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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

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

	(Unaudited)						(Unaudited)
	September 30,			December 31,			March 31,			December 31,
(In millions)	2020			2019			2021			2020
Assets
Current assets:
Cash and cash equivalents	$	68.0		$	64.4		$	82.0		$	103.3
Accounts receivable, net		149.9		227.6				164.4		125.4
Inventories, net		262.9		333.1				217.4		213.5
Contract assets		48.9		52.7				42.3			43.1
Prepaid expenses and other current assets		46.1		27.1				50.7			38.0
Assets held for sale								12.6			12.6
Total current assets		575.8			704.9			569.4			535.9

Property, plant and equipment		3,103.3			3,075.1			3,109.8			3,139.7
Less accumulated depreciation		(1,226.0	)		(1,132.3	)		(1,281.4	)		(1,265.5	)
Net property, plant and equipment		1,877.3			1,942.8			1,828.4			1,874.2

Goodwill and other intangible assets, net		276.6		280.4				274.4		277.8
Investments in affiliated companies		45.7		46.5				44.4		44.7
Other assets		196.7			154.0			176.9			185.2
Total assets	$	2,972.1		$	3,128.6		$	2,893.5		$	2,917.8

Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings	$	0.5		$	9.5		$	0.3		$	0.9
Accounts payable		61.1		157.6				88.5			70.0
Accrued compensation and benefits		48.3		74.4				56.1		43.2
Financial instruments								2.8			3.6
Accrued liabilities		65.6		81.1				72.2		65.4
Total current liabilities		175.5		322.6				219.9			183.1
Commitments and contingencies (see Note 12)

Long-term debt		998.7			1,050.6			912.0			925.5
Retirement obligations		55.5			53.3			52.2			53.9
Deferred income taxes								141.5			153.0
Other non-current liabilities		243.0			256.0			81.0		92.1
Total liabilities		1,472.7			1,682.5			1,406.6			1,407.6
Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares authorized, 109.6 shares and 109.3 shares issued at September 30, 2020 and December 31, 2019, respectively		1.1			1.1
Common stock, $0.01 par value, 200.0 shares authorized, 109.9 shares and 109.7 shares issued at March 31, 2021 and December 31, 2020, respectively								1.1		1.1
Additional paid-in capital		845.1			829.9			861.5			849.7
Retained earnings		2,015.8			1,978.9			1,982.4			1,996.4
Accumulated other comprehensive loss		(85.2	)		(118.7	)		(78.7	)		(59.6	)
		2,776.8			2,691.2			2,766.3			2,787.6
Less – Treasury stock, at cost, 26.1 shares at September 30, 2020 and 25.7 shares at December 31, 2019, respectively.		(1,277.4	)		(1,245.1	)
Less – Treasury stock, at cost, 26.1 shares at March 31, 2021 and 26.1 shares at December 31, 2020, respectively.								(1,279.4	)		(1,277.4	)
Total stockholders' equity		1,499.4			1,446.1			1,486.9			1,510.2
Total liabilities and stockholders' equity	$	2,972.1		$	3,128.6		$	2,893.5		$	2,917.8

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

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(Unaudited)

Quarter Ended September 30,

Nine Months Ended September 30,

(In millions, except per share data)

2020

2019

2020

2019

Net sales

$
286.9

$
572.5

$
1,206.6

$
1,791.4

Cost of sales

273.4

414.6

997.3

1,297.5

Gross margin

13.5

157.9

209.3

493.9

Selling, general and administrative expenses

24.6

33.8

95.2

122.8

Research and technology expenses

10.7

14.2

36.0

43.3

Other operating expense

15.8

—

43.6

—

Operating income (loss)

(37.6
)

109.9

34.5

327.8

Interest expense, net

9.7

11.0

32.4

34.9

     Income (loss) before income taxes, and equity in earnings from affiliated companies

(47.3
)

98.9

2.1

292.9

Provision for (benefit from) income taxes

(56.9
)

18.2

(48.7
)

62.4

     Income before equity in earnings from affiliated companies

9.6

80.7

50.8

230.5

Equity in earnings (loss) from affiliated companies

0.1

(0.4
)

0.3

2.9

     Net income

$
9.7

$
80.3

$
51.1

$
233.4

Basic net income per common share

$
0.12

$
0.94

$
0.61

$
2.74

Diluted net income per common share

$
0.12

$
0.93

$
0.61

$
2.71

Dividends per share

$
—

$
0.17

$
0.17

$
0.47

Weighted-average common shares:

     Basic

83.8

85.1

83.7

85.1

     Diluted

84.0

86.1

84.0

86.1

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

(Unaudited)

Nine Months Ended September 30,

(In millions)

2020

2019

Cash flows from operating activities

Net income

$
51.1

$
233.4

Reconciliation to net cash provided by operating activities:

Depreciation and amortization

106.0

107.1

Amortization related to financing

0.7

1.1

Deferred income taxes

(46.0
)

9.3

Equity in earnings from affiliated companies

(0.3
)

(2.9
)
Stock-based compensation

13.0

15.9

Merger and restructuring charges

43.6

—

Merger and restructuring cash payments

(30.3
)

—

Changes in assets and liabilities:

Decrease (increase) in accounts receivable

81.0

(29.5
)
Decrease (increase) in inventories

74.2

(56.8
)
Decrease (increase) in prepaid expenses and other current assets

1.5

(12.5
)
(Decrease) increase in accounts payable/accrued liabilities

(128.0
)

15.1

Other – net

(9.5
)

(2.9
)
Net cash provided by operating activities

157.0

277.3

Cash flows from investing activities

Capital expenditures

(47.8
)

(162.7
)
Acquisition of business

—

(163.2
)
Net cash used for investing activities

(47.8
)

(325.9
)

Cash flows from financing activities

Repayments of Euro term loan

(49.9
)

(9.0
)
Borrowing from senior unsecured credit facility - 2024

392.0

478.0

Repayment of senior unsecured credit facility - 2024

(403.0
)

(99.0
)
Borrowing from senior unsecured credit facility - 2021

—

345.0

Repayment of senior unsecured credit facility - 2021

—

(547.0
)
Repayment of finance lease obligation and other debt, net

(0.4
)

(0.6
)
Issuance costs related to senior credit facility

(1.3
)

(2.2
)
Dividends paid

(14.2
)

(39.9
)
Repurchase of stock

(24.6
)

(66.9
)
Activity under stock plans

(5.5
)

6.4

Net cash (used for) provided by financing activities

(106.9
)

64.8

Effect of exchange rate changes on cash and cash equivalents

1.3

(1.9
)
Net increase in cash and cash equivalents

3.6

14.3

Cash and cash equivalents at beginning of period

64.4

32.7

Cash and cash equivalents at end of period

$
68.0

$
47.0

Supplemental data:

Accrual basis additions to plant, property and equipment

$
39.4

$
160.9

Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Operations

	(Unaudited)
	Quarter Ended March 31,
(In millions, except per share data)	2021			2020
Net sales	$	310.3		$	541.0
Cost of sales		257.2			400.1
Gross margin		53.1			140.9
Selling, general and administrative expenses		39.6			46.5
Research and technology expenses		11.6			14.0
Other operating expense		12.1			14.7
Operating income		(10.2	)		65.7
Interest expense, net		10.3			12.0
(Loss) income before income taxes, and equity in earnings from affiliated companies		(20.5	)		53.7
Income tax (benefit) expense		(7.5	)		11.8
(Loss) income before equity in earnings from affiliated companies		(13.0	)		41.9
Equity in (losses) earnings from affiliated companies		(1.0	)		0.5
Net (loss) income	$	(14.0	)	$	42.4
Basic net (loss) income per common share	$	(0.17	)	$	0.51
Diluted net (loss) income per common share	$	(0.17	)	$	0.50
Dividends per share	$	-		$	0.17
Weighted-average common shares:
Basic		84.0			83.7
Diluted		84.0			84.3


Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive (Loss) Income

	(Unaudited)
	Quarter Ended March 31,
(In millions)	2021			2020
Net (loss) income	$	(14.0	)	$	42.4
Currency translation adjustments		(12.0	)		(24.8	)
Net unrealized pension and other benefit actuarial (losses) gains and prior service credits (net of tax)		(1.7	)		0.9
Net unrealized losses on financial instruments (net of tax)		(5.4	)		(12.7	)
Total other comprehensive loss		(19.1	)		(36.6	)
Comprehensive (loss) income	$	(33.1	)	$	5.8

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

~~For the Three and Nine Months ended September 30, 2020, and September 30, 2019~~Cash Flows

Additional

Accumulated

Other

Total

Paid-In

Retained

Comprehensive

Treasury

Stockholders’

(In millions)

Par

Capital

Earnings

Income (Loss)

Stock

Equity

Balance, December 31, 2018

$
1.1

$
798.3

$
1,726.5

$
(108.0
)

$
(1,095.9
)

$
1,322.0

Net income

—

—

72.2

—

—

72.2

Dividends paid on common stock

—

—

(12.7
)

—

—

(12.7
)
Change in other comprehensive income (loss) – net of tax

—

—

—

(5.9
)

—

(5.9
)
Stock based compensation

—

13.5

—

—

(5.5
)

8.0

Acquisition of treasury stock

—

—

—

—

(11.2
)

(11.2
)
Balance, March 31, 2019

$
1.1

$
811.8

$
1,786.0

$
(113.9
)

$
(1,112.6
)

$
1,372.4

Net income

—

—

80.9

—

—

80.9

Dividends paid on common stock

—

—

(12.8
)

—

—

(12.8
)
Change in other comprehensive income (loss) – net of tax

—

—

—

(4.2
)

—

(4.2
)
Stock based compensation

—

6.1

—

—

—

6.1

Balance, June 30, 2019

$
1.1

$
817.9

$
1,854.1

$
(118.1
)

$
(1,112.6
)

$
1,442.4

Net income

—

—

80.3

—

—

80.3

Dividends paid on common stock

—

—

(14.4
)

—

—

(14.4
)
Change in other comprehensive income (loss) – net of tax

—

—

—

(43.0
)

—

(43.0
)
Stock based compensation

—

8.8

—

—

(0.6
)

8.2

Acquisition of treasury stock

—

—

—

—

(55.7
)

(55.7
)
Balance, September 30, 2019

$
1.1

$
826.7

$
1,920.0

$
(161.1
)

$
(1,168.9
)

$
1,417.8

Additional

Accumulated

Other

Total

Paid-In

Retained

Comprehensive

Treasury

Stockholders’

(In millions)

Par

Capital

Earnings

Income (Loss)

Stock

Equity

Balance, December 31, 2019

$
1.1

$
829.9

$
1,978.9

$
(118.7
)

$
(1,245.1
)

$
1,446.1

Net income

—

—

42.4

—

—

42.4

Dividends paid on common stock

—

—

(14.2
)

—

—

(14.2
)
Change in other comprehensive income (loss) – net of tax

—

—

—

(36.6
)

—

(36.6
)
Stock based compensation

—

15.2

—

—

(7.2
)

8.0

Acquisition of treasury stock

—

—

—

—

(24.6
)

(24.6
)
Balance, March 31, 2020

$
1.1

$
845.1

$
2,007.1

$
(155.3
)

$
(1,276.9
)

$
1,421.1

Net loss

—

—

(1.0
)

—

—

(1.0
)
Change in other comprehensive income (loss) – net of tax

—

—

—

17.3

—

17.3

Stock based compensation

—

(0.5
)

—

—

—

(0.5
)
Balance, June 30, 2020

$
1.1

$
844.6

$
2,006.1

$
(138.0
)

$
(1,276.9
)

$
1,436.9

Net income

—

—

9.7

—

—

9.7

Change in other comprehensive income (loss) – net of tax

—

—

—

52.8

—

52.8

Stock based compensation

—

0.5

—

—

(0.5
)

0.0

Balance, September 30, 2020

$
1.1

$
845.1

$
2,015.8

$
(85.2
)

$
(1,277.4
)

$
1,499.4

	(Unaudited)
	Quarter Ended March 31,
(In millions)	2021			2020
Cash flows from operating activities
Net (loss) income	$	(14.0	)	$	42.4
Reconciliation to net cash provided by operating activities:
Depreciation and amortization		34.5			35.5
Amortization related to financing		1.5			0.3
Deferred income taxes		(8.8	)		(0.6	)
Equity in earnings from affiliated companies		1.1			(0.5	)
Stock-based compensation		9.0			14.4
Merger and restructuring expenses, net of payments		1.5			12.6
Changes in assets and liabilities:
Increase in accounts receivable		(42.0	)		(42.0	)
Increase in inventories		(7.6	)		(26.4	)
Increase in prepaid expenses and other current assets		(6.8	)		(7.6	)
Increase (decrease) in accounts payable/accrued liabilities		30.2			(18.8	)
Other – net		0.2			(0.7	)
Net cash (used for) provided by operating activities		(1.2	)		8.6

Cash flows from investing activities
Capital expenditures		(4.9	)		(27.2	)
Net cash used for investing activities	$	(4.9	)	$	(27.2	)

Cash flows from financing activities
Repayments of Euro term loan		-			(49.9	)
Borrowing from senior unsecured credit facility - 2024		-			392.0
Repayment of senior unsecured credit facility - 2024		(14.0	)		(12.0	)
Repayment of finance lease obligation and other debt, net		(0.3	)		(0.1	)
Dividends paid		-			(14.2	)
Repurchase of stock		-			(24.6	)
Activity under stock plans		0.8			(6.4	)
Net cash (used for) provided by financing activities		(13.5	)		284.8
Effect of exchange rate changes on cash and cash equivalents		(1.7	)		(1.3	)
Net (decrease) increase in cash and cash equivalents		(21.3	)		264.9
Cash and cash equivalents at beginning of period		103.3			64.4
Cash and cash equivalents at end of period	$	82.0		$	329.3
Supplemental data:
Accrual basis additions to plant, property and equipment	$	4.0		$	21.9

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

								Accumulated
			Additional					Other						Total
			Paid-In		Retained			Comprehensive			Treasury			Stockholders’
(In millions)	Par		Capital		Earnings			Loss			Stock			Equity
Balance, December 31, 2019	$	1.1	$	829.9	$	1,978.9		$	(118.7	)	$	(1,245.1	)	$	1,446.1
Net income	—		—		42.4			—			—				42.4
Dividends paid on common stock ($0.17 per share)	—		—			(14.2	)	—			—				(14.2	)
Change in other comprehensive loss – net of tax	—		—		—				(36.6	)	—				(36.6	)
Stock based compensation	—			15.2	—			—				(7.2	)		8.0
Acquisition of treasury stock	—		—		—			—				(24.6	)		(24.6	)
Balance, March 31, 2020	$	1.1	$	845.1	$	2,007.1		$	(155.3	)	$	(1,276.9	)	$	1,421.1

								Accumulated
			Additional					Other						Total
			Paid-In		Retained			Comprehensive			Treasury			Stockholders’
(In millions)	Par		Capital		Earnings			Loss			Stock			Equity
Balance, December 31, 2020	$	1.1	$	849.7	$	1,996.4		$	(59.6	)	$	(1,277.4	)	$	1,510.2
Net loss	—		—			(14.0	)	—			—				(14.0	)
Dividends paid on common stock	—		—		—			—			—				-
Change in other comprehensive loss – net of tax	—		—		—				(19.1	)	—				(19.1	)
Stock based compensation	—			11.8	—			—				(2.0	)		9.8
Acquisition of treasury stock	—		—		—			—			—				-
Balance, March 31, 2021	$	1.1	$	861.5	$	1,982.4		$	(78.7	)	$	(1,279.4	)	$	1,486.9

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements are those of Hexcel Corporation. Refer to Note 1 to the ~~consolidated financial statements~~Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for a discussion of our significant accounting policies.

The accompanying ~~condensed consolidated financial statements~~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~~Condensed Consolidated Financial Statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholder’s equity for the interim periods presented. The ~~condensed consolidated balance sheet~~Condensed Consolidated Balance Sheet as of December 31, ~~2019~~2020 was derived from the audited ~~2019 consolidated balance sheet.~~2020 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 ~~2019~~2020 Annual Report on Form 10-K.

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

~~On January 12,~~In early November 2020 we ~~announced that we had entered into an agreement~~closed our wind energy prepeg production facility in Windsor, Colorado and plan of merger (the “Merger Agreement”) with Woodward, Inc. (“Woodward”), which provided for the combination of Hexcel and Woodward in an all stock merger of equals (the “Merger”). In response to the impact of the novel strain of coronavirus (“COVID-19”) pandemic, on April 5, 2020, Hexcel and Woodward entered into an agreement to terminate the Merger Agreement.

~~In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326). The Accounting Standards Codification 326, Financial Instruments- Credit Losses (“ASC 326”) requires~~as a ~~financial asset measured at amortized cost basis~~result, certain plant assets to be ~~presented~~sold have been recorded in “Assets held for sale” in the Condensed Consolidated Balance Sheets at ~~the net amount~~both March 31, 2021 and December 31, 2020. The sale of these assets is expected to ~~be collected. We adopted~~occur in the update, effective January 1, 2020, applying this standard to our Accounts Receivable and Contract Assets. Our high-quality credit review practice and good customer relationships has resulted in accounts receivable write offs below 0.5%second or third quarter of our annual sales. Due to the requirements of ASC 326, we have reviewed and refined our bad debt reserve process. Management reviews the average annual charge-off rate along with an assessment of current micro and macro-economic factors to determine any required reserves. If at any time management finds that there are significant changes to any of these contributing factors, the reserve will be adjusted accordingly. In the nine months ended September 30, 2020 we recorded $0.2 million of reserves and there were 0 write-offs against receivables resulting in a reserve balance of $0.8 million at September 30, 2020.2021.

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

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which amends and aims to simplify accounting disclosure requirements regarding a number of topics including: intraperiod tax allocation, accounting for deferred taxes when there are changes in consolidation of certain investments, tax basis step up in an acquisition and the application of effective rate changes during interim periods, amongst other improvements. This standard is

effective for fiscal years beginning after December 15, ~~2020 and allows for early adoption. We are assessing the impact~~2020. Adoption of this new standard did not have a material impact on ~~our consolidated balance sheets, statements of operations and our future disclosures.~~the Company.

Quarter Ended September 30,

Nine Months Ended September 30,

(In millions, except per share data)

2020

2019

2020

2019

Basic net income per common share:

Net income

$
9.7

$
80.3

$
51.1

$
233.4

Weighted average common shares outstanding

83.8

85.1

83.7

85.1

Basic net income per common share

$
0.12

$
0.94

$
0.61

$
2.74

Diluted net income per common share:

Net income

9.7

80.3

51.1

233.4

Weighted average common shares outstanding — Basic

83.8

85.1

83.7

85.1

Plus incremental shares from assumed conversions:

Restricted stock units

0.1

0.4

0.2

0.4

Stock options

0.1

0.6

0.1

0.6

Weighted average common shares outstanding — Dilutive

84.0

86.1

84.0

86.1

Diluted net income per common share

$
0.12

$
0.93

$
0.61

$
2.71

Total ~~shares underlying~~common stock ~~options~~equivalents of, ~~1.5~~1.1 million and ~~0.9~~0.6 million ~~were~~ ~~excluded from the computation of diluted net income per share~~ ~~for the three and nine months ended September 30, 2020~~, ~~respectively, as they were anti-dilutive.~~ ~~Total shares underlying stock options of 0.1 million~~ were excluded from the computation of diluted net (loss) income per share for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2021 and 2020, respectively, ~~as they were~~because to do so would have been anti-dilutive.

On April 6, 2020, the Company declared a dividend of 1 preferred share purchase right (a “right”) for each outstanding share of the Company’s common stock and adopted a stockholder rights plan, as set forth in the rights agreement entered into as of April 6, 2020, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. The dividend was payable on April 16, 2020 to stockholders of record of the Company’s common stock on such date. In general, the rights plan works by imposing a significant penalty upon any person or group which acquires 15% or more of the outstanding common stock without the prior approval of the board. If the rights become exercisable, each right will allow its holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock for $150.00. This portion of a preferred share will give the stockholder approximately the same dividend, voting and liquidation rights as would one share of common stock. The rights will not be exercisable until ten days after the public announcement that a person or group has become an “acquiring person” (as defined in the rights agreement) by obtaining beneficial ownership of 15% or more of our outstanding common stock. Prior to exercise, the right does not give its holder any dividend, voting, or liquidation rights. The rights will expire on April 6, 2021. The rights were not exercisable at any time through September 30, 2020.

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

Net periodic benefit costs of our defined benefit retirement plans for the ~~quarter and nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

All costs related to our pensions are included as a component of operating income in our ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations.~~Operations. For the ~~quarters~~three-month periods ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ amounts unrelated to service costs were an expense of $0.2 million and a ~~benefit~~credit of $0.5 million, ~~and $0.8 million,~~ respectively. ~~For the nine months ended September 30, 2020 and 2019, amounts unrelated to service costs were a benefit of $1.6 million and $2.5 million, respectively.~~

We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred. We have contributed approximately ~~$0.5~~$0.2 million in the first ~~nine~~three months of ~~2020~~2021 to cover unfunded benefits. We expect to contribute a total of ~~$1.4~~$3.4 million in ~~2020~~2021 to cover unfunded benefits. We contributed ~~$0.5~~$0.1 million to our U.S. non-qualified defined benefit retirement plans during the ~~first nine months of 2019.~~quarter ended March 31, 2020.

We contributed ~~$3.0~~$1.1 million and ~~$3.3~~$1.0 million to our European defined benefit retirement plans during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. We plan to contribute approximately ~~$5.0~~$5.6 million during ~~2020~~2021 to our European plans.

We recorded ~~$0.3~~$0.2 million and $0.2 million of net amortization gain deferral for the ~~quarters ended September 30, 2020 and 2019, respectively; and $0.8 million and $0.7 million for the nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the ~~quarters and nine~~three months ended ~~September 30,~~three months ended March 31, 2021 and 2020 ~~and 2019~~ were immaterial.

Amounts contributed in connection with our postretirement plans were immaterial for both the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~March 31, 2020. We periodically fund our postretirement plans to pay covered expenses as they are incurred. We expect to contribute ~~less than $0.5~~approximately $0.4 million in ~~2020~~2021 to cover unfunded benefits.

In June 2019, the Company refinanced its senior unsecured credit facility (the “Facility”), increasing borrowing capacity from $700 million to $1 billion. The Facility matures in June 2024. The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.50%, depending upon the better of the Company’s leverage ratio or the credit rating. During the second quarter of 2020, the interest rate for the Facility increased to LIBOR + 1.125%, reflecting a change in the leverage ratio. As of September 30, 2020, total borrowings under the Facility were $302 million, which approximates fair value. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50 million. Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of September 30, 2020, there were 0 issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $698 million, subject to ongoing covenant compliance. The weighted average interest rate for the Facility was 1.76% for the nine months ended September 30, 2020.

The Facility agreement contains financial and other covenants, including, but not limited to customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage

ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default.

In September 2020, we amended ~~our~~the Facility ~~(the “Amendment”)~~ to allow for relief from certain terms, ofincluding adjusting the maximum leverage ratio covenant for a defined period. On January 28, 2021, we further amended the Facility agreement (the “Second Amendment”), to provide that, from ~~October 1, 2020~~January 28, 2021 through and including ~~September 30, 2021 (the “Covenant Relief Period”). During the Covenant Relief Period,~~March 31, 2022, we ~~are~~will not be subject to a maximum leverage ratio covenant but will instead be required to maintain ~~a leverage ratio not greater than: 4.25, 5.75, 5.00 and 4.25, respectively, for each~~Liquidity (as defined in the Facility Agreement) of the quarterly test periods from December 31, 2020 through September 30, 2021. During the Covenant Relief Period, consolidated total debt is calculated net of unrestricted cash and cash equivalents in an amount not to exceed $200at least $250 million. Additionally, during such period, the ~~Covenant Relief Period, we are~~Company will be subject to ~~(i)~~ limitations on share repurchases, cash dividends, and its ability to incur secured debt, in each case subject to certain exceptions; the applicable margin and commitment fees are increased; the incremental facility will not be available; and if the Company’s public debt rating is downgraded to (i) BB or lower by Standard & Poor’s and (ii) ~~further limitations~~Ba2 or lower by Moody’s, we will be required to grant liens on certain of our assets, which liens will be released upon the ~~incurrence~~Company’s public debt rating being upgraded to BB+ or higher by Standard & Poor’s or Ba1 or higher by Moody’s. The Company’s public debt rating as of ~~secured indebtedness,~~March 31, 2021 is BB+/Baa3. In addition, the Second Amendment provides that the Company will not be subject to an interest coverage ratio covenant until the test period ending December 31, 2021 and ~~(iii)~~revolving commitments under the Facility were reduced to $750 million. In connection with the Second Amendment, we accelerated a portion of the deferred financing costs and recognized $0.9 million in interest expense during the first quarter of 2021. As of March 31, 2021, we were in compliance with all debt covenants.

As of March 31, 2021, total borrowings under the Facility were $214 million, which approximates fair value. The Facility agreement permits us to issue letters of credit up to an ~~increase~~aggregate amount of $50 million. Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of March 31, 2021, there were 0 issued letters of credit under the Facility, resulting in ~~pricing based on~~undrawn availability under the ~~then existing leverage ratio.~~ Facility of $536 million. The weighted average interest rate for the Facility was 3.99% for the three months ended March 31, 2021.

In 2017, the Company issued $400 million in aggregate principal amount of 3.95% Senior Unsecured Notes due in 2027. The interest rate on these senior notes may be increased 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 5.95%. The effective interest rate for ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~3.87%~~4.00% inclusive of approximately a 0.25% benefit of treasury locks. Based on quoted prices the fair value of the senior unsecured notes due in 2027 was ~~$431.1~~$418.3 million at ~~September 30, 2020.~~March 31, 2021.

~~In January 2020, we used $49.9 million to repay and terminate the Euro term loan.~~

In 2015, the Company issued $300 million in aggregate principal amount of 4.7% Senior Unsecured Notes due in 2025. The interest rate on these senior notes may be increased by 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 6.7%. The effective interest rate for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~4.83%~~4.95%. Based on quoted prices, the fair value of ~~these~~the senior unsecured notes due in 2025 was ~~$334.0~~$326.6 million at ~~September 30, 2020.~~March 31, 2021.

InPrior to January 2020, we ~~terminated €45 million of~~had interest rate swaps that swap the EURIBOR on our European term loan for a fixed rate. We terminated these swaps in January 2020 when we repaid the ~~Euro~~European term ~~loan recognizing a charge of $0.7 million.~~loan. These interest rate ~~swaps fixed the interest rate at a weighted average of 0.5%. These~~ swaps were designated as cash flow hedges to floating rate bank ~~loans, therefore, the~~loans. The Euro swaps had final maturities dates between June 2023 and June 2024, in annual installments. The fair value of ~~the~~interest rate swap agreements was recorded in other assets or as a liability with a corresponding amount to other comprehensive ~~loss.~~(loss) income. At March 31, 2021, we had 0 interest rate swap agreements outstanding.

The Company had treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 3.95% Senior Unsecured Notes. These hedges were designated as cash flow ~~hedges; therefore,~~hedges for hedge accounting purposes thus any change in fair value was recorded as a component of other comprehensive ~~loss.~~(loss) income. As part of the issuance of ~~these notes,~~our 3.95% Senior Unsecured Notes, we net settled ~~the~~these derivatives ~~and therefore~~for $10 million in cash. As a result of settling these derivatives the previously deferred gains recorded in other comprehensive ~~loss~~(loss) income will be released to interest expense over the life of the ~~senior notes.~~3.95% Senior Unsecured Notes. The effect of these treasury locks reduced the effective interest rate on these notes by approximately 0.25%.

In November 2020 we entered into a cross currency and interest rate swap, which is designated as a cash flow hedge of a €270 million, 5-year amortizing, intercompany loan between one of our European subsidiaries and the US parent company. Changes in the spot exchange are recorded to the general ledger and offset the fair value re-measurement of the hedged item. The net difference in the interest rates coupons is recorded as a credit to interest expense. The derivative swaps €270 million bearing interest at a fixed rate of 0.30% for $319.9 million plus fixed rate interest of 1.115%. The interest coupons settle semi-annually. The principal will amortize each year on November 15, as follows: for years 1 through 4, beginning November 15, 2021, €50 million versus $59.2 million, and a final settlement on November 15, 2025 of €70 million versus $82.9 million. The carrying value of the derivative at March 31, 2021 is a current asset of $2.9 million and a long-term liability of $1.2 million.

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~~pound sterling. We entered into contracts to exchange U.S. dollars for Euros and British ~~Pound~~pound sterling through ~~March 2023, which we account for as cash flow hedges.~~September 2023. The aggregate notional amount of these contracts was ~~$272.5~~$232.1 million and ~~$426.9~~$250.3 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The purpose of these contracts is to hedge a portion of the forecasted transactions of our European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. The effective portion of the hedges, ~~gains of $14.4 million and~~ losses of ~~$0.1~~$5.5 million were recorded in other comprehensive ~~loss~~(loss) income for the ~~quarter and nine~~three months ended ~~September 30, 2020~~March 31, 2021 and losses of ~~$16.9 million and $25.7~~$17.3 million for the ~~quarter and nine~~three months ended ~~September 30, 2019.~~March 31, 2020. We classified ~~$7.2~~$9.5 million of the carrying amount of these contracts as assets ($~~4.6~~7.4 million of which was recorded in prepaid expenses and other current assets) and ~~$6.5~~$2.7 million as liabilities ($~~0.7~~0.5 million of which is recorded in non-current liabilities), on the ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets at ~~September 30, 2020,~~March 31, 2021, and $~~3.7~~16.0 million of the carrying amount of these contracts was classified in assets ($~~1.3~~10.7 million of which was recorded in prepaid expenses and other current assets) and ~~$15.5~~$2.5 million as liabilities ~~($2.9~~(less than $0.1 million of which is in other non-current liabilities) at December 31, ~~2019.~~2020. We recognized net ~~losses~~gains of ~~$2.6 million and $12.7~~$1.4 million in gross

margin during the ~~quarter and nine~~three months ended ~~September 30, 2020,~~March 31, 2021 and net losses of $~~3.8~~ ~~million and $8.4~~$4.4 million for the ~~quarter and nine~~three months ended ~~September 30, 2019.~~ March 31, 2020.

In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the ~~re-measurement~~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 0 credit contingency features in these derivatives. During the quarters ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ we recognized net foreign exchange losses of ~~$0.9~~$1.6 million and ~~losses of $1.3~~$1.0 million, respectively, in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations. During the nine months ended September 30, 2020 and 2019, we recognized net foreign exchange losses of $2.5 million and $1.9 million, respectively.~~Operations. The net foreign exchange impact recognized from these hedges ~~offsets~~offset the translation exposure of these transactions. The carrying amount of the contracts for derivatives not designated as hedging instruments was ~~$0.2~~$0.4 million classified asin current ~~assets~~liabilities at ~~September 30, 2020,~~March 31, 2021, and $~~0.6~~0.1 million ~~as current assets and less than $0.1 million of~~classified in current liabilities on our ~~consolidated balance sheets~~Condensed Consolidated Balance Sheet at December 31, ~~2019, in the condensed consolidated balance sheets.~~2020.

The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive ~~loss~~(loss) income for the quarters ended March 31, 2021 and ~~nine months ended September 30,~~March 31, 2020 ~~and September 30, 2019~~ was as follows:

Unrealized ~~losses~~gains of ~~$1.2~~$5.2 million recorded in accumulated other comprehensive loss, ~~plus a net tax benefit~~less taxes of ~~$0.1~~$1.1 million, as of ~~September 30, 2020,~~March 31, 2021, are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.

On occasion we enter into commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile). As of ~~September 30, 2020,~~March 31, 2021 we had commodity swap agreements with a notional value of ~~$10.6~~$6.8 million. The swaps mature monthly through March 2022. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items. The fair value of the commodity swap agreements was ~~a liability~~an asset of ~~$3.2~~$2.1 million ($~~0.2~~2.0 million of which is in prepaid and other non-current assets) at March 31, 2021, andan asset of $2.2 million ($1.5 million of which was recorded in prepaid expenses and other ~~non-current liabilities)~~ ~~at September 30, 2020,~~current assets) and a liability of ~~$5.4~~$1.1 million ~~($1.1 million of which was in other non-current liabilities)~~ at December 31, ~~2019.~~2020.

The effective tax ~~provision for the current quarter included a $46.2 million benefit primarily~~ ~~due to the release of a valuation allowance~~ ~~due to a legal entity rationalization and treasury realignment initiative. The tax provision~~rate for the first ~~nine months~~quarter of ~~2020 also included~~2021 was a ~~$2.7 million~~36.8% benefit ~~primarily for~~compared to a 21.9% charge in the ~~release~~first quarter of ~~reserves of unrecognized tax benefits as a result of tax audit settlements.~~2020. The quarter ~~and nine months~~ ended ~~September 30, 2019 included~~March 31, 2021 includes a ~~$3.0~~discrete tax benefit of $3.2 million ~~benefit primarily due~~from the revaluation of our deferred tax liabilities related to a favorable U.S. state tax ~~credits identified in~~law change. The prior period benefited from deductions associated with share-based compensation payments. The effects of the ~~quarter. Given~~COVID-19 pandemic will continue to have an impact on the ~~adverse impact of COVID-19 on our earnings, the~~Company’s overall effective tax rate ~~in 2020 is not meaningful.~~throughout 2021.

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:

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

We have 0 assets or liabilities that utilize Level 1 inputs. However, we have derivative instruments classified as liabilities and assets which utilize Level 2 inputs, and 1 liability that utilizes Level 3 inputs.

For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value. The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). The fair value of these assets and liabilities was ~~$7.4~~approximately $14.4 million and ~~$9.7~~$4.6 million and $~~4.3~~18.4 million and ~~$21.7~~$14.8 million, respectively, at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the ~~condensed consolidated balance sheets.~~Condensed Consolidated Balance Sheets.

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

Counterparties to the above contracts are highly rated financial institutions,NaN of which experienced any significant downgrades in the ~~nine months~~quarter ended ~~September 30, 2020~~March 31, 2021 that would reduce the receivable amount owed, if any, to the Company.

Liabilities classified as Level 3 — At ~~September 30, 2020~~March 31, 2021 we have a liability for ~~$3.2~~$3.3 million, which represents contingent consideration that was recognized in connection with the Company’s Oxford Performance Materials, Inc. acquisition. This amount was estimated based on certain contractual stipulations which require payments to be made to the seller in the future based upon the achievement of certain results. We used forecasted results which were discounted using an internally derived discount rate. Future amounts payable may differ from this estimate by the difference between the actual and forecasted results. There were no payments and the amount of interest related to this liability accreted was not material during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021.

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

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

We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the ~~quarters and nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled. Contract assets are included in our ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets as a component of current assets. The activity related to contract assets for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 is as follows:

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

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

Financial information for our operating segments for the ~~quarters and nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

	(Unaudited)												(Unaudited)
	Composite			Engineered			Corporate &						Composite		Engineered			Corporate &
(In millions)	Materials			Products			Other (a)			Total			Materials		Products			Other (a)			Total
Third Quarter 2020
Quarter Ended March 31, 2021
Net sales to external customers	$	215.7		$	71.2		$	—		$	286.9		$	237.2	$	73.1		$	—		$	310.3
Intersegment sales		7.8			0.7			(8.5	)		—			13.2		0.6			(13.8	)		—
Total sales	$	223.5		$	71.9		$	(8.5	)	$	286.9		$	250.4	$	73.7		$	(13.8	)	$	310.3
Other operating expense		16.4			—			(0.6	)		15.8			12.7		(0.7	)		0.1			12.1
Operating income (loss)		(36.6	)		(2.7	)		1.7			(37.6	)
Operating income														7.4		4.7			(22.3	)		(10.2	)
Depreciation and amortization		31.7			3.9			—			35.6			30.8		3.7			—			34.5
Stock-based compensation		1.5			0.5			(1.7	)		0.3			0.6		0.2			8.2			9.0
Accrual basis additions to capital expenditures		4.7			1.3			—			6.0			3.6		0.4			—			4.0

Third Quarter 2019
Net sales to external customers	$	448.0		$	124.5		$	—		$	572.5
Intersegment sales		23.3			—			(23.3	)		—
Total sales	$	471.3		$	124.5		$	(23.3	)	$	572.5
Operating income (loss)		100.1			20.3			(10.5	)		109.9
Depreciation and amortization		30.7			3.7			—			34.4
Stock-based compensation		1.2			0.2			1.0			2.4
Accrual basis additions to capital expenditures		51.0			2.3			—			53.3

Nine Months Ended September 30, 2020
Quarter Ended March 31, 2020
Net sales to external customers	$	960.4		$	246.2		$	—		$	1,206.6		$	438.5	$	102.5		$	—		$	541.0
Intersegment sales		48.0			1.6			(49.6	)		—			24.8		0.5			(25.3	)		—
Total sales	$	1,008.4		$	247.8		$	(49.6	)	$	1,206.6		$	463.3	$	103.0		$	(25.3	)	$	541.0
Other operating expense		25.5			2.7			15.4			43.6			0.6		0.3			13.8			14.7
Operating income (loss)		75.0			3.3			(43.8	)		34.5
Operating income													91.5		6.5				(32.3	)		65.7
Depreciation and amortization		94.3			11.6			0.1			106.0			31.8		3.7			—			35.5
Stock-based compensation		5.9			1.6			5.5			13.0			4.7		1.2			8.5			14.4
Accrual basis additions to capital expenditures		35.4			4.0			—			39.4			20.2		1.7			—			21.9

Nine Months Ended September 30, 2019
Net sales to external customers	$	1,419.7		$	371.7		$	—		$	1,791.4
Intersegment sales		64.0			0.1			(64.1	)		—
Total sales	$	1,483.7		$	371.8		$	(64.1	)	$	1,791.4
Operating income (loss)		324.4			51.4			(48.0	)		327.8
Depreciation and amortization		95.7			11.3			0.1			107.1
Stock-based compensation		6.4			1.4			8.1			15.9
Accrual basis additions to capital expenditures		156.8			4.1			—			160.9

At ~~September 30, 2020,~~March 31, 2021, the balance of goodwill and intangible assets was ~~$190.9~~$191.9 million and ~~$85.7~~$82.5 million, respectively. During the first quarter of 2020 the Company determined that the economic uncertainty caused by the COVID-19 pandemic was a trigger for an impairment review of goodwill with no other triggers for impairment identified. As a result of management’s review, we determined that it was not more likely than not that there was impairment.

Comprehensive (loss) income ~~(loss)~~ represents net (loss) income and other gains and losses affecting stockholders’ equity that are not reflected in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations.~~Operations. The components of accumulated other comprehensive loss as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:

The amounts of net gains reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs component of accumulated other comprehensive loss for the ~~quarter and nine~~three months ended ~~September 30, 2020,~~March 31, 2021, were $0.1 million less taxes of less than $0.1 ~~million, and $0.5 million less taxes of $0.3 million, respectively.~~million. The amounts reclassified to earnings from the change in fair value of the derivatives component of accumulated other comprehensive loss for the ~~quarter and nine~~three months ended ~~September 30, 2020~~March 31, 2021 were net ~~losses~~gains of ~~$2.6~~$1.4 million less taxes of ~~$0.6 million and $12.7 million less taxes of $3.0~~$0.3 million, for those related to foreign currency forward exchange contracts and ~~$1.5 million less taxes~~losses of ~~$0.4 million and $4.9 million less taxes of $1.2 million, related to commodity swaps.~~ ~~We also recorded net gains of $0.3 million less taxes of $0.1 million and net gains of $0.1~~$0.2 million less taxes of less than $0.1 million, related to commodity swaps, and net gains of $14.1 million less taxes of $3.2 million related to interest rate ~~derivatives, in the three and nine month periods ended September 30, 2020, respectively.~~swaps.

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

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

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

In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower eight miles of the Lower Passaic River at an expected cost ranging from $0.97 billion to $2.07 billion. This estimate does not include any costs related to a future remedy for the upper nine miles of the Lower Passaic River. In August 2017, the EPA appointed an independent third party allocation expert to make recommendations on the relative liability of approximately 120 identified non-government PRP’s. ~~The allocation is expected~~In December 2020, the allocator issued its non-binding report on PRP liability (including Hexcel’s) to be ~~completed by~~ the ~~end~~EPA, which did not result in any change to Hexcel’s accrual for the Passaic matter. We do not know to what extent, if at all, this non-binding report will impact the ultimate outcome of ~~2020~~the matter..

In October 2016, pursuant to a settlement agreement with the EPA, Occidental Chemical Corporation (“OCC”), one of the PRPs, commenced performance of the remedial design required by the ROD, reserving its right of cost contribution from all other PRPs. In June 2018, OCC filed suit against approximately 120 parties, including Hexcel, in the U.S. District Court of the District of New Jersey seeking cost recovery and contribution under CERCLA related to the Lower Passaic River. In July 2019, the court granted in part and denied in part the defendants’ motion to dismiss. In August 2020, the court granted defendants’ motion for summary judgement for certain claims. Discovery for the remaining claims is ongoing. ~~We do not know whether this litigation will impact~~On February 24, 2021, Hexcel and certain other defendants filed a third-party complaint against the ~~EPA’s allocation process or~~Passaic Valley Sewerage Commission and certain New Jersey municipalities seeking recovery of Passaic-related cleanup costs incurred by defendants, as well as contribution for any cleanup costs incurred by OCC for which the ~~ultimate outcome of~~court deems the ~~matter.~~defendants liable.

The accrual related to the Lower Passaic River site was approximately $2.1 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Given the uncertainty associated with the many elements of the Superfund process for the Lower Passaic River, the amounts accrued may not be indicative of the amounts for which we will ultimately be responsible.

We are a PRP at a former chemical waste site in Whittier, California. The PRPs at Omega have established The Omega Chemical Site PRP Organized Group, (the “OPOG”), and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. The OPOG has attributed to Hexcel either 1.2% or 2.18% of the waste tonnage (dependent on the specific location within the Omega Chemical Site) sent to the site. In addition to the Omega site specifically, the EPA is investigating the scope of regional groundwater contamination in the vicinity of the Omega site and issued a ROD. The OPOG members have been served notice by the EPA as PRPs who will be required to be involved in the remediation of the regional groundwater contamination in that vicinity as well. As a member of the OPOG, Hexcel will incur costs associated with the investigation and remediation of the Omega site and the regional groundwater remedy, although our ultimate liability, if any, in connection with this matter cannot be determined at this time. The total accrued liability relating to potential liability for both the Omega site and regional groundwater remedies was $0.2 million at September 30, 2020, and at December 31, 2019.

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lower Passaic River and other sites are accrued in the ~~condensed consolidated balance sheets.~~Condensed Consolidated Balance Sheets. As of ~~both September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, our aggregate environmental related accruals were ~~$2.5~~$2.3 million and $2.4 million, respectively, of which ~~$0.6~~$0.3 million and $0.5 million, respectively, was included in ~~current other~~ accrued liabilities with the remainder included in other non-current liabilities. As related to certain environmental matters the accrual was estimated at the low end of a range of possible outcomes since 0 amount within the range is a better estimate than any other amount. If we had accrued, for those sites where we are able to estimate our liability, at the high end of the range of possible outcomes, our accrual would have been $16 million higher at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

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.

We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the ~~nine months~~quarter ended ~~September 30, 2020,~~March 31, 2021, and accrued warranty cost, included in ~~“other~~ accrued ~~liabilities”~~liabilities in the ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, were as follows:

We ~~took a~~had restructuring ~~charge~~charges of ~~$15.8~~$11.9 million infor the ~~third~~ quarter ~~of which $9.4 million~~ended March 31, 2021 primarily related to ~~asset impairments~~severance. Anticipated future cash payments as ~~part~~ of March 31, 2021 were $15.9 million. For the ~~planned closure of our Windsor, Colorado plant and the remainder was for severance costs related to additional job reductions. In the nine months~~quarter ended March 31, 2020, other operating expense consisted of ~~$43.6~~$14.7 million ~~included second quarter severance~~of costs ~~and costs~~primarily related to the terminated merger agreement with ~~Woodward. Anticipated future cash payments as of September 30, 2020 were $4.7 million.~~Woodward, Inc.

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

We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, radio frequency / electromagnetic interference (“RF/EMI”) and microwave absorbing materials, engineered honeycomb and composite structures, for use in Commercial Aerospace, Space & Defense, and Industrial markets. Our products are used in a wide variety of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive, recreational products, and other industrial applications.

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

We are a manufacturer of products within a single industry: Advanced Composites. We have two ~~segments,~~reportable segments: Composite Materials and Engineered Products. The Composite Materials segment is comprised of our carbon fiber, specialty reinforcements, ~~resins,~~resin systems, prepregs and other fiber-reinforced matrix materials, and honeycomb core product lines and pultruded profiles. The Engineered Products segment is comprised of lightweight ~~high-strength~~high strength composite structures, RF/EMI and microwave absorbing materials, engineered core and specialty machined honeycomb products with added ~~functionality.~~functionality and 3D thermoplastic printing.

On March 11, 2020, the World Health Organization ~~(“WHO”)~~ declared the COVID-19 outbreak a pandemic. The ~~outbreak~~pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

Our company is a sole provider for many programs, including critical defense programs. Consistent with national guidelines and with state and local orders to date, we ~~are~~ currently ~~operating~~continue to operate across our ~~footprint with some temporary site closures.~~footprint. Notwithstanding our continued operations, COVID-19 has had and may have further negative impacts on our operations, supply chain, transportation networks and customers, all of which ~~have and~~ may continue to compress our margins, even after the preventative and precautionary measures that we, other businesses and governments are taking. The COVID-19 ~~outbreak~~pandemic is a widespread public health crisis that is adversely affecting the economies and financial markets globally. The resulting economic downturn has ~~and could for an extended period of time,~~ adversely ~~affect~~affected demand for our products and ~~contribute~~contributed to volatile supply and demand conditions affecting prices and volumes in the markets for our products, services and raw ~~materials.~~materials, which could continue for an extended period of time. The progression of the pandemic could also continue to negatively impact our business or results of operations through the temporary closure of our operating locations or those of our customers or suppliers.

~~During~~In 2020 and into the ~~third~~first quarter of ~~2020,~~2021, our operations, margins and results were adversely impacted by lower demand for our products due to substantial reductions in original equipment manufacturer build rates combined with a move to reduce inventory throughout our supply chain, particularly carbon fiber. Since the outbreak began,, we have seen the impacts of COVID-19 on our markets and operations, including significant decreases in air traffic, temporary shutdowns of our customers’ and suppliers’ facilities and decreased demand from our customers. In response, we have taken certain mitigating actions to align our costs with the lower sales and to preserve liquidity including eliminating approximately ~~30%~~35% of our ~~labor costs,~~global headcount, curtailing discretionary spend, and suspending dividend payments and stock repurchases. In addition, our board of directors adopted a stockholder rights plan in April 2020 in response to the extraordinary business and market dislocations resulting from the COVID-19 pandemic and the actions taken to contain it. The rights plan expired April 6, 2021 and the rights are no longer outstanding. The extent to which COVID-19 continues to adversely impact our business depends on future developments, ~~which are highly uncertain and unpredictable,~~ including the timing of the global rollout of the COVID-19 vaccines, as well as any other new information concerning the effectiveness of actions taken globally to contain or mitigate its ~~effects.~~effects and the emergence and impact of new variants of COVID-19. While we expect the pandemic to continue to negatively impact our results of operations, cash flows and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 means the ~~related~~continuing financial impact to us cannot be reasonably estimated at this time.

On January 12, 2020, we announced that we had entered into an agreement and plan of merger (the “Merger Agreement”) with Woodward, Inc. (“Woodward”), which provided for the combination of Hexcel and Woodward in an all stock merger of equals (the “Merger”). In response to the impact of the COVID-19 pandemic, on April 5, 2020, Hexcel and Woodward entered into an agreement to terminate the Merger Agreement.

Net sales for the ~~quarter~~first three months of 2021 were ~~$286.9~~$310.3 million, ~~49.9%~~42.6% lower ~~(49.7%~~(43.5% in constant currency) than the ~~$572.5~~$541.0 million reported for the ~~third quarter~~first three months of ~~2019.~~2020. Declines in demand in the Commercial Aerospace and Industrial markets drove the decrease in sales for the ~~quarter.~~quarter ended March 31, 2021.

Commercial Aerospace sales of ~~$128.8~~$147.6 million decreased ~~66.6% (66.3%~~59.3% (59.7% in constant currency) for the quarter ended March 31, 2021 as compared to the ~~third~~first quarter of ~~2019.~~2020 Sales were down significantly across all the major programs were down substantially with the largest impact related to the A350. Boeing 737 MAX sales continue to be at a very low level. Build rate reductions driven by the COVID-19 pandemic combined with significant inventory destocking led to the reduced sales levels. Additionalplatforms reflecting pandemic-induced build rate reductions ~~publicly announced at~~by the ~~end of July 2020 by two significant customers is further extending the~~aircraft OEMs and continued supply chain destocking.

Sales to ~~other commercial aerospace,~~“Other Commercial Aerospace,” which includes regional and business aircraft, ~~customers, were down 49.6% for~~decreased 48.0% in the ~~third~~first quarter of ~~2020~~2021 as compared to ~~2019~~the same period in 2020, as ~~demand was~~the global pandemic negatively impacted ~~by the global pandemic,~~demand across this market sector, particularly business jets.

Space & Defense sales of ~~$108.8~~$111.7 million ~~decreased 0.9% (0.5%~~for the quarter ended March 31, 2021 were unchanged compared to the first quarter of 2020 (decrease of 1.0% in constant currency). Strength in rotorcraft, including the CH-53K, as well as the F-35 joint strike fighter, was offset by the collective impact of a softer quarter for ~~the quarter as compared to the third quarter of 2019. The decrease was due to lower demand from~~ a number of ~~European~~smaller U.S. defense and space ~~& defense programs as aggregate U.S. space & defense sales were up moderately in the third quarter of 2020 compared to the third quarter of 2019.~~programs.

Total Industrial sales of ~~$49.3~~$51.0 million for the ~~third~~ quarter ~~of 2020~~ended March 31, 2021 were down ~~35.8% (37.5%~~23.3% (27.1% in constant currency) as compared to the ~~2019 period.~~first quarter of 2020. Lower wind energy sales drove the decrease, partially offset by stronger automotive sales. Wind energy sales (the largest submarket in Industrial), experienced a decline of ~~40.4%~~42.5% in constant currency in the first quarter of 2021 compared to the ~~third~~first quarter of 2019. This reduction reflects a customer demand shift in the U.S. market. As a result of this demand change, Hexcel will close its wind energy prepreg production facility in Windsor, Colorado in early November 2020 that served the U.S. market. The Hexcel wind material prepreg production facility in Austria that serves the European market and the wind material facility in China, that serves the Asian market, continue to operate to produce materials for our wind energy customers.2020.

Gross margin for the ~~third~~first quarter of 2021 decreased to 17.1% as compared to 26.0% for the first quarter of 2020 ~~decreased~~primarily related to ~~4.7% as compared to 27.6% for~~ the ~~third quarter of 2019. The deterioration reflects the under absorption of fixed overhead from lower~~ sales ~~levels magnified by the temporary idling of select production facilities during the period to align production with demand.~~volume declines described above.

Selling, general and administrative and research and technology expenses for the ~~third~~first quarter of ~~2020 were 26% lower than~~2021 decreased 15.4% compared to the prior year ~~as on-going~~period due primarily to global realignment actions and headcount reductions ~~reduce the~~undertaken to lower our cost structure.

Other operating expense of ~~$15.8~~$12.1 million for the ~~third~~first quarter of 2021 was primarily related to severance. Other operating expenses of $14.7 million for the first quarter of 2020 was primarily ~~included~~related to professional fees incurred in connection with the ~~restructuring charge for the Windsor facility closure and additional severance costs across a number of facilities.~~proposed merger with Woodward, Inc. that was subsequently terminated in April 2020.

Operating cash flow for the first ~~nine months~~quarter of ~~2020~~2021 was ~~$157.0~~a use of $1.2 million compared to ~~$277.3~~cash provided of $8.6 million in ~~2019 on~~the same period in 2020 due to lower earnings partially offset by ~~favorable~~lower use of working ~~capital usage.~~capital. For the first ~~nine months~~quarter of ~~2020,~~2021, capital expenditures were ~~$47.8~~$4.9 million as compared to ~~$162.7~~$27.2 million in the first ~~nine months~~quarter of ~~2019.~~2020. Free cash flow (defined as cash provided by operating activities less capital expenditures) for the ~~nine months~~quarter ended ~~September 30, 2020~~March 31, 2021 was ~~a use of $109.2~~($6.1) million ~~versus $114.6~~compared to ($18.6) million in the comparable period of ~~2019.~~2020.

Accrual basis additions to capital expenditures were $4.0 million and $21.9 million for the first three months of 2021 and 2020, respectively.

The Company uses non-GAAP financial measures, including sales and expenses measured in constant dollars (prior year sales and expenses measured at current year exchange rates); operating income, ~~(loss),~~ net income ~~(loss)~~ and earnings ~~(loss)~~ per share adjusted for items included in operating expense and non-operating expenses; and free cash flow. Management believes these non-GAAP measurements are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results and comparisons to prior periods. These adjustments can represent significant charges or credits that we believe are important to an understanding of Hexcel’s overall operating results in the periods presented. Such non-GAAP measurements are not determined in accordance with generally accepted accounting principles and should not be viewed in isolation or as an alternative to or substitutes for GAAP measures of performance. Our calculation of these measures may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating our performance. Reconciliations to adjusted operating income, ~~(loss),~~ adjusted net income, ~~(loss),~~ adjusted diluted net income ~~(loss)~~ per share and free cash flow are provided below.

The following table summarizes net sales to third-party customers by segment and end market for the ~~quarters and nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~

	Quarter Ended September 30,							Nine Months Ended September 30,							Quarter Ended March 31,
(In millions)	2020		2019		% Change			2020		2019		% Change			2021		2020		% Change
Consolidated Net Sales	$	286.9	$	572.5		(49.9	)%	$	1,206.6	$	1,791.4		(32.6	)%	$	310.3	$	541.0		(42.6	)%
Commercial Aerospace		128.8		385.9		(66.6	)%		695.6		1,217.9		(42.9	)%		147.6		362.9		(59.3	)%
Space & Defense		108.8		109.8		(0.9	)%		328.8		329.4		(0.2	)%		111.7		111.6		0.1	%
Industrial	49.3			76.8		(35.8	)%	182.2		244.1			(25.4	)%		51.0		66.5		(23.3	)%

Composite Materials	$	215.7	$	448.0		(51.9	)%	$	960.4	$	1,419.7		(32.4	)%	$	237.2	$	438.5		(45.9	)%
Commercial Aerospace		95.6		294.5		(67.5	)%		567.6		941.6		(39.7	)%		112.5		300.2		(62.5	)%
Space & Defense		71.9		78.9		(8.9	)%		214.5		236.2		(9.2	)%		74.8		73.2		2.2	%
Industrial		48.2		74.6		(35.4	)%		178.3	241.9			(26.3	)%		49.9		65.1		(23.3	)%

Engineered Products	$	71.2	$	124.5		(42.8	)%	$	246.2	$	371.7		(33.8	)%	$	73.1	$	102.5		(28.7	)%
Commercial Aerospace	33.2		91.4			(63.7	)%		128.0	276.3			(53.7	)%		35.1	62.7			(44.0	)%
Space & Defense		36.9		30.9		19.4	%		114.3		93.2		22.6	%		36.9		38.4		(3.9	)%
Industrial		1.1		2.2		(50.0	)%		3.9		2.2		77.3	%		1.1		1.4	N/M

Composite Materials: Net sales of ~~$215.7~~$237.2 million in the ~~third~~first quarter of ~~2020~~2021 decreased ~~$232.3~~$201.3 million from the ~~$448.0~~$438.5 million in sales for the prior year ~~quarter, driven by declines in~~quarter. Commercial Aerospace sales decreases reflect pandemic-induced build rate reductions by the aircraft OEMs and Industrial. Net sales of $960.4 million for the first nine months of 2020 decreased 32.4% compared to the same period last year. In Commercial Aerospace, there were significantly lower sales across all major programs as build rates across Commercial Aerospace have decreased significantly and rapidly in response to the COVID-19 pandemic compounded by extensivecontinued supply chain ~~adjustments. The decline in~~destocking. Space & Defense sales ~~was primarily related to lower military aircraft structure sales outside~~reflect strength in rotorcraft, including the CH-53K, as well as the F-35 joint strike fighter, offset by the collective impact of ~~the Americas.~~a softer quarter for a number of smaller U.S. defense and space programs. The decline in Wind energy sales was ~~primarily related~~due to general lower demand and the cessation of sales in North America following a ~~shift in the type of product our~~previously reported customer ~~demands in the U.S. market.~~ ~~As a result of this~~ demand ~~change, Hexcel will close its wind energy prepreg production facility in Windsor, Colorado in early November 2020 that served the U.S. market.~~shift.

Engineered Products: Net sales of ~~$71.2~~$73.1 million in the ~~third~~first quarter of ~~2020~~2021 decreased ~~$53.3~~$29.4 million from the ~~$124.5 million for 2019.~~ ~~Net sales of $246.2~~$102.5 million for the first ~~nine months~~quarter of 2020, ~~decreased 33.8% compared to~~primarily reflects pandemic-induced build rate reductions by the ~~same period last year. The declines primarily~~ ~~reflect lower sales for the Boeing 737 MAX~~ ~~as well as lower build rates across Commercial Aerospace in response to the COVID-19 pandemic.~~ ~~The increase in Space & Defense sales reflects the growth in U.S. military helicopter programs.~~aircraft OEMs and continued supply chain destocking.

Commercial Aerospace sales of ~~$128.8~~$147.6 million decreased ~~66.6% (66.3%~~59.3% (59.7% in constant currency) for the first quarter of 2021 as compared to the ~~third~~first quarter of ~~2019.~~2020. Sales were down significantly across all the major ~~programs were down substantially with~~platforms reflecting pandemic-induced build rate reductions by the ~~largest impact related to the A350.~~aircraft OEMs and continued supply chain destocking. Boeing 737 MAX sales continue to be at a ~~very~~ low level. Build rate reductions driven by the COVID-19 pandemic combined with significant inventory destocking led to the reduced sales levels. Additional build rate reductions publicly announced at the end of July 2020 by two significant customers is further extending the destocking. Sales of $695.6 million, for the first nine months of 2020, decreased 42.9% compared to the first nine months of 2019 due to significant production cuts across the major aircraft programs announced during the second and third quarters of 2020 and only limited sales for the Boeing 737 MAX program. The decline was compounded by significant destocking in the supply chain, which is amplified as build rates have moved even lower.

Sales to ~~Other~~“Other Commercial Aerospace,” which ~~includes~~include regional and business aircraft, ~~customers, were down 49.6% for~~decreased 48.0% in the ~~third~~first quarter of ~~2020~~2021 as compared to ~~2019 due to significantly lower~~the same period in 2020, as the global pandemic negatively impacted demand across this market sector, particularly business ~~jet demand and have declined 23.5% year to date.~~jets.

Space & Defense sales of ~~$108.8~~$111.7 million ~~decreased 0.9% (0.5%~~were relatively flat (down 1.0% in constant currency) for the first quarter of 2021 as compared to the ~~third~~first quarter of ~~2019~~. ~~The decrease~~2020. Strength in rotorcraft, including the CH-53K, as well as the F-35 joint strike fighter was ~~due to lower demand from~~offset by the collective impact of a softer quarter for a number of ~~European~~smaller U.S. defense and space & defense programs as aggregate U.S. space & defense sales were up moderately in the third quarter of 2020 compared to the third quarter of 2019. Space & Defense sales of $328.8 million, for the first nine months of 2020, were in line with the first nine months of 2019.programs.

Total Industrial sales of ~~$49.3~~$51.0 million for the ~~third~~first quarter of ~~2020~~2021 were down ~~35.8% (37.5%~~23.3% (27.1% in constant currency) as compared to the ~~2019 period anddecreased 25.4% for the first nine months as compared to last year.~~2020 period. Wind energy sales ~~(the largest submarket~~were down 39.9% (42.5% in ~~Industrial) experienced a decline of 40.4% compared to~~constant currency) in the ~~third~~first quarter of 2019. The reduction reflects a customer demand shift in the U.S. market. As a result of this demand change, Hexcel will close its wind energy prepreg production facility in Windsor, Colorado in early November 2020 that served the U.S. market. The Hexcel wind material prepreg production facility in Austria that serves the European market and the wind material facility in China that serves the Asian market continue to operate to produce materials for our wind energy customers. Wind energy sales experienced a decline of 25.8% for the first nine months of 20202021 as compared to the ~~same~~prior year period ~~in 2019~~primarily due to ~~production disruptions caused by~~general lower demand and the ~~pandemic and lower~~cessation of sales in North America following a previously reported customer demand ~~specifically in the U.S.~~

Gross margin for the ~~third~~first quarter of 2021 declined to 17.1% compared to 26.0% in the first quarter of 2020, ~~declined to 4.7% compared to 27.6%~~as we experienced volume declines in the ~~third quarter of 2019~~Commercial Aerospace and was 17.3% and 27.6% for the first nine months of 2020 and 2019, respectively. The dramatic reduction in demand combined with the unfavorable mix impact of lower carbon fiber sales drove the decline in margin performance in 2020.Industrial markets.

Selling, general and administrative and research and technology expenses for the first quarter of 2021 were lower ~~for both the quarter and nine month periods ended September 30, 2020,~~ than the prior ~~year’s comparable periods, as~~year period, reflecting tight cost ~~reduction actions began to take effect, including headcount reductions and minimizing discretionary spending.~~

~~We had an operating loss of $37.6 million for the third quarter of 2020 compared to income of $109.9 million for the third quarter of 2019.~~ Operating (loss) income for the first ~~nine months~~quarters of 2021 and 2020 ~~and 2019~~ was ~~$34.5~~$(10.2) million and ~~$327.8~~$65.7 million, respectively. The ~~three~~decrease was driven by lower volumes in the Commercial Aerospace and ~~nine month periods~~Industrial markets. The quarter ended ~~September 30, 2020~~March 31, 2021 included ~~$15.8~~

restructuring costs of $11.9 million ~~and $43.6 million, respectively, of other operating expense~~ primarily related to ~~restructuring charges~~severance, and the quarter ended March 31, 2020 included costs of $14.7 million primarily related to the ~~Merger. In 2020, operating margins were negatively impacted by the dramatic reduction in demand for our products and the margin mix impact of lower carbon fiber sales.~~

Interest expense for the ~~third~~first quarter ~~and nine months~~ ended ~~September 30, 2020~~March 31, 2021 was lower than the prior year primarily due to lower ~~effective interest rates, when compared to the same periods last year.~~average debt levels.

The ~~tax provision for the current quarter included a $46.2 million benefit~~ ~~primarily due to the release of a valuation allowance in a foreign jurisdiction.~~ The tax provision for the first nine months of 2020 also included a $2.7 million benefit primarily for the release of reserves of unrecognized tax benefits as a result of tax audit settlements. The three months and first nine months ended September 30, 2019 included a $3.0 million benefit primarily due to tax credits identified in the quarter. Given the adverse impact of COVID-19 on our earnings the effective tax rate for the quarter ended March 31, 2021 was a 36.8% benefit compared to a 21.9% charge for the quarter ended March 31, 2020. The quarter ended March 31,2021 included a discrete tax benefit of $3.2 million from the revaluation of our deferred tax liabilities related to a favorable U.S. state tax law change. The prior period benefited from deductions associated with share-based compensation payments. The resulting economic downturn has adversely affected demand for our products and contributed to volatile supply and demand conditions affecting prices and volumes in ~~2020 is not meaningful.~~ the markets for our products, services and raw materials, which could continue for an extended period of time.

Liquidity: ~~As of September 30, 2020, our total debt, net of cash,~~Cash on hand at March 31, 2021 was ~~$931.2~~$82.0 million as compared to ~~$995.7~~$103.3 million at December 31, ~~2019. At~~2020. As of March 31, 2021, total debt was $912.3 million, as compared to $926.4 million at December 31, 2020.

In September ~~30,~~ 2020, we amended the Facility to allow for relief from certain terms, including adjusting the maximum leverage ratio covenant for a defined period. On January 28, 2021, we further amended the Facility agreement (the “Second Amendment”), to provide that, from January 28, 2021 through and including March 31, 2022, we will not be subject to a maximum leverage ratio covenant but will instead be required to maintain Liquidity (as defined in the Facility Agreement) of at least $250 million. Additionally, during such period, the Company will be subject to limitations on share repurchases, cash dividends, and its ability to incur secured debt, in each case subject to certain exceptions; the applicable margin and commitment fees are increased; the incremental facility will not be available; and if the Company’s public debt rating is downgraded to (i) BB or lower by Standard & Poor’s and (ii) Ba2 or lower by Moody’s, we will be required to grant liens on certain of our assets, which liens will be released upon the Company’s public debt rating being upgraded to BB+ or higher by Standard & Poor’s or Ba1 or higher by Moody’s. The Company’s debt rating as of March 31, 2021 is BB+/Baa3. In addition, the Second Amendment provides that the Company will not be subject to an interest coverage ratio covenant until the test period ending December 31, 2021 and revolving commitments under the Facility were reduced to $750 million. As of March 31, 2021, we were in compliance with all debt covenants.

As of March 31, 2021, total borrowings under ~~our $1 billion Senior Unsecured Revolving Credit~~the Facility ~~(the~~

~~“Facility”)~~ were ~~$302 million.~~$214 million, which approximates fair value. The Facility agreement permits us to issue letters of credit up to an aggregate amount of ~~$50.0~~$50 million. ~~Any outstanding~~Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of ~~September 30, 2020, we had not~~March 31, 2021, there were no issued ~~any~~ letters of credit under the Facility, resulting in undrawn availability under the Facility of ~~$698 million, subject to ongoing covenant compliance.~~

$536 million. The Facility agreement contains financial and other covenants, including, but not limited customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of anweighted average interest coverage ratio and a leverage ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default. As detailed in Note 5 to the condensed consolidated financial statementsrate for the Facility was ~~amended in September 2020 to provide~~3.99% for ~~a Covenant Relief Period from October 1, 2020 through and including September 30,~~the three months ended March 31, 2021.

We expect to meet our short-term liquidity requirements (including capital expenditures) through net cash from operating activities, cash on hand and the Facility. As of ~~September 30, 2020,~~March 31, 2021, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until June 2024 when the Facility expires.

Operating Activities: Net cash ~~provided by~~used for operating activities was ~~$157.0~~$1.2 million for the first ~~nine months~~quarter of ~~2020~~2021 as compared to ~~$277.3~~net cash provided of $8.6 million infor the ~~2019~~comparable 2020 period on lower earnings partially offset by ~~favorable~~a decrease in cash used in working ~~capital usage.~~capital. Working capital ~~generated $28.7~~for the three months ended March 31, 2021 was a cash use of $26.2 million ~~in 2020 as~~ compared to a use of ~~$83.7~~$94.8 million in ~~2019.~~the same period in 2020.

Investing Activities: Net cash used for investing activities was ~~$47.8~~$4.9 million and ~~$325.9~~$27.2 million for the first quarter of 2021 and 2020, respectively, due to lower capital expenditures in the first ~~nine months~~quarter of ~~2020 and 2019, respectively. The 2019~~2021 as compared to the same period ~~included $163.2 million for the ARC Technologies, Inc. (“ARC”) acquisition. Capital expenditures were $47.8 million and $162.7 million~~ in ~~2020 and 2019, respectively.~~2020.

Financing Activities: Financing activities ~~used $106.9 million~~were a use of cash of $13.5 million in the first ~~nine~~three months of ~~2020 and~~2021 compared to cash provided ~~$64.8~~of $284.8 million in the same period in ~~2019. The 2019 period included amounts borrowed from~~2020. In response to the impacts of the COVID-19 pandemic we announced in the early part of 2020 that we had suspended our dividend payments and stock repurchases. Borrowings under our Facility were higher in 2020 as we chose to ~~fund~~draw down an additional $250 million in late March as a precautionary measure in anticipation of the ~~ARC acquisition.~~impacts of the COVID-19 pandemic on our operations. In January 2020, the Company used $49.9 million to repay and terminate ~~the Euro~~its European term loan. WeIn the first quarter 2020, we also returned $38.8 million to stockholders from stock repurchases and ~~dividends in the first nine months of 2020 compared to $106.8 million in 2019.~~dividends.

~~In response to the COVID-19 pandemic we announced that we have suspended our dividend payments and stock repurchases.~~

Financial Obligations and Commitments: The next significant scheduled debt maturity will not occur until 2024, when the Facility matures. Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

Our ~~condensed consolidated financial statements~~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~~Condensed Consolidated Financial Statements 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, ~~2019.~~2020.

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. We estimate and accrue our liabilities resulting from such matters based upon a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs. We believe we have adequately accrued for these potential liabilities; however, facts and circumstances may change, such as new developments, or a change in approach, including a change in settlement strategy or in an environmental

remediation plan, that could cause the actual liability to exceed the estimates, or may require adjustments to the recorded liability balances in the future.

~~Our estimate~~ For further discussion, see Note 12, Commitments and Contingencies, to the accompanying Condensed Consolidated Financial Statements of liability as a potentially responsible party and our remaining costs associated with our responsibility to remediate the Lower Passaic River in New Jersey and other sites are accrued in the condensed consolidated balance sheets. As of September 30, 2020, our aggregate environmental related accruals were $2.5 million, of which $0.6 million was included in accrued liabilities, with the remainder included in non-current liabilities. As related to certain environmental matters, the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount. If we had accrued at the high end of the range of possible outcomes, for those sites where we are able to estimate our liability, our accrual would have been approximately $16 million higher. These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required changes in the apportionment of costs among responsible parties, the amount of insurance coverage and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.this Form 10-Q.

This report contains 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,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” “will” and similar terms and phrases, including references to assumptions. Such statements are based on current expectations, are inherently uncertain and are subject to changing assumptions.

Such forward-looking statements include, but are not limited to: (a) the estimates and expectations based on aircraft production rates provided by Airbus, Boeing and others; (b) the revenues we may generate from an aircraft model or program; (c) the impact of the possible push-out in deliveries of the Airbus and Boeing backlog and the impact of delays in the startup or ramp-up of new aircraft programs or the final Hexcel composite material content once the design and material selection have been completed; (d) expectations with regard to the build rate ~~and return to service~~ of the Boeing 737 MAX following its return to service and the related impact on our revenues; (e) expectations with regard to the timing of inventory destocking resulting from the pandemic-induced decrease in customer demand; (f) expectations of composite content on new commercial aircraft programs and our share of those requirements; ~~(f)~~(g) expectations regarding revenues ~~for~~from space and defense applications, including whether certain programs might be curtailed or discontinued; ~~(g)~~(h) expectations regarding sales for wind energy, recreation, automotive and other industrial applications; ~~(h)~~(i) expectations regarding working capital trends and expenditures and inventory levels; ~~(i)~~(j) expectations as to the level of capital expenditures and ~~when we will complete the construction~~completion of

capacity expansions and qualification of new products; ~~(j)~~(k) expectations regarding our ability to maintain and improve margins in view of the ~~current~~pandemic-induced economic environment; ~~(k)~~(l) expectations regarding the outcome of legal matters or the impact of changes in laws or ~~regulations; (l)~~regulations or government policies; (m) our projections regarding our tax rate; ~~(m)~~(n) expectations with regard to the ~~anticipated~~continued impact of the COVID-19 pandemic on worldwide air travel and aircraft programs, as well as on our customers and suppliers and, in turn, on our operations and financial results; and ~~(n)~~(o) the anticipated impact of the above factors and various market risks on our expectations of financial results for ~~2020~~2021 and beyond.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. Such factors include, but are not limited to, the following: the impact of the COVID-19 pandemic ~~including~~(including continued disruption in global financial markets, ongoing restrictions on movement and travel, employee absenteeism and reduced ~~consumer~~ demand for air ~~travel,~~travel) on the operations, business and financial condition of Hexcel and its customers and suppliers; reductions in sales to any significant customers, particularly Airbus ~~Boeing~~ or ~~Vestas,~~Boeing, including reduction in revenue related to ~~a prolonged suspension~~the timing of ramp-up of production of the Boeing 737 MAX, as well as due to the impact of the COVID-19 pandemic; ~~inability~~our ability to effectively adjust production and inventory levels to align with ~~reduced~~customer demand; inability to effectively motivate, retain and ~~retain~~hire necessary workforce; our ability to successfully implement or realize our business strategies, plans and objectives of management, including any restructuring or alignment activities in which we may engage; timing of inventory destocking caused by the COVID-19 pandemic; changes in sales mix; changes in current pricing and cost levels; changes in aerospace delivery rates; changes in government defense procurement budgets; changes in military aerospace program technology; timely new product development or introduction; industry capacity; increased competition; availability and cost of raw materials; supply chain disruptions; ~~inability~~our ability to install, staff and qualify necessary capacity or complete ~~planned manufacturing improvements~~capacity expansions to meet customer demand; cybersecurity breaches or intrusions; currency exchange rate fluctuations; changes in ~~global~~ political, social and economic conditions, including, but not limited to, the effect of change in global trade policies and the impact of the exit of the U.K. from the European Union; work stoppages or other labor disruptions; our ability to successfully complete any strategic acquisitions, investments or dispositions; compliance with environmental, health, safety and other related laws and regulations; and the unexpected outcome of legal matters or impact of changes in laws or regulations.

Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. As a result, the foregoing factors should not be construed as exhaustive and should be read together with other cautionary statements included in this and other reports we file with the SEC. For additional information regarding certain

factors that may cause our actual results to differ from those expected or anticipated, see the information under the caption “Risk Factors” which is located in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, as well as in Item 1A. “Risk Factors” of this Form 10-Q. We do not undertake anany obligation to update our forward-looking statements or risk factors to reflect future events or circumstances, except as otherwise required by law.

Except for the continued broad effects of COVID-19, ~~as a result of its negative impact on the global economy and major financial markets,~~ there have been no material changes in market risk from the information provided in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of ~~September 30, 2020,~~March 31, 2021, and with the participation of the Company's management have concluded that these disclosure controls and procedures ~~are~~were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our Chief Executive Officer and Chief Financial Officer have concluded that there have not been any changes in our internal control over financial reporting during the three months ended ~~September 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The information required by Item 1 is contained within Note 12 on pages 1615 through 1816 of this Form 10-Q and is incorporated herein by reference.

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, ~~2019,~~2020, which could materially affect our business, financial condition or future results. There have been no material changes in the Company’s risk factors from the aforementioned Form 10-K, except ~~as set forth in~~that our stockholder rights plan expired on April 6, 2021 and, accordingly, the ~~below~~ risk factor ~~and~~entitled “The short-term rights agreement that ~~due~~we entered into in 2020 could discourage third parties from seeking strategic transactions with us that could be beneficial to ~~the termination of the Merger Agreement, the risk factors set forth in the Form 10-K under “Risks Relating to the Proposed Merger with Woodward” are~~our stockholders.” is no longer applicable.

~~Our business has been and will continue to be adversely affected by the COVID-19 pandemic. The extent to which the COVID-19 pandemic will adversely impact our business, financial condition and results of operations is highly uncertain and cannot be predicted.~~

In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic. The COVID-19 pandemic has created significant uncertainty and economic disruption. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the extent of the adverse impact of the COVID-19 pandemic on our business, and there is no guarantee our efforts to address the adverse impacts of COVID-19 will be effective.

We have experienced operational interruptions as a result of COVID-19, including the temporary suspension of operations due to the inability to staff facilities or government-imposed restrictions, which has had an adverse effect on the productivity and profitability of such manufacturing facilities, and in turn an adverse effect on our business and operations. While most of our manufacturing sites are currently in operation, we have reduced or furloughed certain operations in response to government measures, employee welfare concerns and the impact of COVID-19 on the global demand and supply chain. Our manufacturing operations may be further adversely affected by impacts from COVID-19 including, among other things, additional government actions and other responsive measures, further decreases in demand and/or deeper supply chain disruptions, and health and availability of essential onsite

personnel. To comply with local regulations and ensure workplace safety, enhanced cleaning and sanitation procedures and protocols for the use of personal protective equipment have been instituted, as well as work cell zoning to ensure social distancing, for those sites that remain operational.

In addition, several countries, including the United States, have taken steps to restrict air travel, and many companies have adopted policies prohibiting non-essential business travel by their employees. Even in the absence of formal restrictions and prohibitions, contagious illness and fear of contagion adversely affects travel behavior. Approximately 68% of our net sales for fiscal year ended December 31, 2019 were derived from sales to Commercial Aerospace customers, which included 87% from Airbus and Boeing aircraft, and 13% from regional and business aircraft. Current travel restrictions, as well as changes in the propensity for the general public to travel by air as a result of the COVID-19 pandemic, has caused reductions in demand for commercial aircraft, which has had an adverse impact our net sales and operating results and may continue to do so for an extended period of time. While we are unable to predict the magnitude and duration of such impact at this time, the loss of, or significant reduction in, purchases by Airbus or Boeing will materially impair our business, operating results, prospects and financial condition.

Furthermore, the COVID-19 pandemic has resulted in market volatility which has caused a precipitous decline in our stock price subjecting us to increased takeover risk, impaired our ability to declare dividends or other distributions and conduct share buybacks, and may impact our ability to comply with the covenants contained in the agreements that govern our indebtedness and raise additional funds when and as needed. We may also incur additional costs to remedy damages caused by business disruptions, performance delays or interruptions, payment defaults or bankruptcy of our third-party customers and suppliers, which could adversely affect our financial condition and results of operations.

To the extent the COVID-19 pandemic or any worsening of the global business and economic environment as a result thereof adversely affects our business and financial results, it may also have the effect of heightening or exacerbating many of the other risks described in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2019, such as those relating to the cyclical nature of the markets in which we operate, our ability to maintain manufacturing efficiency, disruption of our operations at our manufacturing facilities or in our supply chain, cybersecurity threats and risks generally associated with international business operations.

Due to the evolving and highly uncertain nature of this event, we cannot predict at this time the full extent to which the COVID-19 pandemic will adversely impact our business, results and financial condition, which will depend on many factors that are not known at this time. These include, among others, the extent of harm to public health, the continued disruption to the manufacturing of and demand for our products, our ability to effectively manage inventory levels and adjust our production schedules to align with reduced demand, potential future restructuring, impairment and other charges, the impact of the global business and economic environment on liquidity and the availability of capital, the costs incurred to keep our employees safe while maintaining continued operations, and our ability to effectively motivate and retain the necessary workforce. We are staying in close communication with our manufacturing facilities, employees, customers, and suppliers, and acting to mitigate the impact of this dynamic and evolving situation through cost-savings and other measures, which may not be successful and are subject to the factors described above, many of which are uncertain or outside of our control.

During the third quarter of 2020 we did not repurchase any shares of outstanding common stock. We suspended our share repurchase program for the second and third quarters of 2020 as a result of the impacts of the COVID-19 pandemic and we have limitations on share repurchases through September 2021 under the amended Facility. The Company still has $217.2 million available under the $500 million stock repurchase program that our Board announced on May 7, 2018.

*Schedules and exhibits have been omitted pursuant to Regulation S-K, Item 601(a)(5). The Company will provide a copy of any omitted schedule or exhibit to the Securities and Exchange Commission or its staff upon request.

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

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

Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

		Emerging growth company ☐

Class		Outstanding at ~~October~~April 15, ~~2020~~2021
COMMON STOCK		~~83,535,720~~83,772,604

			Page
PART I.	FINANCIAL INFORMATION		3

ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)		3

	•●	Condensed Consolidated Balance Sheets — ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	3

	•●	Condensed Consolidated Statements of Operations — The ~~quarter and nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	4

	•●	Condensed Consolidated Statements of Comprehensive (Loss) Income — The ~~quarter and nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	4

	•●	Condensed Consolidated Statements of Cash Flows — The ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	5

	•●	Condensed Consolidated Statements of Stockholders’ Equity — The ~~quarter and nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	6

	•●	Notes to Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1917

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		2623

ITEM 4.	Controls and Procedures		2623

PART II.	OTHER INFORMATION		2624

ITEM 1.	Legal Proceedings		2624

ITEM 1A.	Risk Factors		26

~~ITEM 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~		2824

ITEM 6.	Exhibits		2925

	SIGNATURE		3026

(In millions)	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Current portion of finance lease	$	0.5		$	0.6		$	0.3		$	0.9
Current portion of Euro term loan		—			8.9
Current portion of debt		0.5			9.5			0.3			0.9
Non-current portion of Euro term loan		—			41.5
Senior unsecured credit facility		302.0			313.0			214.0			228.0
4.7% senior notes --- due 2025		300.0			300.0			300.0			300.0
3.95% senior notes --- due 2027		400.0			400.0			400.0			400.0
Senior notes --- original issue discount		(1.5	)		(1.7	)		(1.4	)		(1.5	)
Senior notes --- deferred financing costs		(3.7	)		(4.2	)		(3.4	)		(3.5	)
Non-current portion of finance lease and other debt		1.9			2.0			2.8			2.5
Long-term debt		998.7			1,050.6			912.0			925.5
Total debt	$	999.2		$	1,060.1		$	912.3		$	926.4


(In millions)	Composite Material			Engineered Products			Total			Composite Material		Engineered Products			Total
Balance at December 31, 2019	$	12.8		$	39.9		$	52.7
Balance at December 31, 2020										$	7.8	$	35.3		$	43.1
Net revenue billed		(1.4	)		4.6			3.2			1.6		(2.4	)		(0.8	)
Balance at March 31, 2020	$	11.4		$	44.5		$	55.9
Net revenue billed		0.5			(1.7	)		(1.2	)
Balance at June 30, 2020	$	11.9		$	42.8		$	54.7
Net revenue billed		(3.2	)		(2.6	)		(5.8	)
Balance at September 30, 2020	$	8.7		$	40.2		$	48.9
Balance at March 31, 2021										$	9.4	$	32.9		$	42.3

Goodwill and Intangible Assets	Composite			Engineered						Composite			Engineered
(In millions)	Materials			Products			Total			Materials			Products			Total
Balance at December 31, 2019	$	96.2		$	184.2		$	280.4
Amortization expense		(1.2	)		(3.7	)		(4.9	)
Balance at December 31, 2020										$	98.7		$	179.1		$	277.8
Amortization Expense											0.5			1.3			1.8
Currency translation adjustments		1.1		—				1.1			(2.7	)		(2.5	)		(5.2	)
Balance at September 30, 2020	$	96.1		$	180.5		$	276.6
Balance at March 31, 2021										$	96.5		$	177.9		$	274.4

(In millions)	Unrecognized Net Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2019	$	(22.4	)	$	(6.9	)	$	(89.4	)	$	(118.7	)
Other comprehensive income (loss) before reclassifications		—			(2.3	)		22.7			20.4
Amounts reclassified from accumulated other comprehensive loss		(0.2	)		13.3		—				13.1
Other comprehensive income (loss)		(0.2	)		11.0			22.7			33.5
Balance at September 30, 2020	$	(22.6	)	$	4.1		$	(66.7	)	$	(85.2	)

	Product			Product
(In millions)	Warranties			Warranties
Balance as of December 31, 2019	$	5.5
Balance as of December 31, 2020				$	2.6
Warranty expense		1.3			0.2
Deductions and other		(2.3	)		(0.3	)
Balance as of March 31, 2020	$	4.5
Warranty expense		—
Deductions and other		(1.5	)
Balance as of June 30, 2020	$	3.0
Warranty expense		0.4
Deductions and other		(0.4	)
Balance as of September 30, 2020	$	3.0
Balance as of March 31, 2021				$	2.5

			Activity for the Quarter Ended March 31, 2021
	December 31,		Restructuring					Cash					March 31,
(In Millions)	2020		Charge		FX Impact			Paid			Non-Cash		2021
Employee termination	$	14.2	$	10.0	$	(0.6	)	$	(7.7	)	$	—	$	15.9
Impairment and other		—		1.9		—			(2.7	)		0.8		-
Total	$	14.2	$	11.9	$	(0.6	)	$	(10.4	)	$	0.8	$	15.9

	Quarter Ended September 30,									Nine Months Ended September 30,									Quarter Ended March 31
(In millions)	2020			2019			% Change			2020			2019			% Change			2021			2020			% Change
Consolidated operating income (loss)	$	(37.6	)	$	109.9			(134.2	)%	$	34.5		$	327.8			(89.5	)%
Consolidated operating (loss) income																			$	(10.2	)	$	65.7			(115.4	)%
Operating margin		(13.1	)%		19.2	%					2.9	%		18.3	%					(3.3	)%		12.1	%
Composite Materials		(36.6	)		100.1			(136.6	)%		75.0		324.4				(76.9	)%		7.4			91.5			(91.9	)%
Operating margin		(16.4	)%		21.2	%					7.4	%		21.9	%					3.0	%		19.7	%
Engineered Products		(2.7	)	20.3				(113.3	)%		3.3		51.4				(93.6	)%		4.7		6.5				(27.7	)%
Operating margin		(3.8	)%		16.3	%					1.3	%		13.8	%					6.4	%		6.3	%
Corporate & Other		1.7			(10.5	)		(116.2	)%		(43.8	)		(48.0	)		(8.8	)%		(22.3	)		(32.3	)		(31.0	)%

Exhibit No.		Description



~~3.1~~		Certificate of Designations of Series A Junior Participating Preferred Stock of Hexcel Corporation, as filed with the Secretary of the State of Delaware on April 6, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 6, 2020).

~~4.1~~		Rights Agreement, dated as of April 6, 2020, between Hexcel Corporation and American Stock Transfer & Trust Company, LLC, which includes the form of Certificate of Designations as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 6, 2020).

10.1		Mutual Termination Agreement, dated as of April 5, 2020, between Hexcel Corporation, Woodward, Inc. and Genesis Merger Sub, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 6, 2020).

~~10.2~~		~~First~~Second Amendment to Credit Agreement, dated as of ~~September~~January 28, ~~2020,~~2021, by and among Hexcel Corporation, the lenders party thereto, and Citizens Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated ~~September~~January 28, ~~2020)~~2021).*
10.2		Form of Restricted Stock Unit Agreement for Executive Officers (2021) (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).**
10.3		Form of Performance Based Award Agreement for Executive Officers (2021) (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).**
10.4		Form of Option Agreement for Executive Officers (2021) (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).**
10.5		Form of Restricted Stock Unit Agreement for Non-U.S. Executive Officers (2021) (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).**
10.6		Form of Performance Based Award Agreement for Non-U.S. Executive Officers (2021) (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).**
10.7		Form of Option Agreement for Non-U.S. Executive Officers (2021) (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).**
10.8		Form of Restricted Stock Unit Agreement for Non-Employee Directors (Non-Deferred Retainer Grant) (incorporated by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).**
10.9		Form of Restricted Stock Unit Agreement for Non-Employee Directors (Deferred Retainer Grant) (incorporated by reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).**
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.~~2002

101.INS		Inline XBRL Instance Document: The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101.

		Hexcel Corporation

~~October~~April 19, ~~2020~~2021		/s/ ~~Kimberly Hendricks~~Amy S. Evans
(Date)		~~Kimberly Hendricks~~Amy S. Evans
		Senior Vice President, ~~Corporate Controller and~~
		Chief Accounting Officer ~~(on behalf of the registrant and as the~~ ~~registrant’s Principal Accounting Officer)~~