 2011.  Below is a summary of valuation techniques for all Level 2 financial assets and liabilities:

·Interest rate swap — valued using LIBOR yield curves at the reporting date.  Fair value of asset was $1.0 million at March 31, 2011.

·Cross-currency interest rate swap derivative liabilities — valued using LIBOR and EURIBOR yield curves and quoted forward foreign exchange prices at the reporting date. Fair value at March 31, 2011 was $7.1 million.

·Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date. Fair value of assets and liabilities at March 31, 2011 was $8.8 million and $0.3 million, respectively.

Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in the three months ended March 31, 2011 that would reduce the receivable amount owed, if any, to the Company.

·Money market funds — considered available-for-sale, and classified as cash equivalents. Fair value at March 31, 2011 was $17.5 million, the same as book value.

Note 12 — Segment Information

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

Financial information for our business segments for the quarters ended March 31, 2011 and 2010 is as follows:

(In millions)	Composite Materials(a)			Engineered Products		Corporate & Other (b)			Total
First Quarter 2011
Net sales to external customers:
Commercial aerospace	$	143.2		$	54.4	$	—		$	197.6
Space and defense	59.9			19.8		—			79.7
Industrial	53.2			1.1		—			54.3
Net sales to external customers	256.3			75.3		—			331.6
Intersegment sales	13.9			0.3		(14.2		)	—
Total sales	270.2			75.6		(14.2		)	331.6
Operating income (a)	49.8			12.5		(15.1		)	47.2
Depreciation and amortization	12.9			1.1		0.1			14.1
Stock-based compensation expense	1.6			0.3		4.5			6.4
Other operating (income) expense	(5.7		)	—		—			(5.7		)
Accrual basis additions to capital expenditures	24.3			0.9		—			25.2
First Quarter 2010
Net sales to external customers:
Commercial aerospace	$	109.3		$	42.7	$	—		$	152.0
Space and defense	53.1			19.4		—			72.5
Industrial	38.0			0.5		—			38.5
Net sales to external customers	200.4			62.6		—			263.0
Intersegment sales	8.9			—		(8.9		)	—
Total sales	209.3			62.6		(8.9		)	263.0
Operating income (b)	30.6			11.4		(18.2		)	23.8
Depreciation and amortization	10.9			1.0		0.1			12.0
Stock-based compensation expense	1.6			0.3		3.8			5.7
Other operating (income) expense	—			—		3.5			3.5
Accrual basis additions to capital expenditures	6.8			0.1		—			6.9

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

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

Goodwill and Intangible Assets

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

(In millions)	March 31, 2011		December 31, 2010
Composite Materials	$	40.6	$	40.1
Engineered Products	16.1		16.1
Goodwill and intangible assets	$	56.7	$	56.2

No impairments have been recorded against these amounts.

Note 13 — Commitments and Contingencies

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment, and health and safety matters.  We estimate and accrue our liabilities when a loss becomes probable and estimable. These judgments take into consideration a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs.  Such estimates are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

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

Environmental Matters

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

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

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Lodi, New Jersey Site

Pursuant to the New Jersey Industrial Site Recovery Act, Hexcel entered into an Administrative Consent Order for the environmental remediation of a manufacturing facility we own and formerly operated in Lodi, New Jersey.  We have commenced remediation of this site in accordance with an approved plan.  In the first quarter of 2010, we made a decision to enhance the remediation system to accelerate completion of the remediation and the system is currently operating.  The additional cost associated with this enhancement is included in our accrual for this liability, which at March 31, 2011 is $3.1 million.

Lower Passaic River Study Area

In October 2003, we received, along with 66 other entities, a directive from the New Jersey Department of Environmental Protection (“NJDEP”) that requires the entities to assess whether operations at various New Jersey sites, including our former manufacturing site in Lodi, New Jersey, caused damage to natural resources in the Lower Passaic River watershed.  In May 2005, the NJDEP dismissed us from the Directive.  In February 2004, 42 entities including Hexcel, received a general notice letter from the EPA which requested that the entities consider helping to finance an estimated $10 million towards an EPA study of environmental conditions in the Lower Passaic River watershed.  In May 2005, we signed into an agreement with the EPA to participate (bringing the total number of participating entities to 43) in financing such a study up to $10 million, in the aggregate.  Since May 2005, a number of additional PRPs have joined into the agreement with the EPA.  In October 2005, we along with the other EPA notice recipients were advised by the EPA that the notice recipients’ share of the costs of the EPA study was expected to significantly exceed the earlier EPA estimate.  While we and the other recipients were not obligated by our agreement to share in such excess, a Group of notice recipients (73 companies including Hexcel) negotiated an agreement with the EPA to assume responsibility for the study pursuant to an Administrative Order on Consent.  We believe we have viable defenses to the EPA claims and expect that other as yet unnamed parties will also receive notices from the EPA.  In June 2007, the EPA issued a draft Focused Feasibility Study (“FFS”) that considers interim remedial options for the lower eight miles of the river, in addition to a “no action” option.  The estimated costs for the six options range from $900 million to $2.3 billion.  The PRP Group provided comments to the EPA on the FFS; the EPA has not yet taken further action.  The Administrative Order on Consent regarding the study does not cover work contemplated by the FFS.  Furthermore, the Federal Trustee for natural resources have indicated their intent to perform a natural resources damage assessment on the river and invited the PRPs to participate in the development and performance of this assessment.  The PRP Group, including Hexcel, has not agreed to participate in the assessment at this time.  Finally, on February 4, 2009, Tierra Solutions (“Tierra”) and Maxus Energy Corporation (“Maxus”) filed a third party complaint in New Jersey Superior Court against us and over 300 other entities in an action brought against Tierra and Maxus (and other entities) by the State of New Jersey.  New Jersey’s suit against Tierra and Maxus relates to alleged discharges of contaminants by Tierra and Maxus to the Passaic River and seeks payment of all past and future costs the State has and will incur regarding cleanup and removal of contaminants, investigation of the Passaic River and related water bodies, assessment of natural resource injuries and other specified injuries.  The third party complaint seeks contribution from us for all or part of the damages that Tierra and Maxus may owe to the State.  We filed our answer to the complaint and served our initial disclosures, and have produced initial documents to Tierra and Maxus, pursuant to an order of the court.  We expect additional discovery and litigation activities to occur during 2011.  Our ultimate liability for investigatory costs, remedial costs and/or natural resource damages in connection with the Lower Passaic River cannot be determined at this time.

Kent, Washington Site

We were party to a cost-sharing agreement regarding the operation of certain environmental remediation systems necessary to satisfy a post-closure care permit issued to a previous owner of our Kent, Washington site by the EPA.  Under the terms of the cost-sharing agreement, we were obligated to reimburse the previous owner for a portion of the cost of the required remediation activities.  Management has determined that the cost-sharing agreement terminated in December 1998; however, the other party disputes this determination.  The Washington Department of Ecology (“Ecology”) has issued a unilateral Enforcement Order to us requiring us to (a) maintain the interim remedial system and to perform system separation, (b) to conduct a focused remedial investigation and (c) to conduct a focused feasibility study to develop recommended long term remedial measures.  We asserted defenses against performance of the order, particularly objecting to the remediation plan proposed by the previous owner, who still owns the adjacent contaminated site.  However, we are currently complying with the order, with one exception, without withdrawing our defenses.  As a result of a dispute resolution procedure, Hexcel and Ecology have reached an agreement to modify certain work requirements and to extend certain deadlines, and we are in full compliance with the order as modified.  Recently, the other party’s cleanup efforts have declined due to discovery of additional contamination and equipment failures; we believe that this has increased the contamination migrating to our property and will increase the duration of our cleanup.  The total accrued liability related to this matter was $1.6 million at March 31, 2011.

Omega Chemical Corporation Superfund Site, Whittier, CA

We are a potentially responsible party at a former chemical waste site in Whittier, CA. The PRPs at Omega have established a PRP Group, the “Omega PRP Group”, and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. Hexcel contributed approximately 1.07% of the waste tonnage sent to the site during its operations.  In

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

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lodi, New Jersey; Kent, Washington; and other sites are accrued in the consolidated balance sheets.  As of March 31, 2011, our aggregate environmental related accruals were $6.1 million, of which $4.2 million was included in accrued liabilities with the remainder included in non-current liabilities.  As related to certain environmental matters, excluding the Lodi site, the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued for these matters at the high end of the range of possible outcomes, our accrual would have been $1.5 million higher. These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required, changes in the apportionment of costs among responsible parties and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.

Environmental remediation spending charged directly to our reserve balance for the quarter ended March 31, 2011 was $2.1 million and $0.7 million for the quarter ended March 31, 2010.  In addition, our operating costs relating to environmental compliance charged directly to expense were $2.3 million for the quarters ended March 31, 2011 and 2010.  Capital expenditures for environmental matters were $0.2 million for the quarters ended March 31, 2011 and 2010.

Litigation

Seemann Composites, Inc. v. Hexcel Corporation

Seemann Composites, Inc., (SCI) has sued us in the United States District Court, Southern District of Mississippi (Civil Action No. 1:09-cv-00675-HSO-JMR), filed September 16, 2009.  SCI alleges that we supplied the wrong or a defective finished fabric to them, through one of our distributors, and is seeking unspecified compensatory damages and $10.0 million in punitive damages.  Discovery has concluded and trial is currently set for August 1, 2011.  We intend to vigorously defend the suit.  Our ultimate liability for this matter cannot be determined at this time.

Product Warranty

We provide for an estimated amount of product warranty expense at the time revenue is recognized.  This estimated amount is provided by product and based on historical warranty experience.  In addition, we periodically review our warranty accrual and record any adjustments as deemed appropriate.  Warranty expense for the quarter ended March 31, 2011, and accrued warranty cost, included in “accrued liabilities” in the condensed consolidated balance sheets at March 31, 2011 and December 31, 2010, was as follows:

(In millions)	Product Warranties
Balance as of December 31, 2010	$	4.3
Warranty expense	0.7
Balance as of March 31, 2011	$	5.0

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

Business Overview

Hexcel Corporation and its subsidiaries, is a leading advanced composites company.  We develop, manufacture, and market lightweight, high-performance composites, including carbon fibers, reinforcements, prepregs, honeycomb, matrix systems, adhesives and composite structures, for use in commercial aerospace, space and defense and industrial applications.  Our products are used in a wide variety of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive and a wide variety of recreational equipment and other industrial applications.

We serve international markets through manufacturing facilities and sales offices located in the United States, Europe and Asia, and through sales representation offices located in Asia, Australia and South America.  We also hold a 50% interest in Asian

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Composites Manufacturing Sdn. Bhd., located in Malaysia, which manufactures composite structures for commercial aerospace applications.

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

Net sales for the quarter were $331.6 million, 26.1% higher (26.2% in constant currency) than the $263.0 million reported for the first quarter of 2010.  The growth was led by new programs in the commercial aerospace market but we experienced solid growth across all of our other markets.

Commercial aerospace sales increased 30.0% for the quarter as compared to the first quarter of 2010.  Airbus and Boeing related sales (which combined accounted for over 80% of our sales to this market) were up over 27% as revenues attributed to new aircraft programs (A380, A350, B787, B747-8) more than doubled versus the same period last year and now comprise more than 25% of Commercial Aerospace sales.  Airbus and Boeing legacy aircraft related sales for the quarter were up about 5% as compared to the first quarter of 2010.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were up more than 40% from a year ago, reaching the highest level since the first quarter of 2009 as revenues for business jets gained traction.

Space and Defense sales of $79.7 million were 9.9% higher than the first quarter of 2010.  We continue tobenefit from rotorcraft related growth.  Rotorcraft sales represent just over 50% of the Space and Defense market and were about 15% higher than a year ago.

Industrial sales of $54.3 million for the first quarter of 2011 were 41.0% higher (41.8% in constant currency) than the first quarter of 2010.  Wind sales for the quarter were up significantly from the first quarter of 2010 as last year was impacted by production shutdowns at our largest wind energy customer, but were in line with the 2010 full year run-rate.  Based on the announced backlog of our wind turbine customers, we expect steady improvement in the sales each quarter this year.

Gross margin was 25.0% of net sales for the quarter as compared to 25.1% in the same period last year.  While the quarter benefited from higher sales than last year, we did see an impact from certain rising raw material costs.  The impact from exchange rates was slightly favorable as compared to the first quarter of last year. SG&A expenses were $1.5 million, or 4.8%, higher than first quarter of 2010, with about half the increase reflecting higher stock compensation expense.  Adjusted operating income increased from 10.4% in the first quarter of 2010 to 12.5% in the first quarter of 2011.  Higher sales volume combined with good cost control resulted in the higher operating margin.

We expect to spend $150 to $175 million on capital additions in 2011, as we ramp-up for the expected growth ahead.  Accrual basis additions to capital expenditures were $25.2 million in the first quarter of 2011 as compared to $6.9 million during the first quarter of 2010.

Free cash flow (defined as cash provided by operating activities less capital expenditures) for the first quarter was a use of $19 million as compared to a use of $10 million for the quarter of 2010 primarily due to higher capital expenditures in 2011.

The tragedy in Japan has not impacted either our core markets or supply chain to-date, and we are not aware of any significant problems going forward.  However, we remain cautious until customers confirm there will not be transitory negative impacts in future periods.  Nevertheless, due to the strong start to the year, we are increasing our adjusted diluted EPS guidance to $0.95 - $1.05 (from $0.90 - $0.98).  We are also raising our sales guidance for the year by $50 million to $1,275 million - $1,350 million.

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Financial Overview

Results of Operations

	Quarter Ended March 31,
(In millions, except per share data)	2011			2010			% Change
Net sales	$	331.6		$	263.0		26.1	%
Operating income	47.2			23.8			98.3	%
As a percentage of net sales	14.2		%	9.0		%
Net income	$	26.4		$	15.8		67.1	%
Diluted net income per common share	$	0.26		$	0.16
Non-GAAP measures:
Adjusted operating income	$	41.5		$	27.3		52.0	%
As a percentage of net sales	12.5		%	10.4		%
Adjusted net income	$	25.3		$	14.5		74.4	%
Adjusted diluted earnings per share	$	0.25		$	0.15

The Company’s performance measurements include operating and net income adjusted for special items, both of which are non-GAAP measures.  Management believes these non-GAAP measurements are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results.  Special items represent significant charges or credits that are important to understanding Hexcel’s overall operating results in the periods presented. Such non-GAAP measurements are not recognized in accordance with generally accepted accounting principles and should not be viewed as an alternative to GAAP measures of performance.  The following is a reconciliation from GAAP to non-GAAP amounts.

	Quarter Ended March 31,
(In millions, except per share data)	2011			2010
Operating income	$	47.2		$	23.8
Other operating (income) expense (a)	(5.7		)	3.5
Adjusted operating income	$	41.5		$	27.3
Net income	$	26.4		$	15.8
Other operating (income) expense, net of tax (a)	(4.1		)	2.2
Non-operating expense, net of tax (b)	3.0
Tax credits (c)	—			(3.5		)
Adjusted net income	$	25.3		$	14.5

(a)Other operating income for the quarter ended March 31, 2011 is a benefit from the curtailment of our U.K. pension plan.  In 2010, other operating expense is the increase in environmental reserves primarily for remediation of a manufacturing facility sold in 1986.

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

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

Net Sales

Net sales for the quarter ended March 31, 2011 increased 26.1% from the first quarter of 2010. Foreign exchange had a minimal impact on sales for the quarter.  The following table summarizes net sales to third-party customers by segment and end market for the quarters ended March 31, 2011 and 2010:

	Quarter Ended March 31,
(In millions)	2011		2010		% Change
Consolidated Net Sales	$	331.6	$	263.0	26.1	%
Commercial Aerospace	197.6		152.0		30.0	%
Space & Defense	79.7		72.5		9.9	%
Industrial	54.3		38.5		41.0	%
Composite Materials	$	256.3	$	200.4	27.9	%
Commercial Aerospace	143.2		109.3		31.0	%
Space & Defense	59.9		53.1		12.8	%
Industrial	53.2		38.0		40.0	%
Engineered Products	$	75.3	$	62.6	20.3	%
Commercial Aerospace	54.4		42.7		27.4	%
Space & Defense	19.8		19.4		2.1	%
Industrial	1.1		0.5		120.0	%

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Commercial Aerospace: Net sales increased $45.6 million, or 30.0% (same in constant currency) to $197.6 million for the first quarter of 2011.  Revenues attributed to new aircraft programs (A380, A350, B787 and B747-8) more than doubled versus the same period last year and now comprise more than 25% of Commercial Aerospace sales.  Airbus and Boeing legacy aircraft related sales for the quarter were up about 5% as compared to the first quarter of 2010.  Regional and business aircraft sales, which account for less than 20% of sales for this market, were the highest since the first quarter of 2009 and more than 40% above the first quarter of 2010.

Space & Defense: Net sales of $79.7 million were up $7.2 million, or 9.9% (10.1% in constant currency) from the first quarter of 2010.  We continue to benefit from rotorcraft related growth and participating in a wide range of programs in the U.S., Europe and Asia.  Rotorcraft sales represent just over 50% of the Space and Defense market and were about 15% higher than a year ago.

Industrial: Net sales increased $15.8 million, or 41.0% (up 41.8% on a constant currency basis), to $54.3 million for the first quarter of 2011.  Wind energy sales for the quarter were up significantly from first quarter of 2010 as last year was impacted by production shutdowns at our largest wind energy customer, but were in line with the 2010 full year run-rate.   Industrial sales, excluding wind energy, were up over 10% in constant currency from last year’s first quarter sales.  Sales were consistent with the range we experienced in the second half of 2010.

Gross Margin

	Quarter Ended March 31,
(In millions)	2011			2010			% Change
Gross margin	$	83.0		$	66.1		25.6	%
Percentage of sales	25.0		%	25.1		%

Gross margin percentage was essentially flat as compared to the prior-year quarter.  The benefit of higher volume in the current quarter was partially offset by an increase in raw material costs.  The impact from exchange rates was slightly favorable as compared to first quarter of last year.  Depreciation and amortization expense, included in cost of sales during the quarter increased $1.8 million to $12.2 million.

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

	Quarter Ended March 31,
(In millions)	2011			2010			% Change
SG&A expense	$	32.9		$	31.4		4.8	%
Percentage of sales	9.9		%	11.9		%

SG&A expenses increased $1.5 million from last year, reflecting higher stock compensation expense and increased costs in support of projected growth.

Research and Technology Expenses (“R&T”)

	Quarter Ended March 31,
(In millions)	2011			2010			% Change
R&T expense	$	8.6		$	7.4		16.2	%
Percentage of sales	2.6		%	2.8		%

R&T expenses were up slightly due to higher qualification costs.  Qualification costs will be the main driver of fluctuations from quarter to quarter.

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Operating Income

	Quarter Ended March 31,
(In millions)	2011			2010			% Change
Consolidated Operating income	$	47.2		$	23.8		98.3	%
Operating margin	14.2		%	9.0		%
Composite Materials	49.8			30.6			62.7	%
Operating margin	18.4		%	14.6		%
Engineered Products	12.5			11.4			9.6	%
Operating margin	16.5		%	18.2		%
Corporate & Other	(15.1		)	(18.2		)	(17.0	)%

Excluding the $5.7 million curtailment gain, adjusted operating margin was 12.5%. Operating margin in 2010 included a $3.5 million environmental charge related to a previously sold manufacturing site; our adjusted 2010 operating margin was 10.4%.   The year over year increase in operating margin percentage was due to the higher sales and good cost control efforts.

Interest Expense, Net

	Quarter Ended March 31,
(In millions)	2011			2010			% Change
Interest expense, net	$	4.2		$	6.6		(36.4	)%
Percentage of sales	1.3		%	2.5		%

The $2.4 million decrease in interest expense was due to lower average borrowings and lower average rates as a result of the July 2010 refinancing and the February 2011 prepayment of $150 million of the 6.75% senior subordinated notes.  The notes were partially refinanced with $135 million from our senior secured credit agreement which was then reduced to $100 million during the current quarter.

Provision for Income Taxes

	Quarter Ended March 31,
(In millions)	2011			2010
Income tax expense	$	12.2		$	1.5
Effective tax rate	32.0		%	8.7		%

The 32.0% effective tax rate in 2011 is in-line with our expected rate for the year.  2010 includes $3.5 million of the Clean Energy Manufacturing Tax Credits awarded in January 2010 for qualifying capital investments made in our U.S. wind energy facility in 2009.  The effective tax rate excluding these credits would have been 29.1% for the first quarter of 2010.

Financial Condition

Liquidity:  As of March 31, 2011, we had cash and cash equivalents of $50.6 million.  Aggregate borrowings as of March 31, 2011 under the Senior Secured Credit Facility (the “Facility”) consisted of $196.3 million.  The Facility permits us to issue letters of credit up to an aggregate amount of $40.0 million.  Outstanding letters of credit reduce the amount available for borrowing under our revolving loan.  As of March 31, 2011, we had issued letters of credit under the Facility totaling $1.8 million, resulting in undrawn availability under the Facility as of March 31, 2011 of $183.2 million.  In addition, we borrowed $5.9 million from the credit line established in China associated with our operations there.  Our total debt, net of cash, as of March 31, 2011 was $229.2 million.  This represents an increase of $14.2 million from December 31, 2010.

The Facility contains financial and other covenants, including, but not limited to, restrictions on the incurrence of debt and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio, and limitations on capital expenditures.  In accordance with the terms of the Facility, we are required to maintain a minimum interest coverage ratio of 4.00 (based on the ratio of EBITDA, as defined in the credit agreement, to interest expense) and may not exceed a maximum leverage ratio of 3.00 (based on the ratio of total debt to EBITDA) throughout the term of the Facility.  In addition, the Facility contains other terms and conditions such as customary representations and warranties, additional covenants and customary events of default.  As of March 31, 2011, we were in compliance with all debt covenants and expect to remain in compliance.

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We expect to meet our short-term liquidity requirements (including capital expenditures) through net cash from operating activities, cash on hand and our revolving credit facility. As of March 31, 2011, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations.  We do not have any significant required debt repayments until September 2014.  Our term loan requires repayments at a rate of approximately $1.3 million per quarter through June 2012 and increasing to $2.5 million per quarter until June 2014.  Our next required payment of $1.3 million is due in June 2011.  Our revolver facility expires in July 2015.

Operating Activities: Net cash provided by operating activities was $16.9 million in the first quarter of 2011, as compared to net cash provided by operating activities of $2.9 million in the first quarter of 2010.  Historically, working capital traditionally increases from the low seasonal December levels, and our annual benefit and variable compensation payments occur in the first quarter.

Investing Activities:Net cash used for investing activities of $35.9 million in the first quarter of 2011 was for capital expenditures. This compares to capital expenditures of $12.6 million during the first quarter of 2010.    We continue to expect accrual basis capital expenditures to be $150 to $175 million in 2011.

Financing Activities: Financing activities used $52.9 million of net cash in the first quarter of 2011 compared with using $30.1 million in the same period of 2010.On February 1, 2011, we redeemed $150 million of our $225 million 6.75% senior subordinated notes at a call premium of 2.25%.  The redemption was primarily funded by a $135 million add-on to our senior secured credit facility that was completed in December 2010, of which $35 million was repaid in the first quarter.  Last year, we repaid $30 million of our Senior Secured Credit Facility with cash on hand.

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

Financial Obligations and Commitments: As of March 31, 2011, current maturities of notes payable and capital lease obligations were $11.4 million.  The next significant scheduled debt maturity will not occur until 2014, in the amount of $10.0 million.  Remaining debt and capital lease maturities in 2011 are aproximately $4.1 million (refer to MD&A in our 2010 Annual Report on Form 10-K for further details regarding our financial obligations and commitments).  We have one capital lease for a building which expires in 2021.  In addition, certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

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

Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP.  In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect reported amounts of assets, liabilities, revenues, expenses and related disclosures.  We base our assumptions, estimates and judgments on historical experience, current trends and other factors management believes to be relevant at the time our condensed consolidated financial statements are prepared.  On a regular basis, management reviews accounting policies, assumptions, estimates and judgments to ensure our financial statements are presented fairly and in accordance with U.S. GAAP.  However, because future events and their effects cannot be determined with certainty, actual results may differ from our assumptions and estimates, and such differences could be material.

We describe our significant accounting policies and critical accounting estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.  There were no significant changes in our accounting policies and estimates since the end of fiscal 2010.

Forward-Looking Statements

Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable.  These statements also relate to future prospects, developments and business strategies.  These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “would”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “should”, “will”, and similar terms and phrases, including references to assumptions.  Such statements are

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based on current expectations, are inherently uncertain, and are subject to changing assumptions.

Such forward-looking statements include, but are not limited to: (a) the estimates and expectations based on aircraft production rates made publicly available by Airbus and Boeing; (b) the revenues we may generate from an aircraft model or program; (c)  the impact of the possible push-out in deliveries of the Airbus and Boeing backlog and the impact of delays in new aircraft programs or the final Hexcel composite material content once the design and material selection has been completed; (d) expectations of composite content on new commercial aircraft programs and our share of those requirements; (e) expectations of growth in revenues from space and defense applications, including whether certain programs might be curtailed or discontinued; (f) expectations regarding growth in sales for wind energy, recreation and other industrial applications; (g) expectations regarding working capital trends and expenditures; (h) expectations as to the level of capital expenditures and when we will complete the construction and qualification of capacity expansions; (i) our ability to maintain and improve margins in light of the ramp-up of capacity and new facilities and the current economic environment; (j) the outcome of legal matters; (k) our projections regarding the realizability of net operating loss and foreign tax credit carryforwards; and (l) the impact of various market risks, including fluctuations in interest rates, currency exchange rates, environmental regulations and tax codes, commodity prices, and in the market price of our common stock; and the impact of the above factors on our expectations of 2011 financial results.  In addition, actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to changing market conditions, increased competition, product mix, inability to achieve planned manufacturing improvements and cost reductions, supply chain disruptions and conditions in the financial markets.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. Such factors include, but are not limited to, the following: changes in general economic and business conditions; changes in current pricing and cost levels; changes in political, social and economic conditions and local regulations, particularly in Asia and Europe; foreign currency fluctuations; changes in aerospace delivery rates; reductions in sales to any significant customers, particularly Airbus, Boeing or Vestas; changes in sales mix; changes in government defense procurement budgets; changes in military aerospace programs technology; industry capacity; competition; disruptions of established supply channels, particularly where raw materials are obtained from a single or limited number of sources and cannot be substituted by unqualified alternatives; manufacturing capacity constraints; and the availability, terms and deployment of capital.

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

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

There are no material changes in market risk from the information provided in the Company’s 2010 Annual Report on Form 10-K.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of March 31, 2011 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.   These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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

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PART II.  OTHER INFORMATION

ITEM 1.  Legal Proceedings

The information required by Item 1 is contained within Note 13 on pages 12 through 14 of this Form 10-Q and is incorporated herein by reference.

ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010, which could materially affect our business, financial condition or future results. In addition, future uncertainties may increase the magnitude of these adverse effects or give rise to additional material risks not now contemplated.

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

(c)

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1 — January 31, 2011	0		$	0	0	0
February 1 —February 28, 2011	14,301		20.57		0	0
March 1 —March 31, 2011	30,150		18.00		0	0
Total	44,451	(1)	$	18.83	0	0

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

ITEM 5. Other Information

Not applicable

ITEM 6.  Exhibits

Exhibit No.	Description
10.1	Form of Employee Option Agreement (2011).
10.2	Form of Restricted Stock Unit Agreement (2011).
10.3	Form of Performance Based Award Agreement (2011).
31.1	Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Hexcel Corporation Annual Report on Form 10-Q for the three months ended March 31, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) related notes, tagged as blocks of text.

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Signature

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

	Hexcel Corporation
April 25, 2011	/s/ Kimberly Hendricks
(Date)	Kimberly Hendricks
	Vice President, Corporate Controller and
	Chief Accounting Officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Form of Employee Option Agreement (2011).
10.2	Form of Restricted Stock Unit Agreement (2011).
10.3	Form of Performance Based Award Agreement (2011).
31.1	Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Hexcel Corporation Annual Report on Form 10-Q for the quarter ended March 31, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) related notes, tagged as blocks of text.

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EX-10.1

Exhibit 10.1

FY 2011

EMPLOYEE OPTION AGREEMENT

under the

Hexcel Corporation 2003 Incentive Stock Plan

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

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

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

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

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

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

5.Terms of Option.

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

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

(c)Termination of Employment; Change in Control.

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

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

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

If the Optionee’s employment terminates by reason of Retirement, (A) the Option shall, if not fully vested at the time of such termination, continue to vest in accordance with Section 4(b) above, and (B) the Option shall expire upon the earlier to occur of the five-year anniversary date of such Retirement and the expiration of the Term. If the Optionee dies during the five-year period immediately following the Retirement of the Optionee, the Options shall (I) become fully and immediately vested and exercisable and (II) remain exercisable for the remainder of the five-year period from the date of Retirement (but not beyond the Term of the Option).

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

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

2

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

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

(ii)“Protective Condition” shall mean that (A) the Optionee complies with all terms and provisions of any obligation of confidentiality contained in a written agreement with the Company (or a Subsidiary) signed by the Optionee, or otherwise imposed on Optionee by applicable law, and (B) during the time Optionee is employed by the Company (or a Subsidiary) and for a period of one year after the Optionee’s employment with the Company (or a Subsidiary) terminates, the Optionee does not engage, in any capacity, directly or indirectly, including but not limited to as employee, agent, consultant, manager, executive, owner or stockholder (except as a passive investor holding less than a 5% equity interest in any enterprise), in any business enterprise then engaged in competition with the business conducted by the Company anywhere in the world; provided, however, that the Optionee may be employed by a competitor of the Company within such one year period so long as the duties and responsibilities of Optionee’s position with such competitor do not involve the same or substantially similar duties and responsibilities as those performed by the Optionee for the Company (or a Subsidiary) in a business segment of the new employer which competes with the business segment(s) with which the Optionee worked or had supervisory authority over while employed by the Company (or a Subsidiary).

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

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

6.Adjustment Upon Changes in Capitalization.

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

3

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

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

7.Method of Exercising Option and Withholding.

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

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

8.Transfer.  The Option is not transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised during the Optionee’s lifetime only by the Optionee.  Any attempt to transfer the Option in contravention of this Section 8 is void ab initio.  The Option shall not be subject to execution, attachment or other process.

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

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

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

12.Section 409A

(a)It is intended that this Agreement comply in all respects with the requirements of Sections 409A(a)(2) through (4) of the Code and applicable Treasury Regulations and other

4

generally applicable guidance issued thereunder (collectively, the “Applicable Regulations”), and this Agreement shall be interpreted for all purposes in accordance with this intent.

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

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

13.Modifications; Extensions.

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

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

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

(d)Notwithstanding subsections (b) and (c) above, it shall not be a Modification or an Extension, respectively, to change the terms of an Option in any of the ways or for any of the purposes provided in applicable Treasury Regulations or other guidance under Section 409A of the Code as not resulting in a Modification or Extension for purposes of that section.  In particular, it shall not be an Extension to extend the exercise period of the Option to a date no later than the earlier of (i) the latest date upon which the Option could have expired by its original terms under any circumstances or (ii) the 10th anniversary of the Grant Date.

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

15.Resolution of Disputes.  Any disputes arising under or in connection with this Agreement shall be resolved by binding arbitration before three arbitrators constituting an

5

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

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

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

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

19.Definitions.  For purposes of this Agreement:

(I)“Affiliate” of any Person shall mean any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.  The term “Control” shall have the meaning specified in Rule 12b-2 under the Exchange Act;

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

(III)“Cause” shall mean any (A) willful and continued failure by the Optionee to obey the reasonable instructions of a person to whom he reports, (B) willful and continued neglect by the Optionee of his duties and obligations as an employee of the Company or (C) willful misconduct of the Optionee or other actions in bad faith by the Optionee which are to the detriment of the Company including, without limitation, conviction of a felony, embezzlement or misappropriation of funds or conviction of any act of fraud. For purposes of the foregoing, no act or failure to act on the Optionee’s part shall be deemed “willful” unless done, or omitted to be done, by the Optionee not in good faith and without the reasonable belief that the Optionee’s act, or failure to act, was in the best interest of the Company;

(IV)“Change in Control” shall mean any of the following events:

(1)any Person is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of either (A) the combined fair market value of the then outstanding stock of the Company (the “Total Fair Market Value”) or (B) the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of

6

the Company (the “Total Voting Power”); excluding, however, the following: (i) any acquisition by the Company or any of its Controlled Affiliates, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Controlled Affiliates, (iii) any Person who becomes such a Beneficial Owner in connection with a transaction described in the exclusion within paragraph (4) below and (iv) any acquisition of additional stock or securities by a Person who owns more than 50% of the Total Fair Market Value or Total Voting Power of the Company immediately prior to such acquisition; or

(2)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company that, together with any securities acquired directly or indirectly by such Person within the immediately preceding twelve-consecutive month period, represent 40% or more of the Total Voting Power of the Company; excluding, however, any acquisition described in subclauses (i) through (iv) of subsection (1) above; or

(3)a change in the composition of the Board such that the individuals who, as of the effective date of this Agreement, constitute the Board (such individuals shall be hereinafter referred to as the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a director subsequent to such effective date, whose election, or nomination for election by the Company’s stockholders, was made or approved by a vote of at least a majority of the Incumbent Directors (or directors whose election or nomination for election was previously so approved) shall be considered an Incumbent Director; but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person or legal entity other than the Board shall not be considered an Incumbent Director; provided finally, however, that, as of any time, any member of the Board who has been a director for at least twelve consecutive months immediately prior to such time shall be considered an Incumbent Director for purposes of this definition, other than for the purpose of the first proviso of this definition; or

(4)there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary of the Company or a sale or other disposition of all or substantially all of the assets of the Company (“Corporate Transaction”); excluding, however, such a Corporate Transaction (A) pursuant to which all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the outstanding Common Stock of the Company and Total Voting Power immediately prior to such Corporate Transaction will Beneficially Own, directly or indirectly, more than 50%, respectively, of the outstanding common stock and the combined voting power of the  then outstanding common stock and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Corporate Transaction of the Outstanding Common Stock and Total Voting Power, as the case may be, and (B) immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the company resulting from such Corporate Transaction (including, without limitation, a

7

company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries);

provided, however, that notwithstanding anything to the contrary in subsections (1) through (4) above, an event which does not constitute a change in the ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Section 1.409A-3(i)(5) of the Treasury Regulations (or any successor provision), shall not be considered a Change in Control for purposes of this Agreement;

(V)“Disability” and “Disabled” shall have the same meaning as in the Company’s then current long term disability plan;

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

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

8

EX-10.2

Exhibit 10.2

FY 2011

RESTRICTED STOCK UNIT AGREEMENT

under the

Hexcel Corporation 2003 Incentive Stock Plan

This Restricted Stock Unit Agreement (the “Agreement”), is entered into as of the Grant Date, by and between Hexcel Corporation, a Delaware corporation (the “Company”), and the Grantee.

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

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

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

3.Terms of Restricted Stock Units.  The grant of RSUs provided in Section 1 hereof shall be subject to the following terms, conditions and restrictions:

(a)The Grantee shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in shares of the Common Stock in respect of the RSUs until such RSUs have vested and been distributed to the Grantee in the form of shares of Common Stock.

(b)The RSUs and any interest therein may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, prior to the distribution of the Common Stock in respect of such RSUs and subject to the conditions set forth in the Plan and this Agreement. Any attempt to transfer RSUs in contravention of this Section is void ab initio. RSUs shall not be subject to execution, attachment or other process.

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

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

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

(ii)“Protective Condition” shall mean that (A) the Grantee complies with all terms and provisions of any obligation of confidentiality contained in a written agreement with the Company (or a Subsidiary) signed by the Grantee, or otherwise imposed on Grantee by applicable law, and (B) during the time Grantee is employed by the Company (or a Subsidiary) and for a period of one year after the Grantee’s employment with the Company (or a Subsidiary) terminates, the Grantee does not engage, in any capacity, directly or indirectly, including but not limited to as employee, agent, consultant, manager, executive, owner or stockholder (except as a passive investor holding less than a 5% equity interest in any enterprise), in any business enterprise then engaged in competition with the business conducted by the Company anywhere in the world; provided, however, that the Grantee may be employed by a competitor of the Company within such one year period so long as the duties and responsibilities of Grantee’s position with such competitor do not involve the same or substantially similar duties and responsibilities as those performed by the Grantee for the Company (or a Subsidiary) in a business segment of the new employer which competes with the business segment(s) with which the Grantee worked or had supervisory authority over while employed by the Company (or a Subsidiary).

(iii)In the event clauses 3(c)(i), (ii) or (iii) are unenforceable in the jurisdiction in which the Grantee is employed on the date hereof, such clause(s) nevertheless shall be enforceable to the full extent permitted by the laws of the jurisdiction(s) in which the Grantee engages in any activity prohibited by this clause 3(c).

4.Vesting and Conversion of RSUs.  Subject to Section 5, the RSUs shall vest and be converted into an equivalent number of shares of Common Stock that will be immediately distributed to the Grantee at the rate of 33-1/3% of the RSUs on each of the first three anniversaries of the Grant Date.

5.Termination of Employment; Change of Control.

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

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(b)If the Grantee dies or terminates employment due to Disability (as defined in the last Section hereof), all RSUs shall immediately vest, be converted into shares of Common Stock and be distributed to the Grantee within 30 days of the date of such termination; provided, however, that if the Grantee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the “Code”) as of the date of such termination, all RSUs shall immediately vest but shall not be converted into shares of Common Stock and distributed to the Grantee until the earlier of (i) the date which is six months after the date of the Grantee’s termination of employment and (ii) the date of the Grantee’s death.  If the Grantee’s employment with the Company terminates due to the Grantee’s Retirement (as defined in the last Section hereof), all RSUs shall continue to vest (and be converted into an equivalent number of shares of Common Stock that will be distributed to the Grantee) in accordance with Section 3 above. If the Grantee dies during the three year period immediately following the Retirement of the Grantee, then all RSUs shall immediately vest, be converted into shares of Common Stock and be distributed to the Grantee’s personal representative within 30 days of the date of such death.

(c)Subject to Section 5(d), if the Grantee’s employment terminates for any reason other than death, Disability or Retirement, the Grantee shall forfeit all unvested RSUs.

(d)Notwithstanding any other provision contained herein or in the Plan, in the event of a Change in Control (as defined in the last Section hereof) or of the termination of this Agreement within twelve months of a complete liquidation or dissolution of the Company that is taxed under Section 331 of the Code, all RSUs shall immediately vest, be converted into shares of Common Stock and be distributed to the Grantee within 30 days of the date of such event or (in the event of a complete liquidation or dissolution of the Company) as soon as administratively practicable thereafter.

6.Equitable Adjustment.  The aggregate number of shares of Common Stock subject to the RSUs shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares or other capital adjustment, or the payment of a stock dividend or other increase or decrease in such shares, effected without the receipt of consideration by the Company, or other change in corporate or capital structure. The Committee shall also make the foregoing changes and any other changes, including changes in the classes of securities available, to the extent reasonably necessary or desirable to preserve the intended benefits under this Agreement in the event of any other reorganization, recapitalization, merger, consolidation, spin-off, extraordinary dividend or other distribution or similar transaction involving the Company.

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

8.Taxes.  Upon the conversion into shares of Common Stock of some or all of the RSUs, absent a notification by the Grantee to the Company which is received by the Company at least three business days prior to the date of such conversion to the effect that the Grantee will pay to the Company or a Subsidiary by check or wire transfer any taxes (“Withholding Taxes”) the Company reasonably determines it or a Subsidiary is required to withhold under applicable tax laws with respect to the RSUs which are the subject of such conversion, the Company will reduce the number of shares of Common Stock to be distributed to the Grantee in connection with such conversion by a number of shares of Common Stock the Fair Market

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Value on the date of such conversion of which is equal to the total amount of Withholding Taxes.  In the event the Grantee elects to pay to the Company or a Subsidiary the Withholding Taxes with respect to the conversion of some or all of the RSUs by check or wire transfer, the Company’s obligation to deliver shares of Common Stock shall be subject to the payment in available funds by the Grantee of all Withholding Taxes with respect to the RSUs which are the subject of such conversion.  The Company or a Subsidiary shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Grantee any federal, state, local or other taxes required to be withheld with respect to such payment.

9.No Guarantee of Employment.  Nothing set forth herein or in the Plan shall confer upon the Grantee any right of continued employment for any period by the Company, or shall interfere in any way with the right of the Company to terminate such employment.

10.Section 409A

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

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

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

(d)Except as otherwise specifically provided herein, the time for distribution of the RSUs as provided in Sections 4, 5(b) and 5(c) shall not be accelerated or delayed for any reason, unless to the extent necessary to comply with or permitted under the Applicable Regulations.

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

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

13.Governing Law.  This Agreement shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflicts of laws provisions thereof.

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

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

15.Definitions.  For purposes of this Agreement:

(a)“Affiliate” of any Person shall mean any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.  The term “Control” shall have the meaning specified in Rule 12b-2 under the Exchange Act;

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

(c)“Cause” shall mean any (A) willful and continued failure by the Grantee to obey the reasonable instructions of a person to whom he reports, (B) willful and continued neglect by the Grantee of his duties and obligations as an employee of the Company or (C) willful misconduct of the Grantee or other actions in bad faith by the Grantee which are to the detriment of the Company including, without limitation, conviction of a felony, embezzlement or misappropriation of funds or conviction of any act of fraud. For purposes of the foregoing, no act or failure to act on the Grantee’s part shall be deemed “willful” unless done, or omitted to be done, by the Grantee not in good faith and without the reasonable belief that the Grantee’s act, or failure to act, was in the best interest of the Company;

(d)“Change in Control” shall mean any of the following events:

(i)any Person is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of either (A) the combined fair market value of the then outstanding stock of the Company (the “Total Fair Market Value”) or (B) the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company (the “Total Voting Power”); excluding, however, the following: (I) any acquisition by the Company or any of its Controlled Affiliates, (II) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Controlled Affiliates, (III) any Person who becomes such a Beneficial Owner in connection with a transaction described in the exclusion within paragraph (iv) below and (IV) any acquisition of additional stock or securities by a Person who owns more than 50% of the Total Fair Market Value or Total Voting Power of the Company immediately prior to such acquisition; or

(ii)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company that, together with any securities acquired directly or indirectly by

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such Person within the immediately preceding twelve-consecutive month period, represent 40% or more of the Total Voting Power of the Company; excluding, however, any acquisition described in subclauses (I) through (IV) of subsection (i) above; or

(iii)a change in the composition of the Board such that the individuals who, as of the effective date of this Agreement, constitute the Board (such individuals shall be hereinafter referred to as the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a director subsequent to such effective date, whose election, or nomination for election by the Company’s stockholders, was made or approved by a vote of at least a majority of the Incumbent Directors (or directors whose election or nomination for election was previously so approved) shall be considered an Incumbent Director; but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person or legal entity other than the Board shall not be considered an Incumbent Director; provided finally, however, that, as of any time, any member of the Board who has been a director for at least twelve consecutive months immediately prior to such time shall be considered an Incumbent Director for purposes of this definition, other than for the purpose of the first proviso of this definition; or

(iv)there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary of the Company or a sale or other disposition of all or substantially all of the assets of the Company (“Corporate Transaction”); excluding, however, such a Corporate Transaction (A) pursuant to which all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the outstanding Common Stock of the Company and Total Voting Power immediately prior to such Corporate Transaction will Beneficially Own, directly or indirectly, more than 50%, respectively, of the outstanding common stock and the combined voting power of the  then outstanding common stock and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Corporate Transaction of the Outstanding Common Stock and Total Voting Power, as the case may be, and (B) immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries); provided, however, that notwithstanding anything to the contrary in subsections (i) through (iv) above, an event which does not constitute a change in the ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Section 1.409A-3(i)(5) of the Treasury Regulations (or any successor provision), shall not be considered a Change in Control for purposes of this Agreement;

(e)“Disability” shall have the same meaning as in the Company’s then current long term disability plan;

(f)“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) of the Exchange Act and shall include “persons

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acting as a group” within the meaning of Section 1.409A-3(i)(5)(v)(B) of the Treasury Regulations (or any successor provision); and

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

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EX-10.3

Exhibit 10.3

FY 2011

PERFORMANCE BASED AWARD AGREEMENT

under the

Hexcel Corporation 2003 Incentive Stock Plan

This Performance Based Award Agreement (the “Agreement”), is entered into as of the Grant Date, by and between Hexcel Corporation, a Delaware corporation (the “Company”), and the Grantee.

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

1.Notice of Grant; Acceptance of PBA.  The PBA awarded pursuant to this Agreement may result in the Grantee being awarded up to that number of unrestricted shares of Common Stock equal to the Maximum Share Award (as defined herein).  Grantee will be deemed to accept the terms and conditions of this Agreement by clicking the “Accept” button on the Merrill Lynch Benefits OnLine®  Award Acceptance screen with regard to this PBA.

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

3.Performance Periods; Award of Unrestricted Shares of Common Stock.

(a)There are three Annual Performance Periods (2011, 2012 and 2013) and a Long-Term Performance Period (2011-2013) under this PBA.  Each Annual Performance Period shall have performance measures identical to those selected by the Committee under the Annual Cash Bonus Plan for that Annual Performance Period. The performance measure for the Long-Term Performance Period is the Long-Term Performance Measure as set forth on Annex A.

(b)As soon as practicable (but in no event later than 75 days) after the end of each Annual Performance Period, the Company shall determine the Annual Performance Share Award for such Annual Performance Period by multiplying the Annual Target Share Award by the Annual Payout Percentage achieved for such Annual Performance Period.

(c)So long as the Grantee is employed by the Company or a Subsidiary at the end of the Long-Term Performance Period, the Grantee shall, at such time as the number of unrestricted shares of Common Stock is determined under this subsection 3(c), become entitled to receive that number of unrestricted shares of Common Stock equal to the greater of (i) the number determined in accordance with the Share Award Schedule that appears on Annex A and (ii) the sum of the Annual Performance Share Awards for each of the three Annual Performance Periods; provided however that if the sum of the Annual Performance Share Awards is greater than the number determined in accordance with the Share Award Schedule that appears on Annex B, and the Company does not attain the Threshold Level of the Long-

Term Performance Measure, then the number of unrestricted shares of Common Stock to be received by the Grantee shall be equal to 75% of the sum of the Annual Performance Share Awards. The Committee shall certify the degree of achievement of the Long-Term Performance Measure promptly (but in no event later than 75 days) after the end of the Long-Term Performance Period.

3.Termination of Employment; Pro-rata Award.

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

(b)If during the first Annual Performance Period the Grantee dies or terminates employment due to Disability or Retirement, or the Grantee’s employment is involuntarily terminated without Cause, then the Grantee shall be entitled to receive that number of unrestricted shares of Common Stock equal to the Annual Performance Share Award determined for the first Annual Performance Period multiplied by a fraction equal to M/12, where M is the number of partial or total months the Grantee is employed by the Company during the first Annual Performance Period.

(c)If during the second Annual Performance Period the Grantee dies or terminates employment due to Disability or Retirement, or the Grantee’s employment is involuntarily terminated without Cause, then the Grantee shall be entitled to receive a number of unrestricted shares of Common Stock equal to the lesser of (i) the sum of (A) the Annual Performance Share Award determined for the first Annual Performance Period and (B) the Annual Performance Share Award determined for the second Annual Performance Period multiplied by a fraction equal to M/12, where M is the number of partial or total months the Grantee is employed by the Company during the second Annual Performance Period, and (ii) the PBA Target Share Award.

(d)If during the third Annual Performance Period the Grantee dies or terminates employment due to Disability or Retirement, or the Grantee’s employment is involuntarily terminated without Cause, then the Grantee shall be entitled to receive that number of unrestricted shares of Common Stock to which the Grantee would have been entitled to receive under subsection 3(c) had he been employed by the Company or a Subsidiary at the end of the Long-Term Performance Period multiplied by a fraction equal to M/36, where M is the number of partial or total months the Grantee is employed by the Company during the Long-Term Performance Period.

(e)If, at any time during the Long-Term Performance Period the Grantee terminates employment other than for Disability or Retirement, or Grantee’s employment is terminated by the Company for Cause, the Grantee shall receive no award and this PBA shall be null and void.

(f)The Grantee shall become entitled to receive shares of unrestricted Common Stock pursuant to Section 4(b) or 4(c) upon the date on which the Committee certifies the degree of achievement of the applicable performance measure(s) for the Annual Performance Period during which the Grantee’s employment terminated. The Grantee shall become entitled

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to receive shares of unrestricted Common Stock under Section 4(d) at the same time as the Grantee would have become entitled to receive shares of unrestricted Common Stock under Section 3(c) if the Grantee were employed by the Company or a Subsidiary at the end of the Long-Term Performance Period.

5.Change in Control.  If a Change in Control occurs anytime during the Long-Term Performance Period and prior to the Grantee’s receiving any award under this PBA, the Grantee shall immediately be awarded the PBA Target Share Award.  Delivery of the PBA Target Share Award shall discharge any obligation to the Grantee under this PBA in its entirety and the Grantee shall not be entitled to any additional award under this PBA.

6.Transferability of PBA; No Incidents of Ownership; Dividends

(a)Neither the PBA nor any interest therein may be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution. Any attempt to transfer the PBA in contravention of this Section 6(a) is void ab initio. The PBA shall not be subject to execution, attachment or other process.

(b)Except as set forth in Section 6(c), the Grantee shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in shares of Common Stock in respect of the PBA unless and until the Grantee becomes entitled to receive unrestricted shares of Common Stock.

(c)If one or more cash dividends are paid with respect to Common Stock during the Long-Term Performance Period then, at the time unrestricted shares of Common Stock are distributed to the Grantee, the Grantee shall receive a cash payment equal to the aggregate dividend amount the Grantee would have received had Grantee owned such shares of Common Stock on the dividend record date(s).

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

(a)Notwithstanding anything to the contrary contained in this Agreement, should the Grantee breach the “Protective Condition” (as defined in Section (b)), then (I) the PBA, and any RSUs acquired by the Grantee pursuant to the PBA, to the extent not previously converted into PBA shares, shall immediately be cancelled upon such breach, (II) the Grantee shall immediately deliver to the Company the number of PBA Shares the Grantee received during the 180-day period immediately prior to such breach and (III) if any PBA shares were sold during 180-day period immediately prior to such breach, the Grantee shall immediately deliver to the Company all proceeds of such sales. “PBA Shares” shall mean shares of Common Stock the Grantee may receive pursuant to this Agreement. The PBA Shares and proceeds to be delivered under clauses (II) and (III) may be reduced to reflect the Grantee’s liability for taxes payable on such PBA Shares and/or proceeds.

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(b)“Protective Condition” shall mean that (I) the Grantee complies with all terms and provisions of any obligation of confidentiality contained in a written agreement with the Company (or a Subsidiary) signed by the Grantee, or otherwise imposed on Grantee by applicable law, and (II) during the time Grantee is employed by the Company (or a Subsidiary) and for a period of one year after the Grantee’s employment with the Company (or a Subsidiary) terminates, the Grantee does not engage, in any capacity, directly or indirectly, including but not limited to as employee, agent, consultant, manager, executive, owner or stockholder (except as a passive investor holding less than a 5% equity interest in any enterprise), in any business enterprise then engaged in competition with the business conducted by the Company anywhere in the world; provided, however, that the Grantee may be employed by a competitor of the Company within such one year period so long as the duties and responsibilities of Grantee’s position with such competitor do not involve the same or substantially similar duties and responsibilities as those performed by the Grantee for the Company (or a Subsidiary) in a business segment of the new employer which competes with the business segment(s) with which the Grantee worked or had supervisory authority over while employed by the Company (or a Subsidiary).

(c)This paragraph (c) shall apply if the Grantee is an executive officer or officer (as defined in Rule 3b-7or Rule 3b-2 under the Securities Exchange Act of 1934). In accordance with the Company’s policy adopted by the Board on the Potential Impact on Compensation from Executive Misconduct, if it is determined, within eighteen full calendar months after the date on which the Grantee became entitled to receive any PBA Shares, that the Grantee engaged in misconduct resulting in the inaccurate reporting of the Company’s financial results, and the number of PBA Shares the Grantee became entitled to receive (the “Incorrect Number of Shares”) was greater than the number of PBA shares that would have been awarded, paid or delivered to, or realized by, the Grantee, if calculated based on the accurate reporting of financial results (the “Correct Number of Shares”), then (I) if the Grantee has not yet received the PBA Shares, the number of PBA Shares to which the Grantee shall be entitled shall be immediately reduced from the Incorrect Number of Shares to the Correct Number of Shares, (II) if the Grantee has received the PBA Shares, then the Grantee shall immediately deliver to the Company that number of PBA Shares equal to the difference between the Incorrect Number of Shares and the Correct Number of Shares (the “Forfeited Shares”), and (III) if the Grantee has received the PBA Shares and sold any of the Forfeited Shares, the Grantee shall immediately deliver to the Company all proceeds from the sales of such Forfeited Shares. The PBA Shares and proceeds to be delivered under clauses (II) and (III) may be reduced to reflect the Grantee’s liability for taxes payable on such PBA Shares and/or proceeds.

(d)In the event clauses 7(a), (b) or (c) are unenforceable in the jurisdiction in which the Grantee is employed on the date hereof, such clause(s) nevertheless shall be enforceable to the full extent permitted by the laws of the jurisdiction(s) in which the Grantee engages in any activity prohibited by this clause 7.

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

8.Issuance of Shares.  Subject to section 12(e) below, any shares of unrestricted Common Stock to be issued to the Grantee under this PBA (i) shall be delivered to the Grantee promptly, but in no event later than ten days, after such time as the Grantee becomes entitled to

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receive such shares of Common Stock, and (ii) may be issued in either certificated form or in uncertificated form (via the Direct Registration System or otherwise).

9.Equitable Adjustment.  The aggregate number of shares of Common Stock subject to this PBA shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares or other capital adjustment, or the payment of a stock dividend or other increase or decrease in such shares, effected without the receipt of consideration by the Company, or other change in corporate or capital structure. The Committee shall also make the foregoing changes and any other changes, including changes in the classes of securities available, to the extent reasonably necessary or desirable to preserve the intended benefits under this Agreement in the event of any other reorganization, recapitalization, merger, consolidation, spin-off, extraordinary dividend or other distribution or similar transaction involving the Company.

10.Taxes.  Upon the distribution of unrestricted shares of Common Stock to the Grantee, absent a notification by the Grantee to the Company (or an agent designated by the Company to administer the Company’s stock incentive program) which is received by the Company or its agent at least three business days prior to the date of such distribution, to the effect that the Grantee will pay to the Company or a Subsidiary by check or wire transfer any taxes (“Withholding Taxes”) the Company reasonably determines it or a Subsidiary is required to withhold under applicable tax laws with respect to such shares, the Company will reduce the number of shares of Common Stock to be distributed to the Grantee in connection with such distribution by a number of shares of Common Stock the Fair Market Value of which (as of the date the Grantee becomes entitled to receive such shares) is equal to the total amount of Withholding Taxes. In the event the Grantee elects to pay to the Company or a Subsidiary the Withholding Taxes with respect to such shares by check or wire transfer, the Company’s obligation to deliver such shares of Common Stock shall be subject to receipt by the Company or Subsidiary of such payment in available funds. The Company or a Subsidiary shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Grantee any federal, state, local or other taxes required to be withheld with respect to such payment.

11.No Guarantee of Employment.  Nothing set forth herein or in the Plan shall confer upon the Grantee any right of continued employment for any period by the Company or a Subsidiary, or shall interfere in any way with the right of the Company or Subsidiary to terminate such employment.

12.Section 409A.

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

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

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The Company shall notify the Grantee as soon as reasonably practicable of any such amendment affecting the Grantee.

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

(d)Except as otherwise specifically provided herein, the time for distribution of unrestricted shares of Common Stock under this PBA shall not be accelerated or delayed for any reason, unless to the extent necessary to comply with or permitted under the Applicable Regulations.

(e)Notwithstanding any term or provision of this Agreement to the contrary, if the Grantee is a specified employee (as defined in Section 409A(a)(2)(B)(i) of the Code) as of the date of his or her termination of employment, then any amounts payable to the Grantee under this PBA on account of his or her termination of employment (including without limitation any dividends payable to the Grantee pursuant to Section 6(c) if payable on account of his or her termination of employment) shall be paid to the Grantee upon the later of (i) the date such amounts would otherwise be payable to the Grantee under this PBA without regard to this Section 12(e) and (ii) the date which is six months following the date of the Grantee’s termination of employment.  The preceding sentence shall not apply in the event Grantee’s termination of employment is due to his or her death.  If the Grantee should terminate employment for a reason other than his or her death but subsequently die during the six-month period described in subclause (ii) of the first sentence above, such six-month period shall be deemed to end on the date of the Grantee’s death.

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

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

15.Governing Law; Disputes.  This Agreement shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflicts of laws provisions thereof. Any disputes arising under or in connection with this Agreement shall be resolved by binding arbitration before a three arbitrators constituting an Employment Dispute Tribunal, to be held in Connecticut in accordance with the commercial rules and procedures of the American Arbitration Association.  Judgment upon the award rendered by the arbitrator shall be final and subject to appeal only to the extent permitted by law.  Each party shall bear such party’s own expenses incurred in connection with any arbitration. Anything to the contrary notwithstanding, each party hereto has the right to proceed with a court action for injunctive relief or relief from violations of law not within the jurisdiction of an arbitrator.

16.Miscellaneous.  This Agreement cannot be changed or terminated orally. This Agreement and the Plan contain the entire agreement between the parties relating to the

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subject matter hereof. The section headings herein are intended for reference only and shall not affect the interpretation hereof.

17.Definitions.  For purposes of this Agreement:

(a)“Affiliate” of any Person shall mean any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.  The term “Control” shall have the meaning specified in Rule 12b-2 under the Exchange Act;

(b)“Annual Cash Bonus Plan” shall mean the Company’s Management Incentive Compensation Plan, or any successor or replacement annual cash bonus plan adopted by the Board or the Committee;

(c)“Annual Payout Percentage” with respect to an Annual Performance Period shall mean the percentage of target cash award certified by the Committee under the Annual Cash Bonus Plan for such Annual Performance Period;

(d)“Annual Performance Period” shall mean each of the three calendar years 2011, 2012 and 2013;

(e)“Annual Performance Share Award” shall be determined as set forth in Section 3(b);

(f)“Annual Target Share Award” shall mean one-third of the PBA Target Share Award;

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

(h)“Cause” shall mean any (i) willful and continued failure by the Grantee to obey the reasonable instructions of a person to whom he reports, (ii) willful and continued neglect by the Grantee of his duties and obligations as an employee of the Company or (iii) willful misconduct of the Grantee or other actions in bad faith by the Grantee which are to the detriment of the Company including, without limitation, conviction of a felony, embezzlement or misappropriation of funds or conviction of any act of fraud. For purposes of the foregoing, no act or failure to act on the Grantee’s part shall be deemed “willful” unless done, or omitted to be done, by the Grantee not in good faith and without the reasonable belief that the Grantee’s act, or failure to act, was in the best interest of the Company;

(i)“Change in Control” shall mean any of the following events:

(i)      any Person is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of either (A) the combined fair market value of the then outstanding stock of the Company (the “Total Fair Market Value”) or (B) the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company (the “Total Voting Power”); excluding, however, the following: (I) any acquisition by the Company or any of its Controlled Affiliates, (II) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Controlled Affiliates, (III) any Person who becomes such a Beneficial Owner in connection with a transaction described in the exclusion

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within paragraph (iv) below and (IV) any acquisition of additional stock or securities by a Person who owns more than 50% of the Total Fair Market Value or Total Voting Power of the Company immediately prior to such acquisition; or

(ii)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company that, together with any securities acquired directly or indirectly by such Person within the immediately preceding twelve-consecutive month period, represent 40% or more of the Total Voting Power of the Company; excluding, however, any acquisition described in subclauses (I) through (IV) of subsection (i) above; or

(iii)a change in the composition of the Board such that the individuals who, as of the effective date of this Agreement, constitute the Board (such individuals shall be hereinafter referred to as the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a director subsequent to such effective date, whose election, or nomination for election by the Company’s stockholders, was made or approved by a vote of at least a majority of the Incumbent Directors (or directors whose election or nomination for election was previously so approved) shall be considered an Incumbent Director; but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person or legal entity other than the Board shall not be considered an Incumbent Director; provided finally, however, that, as of any time, any member of the Board who has been a director for at least twelve consecutive months immediately prior to such time shall be considered an Incumbent Director for purposes of this definition, other than for the purpose of the first proviso of this definition; or

(iv)there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary of the Company or a sale or other disposition of all or substantially all of the assets of the Company (“Corporate Transaction”); excluding, however, such a Corporate Transaction (A) pursuant to which all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the outstanding Common Stock of the Company and Total Voting Power immediately prior to such Corporate Transaction will Beneficially Own, directly or indirectly, more than 50%, respectively, of the outstanding common stock and the combined voting power of the  then outstanding common stock and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Corporate Transaction of the Outstanding Common Stock and Total Voting Power, as the case may be, and (B) immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the company resulting from such Corporate Transaction (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries);provided, however, that notwithstanding anything to the contrary in subsections (i) through (iv) above, an event which does not constitute a change in the ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Section 1.409A-3(i)(5) of the Treasury Regulations (or any successor provision), shall not be considered a Change in Control for purposes of this Agreement;

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(j)“Disability” shall have the same meaning as in the Company’s then current long term disability plan;

(k)“Long-Term Performance Measure” is defined on Annex A;

(l)“Long-Term Performance Period” shall mean the period beginning on January 1, 2011 and ending on December 31, 2013;

(m)“Maximum Share Award” is the maximum amount of unrestricted shares of Common Stock that can be awarded to the Grantee under this PBA, which is 200% of the PBA Target Share Award;

(n)“PBA Target Share Award” shall mean the number of unrestricted shares of Common Stock set forth in the Grantee’s account on Merrill Lynch Benefits OnLine®  under this PBA (which number represents the number of unrestricted shares that can be awarded to the Grantee under this PBA if the Target Level of 100% is achieved);

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

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

(q)“Target Level” is defined on Annex A.

(r)“Threshold Level” is defined on Annex A.

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Annex A

The “Long-Term Performance Measure” shall be Return on Invested Capital, or “ROIC,” as defined on Exhibit I attached hereto.

The “Target Level” of the Long-Term Performance Measure shall be 12.3%.

The “Threshold Level” of the Long-Term Performance Measure shall be 9.8%.

Share Award Schedule

Degree of Attainment of Target Level of Long- Term Performance Measure	Percentage of PBA Target Share Award to be awarded to Grantee
120% or more	200%
100%	100%
80%	50%
less than 80%	0

Interpolation shall be used, on a ratable basis, to determine the number of unrestricted shares of Common Stock to be awarded when the degree of attainment of the Long-Term Performance Measure is between two percentages in the left hand column above.

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Exhibit I

HEXCEL CORPORATION

Definition and Computation of ROIC

For Purposes Of

Performance Share Awards for 2011-2013 Performance Cycle

Computation:

“ROIC” shall be computed by dividing the Average return by the Average Capital employed and expressed as a percentage:

Average Return

Average Capital Employed

Definitions:

“Average Capital Employed” shall mean the sum of Net Capital Employed as of December 31, 2010, December 31, 2011, December 31, 2012 and December 31, 2013, divided by four.

“Average Return” shall mean the sum of the Return for the calendar years of 2011, 2012 and 2013, divided by three.

“Cash” as of a particular date shall mean cash and cash equivalents of the Company and its Subsidiaries as of such date, as reported in its financial statements.

“Consolidated Operating Income” shall mean the operating income of the Company and its Subsidiaries as reported in its financial statements.

“Equity in Earnings from Affiliated Companies” shall mean the equity in earnings from affiliated companies of the Company and its Subsidiaries as reported in its financial statements.

“Net Capital Employed” as of a particular date shall mean the sum of Shareholders’ Equity and Total Debt as of such date, minus Cash as of such date.

“Other Operating Expense (Income), Net” of the Company, as reported in its financial statements.

“Return” for a particular period shall mean (i) the sum of Consolidated Operating Income and Other Operating Expense (Income), Net for such period, multiplied by (ii) one minus the Tax Rate for such period, plus (iii) Equity in Earnings from Affiliated Companies.

“ROIC” is an acronym for Return on Invested Capital.

“Shareholder’s Equity” as of a particular date shall mean total shareholder’s equity of the Company as reported in its financial statements as of such date.

“Tax Rate” means the tax rate as adjusted to exclude non-recurring items that relate to prior years, consistent with the calculation of adjusted net income in the Company’s earnings release.

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“Total Debt” as of a particular date shall mean the sum of “short-term borrowings and current maturities of capital lease obligations” and “long-term notes payable and capital lease obligations” of the Company and its Subsidiaries as of such date, as reported in its financial statements.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, David E. Berges, certify that:

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

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

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

4.The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

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

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

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

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

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Wayne Pensky, certify that:

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

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

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

4.The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

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

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

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

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

EX-32

Exhibit 32

CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hexcel Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David E. Berges, Chairman of the Board of Directors and Chief Executive Officer of the Company, and Wayne Pensky, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

April 25, 2011	/s/ David E. Berges
(Date)	David E. Berges
	Chairman of the Board of Directors
	and Chief Executive Officer
April 25, 2011	/s/ Wayne Pensky
(Date)	Wayne Pensky
	Senior Vice President and
	Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Hexcel Corporation and will be retained by Hexcel Corporation and furnished to the Securities and Exchange Commission or its staff upon request.