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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“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 by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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

Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets

	(Unaudited)						(Unaudited)
	September 30,			December 31,			June 30,			December 31,
(In millions)	2017			2016			2018			2017
Assets
Current assets:
Cash and cash equivalents	$	119.1		$	35.2		$	39.1		$	60.1
Accounts receivable, net		245.0			245.6			287.2			248.7
Inventories, net		313.4			291.0			305.4			314.0
Contract assets								37.7		―
Prepaid expenses and other current assets		30.0			35.2			38.4			33.9
Total current assets		707.5			607.0			707.8			656.7

Property, plant and equipment		2,662.3			2,378.4			2,800.1			2,743.9
Less accumulated depreciation		(836.8	)		(752.8	)		(920.5	)		(877.6	)
Net property, plant and equipment		1,825.5			1,625.6			1,879.6			1,866.3

Goodwill and other intangible assets		74.0			72.2			145.3			148.7
Investments in affiliated companies		67.1			53.1			44.6			47.7
Other assets		63.1			42.7			58.8			61.5
Total assets	$	2,737.2		$	2,400.6		$	2,836.1		$	2,780.9

Liabilities and Stockholders' Equity
Current liabilities:
Current portions of capital lease and term loan	$	4.2		$	4.3
Current portion of debt							$	9.3		$	4.3
Accounts payable		128.6			137.3			147.1			144.1
Accrued compensation and benefits							68.8				73.0
Accrued liabilities		125.0			130.3			68.6			40.7
Total current liabilities		257.8			271.9			293.8			262.1

Commitments and contingencies (see Note 11)
Commitments and contingencies (see Note 13)

Long-term debt		829.6			684.4			930.1			805.6
Retirement obligations								41.3			45.4
Other non-current liabilities		223.1			199.4			171.1			172.7
Total liabilities		1,310.5			1,155.7			1,436.3			1,285.8

Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares authorized, 107.5 shares and 106.7 shares issued at September 30, 2017 and December 31, 2016, respectively		1.1			1.1
Common stock, $0.01 par value, 200.0 shares authorized, 108.4 shares and 107.8 shares issued at June 30, 2018 and December 31, 2017, respectively								1.1			1.1
Additional paid-in capital		766.5			738.8			792.0			774.3
Retained earnings		1,419.1			1,254.7			1,606.2			1,496.1
Accumulated other comprehensive loss		(57.2	)		(174.4	)		(80.8	)		(45.0	)
		2,129.5			1,820.2			2,318.5			2,226.5
Less – Treasury stock, at cost, 17.7 shares at September 30, 2017, and 15.3 shares at December 31, 2016, respectively.		(702.8	)		(575.3	)
Less – Treasury stock, at cost, 20.9 shares at June 30, 2018, and 18.2 shares at December 31, 2017, respectively.								(918.7	)		(731.4	)
Total stockholders' equity		1,426.7			1,244.9			1,399.8			1,495.1
Total liabilities and stockholders' equity	$	2,737.2		$	2,400.6		$	2,836.1		$	2,780.9

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

	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
	Quarter Ended September 30,				Nine Months Ended September 30,				Quarter Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2017		2016		2017		2016		2018		2017		2018		2017
Net sales	$	491.5	$	500.5	$	1,461.6	$	1,520.8	$	547.5	$	491.3	$	1,087.6	$	970.1
Cost of sales		355.9		364.8		1,052.0		1,091.8		402.7		351.4		800.2		696.1
Gross margin		135.6		135.7		409.6		429.0		144.8		139.9		287.4		274.0
Selling, general and administrative expenses		34.7		35.1		115.7		121.1		35.3		38.1		81.7		81.0
Research and technology expenses		11.8		11.5		36.5		34.8		13.0		12.1		26.8		24.7
Other operating income (expense)										-		-		-		-
Operating income		89.1		89.1		257.4		273.1		96.5		89.7		178.9		168.3
Interest expense, net		7.0		5.5		20.0		16.8		8.7		6.8		16.7		13.0
Non-operating expense		—		—		—		0.4
Income before income taxes, and equity in earnings from affiliated companies		82.1		83.6		237.4		255.9		87.8		82.9		162.2		155.3
Provision for income taxes		13.6		16.1		44.3		67.5		20.0		22.1		34.1		30.7
Income before equity in earnings from affiliated companies		68.5		67.5		193.1		188.4		67.8		60.8		128.1		124.6
Equity in earnings from affiliated companies		1.2		0.7		2.8		1.9		1.0		0.8		2.3		1.6
Net income	$	69.7	$	68.2	$	195.9	$	190.3	$	68.8	$	61.6	$	130.4	$	126.2
Basic net income per common share	$	0.77	$	0.74	$	2.16	$	2.04	$	0.77	$	0.68	$	1.45	$	1.39
Diluted net income per common share	$	0.76	$	0.72	$	2.13	$	2.01	$	0.76	$	0.67	$	1.44	$	1.37
Dividends per share	$	0.125	$	0.11	$	0.345	$	0.32	$	0.125	$	0.11	$	0.25	$	0.22
Weighted-average common shares:
Basic		90.1		92.7		90.7		93.1		88.8		90.7		89.4		91.1
Diluted		91.4		94.1		92.1		94.6		89.9		92.0		90.5		92.4

(Unaudited)

(Unaudited)

Quarter Ended September 30,

Nine Months Ended September 30,

(In millions)

2017

2016

2017

2016

Net Income

$
69.7

$
68.2

$
195.9

$
190.3

Currency translation adjustments

28.7

(0.4
)

87.2

(11.0
)
Net unrealized pension and other benefit actuarial gains
and prior service credits

(0.6
)

0.4

(1.6
)

1.9

Net unrealized gains on financial instruments (net of tax)

7.7

1.7

31.6

0.2

Total other comprehensive income (loss)

35.8

1.7

117.2

(8.9
)
Comprehensive income

$
105.5

$
69.9

$
313.1

$
181.4

	(Unaudited)						(Unaudited)
	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2018			2017			2018			2017
Net Income	$	68.8		$	61.6		$	130.4		$	126.2
Currency translation adjustments		(57.4	)		49.4			(25.8	)		58.5
Net unrealized gains (losses) on pension and other retirement benefits		1.3			(0.8	)		0.5			(1.0	)
Net unrealized (losses) gains on financial instruments (net of tax)		(16.9	)		16.5			(12.1	)		23.9
Total other comprehensive income		(73.0	)		65.1			(37.4	)		81.4
Comprehensive (loss) income	$	(4.2	)	$	126.7		$	93.0		$	207.6

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

	(Unaudited)						(Unaudited)
	Nine Months Ended September 30,						Six Months Ended June 30,
(In millions)	2017			2016			2018			2017
Cash flows from operating activities
Net income	$	195.9		$	190.3		$	130.4		$	126.2
Reconciliation to net cash provided by operating activities:
Depreciation and amortization		76.3			69.0			59.6			49.5
Amortization related to financing		0.6			1.4			0.7			0.4
Deferred income taxes		15.1			50.5			12.7			2.0
Equity in earnings from affiliated companies		(2.8	)		(1.9	)		(2.3	)		(1.6	)
Stock-based compensation		15.5			13.6			12.0			13.3
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		19.7			(16.8	)
(Increase) decrease in accounts receivable								(43.4	)		2.4
Increase in inventories		(6.7	)		(5.0	)		(28.6	)		(11.6	)
Decrease (increase) in prepaid expenses and other current assets		1.4			(7.3	)
Decrease in accounts payable/accrued liabilities		(9.8	)		(9.1	)
Increase in prepaid expenses and other current assets								(12.9	)		(2.9	)
Increase in accounts payable/accrued liabilities								24.7			5.0
Other – net		3.3			2.1			4.3			(0.3	)
Net cash provided by operating activities		308.5			286.8			157.2			182.4

Cash flows from investing activities
Capital expenditures		(221.3	)		(231.8	)		(101.9	)		(169.2	)
Acquisition of business and investment in affiliate		(12.0	)		(33.6	)	―				(10.0	)
Net cash used for investing activities		(233.3	)		(265.4	)		(101.9	)		(179.2	)

Cash flows from financing activities
Proceeds from senior notes due 2027 (including original issue discount of $1.7)		398.3		―			―				398.3
Issuance costs related to senior notes due 2027		(3.7	)	―			―				(3.7	)
Proceeds from settlement of treasury locks associated with senior notes due 2027		10.0		―			―				10.0
Proceeds from Euro term loan		37.4			27.4		―				37.4
Repayments of Euro term loan		(4.1	)	―				(4.2	)		(4.1	)
Borrowing from senior unsecured credit facility	―				63.0			379.0			252.0
Issuance costs related to credit facility	―				(1.7	)
Repayment of senior unsecured credit facility		(290.0	)	―				(244.0	)		(552.0	)
Other debt, net		(0.4	)		(0.4	)
Repayment of capital lease obligation and other debt, net							―				0.2
Dividends paid		(31.3	)		(29.7	)		(22.4	)		(20.1	)
Repurchase of stock		(122.0	)		(84.9	)		(181.0	)		(120.8	)
Activity under stock plans		6.8			(1.0	)		(0.7	)		5.6
Net cash provided by (used in) financing activities		1.0			(27.3	)
Net cash (used for) provided by financing activities								(73.3	)		2.8
Effect of exchange rate changes on cash and cash equivalents		7.7			(0.2	)		(3.0	)		4.3
Net increase (decrease) in cash and cash equivalents		83.9			(6.1	)
Net (decrease) increase in cash and cash equivalents								(21.0	)		10.3
Cash and cash equivalents at beginning of period		35.2		51.8				60.1		35.2
Cash and cash equivalents at end of period		119.1		45.7			$	39.1		$	45.5
Supplemental data:
Accrual basis additions to property, plant and equipment	$	218.0		$	232.6		$	90.0		$	170.1

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~~Condensed Consolidated Financial statements are those of Hexcel Corporation. Refer to Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 for a discussion of our significant accounting policies. Significant changes to our accounting policies subsequent to the filing of our Form 10-K, relate solely to the adoption of Topic 606, Revenue from Contracts with Customers, are discussed below in Recent Accounting Pronouncements as well as in Note 9.

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

In the opinion of management, the Condensed Consolidated Financial Statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations and cash flows for the interim periods presented. The Condensed Consolidated Balance Sheet as of December 31, ~~2016~~2017 was derived from the audited ~~2016~~2017 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 ~~2016~~2017 Annual Report on Form ~~10-K filed with~~10-K. Within the ~~SEC on February 9, 2017.~~Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2017, borrowings and repayments related to our revolving credit facility previously presented net within financing activities have been presented gross to conform to the current year presentation.

~~We have~~At June 30, 2018, we had a 50% equity ~~ownership~~ investment in ~~a joint venture~~ Aerospace Composites Malaysia Sdn. Bhd. (“ACM”). This investment is accounted for using the equity method of accounting. In 2016, the Company invested a total of $30.0 million in three new affiliates. In 2017, the Company invested an additional $12 million in two of these affiliates. The investments are each below a 20% ownership level and the Company accounts for these investments using the cost method.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2014-09 (ASU 2014-09), “Revenue from Contracts with ~~Customers”~~Customers (“ASC 606”). The update ~~clarifies~~clarified the principles for recognizing revenue and ~~develops~~developed a common revenue standard for all industries. ~~The~~We adopted this new standard is effective for the first quarter of 2018. Our implementation efforts include the identification of revenue within the scope of the standard, the evaluation of revenue contracts under the guidance and assessing the qualitative and quantitative impacts of the new standard on our financial statements. We are in the process of assessing the anticipated impact of the amended standard on our financial statements. We have certain contracts under which we produce products with no alternative use and the Company has an enforceable right to payment. As a result, the Company will be required to record revenue for these contracts over time as opposed to at the time of shipment as we do today.

We expect to complete our evaluation by the end of fiscal 2017, which will allow us to determine the impact of the new standard on our consolidated results of operations and financial condition. The Company plans to adopt the new standard on January 1, 2018, using the modified retrospective method.

~~In July 2015,~~ As a result of adopting this guidance under the ~~FASB issued Accounting Standards Update No.2015-11 (“ASU 2015-11”),~~ ~~Simplifying~~modified retrospective method we adjusted the ~~Measurement~~opening balance of ~~Inventory.~~ ~~The update requires that inventory within~~our retained earnings by approximately $3.8 million, which represented the ~~scope~~cumulative net earnings effect of revenue recognized over time prior to the ~~guidance be measured at~~date of adoption, related to those contracts whose performance obligations were not fully satisfied by the lower of cost and net realizable value. The Company adopted this ASU in the first quarter of 2017 with no material impact on our consolidated balance sheets, results of operations and financial condition.adoption date.

In February 2016, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The Company will adopt this ~~ASU~~standard on January 1, 2019. We are ~~currently evaluating~~in the process of assessing the impact ~~of adopting~~ this ~~guidance~~new standard will have on our ~~consolidated balance sheets, results~~financial statements. We will adopt the provisions of ~~operations and financial condition.~~

~~In March 2016,~~this standard using the ~~FASB issued Accounting Standards Update No. 2016-06 (ASU 2016-06),~~ ~~Contingent put and call options in debt instruments.~~ ~~The new guidance clarifies that an exercise contingency does not need~~modified retrospective method which allows companies to be evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis. The new guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within those years. We adopted ASU 2016-06 effective forrecognize existing leases at the ~~quarter ended March 31, 2017 with no material impact on our consolidated balance sheets, results~~adoption date regardless of ~~operations and financial condition.~~when they were entered into.

~~In August of 2016, the FASB issued Accounting Standards Update No. 2016-15 (ASU 2016-15)~~ ~~"Classification of Certain Cash Receipts and Cash Payments”~~ which clarifies the classification of certain types of cash flows. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2017. Early adoption beginning in 2016 was permitted. Retrospective application is required. The Company is not early adopting and expects this ASU to have a minimal impact on the Company’s Statements of Cash Flows.

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04),~~ ~~Simplifying the test for Goodwill Impairment,~~ which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted ASU 2017-04 effective for the quarter ended March 31, 2017, for use in its fourth quarter annual goodwill impairment testing.

In March 2017, the FASB issued Accounting Standards Update No. 2017-07 (ASU 2017-07), Compensation-Retirement Benefits, that amends the presentation of net periodic pension cost and net periodic postretirement benefit cost. This amendment ~~will require an entity~~requires entities to disaggregate the service cost component from the other components of net periodic benefit cost, to report the service cost component in the same line item as other compensation costs and to report the other components of net periodic benefit cost separately as a line item below operating income on our statement of operations. In addition, capitalization of net periodic benefit cost in assets ~~will be~~is limited to the service cost component. ~~This~~We adopted this amendment ~~is effective~~ on January 1, 2018. ~~This amendment is required~~The adoption did not have a material impact to be adopted (i) retrospectively with respect to the disaggregation of the service cost component from the other components of net periodic benefit cost and the separate reporting of the other components of net periodic benefit cost outside of operating income and (ii) prospectively with respect to the capitalization in assets of the service cost component. We are currently evaluating the impact of this amendment on our financial ~~position, results of operations and cash flows.~~statements or disclosures.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12 (ASU 2017-12), Targeted Improvement to Accounting for Hedging Activities, which better ~~align~~aligns hedge accounting with an organization’s risk management activities in the financial statements. In addition, the ~~ASU simplifies~~standard simplified the application of hedge accounting guidance in areas where practice issues exist. ~~The ASU~~We adopted this standard on January 1, 2018, with no material impact to our results of operations, or financial position.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02 (ASU 2018-02), Income Statement—Reporting Comprehensive Income (Topic 220), which amends the previous guidance to allow for certain tax effects “stranded” in accumulated other comprehensive income, which are impacted by the Tax Cuts and Jobs Act (the “Act”), to be reclassified from accumulated other comprehensive income into retained earnings. This amendment pertains only to those items impacted by the new tax law and will not apply to any future tax effects stranded in accumulated other comprehensive income. This standard is effective for fiscal years beginning after December 15, 2018, and ~~interim periods within those fiscal years. Early~~ allows for early adoption. The Company elected to early adopt this standard during the quarter ended March 31, 2018. As a result of the adoption ~~is permitted, including interim periods within those years. We expect~~of this ~~ASU to have a minimal impact on our consolidated~~standard, the Company reduced the opening balance ~~sheets, results~~ of ~~operations and financial condition.~~retained earnings by approximately $1.6 million.

	Quarter Ended September 30,				Nine Months Ended September 30,				Quarter Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2017		2016		2017		2016		2018		2017		2018		2017
Basic net income per common share:
Net income	$	69.7	$	68.2	$	195.9	$	190.3	$	68.8	$	61.6	$	130.4	$	126.2
Weighted average common shares outstanding		90.1		92.7		90.7		93.1		88.8		90.7		89.4		91.1

Basic net income per common share	$	0.77	$	0.74	$	2.16	$	2.04	$	0.77	$	0.68	$	1.45	$	1.39

Diluted net income per common share:
Net income		69.7		68.2		195.9		190.3		68.8		61.6		130.4		126.2

Weighted average common shares outstanding — Basic		90.1		92.7		90.7		93.1		88.8		90.7		89.4		91.1
Plus incremental shares from assumed conversions:
Restricted stock units		0.4		0.4		0.4		0.5		0.4		0.4		0.4		0.4
Stock options		0.9		1.0		1.0		1.0		0.7		0.9		0.7		0.9
Weighted average common shares outstanding — Dilutive		91.4		94.1		92.1		94.6		89.9		92.0		90.5		92.4

Diluted net income per common share	$	0.76	$	0.72	$	2.13	$	2.01	$	0.76	$	0.67	$	1.44	$	1.37

Total shares underlying stock options of 0.1 ~~million and 0.2~~ million were excluded from the computation of diluted net income per share for both the ~~quarter~~three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, as they were anti-dilutive. Total shares underlying stock options of ~~0.4~~0.1 million and ~~0.5~~0.2 million, respectively, were excluded from the computation of diluted net income per share for the ~~quarter~~three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, as they were anti-dilutive.

	September 30,		December 31,		June 30,		December 31,
(In millions)	2017		2016		2018		2017
Raw materials	$	133.6	$	120.6	$	137.0	$	126.7
Work in progress		46.8		53.7		49.6		52.1
Finished goods		133.0		116.7		118.8		135.2
Total Inventory	$	313.4	$	291.0	$	305.4	$	314.0

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 ~~quarters~~three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 were as follows:

	Quarter Ended September 30,					Nine Months Ended September 30,				Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2017		2016			2017		2016		2018		2017		2018		2017
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.4	$	0.3		$	1.1	$	0.9	$	0.3	$	0.4	$	0.6	$	0.7
Interest cost		0.1		0.2			0.4		0.5	0.2		0.1		0.3		0.3
Settlement expense		0.2		―			0.3		―	―		0.1		―		0.1
Net amortization and deferral		0.1			—		0.3		0.2	―		0.1		―		0.2
Net periodic benefit cost	$	0.8	$	0.5		$	2.1	$	1.6	$	0.5	$	0.7	$	0.9	$	1.3

		September 30, 2017		December 31, 2016
(In millions)					June 30, 2018		December 31, 2017
Amounts recognized on the balance sheet:
Accrued liabilities	$	1.1	$	1.1	$	4.8	$	4.5
Other non-current liabilities		20.3		18.6		17.4	16.9
	$	21.4	$	19.7	$	22.2	$	21.4

	Quarter Ended September 30,								Nine Months Ended September 30,								Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2017				2016				2017				2016				2018			2017			2018			2017
European Defined Benefit Retirement Plans
Service cost	$	0.3			$	0.2			$	0.7			$	0.6			$	0.2		$	0.2		$	0.5		$	0.4
Interest cost		1.1				1.5				3.3				4.4			1.1			1.1			2.2			2.2
Expected return on plan assets			(2.0	)			(2.1	)			(6.1	)			(6.2	)		(2.3	)		(2.1	)		(4.7	)		(4.1	)
Net amortization and deferral			—			0.2				0.2				0.5				0.1		0.1			0.2			0.2
Net periodic benefit credit	$		(0.6	)	$		(0.2	)	$		(1.9	)	$		(0.7	)	$	(0.9	)	$	(0.7	)	$	(1.8	)	$	(1.3	)

		September 30, 2017			December 31, 2016	June 30, 2018		December 31, 2017
Amounts recognized on the balance sheet:
Noncurrent asset	$	32.9		$	23.9	$	36.6	$	32.2

Accrued liabilities			1.0		0.4		1.2		0.3
Other non-current liabilities			19.7		16.2		20.7		19.6
Total accrued benefit	$	20.7		$	16.6	$	21.9	$	19.9

All costs related to our pensions are included as a component of operating income in our consolidated statements of operations. For the three months ended June 30, 2018 and 2017, amounts unrelated to service costs were a benefit of $0.9 million and $0.6 million, respectively, and for the six months ended June 30, 2018 and 2017, amounts unrelated to service costs were a benefit of $2.0 million and $1.1 million, respectively.

We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred. We ~~did not make any contributions under the provisions of these non-qualified plans in the third quarter of 2017 and we~~ have contributed approximately ~~$0.1~~$0.8 million in the first ~~nine~~six months of ~~2017~~2018 to cover unfunded benefits. We expect to contribute a total of ~~$1.1~~$4.6 million in ~~2017.~~2018 to cover unfunded benefits. We contributed $0.2 million to our U.S. non-qualified defined benefit retirement plans during ~~2016.~~the six months ended June 30, 2017.

We contributed ~~$0.9~~$2.5 million and ~~$1.2~~$2.0 million to our European defined benefit retirement plans in the ~~third quarters of 2017 and 2016, respectively. Contributions to the defined benefit retirement plans were $2.8 million and $4.9 million for the nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. We plan to contribute approximately ~~$4.6~~$5.0 million during ~~2017~~2018 to our European plans. ~~We contributed $6.0 million to our European plans during 2016.~~

We recorded ~~$0.3~~$0.6 million and $0.9 million of net amortization gain deferral for the ~~quarter~~three and ~~$0.9~~six months ended June 30, 2018, and $0.3 million and $0.6 million of net amortization gain deferral for the ~~nine~~three and six months ended ~~September~~June 30, 2017. Net periodic benefit

costs of our postretirement health care and life insurance benefit plans for the ~~quarters~~three and ~~nine~~six months ended ~~September~~June 30, 2018 and 2017 ~~and 2016~~ were ~~not material.~~immaterial.

	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.5	$	0.5	$	0.5	$	0.5
Other non-current liabilities		3.7		3.9	3.2		3.6
Total accrued benefit	$	4.2	$	4.4	$	3.7	$	4.1

In connection with our postretirement plans, we contributed about ~~$0.1~~$0.3 million during ~~each of~~ the ~~quarters~~six months ended ~~September~~June 30, ~~2017~~2018, and ~~2016.~~$0.2 million during the six months ended June 30, 2017. We periodically fund our postretirement plans to pay covered expenses as they are incurred. We expect to contribute approximately ~~$0.5~~$0.4 million in ~~2017~~2018 to cover unfunded benefits. ~~We contributed $0.2 million to our postretirement plans during 2016.~~


(In millions)	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Current portion of capital lease	$	—		$	0.5
Current portion of Euro term loan		4.2			3.8		$	9.3		$	4.3
Current portion of debt	$	4.2		$	4.3			9.3			4.3
Non-current portion of Euro term loan		62.4			22.6			52.3			63.3
Senior unsecured credit facility- revolving loan due 2021		75.0			365.0
Senior unsecured credit facility - due 2021								185.0			50.0
4.7% senior notes due 2025		300.0			300.0			300.0			300.0
Senior notes due 2025 - original issue discount and deferred financing costs		(2.9	)		(3.2	)
3.95% senior notes due 2027		400.0		―				400.0			400.0
Senior notes due 2027 - original issue discount and deferred financing costs		(5.1	)	―
Senior notes original issue discount								(2.1	)		(2.3	)
Senior notes deferred financing costs								(5.2	)		(5.5	)
Other debt		0.2		―				0.1			0.1
Long-term debt		829.6			684.4			930.1			805.6
Total debt	$	833.8		$	688.7		$	939.4		$	809.9

In ~~February~~ 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 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 5.95%. The net proceeds of approximately $394.6 million were initially used to repay, in part, $350 million of our Senior Unsecured Revolving Credit Facility (the “Facility”) and the remainder was used for general purposes including share repurchases. The conditions and covenants related to the senior notes are less restrictive than those of our Facility. The effective interest rate for the ~~outstanding period in the first nine~~six months ended June 30, 2018 was ~~3.86%~~3.88% inclusive of approximately a 0.25% benefit of treasury locks. The fair value of the senior notes due in 2027 based on quoted prices utilizing Level 2 inputs was ~~$410.0~~$390.1 million at ~~September~~June 30, ~~2017.~~2018.

In ~~August~~ 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 ~~conditions and covenants related to the senior notes are less restrictive than those of our Facility. The~~ effective interest rate for the ~~first nine-months of 2017~~six months ended June 30, 2018 was ~~4.85%~~4.84%. The fair value of the notes due in 2025 based on quoted prices utilizing Level 2 inputs was ~~$323.4~~$306.1 million at ~~September~~June 30, ~~2017.~~2018.

The Company has a revolving credit facility (the “Facility”) that allows up to $700 million of borrowings. The Facility ~~were $75 million, which approximates fair value using Level 2 inputs.~~matures in June 2021. The ~~Company utilized its~~interest rate for the Facility at ~~various borrowing levels with $451 million and $524 million representing~~June 30, 2018 is LIBOR + 1.25%. The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.875%, depending upon the highest amounts borrowed within the nine months ended September 30, 2017 and 2016, respectively. The Facility permits us to issue letters of credit up to an aggregate amount of $40 million. Outstanding letters of credit reduce the amount available for borrowing under our revolving loan. As of September 30, 2017, we had no outstanding letters of credit under the Facility, resulting in undrawn availability under the Facility as of September 30, 2017 of $625.0 million.Company’s leverage ratio.

The Facility contains financial and other covenants, including, but not limited to, restrictions on the incurrence of debt and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. In accordance with the terms of the Facility, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA, as defined in the ~~credit agreement,~~Credit Agreement, to interest expense) and may not exceed a maximum leverage ratio of 3.50 (based on the ratio of total debt to EBITDA) throughout the term of the Facility. In addition, the Facility contains other terms and conditions such as customary representations and warranties, additional covenants and customary events of default.

As of June 30, 2018, total borrowings under the Facility were $185.0 million, which approximates fair value using Level 2 inputs. The Facility permits us to issue letters of credit up to an aggregate amount of $40 million. Outstanding letters of credit reduce the amount available for borrowing under our revolving loan. As of June 30, 2018, there were no outstanding letters of credit under the Facility, resulting in undrawn availability under the Facility as of June 30, 2018 of $515.0 million. The weighted average interest rate onfor the Facility was ~~2.36%~~3.17% for the ~~nine~~six months ~~of 2017. The average interest rate was 1.8% for 2016.~~ended June 30, 2018.

In ~~June~~ 2016, we entered into a €60 million term loan. The loan has two tranches of which the first tranche for €25 million has a rate of Euribor +1.2% and a final maturity date of June 30, ~~2023. The first tranche is repayable in seven equal annual installments, which began on June 30, 2017. The~~2023, and a second tranche for €35 million has a rate of Euribor +1.25% ~~and~~with a final maturity date of June 30, 2024. The ~~first~~loans are payable in annual ~~amortization payment~~installments that began on June 30, 2017, for the ~~second~~first tranche, ~~is due~~and beginning on June 30, ~~2019.~~2019, for the second. There is a zero percent floor on the Euribor. ~~The~~Amounts outstanding ~~amounts~~under this loan at ~~September~~June 30, ~~2017 and December 31, 2016~~2018 were ~~€56.4~~$61.6 million ~~(or $66.6 million) and €25 million (or $26.4 million),~~ which approximates fair ~~value.~~value using Level 2 inputs under the market approach. The ~~term loan~~facility is guaranteed by Hexcel Corporation.

As of ~~September~~June 30, ~~2017,~~2018, the Company had ~~agreements to~~interest rate swaps, having a combined notional value of $50.0 million, that swap ~~$50 million of~~ floating rate obligations for fixed rate obligations at an average rate of ~~1.087%~~1.09% against LIBOR in U.S. ~~dollars, which matures~~dollars. Both swaps mature in September 2019. The swaps ~~were~~are accounted for as cash flow hedges of our floating rate bank ~~loans.~~loan. To ensure the swaps were highly effective, all of the ~~principal~~critical terms of the swaps matched the terms of the bank ~~loans.~~loan. The fair value of the interest rate swaps ~~were assets~~was an asset of ~~$0.6~~$0.9 million and ~~$0.7~~$0.8 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

~~In December 2016,~~At June 30 2018, we had interest swaps related to European debt obligations which had a combined notional value of approximately €52.9 million. These derivatives swapped ~~€25.0 million of~~ floating rate obligations for fixed rate obligations at a weighted average rate of ~~0.365%~~0.51% against ~~EURIBOR~~Euribor in Euros. The ~~swap amortizes over seven equal annual installments, which began~~swaps amortize through the final maturities of the obligations on June 30, ~~2017 until the final maturity on~~2023 and June 30, ~~2023. In April 2017, we swapped €35.0 million of floating rate obligations at a rate of 0.59% against EURIBOR~~2024, in ~~Euros.~~annual installments. The ~~swap amortizes over six unequal annual installments beginning June 30, 2019 until the final maturity on June 30, 2024. Both~~ derivatives are accounted for as cash flow hedges of the floating rate ~~Euro~~ term ~~loan.~~loans. To ensure the ~~swap is~~swaps are highly effective, all of the principal terms of the swap matched the terms of the bank ~~loan.~~loans. The fair value of the interest rate swaps ~~were liabilities~~was a liability of $0.4 million ~~and $0.1 million~~both at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016, respectively.~~2017.

The Company ~~also uses~~had treasury ~~locks~~lock agreements to protect against unfavorable movements in the benchmark treasury rate related to ~~forecasted debt issuances. In September 2016 and February 2017,~~ the ~~Company entered into interest rate treasury lock agreements with notional values~~issuance of ~~$150 million and $100 million for the 2017 note issuance. We accounted for these interest rate treasury locks~~our 3.95% Senior Unsecured Notes. These hedges were designated as cash flow hedges sothus any change in fair value was recorded ~~into~~as a component of other comprehensive ~~income and then amortized into interest expense over the life~~income. As part of the ~~bonds upon issuance. On February 15, 2017, we issued~~issuance of our senior notes, ~~due 2027 and received $10.0~~we net settled these derivatives for $10 million in ~~cash in settlement~~cash. As a result of settling these derivatives the ~~derivatives. The amount~~previously deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The effect of these settled treasury locks ~~is to~~will reduce the effective interest rate on ~~these~~the senior notes by approximately 0.25%.

A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British Pound sterling. We entered into contracts to exchange U.S. dollars for Euros and British Pound sterling through ~~March~~December 2020, which we account for as cash flow hedges. The aggregate notional amount of these contracts was ~~$317.6~~$399.5 million and ~~$423.8~~$285.4 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, 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~~For effective portion of the hedges, ~~gains~~losses of ~~$9.7~~$20.9 million and ~~$31.7~~$12.5 million, respectively, were recorded in other comprehensive income (“OCI”) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, and ~~losses~~gains of ~~$1.4~~$18.6 million and ~~$10.7~~$22.0 million ~~respectively, were recorded in OCI~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017, respectively. We classified the carrying amount of these contracts of ~~$13.5~~$5.2 million in other assets and ~~$4.3~~$9.2 million in other liabilities on the Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2017~~2018 and ~~$33.9~~$14.7 million in other assets and $2.8 million in other liabilities at December 31, ~~2016. During the three and nine months ended September 30, 2017, we~~2017. We recognized net ~~losses~~gains of ~~$0.6~~$1.1 million and ~~$11.4~~net gains of $3.4 million in gross margin ~~respectively. During~~during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, we recognized net~~2018, and losses of ~~$5.0~~$4.2 million and ~~$13.5~~$10.8 million ~~in gross margin,~~for the three and six months ended June 30, 2017, respectively. For the ~~quarters~~three and ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016,~~respectively, hedge ineffectiveness was immaterial.

In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the re-measurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the quarters ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, we recognized net foreign exchange losses of $6.0 million and gains of ~~$4.0 million and $0.8~~$9.9 million, respectively, in the Condensed Consolidated Statements of Operations. During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, we recognized net foreign exchange losses of $4.0 million and gains of ~~$15.4 million and of $3.4~~$11.4 million, respectively, in the Condensed Consolidated Statements of Operations. The net foreign exchange impact recognized from these hedges offset the translation exposure of these transactions. The carrying amount of the contracts for ~~asset and liability~~ derivatives not designated as hedging instruments was ~~$0.1~~$0.6 million classified in other assets and ~~$1.6~~$1.0 million in other liabilities, and ~~$1.0~~$1.3 million classified in other assets, and ~~$0.3~~$0.1 million in other liabilities on the ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 Condensed Consolidated Balance Sheets, respectively.

The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and ~~nine~~six months ended ~~September~~June 30, 2018 and June 30, 2017 ~~and 2016~~ was as follows:

We expect to reclassify ~~$1.7~~$1.1 million of unrealized ~~gains~~losses into earnings over the next twelve months as the ~~hedged sales are~~underlying hedge item, revenue, is recorded.

The ~~income tax provisions for the third quarter and nine months ended September 30, 2017 were $13.6 million and $44.3 million. The~~ effective tax rate for the ~~third~~current quarter was 16.5% as the quarter benefitted from the impact of tax credits identified during the quarter as well as deductions associated with share-based compensation payments. The third quarter provision also included a non-recurring discrete tax benefit of $4.2 million from the reversal of provisions for uncertain tax provisions. The income tax provision22.8% compared to 26.7% for the quarter ended ~~September~~June 30, ~~2016 was $16.1 million, including~~2017. The current quarter benefitted from a ~~net~~discrete benefit of ~~$6.6~~$1.3 million ~~from~~related to the release of reserves for uncertain tax positions. The effective tax rate for the six months ended June 30, 2018, was 21% compared to 19.8% for the six months ended June 30, 2017. The provision for the ~~first nine~~six months ofended June 30, 2017 ~~also~~ included a nonrecurring discrete benefit of $9.1 million, ~~from~~which related to the release of a valuation allowance in a foreign jurisdiction. The effective tax rate, excluding these benefits, for the ~~nine months~~first half of ~~2017~~2018 was ~~24.2%~~21.8% as compared to ~~30.5%~~25.7% in ~~2016,~~2017, as both periods benefitted from deductions associated with share-based compensation ~~payments~~payments.

The Tax Cuts and Jobs Act (the “Act”) enacted in ~~addition~~2017, resulted in the U.S. Federal income tax rate being reduced to 21% from 35% for the same period last year. During the measurement period, which is one year from the date of enactment, or the completion of all estimates made in connection with the Act, companies are permitted to make additional income tax adjustments and revisions of estimates related to the Act. Accordingly, the impact resulting fromthe Act is subject to further refinement of the Company’s calculations, changes in interpretation and assumptions, or issuance of additional guidance and regulations by the relevant tax ~~credits identified in 2017.~~
authorities. During the quarter and six months ended June 30, 2018, there were no adjustments made to previously made estimates related to the Act.

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 ~~do not have any significant assets or liabilities that utilize Level 3 inputs. In addition, we~~ have no assets or liabilities that utilize Level 1 inputs. However, we have a significant amount of derivative instruments classified as liabilities and assets which utilize Level 2 inputs, and one liability that utilizes Level 3 inputs.

For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value. The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). The fair value of these assets and liabilities was approximately ~~$14.1~~$6.7 million and ~~$6.3~~$10.6 million, respectively, at ~~September~~June 30, ~~2017.~~2018. In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the Consolidated Balance Sheet.

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

Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 that would reduce the receivable amount owed, if any, to the Company.

Liabilities classified as Level 3— we have a liability for $3.0 million, which represented contingent consideration, that was recognized in connection with an acquisition completed during the prior year. This amount was estimated based on certain contractual stipulations which requires payments to be made to the seller in the future based upon the achievement of certain results. We used forecasted results which were discounted using an internally derived discount rate. Future amounts payable may differ from this estimate by the difference between the actual and forecasted results. The amount of interest related to this liability accreted during the quarter and six months was not significant.

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. The majority of our sales are covered under long-term agreements, with the remaining sales coming from POs. Our agreements (including POs) generally do not have multiple performance obligations and thus do not require an allocation of a single price amongst multiple goods or services. All pricing is fixed and determinable. A majority of our revenue is earned when goods are shipped to a customer. In instances where our customers acquire our goods related to government contracts, the contracts are typically subject to terms similar, or equal to, the Federal Acquisition Regulation Part 52.249-2, which contains a termination for convenience clause (“T for C”). T for C allows for a customer to cancel a contract at any point for any reason, but also requires that the customer pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit relative to the work performed. Generally these arrangements relate to unique products manufactured to customer specifications and have no alternative use.

Upon adoption of ASC 606 we recognize revenue over time for those agreements that have T for C, and where the products being produced have no alternative use. Prior to the adoption date, revenue related to these agreements was recognized when the goods were shipped, however, as a result of the adoption of ASC 606 a portion of our revenue may be earned in periods earlier than it would have been in prior years. The cumulative adjustment to retained earnings upon adoption represents those earnings, which would have been recognized in the previous year had ASC 606 been in effect during that time. As our production cycle is typically six months or less, it is expected that goods related to the revenue represented in that adjustment will be shipped and billed within the current year. Less than half of our agreements contain provisions which would require revenue to be recognized over time. For revenue recognized over time, we estimate the amount of revenue earned at a given point during the production cycle based on certain costs factors such as raw materials and labor, incurred to date, plus a reasonable profit. We believe this method, which is the cost-to-cost input method, best estimates the revenue recognizable for T for C agreements.

We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the three and six months ended June 30, 2018 and 2017:

Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled. Contract assets are included in our Consolidated Balance Sheets as a component of current assets. The activity related to contracts assets for the six months ended June 30, 2018 is as follows:

Upon adoption of ASC 606, the Company recorded $38.1 million of contract assets for revenue that was unbilled at December 31, 2017, and a $33.0 million reduction in inventory representing the value of the inventory associated with the revenue recognized over time, with the offset recorded to the opening balance of retained earnings (less $1.3 million in taxes). The amount of contract assets billed, and subsequently reclassified to trade accounts receivable, during the quarter ended June 30, 2018, was approximately $35.0 million. Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional.

The financial results were not significantly impacted by the adoption of ASC 606. Under ASC 606 revenue and gross margin for the quarter ended June 30, 2018 increased $2.8 million and $0.6 million, respectively, then it would have been under ASC 605. For the six months ended June 30, 2018, the impact of ASC 606 to both revenue and gross margin was immaterial. Diluted earnings per share increased under one half of one cent for the quarter, with no material impact on earnings per share for the six months ended June 30, 2018. At June 30, 2018 our inventory was $32.8 million lower as a result of the impact of ASC 606.

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~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 were as follows:

	(Unaudited)									(Unaudited)
	Composite		Engineered		Corporate &					Composite		Engineered		Corporate &
(In millions	Materials		Products		Other (a)			Total
Third Quarter 2017
(In millions)										Materials		Products		Other (a)			Total
Second Quarter 2018
Net sales to external customers	$	398.9	$	92.6	$	—		$	491.5	$	445.8	$	101.7	$	—		$	547.5
Intersegment sales		16.4		—		(16.4	)		—		20.3		—		(20.3	)		—
Total sales		415.3		92.6		(16.4	)		491.5	$	466.1	$	101.7	$	(20.3	)	$	547.5
Operating income		90.0		12.1		(13.0	)		89.1		93.1		15.9		(12.5	)		96.5
Depreciation and amortization		24.8		1.9		0.1			26.8		27.5		2.3		—			29.8
Stock-based compensation		1.1		0.1		1.0			2.2		0.9		0.1		1.1			2.1
Accrual basis additions to capital expenditures		47.4		0.5		—			47.9		43.4		1.3		—			44.7

Third Quarter 2016
Second Quarter 2017
Net sales to external customers	$	398.2	$	102.3	$	—		$	500.5	$	397.3	$	94.0	$	—		$	491.3
Intersegment sales		16.2		—		(16.2	)		—		15.1		—		(15.1	)		—
Total sales		414.4		102.3		(16.2	)		500.5	$	412.4	$	94.0	$	(15.1	)	$	491.3
Operating income		88.8		12.9		(12.6	)		89.1		92.1		12.1		(14.5	)		89.7
Depreciation and amortization		21.7		1.8		—			23.5		23.3		1.8		—			25.1
Stock-based compensation		0.7		0.1		—			0.8		1.2		0.2		1.0			2.4
Accrual basis additions to capital expenditures		84.4		5.9		0.1			90.4		74.5		2.7		—			77.2

Nine Months Ended September 30, 2017
Six Months Ended June 30, 2018
Net sales to external customers	$	1,183.7	$	277.9	$	—		$	1,461.6	$	890.4	$	197.2	$	—		$	1,087.6
Intersegment sales		48.6		—		(48.6	)		—		39.5		—		(39.5	)		—
Total sales		1,232.3		277.9		(48.6	)		1,461.6	$	929.9	$	197.2	$	(39.5	)	$	1,087.6
Operating income		264.0		37.2		(43.8	)		257.4		184.1		25.8		(31.0	)		178.9
Depreciation and amortization		70.6		5.6		0.1			76.3		55.0		4.6		—			59.6
Stock-based compensation		5.7		1.0		8.8			15.5		4.5		0.8		6.7			12.0
Accrual basis additions to capital expenditures		208.5		9.5		—			218.0		88.7		1.3		—			90.0

Nine Months Ended September 30, 2016
Six Months Ended June 30, 2017
Net sales to external customers	$	1,219.3	$	301.5	$	—		$	1,520.8	$	784.8	$	185.3	$	—		$	970.1
Intersegment sales		53.2		—		(53.2	)		—		32.2		—		(32.2	)		—
Total sales		1,272.5		301.5		(53.2	)		1,520.8	$	817.0	$	185.3	$	(32.2	)	$	970.1
Operating income		281.2		36.8		(44.9	)		273.1		174.0		25.1		(30.8	)		168.3
Depreciation and amortization		63.5		5.4		0.1			69.0		45.8		3.7		—			49.5
Stock-based compensation		4.9		0.9		7.8			13.6		4.6		0.9		7.8			13.3
Accrual basis additions to capital expenditures		221.6		10.9		0.1			232.6		161.1		9.0		—			170.1
_________________

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

	September 30,			December 31,		June 30,		December 31,
(In millions)	2017			2016		2018		2017
Composite Materials	$	57.9		$	56.1	$	100.7	$	103.7
Engineered Products		16.1			16.1	44.6			45.0
Goodwill and intangible assets	$		74.0	$	72.2	$	145.3	$	148.7

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the Consolidated Statements of Operations. The components of accumulated other comprehensive ~~(loss) income~~loss as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows:

The amounts reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs component of accumulated other comprehensive loss for the quarter ~~were $0.4 million of net gains less taxes of $0.1 million~~ and ~~were $0.7 million of net gains less $0.2 million of taxes for the nine~~six months ended ~~September~~June 30, ~~2017.~~2018, were not material. The amounts reclassified to earnings from the change in fair value of the derivatives component of accumulated other comprehensive loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 were net ~~losses~~gains of ~~$0.4 million net taxes of $0.1 million and net losses of $10.7~~$1.4 million less taxes of ~~$2.2~~$0.4 million, ~~respectively.~~and net gains of $4.0 million less taxes of $1.2 million. The currency translation adjustments are not currently adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.

During the second quarter of 2018 we recorded $7.3 million in other operating income (expense) related to an environmental insurance recovery which was offset by the write-down of our investment in Carbon Conversions, Inc., as well as an additional environmental reserve related to the Lower Passaic River matter described in Note 13 below.

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

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

We are subject to various international, U.S., state and local environmental, and health and safety laws and regulations. We are also subject to liabilities arising under the Federal Comprehensive Environmental Response, Compensation and Liability Act

(“ (“CERCLA” or “Superfund”), the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and similar state and international laws and regulations that impose responsibility for the control, remediation and abatement of air, water and soil pollutants and the manufacturing, storage, handling and disposal of hazardous substances and waste.

We have been named as a potentially responsible party (“PRP”) with respect to several hazardous waste disposal sites that we do not own or possess, which are included on, or proposed to be included on, the Superfund National Priority List of the U.S. Environmental Protection Agency (“EPA”) or on equivalent lists of various state governments. Because CERCLA allows for joint and

several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs. We believe, based on the amount and nature of our waste, our existing insurance coverage, the amounts already provided for and the number of other financially viable PRPs, that our liability in connection with such matters will not be material.

Hexcel and a group of approximately 5148 other PRPs comprise the Lower Passaic Cooperating Parties Group (the “CPG”). Hexcel and the CPG are subject to a May 2007 Administrative Order on Consent (“AOC”) to perform a Remedial Investigation/Feasibility Study (“RI/FS”) of environmental conditions in the Lower Passaic River watershed. 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 river. The ROD calls for capping and dredging of the lower eight miles of the Passaic River, with the placement of an engineered cap over the entire eight miles, at an expected cost ranging from $0.97 billion to $2.07 ~~billion, according to the EPA.~~billion. Because the EPA has not yet selected a remedy for the upper nine miles of the Lower Passaic River, this estimate ~~range~~ does not include any costs related to a future remedy for the upper portion of the river. ~~Now that it~~The EPA has ~~issued the final ROD,~~appointed an independent third party allocation expert (the “Allocator”) to conduct a complete review of and make recommendations to the EPA ~~will seek~~on the relative liability of all identified non-governmental PRP’s. Hexcel is cooperating in the allocation process, which is not expected to ~~hold some combination of the PRPs liable to perform the work selected through the ROD. At this point, we have not yet determined our allocable share of performing the selected remedy.~~be completed until 2020. However, based on a review of the Company’s position, and as no point within the range is a more probable outcome than any other point, the Company has determined that its accrual is sufficient at this time. The accrual balance was ~~$2.0~~$2.2 million as of ~~September~~June 30, ~~2017~~2018 and $2.1 million at December 31, ~~2016.~~2017. Despite the issuance of the final ROD, and given the ongoing work of the Allocator, there ~~continue~~continues to be many uncertainties associated with the selected remedy, the Company’s allocable share of the remediation and the amount of insurance coverage. Given those uncertainties, the amounts accrued may not be indicative of the amounts for which the Company is ultimately responsible and will be refined as events in the remediation process develop.

We are a PRP at a former chemical waste site in Whittier, California. The PRPs at Omega have established a PRP Group, (the “Omega PRP Group”), and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. The Omega PRP Group has attributed approximately 1.07% of the waste tonnage sent to the site to Hexcel. 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 Record of Decision; the Omega PRP Group 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 Omega PRP Group, 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 $0.5 million at June 30, 2018, and $0.6 million at ~~both September 30, 2017 and at~~ December 31, ~~2016, respectively.~~2017.

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lower Passaic River and other sites are accrued in the consolidated balance sheets. As of ~~September~~June 30, ~~2017,~~2018, our aggregate environmental related accruals were ~~$2.8~~$2.9 million, of which ~~$0.9~~$1.0 million was included in accrued liabilities with the remainder included in non-current liabilities. As of December 31, ~~2016,~~2017, our aggregate environmental related accruals were ~~$3.2~~$2.8 million, of which ~~$1.4~~$0.9 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 $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, 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.

Environmental remediation spending charged to our reserve balance for each of the quarters ended ~~September~~June 30, 2018 and 2017 ~~and 2016~~ was ~~$0.1~~$0.2 million and ~~$0.2~~$0.1 million, respectively, and $0.3 million and ~~$0.7~~$0.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~June 30, 2017, respectively. In addition, our operating costs relating to environmental compliance charged to expense were ~~$2.4~~$2.6 million and ~~$2.6~~$2.5 million for the quarters ended ~~September~~June 30, 2018 and June 30, 2017, ~~and 2016,~~ respectively, and ~~$7.1~~$5.1 million and ~~$7.5~~$4.7 million for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016 ,~~ respectively.

We provide standard assurance-type warranties for ~~an estimated amount of product warranty expense,~~our products, which ~~is provided by product~~cannot be purchased separately and ~~based on historical warranty experience. In addition, we periodically review our warranty accrual and record any adjustments as deemed appropriate.~~do not meet the criteria to be considered a performance obligation. Warranty expense for the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, and accrued warranty cost, included in “accrued liabilities” in the Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, were as follows:

In October 2015, our Board authorized the repurchase of $250 million of the Company’s stock (“2015 Repurchase Plan”). On February 9, 2017, our Board authorized the repurchase of $300 million of the Company’s stock (“2017 Repurchase Plan”).

In the third quarter of 2017, the Company spent $1.2 million to repurchase our common stock and for the first nine months of 2017 the Company spent $122.0 million to repurchase our common stock. At September 30, 2017, the 2015 plan was completed and the Company has $270.7 million remaining under the 2017 Repurchase Plan.

~~On October 2,~~2017, we completed the acquisition of Structil SA (“Structil”). This acquisition further enhances our technology portfolio with new adhesive, prepreg and pultrusion technologies. Revenues and earnings from Structil will be consolidated into our results from the beginning of the fourth quarter.

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, engineered ~~core~~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 and Africa. We are also a partner in a joint venture in Malaysia, which manufactures composite structures for Commercial Aerospace applications.

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

Net sales for the quarter were ~~$491.5~~$547.5 million, ~~1.8% lower (2.4% lower~~11.4% greater (10.3% in constant currency) than the ~~$500.5~~$491.3 million reported for the ~~third~~second quarter of ~~2016.~~ 2017. Year to date net sales were ~~3.5% lower~~10.3% higher in constant currency driven by ~~declines~~strong growth in ~~both the commercial aerospace and industrial~~all markets.

Commercial ~~aerospace~~Aerospace sales of ~~$352.6~~$383.8 million ~~decreased 2.2% (2.5%~~increased 10.0% (9.7% in constant currency) for the quarter as compared to the ~~third~~second quarter of ~~2016~~ 2017, and ~~decreased 2.8% (2.7%~~increased 10.1% (9.6% in constant currency) for the ~~nine month~~six-month period as compared to ~~2016.~~2017. The ~~sales declines in certain legacy widebody aircraft (A380, B777~~quarter benefited from increased production rates and ~~B747) slightly more than offset the growth of the A350 and~~higher composite content on the new ~~narrowbody aircraft.~~ narrow body planes.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were ~~down 6%~~up over 45.0% for the ~~third~~second quarter ~~2017 and down about 7% for first nine months~~ of ~~2017~~2018 as compared to ~~2016,~~2017, reflecting strengthening of business jet sales following an extended period of softness. Sales increased for the first half of 2018 as compared to 2017, driven by ~~lower~~higher business jet sales.

Space & Defense sales of ~~$82.7~~$91.7 million increased ~~1.5% (0.7%~~4.4% (3.1% in constant currency) for the quarter as compared to the ~~third~~second quarter of ~~2016. Rotorcraft~~2017. The increase was driven by rotocraft. Rotocraft sales comprise just over half of Space & Defense sales, with ~~strong military performance offset by weaker commercial sales.~~ key programs being the V-22 Osprey and UH-60 Black Hawk. Space & Defense sales for the first ~~nine months~~half of ~~$247.3~~2018 were $181.8 million, which were ~~2.6%~~8.1% higher ~~in constant currency than sales for the first nine months of 2016. The increase was driven by U.S. military rotorcraft and the Joint Strike Fighter (“JSF”) program.~~

Total Industrial sales of $56.2 million for the third quarter of 2017 were 3.8% lower (6.5% in constant currency) than the third quarter of 2016. Wind energy sales were down more than 25% for the third quarter compared to the 2016 quarter. Industrial sales for the first nine months of 2017 were $165.6 million or 15.4% lower in constant currency than the sales for the first ~~nine months~~half of ~~2016.~~2017, driven by the Joint Strike Fighter program.

Total Industrial sales of $72.0 million for the second quarter of 2018 increased 32.1% (24.8% in constant currency) as compared to the second quarter of 2017. Wind energy sales ~~(the largest submarket in Industrial)~~ are experiencing a ~~challenging~~period of substantial growth following lower sales last year ~~and were down just over 30%~~as a new generation of composite blades are adopted. Industrial sales for the first ~~nine months~~half of 2018 were $139.3 million or 17.4% higher in constant currency than the sales for the first half of 2017, as ~~compared to last year. However, the Company expects~~ wind energy sales have increased more than 30% in ~~2018 to exceed 2016 levels, as various legacy blades with lower composite content transition to longer, higher efficiency blades with higher composite content.~~constant currency.

Gross margin for the ~~third~~second quarter of 2018 was ~~27.6%~~26.4% as compared to ~~27.1% in~~28.5% for the ~~third~~second quarter of ~~2016,~~ 2017, and ~~28.0%~~26.4% and 28.2% for the first ~~nine months~~half of 2018 and 2017, respectively. Both periods in 2018 included additional depreciation and ~~2016, respectively,~~amortization, as ~~all periods reflected strong operating performance. As expected, the first nine months of 2017 included about $8 million of~~well as costs related to the startup ~~and training~~ for the new greenfield ~~sites~~site in ~~France and Morocco.~~France.

Selling, general and administrative expenses for the ~~third~~second quarter and first ~~nine months~~half of 2018 were ~~slightly~~ lower in constant currency ~~(3% for the first nine months)~~ than the prior year periods as we maintained tight cost control. Research and technology expenses for the ~~first nine months~~second quarter of ~~$36.5~~$13.0 million ~~was~~were about 7%5% higher in constant currency than the comparable ~~2016 period as we continued to invest~~2017 period. First half research and technology expenses were about 4% higher in ~~innovative composite products and solutions to support our customers and next generation products.~~constant currency than the comparable 2017 period.

Operating cash flow for the first half of 2018 was $157.2 million compared to $182.4 million in 2017 as working capital increased resulting in a cash use of $60.2 million in 2018 as compared to a use of $7.1 million in 2017. For the first half of 2018, capital expenditures were $101.9 million as compared to $169.2 million in the first half of 2017. Free cash flow (defined as cash provided by operating activities less capital expenditures) for the first ~~nine months~~half of ~~2017~~2018 was ~~a source of $87~~$55.3 million versus ~~$55~~$13.2 million in 2016. For the first nine months of 2017, working capital generated $5 million as compared to a $38 million use in the first nine months of 2016. The primary driver was an improvement in receivables due to continued strong collections. 2017.

Accrual basis additions to capital expenditures were ~~$218~~$90.0 million for the first half of 2018 and $170.1 million in ~~2017 and $233 million in 2016.~~2017. We expect accrual basis capital expenditures to be in the ~~$270~~$170 million to ~~$290~~$190 million range in ~~2017, as we continue to expand capacity to meet the planned needs of our customers.~~2018.

	Quarter Ended September 30,											Nine Months Ended September 30,											Quarter Ended June 30,									Six Months Ended June 30,
(In millions, except per share data)	2017				2016				% Change			2017				2016				% Change			2018			2017			% Change			2018			2017			% Change
Net sales	$	491.5			$	500.5				(1.8	)%	$		1,461.6		$		1,520.8			(3.9	)%	$	547.5		$	491.3			11.4	%	$	1,087.6		$	970.1			12.1	%
Net sales change in constant currency										(2.4	)%										(3.5	)%								10.3	%								10.3	%
Operating income			89.1			89.1				(0.0	)%		257.4					273.1			(5.7	)%	$	96.5		$	89.7			7.6	%	$	178.9		$	168.3			6.3	%
As a percentage of net sales	18.1			%	17.8			%						17.6	%	18.0			%					17.6	%		18.3	%					16.4	%		17.3	%
Net income		69.7				68.2				2.2	%		195.9				190.3				2.9	%	68.8			61.6				11.7	%	130.4			126.2				3.3	%
Diluted net income per common share	$		0.76		$		0.72					$		2.13		$		2.01					$	0.76		$	0.67			13.4	%	$	1.44		$	1.37			5.1	%

Non-GAAP measures:
Adjusted net income	$	65.5			$	61.6				6.3	%	$	182.6			$		184.0			(0.8	)%	$	67.5		$	61.6			9.6	%	$	129.1		$	117.1			10.2	%
Adjusted diluted earnings per share	$		0.71		$		0.65					$		1.98		$		1.94					$	0.75		$	0.67			11.9	%	$	1.43		$	1.27			12.6	%

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

Quarter Ended September 30,

Nine Months Ended September 30,

(In millions)

2017

2016

2017

2016

Net income

$
69.7

$
68.2

$
195.9

$
190.3

Accelerated amortization of deferred financing costs

―

―

―

0.3

Discrete tax benefits (a)

(4.2
)

(6.6
)

(13.3
)

(6.6
)
Adjusted net income (Non-GAAP)

$
65.5

$
61.6

$
182.6

$

184.0

	Quarter Ended June 30,									Six Months Ended June 30,
	2018					2017				2018					2017
(In millions. except per share data)	Net Income			Tax Rate %		Net Income		Tax Rate %		Net Income			Tax Rate %		Net Income			Tax Rate %
GAAP net income	$	68.8			22.8	$	61.6		26.7	$	130.4			21.0	$	126.2			19.8
Discrete tax benefits (a)(b)		(1.3	)		1.5	―		―			(1.3	)		0.8		(9.1	)		5.9
Adjusted net income (Non-GAAP)	67.5				24.3	61.6			26.7	129.1				21.8	117.1				25.7
Adjusted diluted net income per share (Non-GAAP)	$	0.75				$	0.67			$	1.43				$	1.27

	For the Nine Months Ended September 30,							Six Months Ended June 30,
(In millions)	2017			2016				2018			2017
Net cash provided by operating activities	$	308.5		$	286.8			$	157.2		$	182.4
Less: Capital expenditures		(221.3	)			(231.8	)		(101.9	)		(169.2	)
Free cash flow (Non-GAAP)	$	87.2		$		55.0		$	55.3		$	13.2

The following table summarizes net sales to third-party customers by segment and end market for the ~~quarters~~three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

	Quarter Ended September 30,									Nine Months Ended September 30,									Quarter Ended June 30,							Six Months Ended June 30,
(In millions)	2017			2016			% Change			2017			2016			% Change			2018		2017		% Change			2018		2017		% Change
Consolidated Net Sales	$		491.5	$		500.5		(1.8	)%			1,461.6	$		1,520.8		(3.9	)%	$	547.5	$	491.3		11.4	%	$	1,087.6	$	970.1		12.1	%
Commercial Aerospace	352.6			360.6				(2.2	)%	1,048.7			1,079.4				(2.8	)%		383.8		349.0		10.0	%		766.5		696.2		10.1	%
Space & Defense	82.7			81.5				1.5	%	247.3			242.6				1.9	%		91.7		87.8		4.4	%		181.8		164.5		10.5	%
Industrial	56.2			58.4				(3.8	)%	165.6			198.8				(16.7	)%	72.0		54.5			32.1	%	139.3		109.4			27.3	%

Composite Materials	$	398.9		$	398.2			0.2	%	$		1,183.7	$		1,219.3		(2.9	)%	$	445.8	$	397.3		12.2	%	$	890.4	$	784.8		13.5	%
Commercial Aerospace	277.1			276.0				0.4	%	820.2			828.3				(1.0	)%		300.6		273.8		9.8	%		603.8		543.3		11.1	%
Space & Defense	65.6			63.8				2.8	%	197.9			192.2				3.0	%		73.2		69.0		6.1	%		147.3		132.2		11.4	%
Industrial	56.2			58.4				(3.8	)%	165.6			198.8				(16.7	)%	72.0		54.5			32.1	%	139.3		109.3			27.4	%

Engineered Products	$		92.6	$	102.3			(9.5	)%	$	277.9		$	301.5			(7.8	)%	$	101.7	$	94.0		8.2	%	$	197.2	$	185.3		6.4	%
Commercial Aerospace	75.5			84.6				(10.8	)%	228.5			251.1				(9.0	)%	83.2		75.2			10.6	%	162.7		152.9			6.4	%
Space & Defense	17.1			17.7				(3.4	)%	49.4			50.4				(2.0	)%	18.5		18.8			(1.6	)%	34.5		32.3			6.8	%
Industrial	—			—			N/A			—			—			N/A			—		—		N/A			—		0.1		N/A

Composite Materials: Net sales of ~~$398.9~~$445.8 million in the ~~third~~second quarter of ~~2017~~2018 increased ~~$0.7~~$48.5 million from the ~~$398.2~~$397.3 million in sales for the prior year quarter, ~~as a 3.8% decrease in Industrial sales was offset~~driven by ~~a slight increase in~~strong growth across all markets. ~~Commercial Aerospace and Space & Defense sales.~~Net sales for the first ~~nine months~~half of ~~2017 declined~~2018 increased by ~~2.9%~~13.5% compared to the same period last year. The increase in Commercial Aerospace benefitted from increased production rates and higher composite content on the new narrow body planes as ~~compared with~~well as strong business jet sales. Growth in the ~~first nine months of 2016.~~F35 Joint Strike Fighter program drove the increase in Space & Defense sales. As expected, wind energy sales were ~~down about 30%~~up in the second quarter ~~and the first nine months~~ of ~~2017. However, the Company expects wind energy sales in~~ 2018, ~~to exceed 2016 levels, once the transition from certain blade models~~as production of new generation blades that are longer with ~~lower~~higher composite content ~~to longer blades with higher content in 2018 is completed.~~has begun.

Engineered Products: Net sales of ~~$92.6~~$101.7 million in the ~~third~~second quarter of ~~2017 decreased $9.7~~2018 increased $7.7 million from the ~~$102.3~~$94.0 million for ~~2016 as driven by a decline~~2017. This was attributable to an increase in Commercial Aerospace sales reflecting strong growth in the 737 MAX, as well as an increase in Space & Defense sales primarily ~~due~~related to ~~the decline in legacy widebody aircraft rates~~military rotorcraft sales. T ~~The decrease~~he increase of ~~7.8%~~6.4% in net sales to ~~$277.9~~$197.2 million for the first ~~nine months~~half of ~~2017~~2018 was ~~also~~ driven by ~~a decline~~growth in Commercial Aerospace sales.

Commercial ~~Aerospace:~~ ~~Commercial~~ Aerospace sales of ~~$352.6~~$383.8 million ~~were 2.2% lower (2.5%~~increased 10.0% (9.7% in constant currency) for the quarter as compared to the ~~third~~second quarter of ~~2016. Net sales~~2017, and increased 10.1% (9.6% in constant currency) for the six-month period as compared to 2017. The quarter benefited from increased production rates and higher composite content on the new narrow body planes. The growth for the first ~~nine months~~half of ~~2017 declined 2.7% on a constant currency basis to $1,048.7 million as compared to~~2018 was driven by the ~~first nine months of 2016. Sales declines in certain legacy widebody aircraft (i.e. A380, B777~~narrow body build rate increases and ~~B747) slightly more than offset~~ the ~~growth of the~~Airbus A350 ~~and new narrowbody aircraft.~~ramp-up.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were ~~down 6%~~up over 40% for the ~~third~~second quarter of 2018 as compared to 2017, ~~and down about 7%~~ reflecting strengthening of business jet sales following an extended period of softness. Sales increased for the first ~~nine months~~half of ~~2017~~2018 as compared to ~~2016,~~2017, driven by ~~lower~~higher business jet sales.

Space & Defense~~: Space & Defense~~ sales of ~~$82.7~~$91.7 million increased ~~1.5% (0.7%~~4.4% (3.1% in constant currency) for the quarter as compared to the ~~third~~second quarter of ~~2016. Rotorcraft~~2017. The increase was driven by rotocraft. Rotocraft sales comprise just over half of Space & Defense sales, with ~~strong military performance offset by weaker commercial sales.~~ key programs being the V-22 Osprey and UH-60 Black Hawk. Space & Defense sales for the first ~~nine months~~half of ~~$247.3~~2018 were $181.8 million, which were ~~2.6%~~8.1% higher in constant currency than the sales for the first ~~nine months~~half of ~~2016. The increase was~~2017, driven by ~~U.S. military rotorcraft and~~ the ~~JSF program~~Joint Strike Fighter program.

Total Industrial sales of $72.0 million for the second quarter of 2018 increased 32.1% (24.8% in constant currency) as compared to the second quarter of 2017. Wind energy sales are experiencing a period of substantial growth following lower sales last year as a new generation of composite blades are adopted. Industrial sales for the first half of 2018 were $139.3 million, or 17.4% higher in constant currency, than the sales for the first half of 2017, as wind energy sales have increased more than 30% in constant currency.

~~Industrial:~~ Sales of $56.2 million for the third quarter of 2017 were 3.8% lower (6.5% in constant currency) than the third quarter of 2016. Wind energy sales were down more than 25% for the third quarter compared to the 2016 quarter. Industrial sales for the first nine months of 2017 were $165.6 million or 15.4% lower in constant currency than sales for the first nine months of 2016. As expected, wind energy sales (the largest submarket in Industrial) are experiencing a challenging year and were down just over 30% for the first nine months of 2017 as compared to last year. However, the Company expects wind energy sales in 2018 to exceed 2016 levels, as various legacy blades with lower composite content transition to longer, higher efficiency blades with higher composite content.

	Quarter Ended September 30,									Nine Months Ended September 30,									Quarter Ended June 30,									Six Months Ended June 30,
(In millions)	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change			2018			2017			% Change
Gross margin	$	135.6		$	135.7			(0.1	)%	$	409.6		$	429.0			(4.5	)%	$	144.8		$	139.9			3.5	%	$	287.4		$	274.0			4.9	%
Percentage of sales	27.6		%	27.1		%				28.0		%	28.2		%					26.4	%		28.5	%					26.4	%		28.2	%

Gross margin for the ~~third~~second quarter was ~~27.6%~~26.4% compared to ~~27.1%~~28.5% in the ~~third~~second quarter of ~~2016,~~ 2017, and ~~28.0%~~26.4% and 28.2% for the first ~~nine months~~half of 2018 and 2017, respectively. 2018 included higher depreciation and ~~2016, respectively,~~amortization, as ~~all periods reflected strong operating performance. As expected, the first nine months of 2017 included about $8 million of~~well as costs related to the startup ~~and training~~ for the new greenfield ~~sites~~site in ~~France and Morocco.~~France.

	Quarter Ended September 30,									Nine Months Ended September 30,											Quarter Ended June 30,									Six Months Ended June 30,
(In millions)	2017			2016			% Change			2017				2016				% Change			2018			2017			% Change			2018			2017			% Change
SG&A expense	$	34.7		$	35.1			(1.1	)%	$		115.7		$		121.1			(4.5	)%	$	35.3		$	38.1			(7.3	)%	$	81.7		$	81.0			0.9	%
Percentage of sales	7.1		%	7.0		%				7.9			%	8.0			%					6.4	%		7.8	%					7.5	%		8.3	%

R&T expense	$	11.8		$	11.5			2.6	%	$	36.5			$	34.8				4.9	%	$	13.0		$	12.1			7.4	%	$	26.8		$	24.7			8.5	%
Percentage of sales	2.4		%	2.3		%				2.5			%	2.3			%					2.4	%		2.5	%					2.5	%		2.5	%

Selling, general and administrative expenses for the ~~third~~second quarter and first ~~nine months~~half of 2018 were ~~slightly~~ lower in constant currency ~~(3% for the first nine months in constant currency)~~ than the ~~prior year~~comparable periods in 2017 as we maintained tight cost ~~controls.~~control. Research and technology expense for the second quarter and first ~~nine months~~half of ~~$36.5~~2018 of $13.0 million and $26.8 million, respectively, was ~~about 7%~~5.2% and 4.4% higher, respectively, in constant currency than the comparable ~~2016 period~~periods of 2017 as we continue to invest in innovative composite products and solutions to support our customers and next-generation products.

	Quarter Ended September 30,													Nine Months Ended September 30,													Quarter Ended June 30,										Six Months Ended June 30,
(In millions)	2017					2016					% Change			2017					2016					% Change			2018				2017			% Change			2018			2017			% Change
Consolidated operating income		89.1				$	89.1					(0.0	)%	$	257.4				$		273.1				(5.7	)%		$	96.5		$	89.7			7.6	%	$	178.9		$	168.3			6.3	%
Operating margin			18.1		%			17.8		%						17.6		%			18.0		%						17.6	%		18.3	%					16.4	%		17.3	%
Composite Materials			90.0				88.8					1.4	%			264.0				281.2					(6.1	)%			93.1			92.1			1.1	%		184.1		174.0				5.8	%
Operating margin			21.7		%			21.4		%						21.4		%			22.1		%						20.0	%		22.3	%					19.8	%		21.3	%
Engineered Products		12.1					12.9					(6.2	)%		37.2					36.8					1.1	%			15.9		12.1				31.4	%		25.8		25.1				2.8	%
Operating margin			13.1		%			12.6		%						13.4		%			12.2		%						15.6	%		12.9	%					13.1	%		13.5	%
Corporate & Other			(13.0	)				(12.6	)			3.2	%			(43.8	)				(44.9	)			(2.4	)%			(12.5	)		(14.5	)		(13.8	)%		(31.0	)		(30.8	)		0.6	%

Operating income for ~~each of~~ the ~~third~~second quarters of 2018 and 2017 was $96.5 million and ~~2016 was $89.1 million.~~$89.7 million, respectively. The impact of exchange rates were not significant for the quarter and ~~first nine~~six months ~~of 2017 were favorably impacted from exchange rates by about 40 basis points and 50 basis points compared to the corresponding 2016 periods, respectively. For~~ended 2018. Operating income for the first ~~nine months~~half of 2018 and 2017 ~~depreciation~~was $178.9 million and $168.3 million, respectively. Depreciation and amortization expense for the first half of 2018 was $8$10.1 million higher ~~in constant currency~~ than the comparable period for ~~2016.~~2017.

	Quarter Ended September 30,							Nine Months Ended September 30,							Quarter Ended June 30,							Six Months Ended June 30,
(In millions)	2017		2016		% Change			2017		2016		% Change			2018		2017		% Change			2018		2017		% Change
Interest expense, net	$	7.0	$	5.5		27.3	%	$	20.0	$	16.8		19.0	%	$	8.7	$	6.8		27.9	%	$	16.7	$	13.0		28.5	%

Interest expense for the ~~third~~second quarter ended June 30, 2018 as compared to the same period last year increased primarily due to higher debt levels as we continue to return funds to stockholders with share repurchases and ~~nine~~dividends. Interest expense for the six months ended ~~September~~June 30, ~~2017~~2018 increased over the comparable period ~~of 2016 due to a higher average interest rate on debt outstanding~~for 2017 as a result of ~~the Company issuance,~~an increase in ~~February 2017, of $400 million of 3.95% senior unsecured notes due~~debt levels and an increase in ~~2027. In addition, debt increased as we continue to invest in capacity, while also returning funds to stockholders through stock buybacks and dividends.~~interest rates.

	Quarter Ended September 30,								Nine Months Ended September 30,								Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2017				2016				2017				2016				2018			2017			2018			2017
Income tax expense	$	13.6			$	16.1			$	44.3			$	67.5			$	20.0		$	22.1		$	34.1		$	30.7
Effective tax rate			16.5	%			19.3	%			18.6	%			26.4	%		22.8	%		26.7	%		21.0	%		19.8	%

The effective tax rate for the ~~third~~second quarter was ~~16.5%~~22.8% compared to ~~19.3%~~26.7% for the ~~third~~second quarter of ~~2016, and the~~2017. The effective tax rate for the ~~first nine~~six months ~~of 2017~~ended June 30, 2018, was ~~18.6%~~21.0% compared to ~~26.4% in 2016. The quarter benefitted from~~19.8% for the ~~impact of tax credits identified during the quarter, while both~~same period last year. During the quarter and six months ended June 30, 2018, the ~~first nine months’ provisions benefitted from deductions associated with share-based compensation payments. The third quarter provisions in 2017 and 2016 included non-recurring~~effective tax rate was impacted by a discrete ~~benefits~~benefit of ~~$4.2~~$1.3 million ~~and $6.6 million from~~related to the ~~reversal~~release of ~~provisions~~a reserve for uncertain tax ~~provisions.~~positions. The provision for the ~~first nine~~six months ofending June 30, 2017, ~~also~~ included a non-recurring discrete benefit of $9.1 million from the release of a valuation allowance in a foreign jurisdiction. Excluding ~~these~~the discrete benefits, the effective tax ~~rate~~rates for the first ~~nine~~six months ~~was 24.2%.~~of 2018 and 2017 were 21.8% and 25.7% as both periods benefitted from deductions associated with share-based compensation.

Our effective income tax rate may change by the end of the fiscal year as guidance continues to be issued in relation to interpreting the new Act.

Liquidity: As of ~~September~~June 30, ~~2017,~~2018, our total debt, net of cash, was ~~$714.7~~$900.3 million, as compared to ~~$653.5~~$749.8 million at December 31, ~~2016.~~2017. The increase in debt in the first ~~nine~~six months of ~~2017~~2018 primarily reflects ~~$122.0~~$181.0 million in ~~stock~~share repurchases and dividends of ~~$31~~$22.4 million, partially offset by $55.3 million of free cash flow ~~of $87 million.~~ In February 2017, the Company issued $400 million aggregate principal amount of 3.95% Senior Unsecured Notes due in 2027. The interest rate on these senior notes may be increased by 0.25% each time a credit rating applicable to the notes is downgraded. The maximum rate is 5.95%. The net proceeds of approximately $395 million were initially used to repay, in part, $350 million of our Senior Unsecured Revolving Credit Facility (the “Facility”) and the remainder was used for general purposes including share repurchases. At ~~September~~June 30, ~~2017,~~2018, total borrowings under our $700 million Senior Unsecured Revolving Credit Facility (“the Facility”) were ~~$75~~$185 million. The Facility permits us to issue letters of credit up to an aggregate amount of $40.0 million. ~~Outstanding~~Any outstanding letters of credit reduce the amount available for borrowing under our revolving loan. As of ~~September~~June 30, ~~2017,~~2018, we had not issued any letters of credit under the Facility, resulting in undrawn availability under the Facility as of ~~September~~June 30, ~~2017~~2018 of ~~$625.0~~$515.0 million.

The Facility contains financial and other covenants, including, but not limited to, restrictions on the incurrence of debt and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. In accordance with the terms of the Facility, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA, as defined in the credit agreement, to interest expense) and may not exceed a maximum leverage ratio of 3.50 (based on the ratio of total debt to EBITDA) throughout the term of the Facility. In addition, the Facility contains other terms and conditions such as customary representations and warranties, additional covenants and customary events of default. The conditions and covenants related to the senior notes are less restrictive than those of our Facility. As of ~~September~~June 30, ~~2017,~~2018, we were in compliance with all debt covenants and expect to remain in compliance.

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~~June 30, ~~2017,~~2018, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until September 2021 when the Facility expires.

Operating Activities: Net cash provided by operating activities was ~~$308.5~~$157.2 million in the first ~~nine~~six months of ~~2017,~~2018, as compared to ~~$286.8~~$182.4 million in the first ~~nine~~six months of ~~2016. Working~~2017. In 2018 working capital ~~generated $4.6~~increased resulting in a cash use of $60.2 million as compared to a use of ~~cash in the first nine months of 2017 versus a usage of $38.2~~$7.1 million in ~~the first nine months of 2016, as accounts receivable collections remain strong.~~2017.

Investing Activities: Net cash used for investing activities, ~~of $233~~primarily for capital expenditures, was $101.9 million and ~~$265~~$179.2 million in the first ~~nine~~six months of 2018 and 2017, ~~and 2016, respectively, was for capital expenditures and investments. Capital expenditures were $221.3 million and $231.8 million in~~respectively. During the first ~~nine months~~half of 2017 ~~and 2016, respectively.~~

~~In 2017,~~ we made an additional ~~investments for a total of $12~~$10 million investment in Oxford Performance Materials ~~(“OPM”) and Carbon Conversions Incorporated (“CCI”). OPM produces thermoplastic, carbon fiber reinforced 3D printed parts for aerospace and medical~~

applications and CCI is a leader in carbon fiber recycling and repurposing. The investment in 2016 represented the acquisition of the remaining 50% of Formax (UK) Limited the initial investment in OPM and a convertible secured loan to Luminati Aerospace LLC.

Financing Activities: Financing activities ~~generated $1.0~~used $73.3 million and ~~used $27.3~~generated $2.8 million of net cash in the first ~~nine~~six months of 2018 and 2017, ~~and 2016,~~ respectively. ~~The first nine months ended September 30, 2017 reflects $400~~We returned $203 million ~~from the issuance of the 3.95% senior notes and $37 million from the issuance of the Euro term loan, offset by the repayment of $290 million of the Facility, and $153 million returned~~ to stockholders from stock repurchases and ~~dividends. The first nine months of 2016 primarily reflects increased borrowings of $63~~dividends in 2018 compared to $141 million ~~from the Facility and $27 million from the Euro term loan less $115 million returned to stockholders from stock repurchases and dividends.~~in 2017.

~~In the first nine months of 2017, the Company repurchased $122 million of shares of common stock under the repurchase plans. In October 2015,~~

On May 7, 2018 our Board authorized ~~the~~us to repurchase ~~of $250~~an additional $500 million of ~~the Company’s stock (“2015 Repurchase Plan”) which was completed in the second quarter of 2017. In February 2017,~~ our ~~Board authorized the repurchase of an additional $300 million of the Company’s stock (“2017 Repurchase Plan”) of which $270.7 million remains under the 2017 Repurchase Plan.~~common stock.

Financial Obligations and Commitments: As of ~~September~~June 30, ~~2017,~~2018, the current portion of debt includes ~~$4.2~~$9.3 million related to the Euro term loan.

The next significant scheduled debt maturity will not occur until 2021, when the ~~senior unsecured credit facility~~Facility matures. Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

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

We describe our significant accounting policies and critical accounting estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017. Significant changes to our accounting policies subsequent to the filing of our Form 10-K, relate solely to the adoption of Topic 606, Revenue from Contracts with Customers, as discussed in Notes 1 and 9 to our financial statements.

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

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lower Passaic River in New Jersey and other sites are accrued in the consolidated balance sheets. As of ~~September~~June 30, ~~2017,~~2018, our aggregate environmental related accruals were ~~$2.8~~$2.9 million, of which ~~$0.9~~$1.0 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 $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.

~~Certain~~This report contains forward-looking statements ~~contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements”~~ within the meaning of Section 27A of the ~~Private~~ Securities ~~Litigation Reform~~ Act of ~~1995.~~ 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to future prospects, developments and business strategies. These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “should”, “would”, “will” and similar terms and phrases, including references to assumptions. Such statements are based on current expectations, are inherently uncertain, and are subject to changing assumptions.

Such forward-looking statements include, but are not limited to: (a) the estimates and expectations based on aircraft production rates made publicly available by Airbus, Boeing and others; (b) the revenues we may generate from an aircraft model or program; (c) the impact of the possible push-out in deliveries of the Airbus and Boeing backlog and the impact of delays in the startup or ramp-up of new aircraft programs or the final Hexcel composite material content once the design and material selection have been completed; (d) expectations of composite content on new commercial aircraft programs and our share of those requirements; (e) expectations of growth in revenues from space and defense applications, including whether certain programs might be curtailed or discontinued; (f) expectations regarding growth in sales for wind energy, recreation, automotive and other industrial applications; (g) expectations regarding working capital trends and expenditures; (h) expectations as to the level of capital expenditures and when we will complete the construction of capacity expansions and qualification of ~~capacity expansions;~~new products; (i) our ability to maintain and improve margins ~~in light of the ramp-up of capacity and~~as we add new facilities and in view of the current economic environment; (j) the outcome of legal matters; (k) our projections regarding the realizability of net operating loss and tax credit carryforwards; and (l) the impact of various market risks, including fluctuations in interest rates, currency exchange rates, environmental regulations and tax codes, fluctuations in commodity

prices, and fluctuations in the market price of our common stock, the impact of work stoppages or other labor disruptions and the impact of the above factors on our expectations of ~~2017~~2018 financial results and beyond. In addition, actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to changing market conditions, increased competition, product mix, inability to achieve planned manufacturing improvements or to meet customer specifications, cost reductions and capacity additions, and conditions in the financial markets.

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

~~If one or more of~~Although we believe that these ~~risks or uncertainties materialize, or if underlying~~forward-looking statements are based on reasonable assumptions, ~~prove incorrect,~~you should be aware that many factors could affect our actual results ~~may vary~~of operations and could cause actual results to differ materially from those ~~expected, estimated or projected. In addition to~~expressed in the forward-looking statements. As a result, the foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with the Securities and Exchange Commission. For additional information regarding certain factors that ~~affect~~may cause our ~~operating~~actual results ~~and financial position, neither past financial performance nor our expectations should be considered reliable indicators~~to differ from those expected or anticipated see the information under the caption “Risk Factors” which is located in Item 1A of future performance. Investors should not use historical trends to anticipate results or trends in future periods. Further, our stock price is subject to volatility. Any of the factors discussed above could have an adverse impact on the pricePart I of our ~~securities. In addition, failure of sales or income in any quarter to meet~~Annual Report on Form 10-K for the ~~investment community’s expectations, as well as broader market trends, can have an adverse impact on the price of our securities.~~fiscal year ended December 31, 2017. We do not undertake an obligation to update our forward-looking statements or risk factors to reflect future events or ~~circumstances.~~circumstances, except as otherwise required by law.

There are no material changes in market risk from the information provided in the Company’s ~~2016~~2017 Annual Report on Form 10-K.

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of ~~September~~June 30, ~~2017~~2018, and with the participation of the company's management have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 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 ~~third quarter of 2017~~three months ended June 30, 2018 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 1113 on pages 1415 through 16 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, ~~2016,~~2017, which could materially affect our business, financial condition or future results. With the exception of the below risk factor, there have been no changes or additions to those disclosed in the aforementioned 10-K. In addition, future uncertainties may increase the magnitude of these adverse effects or give rise to additional material risks not now contemplated.

Certain of our materials may be subject to the effects of various trade agreements, treaties and tariffs. As a result, our cost for these materials may increase dramatically depending on the circumstances, which could materially impact our gross profit margin. Currently, the U.S. Federal Government has altered its policy on certain trade agreements and imposed tariffs on certain goods. This, in turn, may lead to retaliatory tariffs on U.S. goods that could potentially make our products sold from the U.S. more expensive to our non-U.S. customers, in addition to increasing our cost of production. At the present time, it is not possible to predict the outcome this current shift in policy will have on our operations, or the duration of these changes in U.S. trade policy.

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

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

Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

Emerging growth company ☐

Class		Outstanding at ~~October 13, 2017~~July 16, 2018
COMMON STOCK		~~89,825,472~~87,519,465

			Page
PART I.	FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)

	●	Condensed Consolidated Balance Sheets — ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017	3

	●	Condensed Consolidated Statements of Operations — The ~~quarters~~three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	4

	●	Condensed Consolidated Statements of Comprehensive Income — The ~~quarters~~three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	4

	●	Condensed Consolidated Statements of Cash Flows — The ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	5

	●	Notes to Condensed Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1618

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		2324

ITEM 4.	Controls and Procedures		2324

PART II.	OTHER INFORMATION		24

ITEM 1.	Legal Proceedings		24

ITEM 1A.	Risk Factors		24

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2425

ITEM 6.	Exhibits ~~and Reports on Form 8-K~~		2526

SIGNATURE			2728

(In millions)	Unrecognized Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2017	$	(18.5	)	$	14.8		$	(41.3	)	$	(45.0	)
Other comprehensive income (loss) before reclassifications		0.6			(7.7	)		(25.8	)		(32.9	)
Amounts reclassified from accumulated other comprehensive loss		(0.1	)		(2.8	)	―				(2.9	)
Net comprehensive income (loss)		0.5			(10.5	)		(25.8	)		(35.8	)
Balance at June 30, 2018	$	(18.0	)	$	4.3		$	(67.1	)	$	(80.8	)

	Product
(In millions)	Warranties
Balance as of December 31, 2016	$	5.5
Warranty expense		2.5
Deductions and other			(1.8	)
Balance as of June 30, 2017	$	6.2
Warranty expense		0.2
Deductions and other			(0.6	)
Balance as of September 30, 2017	$	5.8

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs			(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1 — July 31, 2017		23,200	$	51.63		23,200		$	270,744,906
August 1 — August 31, 2017		---		---		---			270,744,906
September 1 — September 30, 2017		---		---		---			270,744,906
Total		23,200	$	51.63		23,200	(1)	$	270,744,906

Exhibit No.		Description

~~10.1~~10.1*		~~Credit Agreement, dated as~~Amendment to the Offer of ~~June 9, 2016, by and among~~Employment Letter between Hexcel Corporation Hexcel Holdings Luxembourg S.à.r.l., the financial institutions from time to time party thereto, Citizens Bank, National Association, as administrative agent for the lenders, Citizens Bank, National Association, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint book managers and joint lead arrangers, Bank of America, N.A. and Wells Fargo Bank, National Association, as syndication agents, and Sumitomo Mitsui Banking Corporation, SunTrust Bank, TD Bank, N.A. and U.S. Bank, National Association, as documentation agents (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-KNick L. Stanage, dated ~~June 14, 2016).~~July 22, 2013.

~~10.2~~		Company Guaranty, dated as of June 9, 2016, by Hexcel Corporation in favor of and for the benefit of Citizens Bank, National Association, as administrative agent for each of the Lender Group (as defined in the Credit Agreement) (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated June 14, 2016).

~~31.1~~		~~Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32		~~Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101~~		The following materials from the Hexcel Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related notes.

~~Exhibit No.~~		~~Description~~

~~10.1~~10.2*		~~Credit~~Amendment to the Officer Severance Agreement ~~dated as of June 9, 2016, by and among~~between Hexcel Corporation Hexcel Holdings Luxembourg S.à.r.l., the financial institutions from time to time party thereto, Citizens Bank, National Association, as administrative agent for the lenders, Citizens Bank, National Association, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint book managers and joint lead arrangers, Bank of America, N.A. and Wells Fargo Bank, National Association, as syndication agents, and Sumitomo Mitsui Banking Corporation, SunTrust Bank, TD Bank, N.A. and U.S. Bank, National Association, as documentation agents (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-KPatrick Winterlich, dated ~~June 14, 2016).~~October 2, 2017.

~~10.2~~10.3*		~~Company Guaranty, dated as of June 9, 2016, by~~Amendment to the Officer Severance Agreement between Hexcel Corporation ~~in favor of~~ and ~~for the benefit of Citizens Bank, National Association, as administrative agent for each of the Lender Group (as defined in the Credit Agreement) (incorporated by reference to Exhibit 99.2~~Gail E. Lehman, dated October 2, 2017.

10.4*		Amendment to the ~~Company’s Current Report on Form 8-K~~Amended and Restated Executive Severance Agreement between Hexcel Corporation and Robert G. Hennemuth, dated ~~June 14, 2016).~~December 31, 2008.

31.1		Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Hexcel Corporation Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2017,~~2018, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related notes.

Exhibit No.		Description

10.1*		Amendment to the Offer of Employment Letter between Hexcel Corporation and Nick L. Stanage, dated July 22, 2013.

10.2*		Amendment to the Officer Severance Agreement between Hexcel Corporation and Patrick Winterlich, dated October 2, 2017.

10.3*		Amendment to the Officer Severance Agreement between Hexcel Corporation and Gail E. Lehman, dated October 2, 2017.

10.4*		Amendment to the Amended and Restated Executive Severance Agreement between Hexcel Corporation and Robert G. Hennemuth, dated December 31, 2008.

31.1		Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Hexcel Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related notes.

		Hexcel Corporation

~~October 18, 2017~~July 23, 2018		/s/ Kimberly Hendricks
(Date)		Kimberly Hendricks
		Senior Vice President, Corporate Controller and
		Chief Accounting Officer