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,			March 31,			December 31,
(In millions)	2017			2016			2019			2018
Assets
Current assets:
Cash and cash equivalents	$	119.1		$	35.2		$	43.7		$	32.7
Accounts receivable, net		245.0			245.6			324.3			260.9
Inventories, net		313.4			291.0			334.5			297.8
Contract assets								53.7			50.5
Prepaid expenses and other current assets		30.0			35.2			26.1			33.9
Total current assets		707.5			607.0			782.3			675.8

Property, plant and equipment		2,662.3			2,378.4			2,894.5			2,839.9
Less accumulated depreciation		(836.8	)		(752.8	)		(991.8	)		(963.4	)
Net property, plant and equipment		1,825.5			1,625.6			1,902.7			1,876.5

Goodwill and other intangible assets		74.0			72.2			286.2			142.3
Investments in affiliated companies		67.1			53.1			50.9			48.7
Other assets		63.1			42.7			143.9			80.8
Total assets	$	2,737.2		$	2,400.6		$	3,166.0		$	2,824.1

Liabilities and Stockholders' Equity
Current liabilities:
Current portions of capital lease and term loan	$	4.2		$	4.3
Short-term borrowings							$	9.7		$	9.4
Accounts payable		128.6			137.3			165.2			161.9
Accrued compensation and benefits							62.1				75.8
Accrued liabilities		125.0			130.3			112.9			79.6
Total current liabilities		257.8			271.9			349.9			326.7

Commitments and contingencies (see Note 11)
Commitments and contingencies (see Note 14)

Long-term debt		829.6			684.4			1,160.0			947.4
Retirement obligations								42.1			42.0
Other non-current liabilities		223.1			199.4			241.6			186.0
Total liabilities		1,310.5			1,155.7			1,793.6			1,502.1

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, 108.8 shares and 108.5 shares issued at March 31, 2019 and December 31, 2018, respectively								1.1			1.1
Additional paid-in capital		766.5			738.8			811.8			798.3
Retained earnings		1,419.1			1,254.7			1,786.0			1,726.5
Accumulated other comprehensive loss		(57.2	)		(174.4	)		(113.9	)		(108.0	)
		2,129.5			1,820.2			2,485.0			2,417.9
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, 24.0 shares at March 31, 2019, and 23.7 shares at December 31, 2018, respectively.								(1,112.6	)		(1,095.9	)
Total stockholders' equity		1,426.7			1,244.9			1,372.4			1,322.0
Total liabilities and stockholders' equity	$	2,737.2		$	2,400.6		$	3,166.0		$	2,824.1

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

	(Unaudited)				(Unaudited)				(Unaudited)
	Quarter Ended September 30,				Nine Months Ended September 30,				Quarter Ended March 31,
(In millions, except per share data)	2017		2016		2017		2016		2019		2018
Net sales	$	491.5	$	500.5	$	1,461.6	$	1,520.8	$	609.9	$	540.1
Cost of sales		355.9		364.8		1,052.0		1,091.8		442.7		397.5
Gross margin		135.6		135.7		409.6		429.0		167.2		142.6
Selling, general and administrative expenses		34.7		35.1		115.7		121.1		49.5		46.4
Research and technology expenses		11.8		11.5		36.5		34.8		14.9		13.8
Operating income		89.1		89.1		257.4		273.1		102.8		82.4
Interest expense, net		7.0		5.5		20.0		16.8		12.0		8.0
Non-operating expense		—		—		—		0.4
Income before income taxes, and equity in earnings from affiliated companies		82.1		83.6		237.4		255.9		90.8		74.4
Provision for income taxes		13.6		16.1		44.3		67.5		20.6		14.1
Income before equity in earnings from affiliated companies		68.5		67.5		193.1		188.4		70.2		60.3
Equity in earnings from affiliated companies		1.2		0.7		2.8		1.9		2.0		1.3
Net income	$	69.7	$	68.2	$	195.9	$	190.3	$	72.2	$	61.6
Basic net income per common share	$	0.77	$	0.74	$	2.16	$	2.04	$	0.85	$	0.68
Diluted net income per common share	$	0.76	$	0.72	$	2.13	$	2.01	$	0.84	$	0.68
Dividends per share	$	0.125	$	0.11	$	0.345	$	0.32	$	0.15	$	0.125
Weighted-average common shares:
Basic		90.1		92.7		90.7		93.1		85.0		90.0
Diluted		91.4		94.1		92.1		94.6		86.0		91.2

	(Unaudited)						(Unaudited)						(Unaudited)
	Quarter Ended September 30,						Nine Months Ended September 30,						Quarter Ended March 31,
(In millions)	2017			2016			2017			2016			2019			2018
Net Income	$	69.7		$	68.2		$	195.9		$	190.3		$	72.2		$	61.6
Currency translation adjustments		28.7			(0.4	)		87.2			(11.0	)		(2.8	)		31.6
Net unrealized pension and other benefit actuarial gains and prior service credits		(0.6	)		0.4			(1.6	)		1.9			(0.4	)		(0.8	)
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	)
Net unrealized (losses) gains on financial instruments (net of tax)														(2.7	)		4.8
Total other comprehensive (loss) income														(5.9	)		35.6
Comprehensive income	$	105.5		$	69.9		$	313.1		$	181.4		$	66.3		$	97.2

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

	(Unaudited)						(Unaudited)
	Nine Months Ended September 30,						Three Months Ended March 31,
(In millions)	2017			2016			2019			2018
Cash flows from operating activities
Net income	$	195.9		$	190.3		$	72.2		$	61.6
Reconciliation to net cash provided by operating activities:
Depreciation and amortization		76.3			69.0			38.7			29.8
Amortization related to financing		0.6			1.4			0.3			0.3
Deferred income taxes		15.1			50.5			4.2			10.1
Equity in earnings from affiliated companies		(2.8	)		(1.9	)		(2.0	)		(1.3	)
Stock-based compensation		15.5			13.6			11.1			9.9
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		19.7			(16.8	)
Increase in accounts receivable								(59.4	)		(41.2	)
Increase in inventories		(6.7	)		(5.0	)		(32.3	)		(14.6	)
Decrease (increase) in prepaid expenses and other current assets		1.4			(7.3	)
Decrease in accounts payable/accrued liabilities		(9.8	)		(9.1	)
(Increase) decrease in prepaid expenses and other current assets								(5.8	)		2.6
Increase in accounts payable/accrued liabilities								19.1			7.0
Other – net		3.3			2.1			(0.2)			(1.6	)
Net cash provided by operating activities		308.5			286.8			45.9			62.6

Cash flows from investing activities
Capital expenditures		(221.3	)		(231.8	)		(61.1	)		(59.5	)
Acquisition of business and investment in affiliate		(12.0	)		(33.6	)
Acquisition of business								(158.4	)	―
Net cash used for investing activities		(233.3	)		(265.4	)		(219.5	)		(59.5	)

Cash flows from financing activities
Proceeds from senior notes due 2027 (including original issue discount of $1.7)		398.3		―
Issuance costs related to senior notes due 2027		(3.7	)	―
Proceeds from settlement of treasury locks associated with senior notes due 2027		10.0		―
Proceeds from Euro term loan		37.4			27.4
Repayments of Euro term loan		(4.1	)	―
Borrowing from senior unsecured credit facility	―				63.0			289.0			133.0
Issuance costs related to credit facility	―				(1.7	)
Repayment of senior unsecured credit facility		(290.0	)	―				(77.0	)		(105.0	)
Other debt, net		(0.4	)		(0.4	)
Repayment of finance lease obligation and other debt, net								(0.2	)	―
Dividends paid		(31.3	)		(29.7	)		(12.7	)		(11.2	)
Repurchase of stock		(122.0	)		(84.9	)		(11.2	)		(30.1	)
Activity under stock plans		6.8			(1.0	)		(3.0	)		(2.2	)
Net cash provided by (used in) financing activities		1.0			(27.3	)		184.9			(15.5	)
Effect of exchange rate changes on cash and cash equivalents		7.7			(0.2	)		(0.3	)		2.1
Net increase (decrease) in cash and cash equivalents		83.9			(6.1	)		11.0			(10.3	)
Cash and cash equivalents at beginning of period		35.2		51.8				32.7		60.1
Cash and cash equivalents at end of period		119.1		45.7			$	43.7		$	49.8
Supplemental data:
Accrual basis additions to property, plant and equipment	$	218.0		$	232.6		$	57.5		$	45.3

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

			Additional		Accumulated			Other						Total
			Paid-In		Retained			Comprehensive			Treasury			Stockholders’
(In millions)	Par		Capital		Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2017	$	1.1	$	774.3	$	1,496.1		$	(45.0	)	$	(731.4	)	$	1,495.1
Net income	—		—			61.6		—			—				61.6
Dividends paid on common stock	—		—			(11.2	)	—			—				(11.2	)
Impact of new accounting pronouncements	—		—			2.2			1.6		—				3.8
Change in other comprehensive income – net of tax	—		—		—				35.6		—				35.6
Stock based compensation	—			13.4	—			—				(5.7	)		7.7
Acquisition of treasury stock	—		—		—			—				(30.1	)		(30.1	)
Balance, March 31, 2018	$	1.1	$	787.7	$	1,548.7		$	(7.8	)	$	(767.2	)	$	1,562.5


			Additional		Accumulated			Other						Total
			Paid-In		Retained			Comprehensive			Treasury			Stockholders’
(In millions)	Par		Capital		Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2018	$	1.1	$	798.3	$	1,726.5		$	(108.0	)	$	(1,095.9	)	$	1,322.0
Net income	—		—			72.2		—			—				72.2
Dividends paid on common stock	—		—			(12.7	)	—			—				(12.7	)
Change in other comprehensive income – net of tax	—		—		—				(5.9	)	—				(5.9	)
Stock based compensation	—			13.5	—			—				(5.5	)		8.0
Acquisition of treasury stock	—		—		—			—				(11.2	)		(11.2	)
Balance, March 31, 2019	$	1.1	$	811.8	$	1,786.0		$	(113.9	)	$	(1,112.6	)	$	1,372.4

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

In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements are those of Hexcel Corporation. Refer to Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 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 842, Leases, are discussed below in Recent Accounting Pronouncements as well as in Note 4.

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~~2018 was derived from the audited ~~2016~~2018 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~~2018 Annual Report on Form ~~10-K filed with the SEC on February 9, 2017.~~10-K.

We have a 50% equity ~~ownership~~ investment in ~~a joint venture~~ Aerospace Composites Malaysia Sdn. Bhd. (“ACM”)~~. This~~ and a 25% equity investment isin Hexcut Services. These investments are 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”.~~ The update clarifies the principles for recognizing revenue and develops a common revenue standard for all industries. The 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, the FASB issued Accounting Standards Update No.2015-11 (“ASU 2015-11”),~~ ~~Simplifying the Measurement of Inventory.~~ The update requires that inventory within the scope of the guidance be measured at 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.

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~~standard 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~~leases with a duration of one year or less. We adopted the provisions of this ~~ASU~~standard on January 1, 2019, using the modified transition method which allows companies to recognize existing leases at the adoption date without requiring comparable presentation. As a result of the adoption of this standard we recognized approximately $50 million of right of use assets and related liabilities for operating leases that existed prior to January 1, 2019. ~~We are currently evaluating~~These right of use assets were recorded in noncurrent assets, and the ~~impact of adopting this guidance on our consolidated balance sheets, results of operations~~related liabilities were recorded in other accrued liabilities and ~~financial condition.~~other noncurrent liabilities. See Note 4 - Leases, for more details.

In ~~March 2016,~~August 2018 the FASB issued Accounting Standards Update No. ~~2016-06~~2018-14 (ASU ~~2016-06)~~2018-14), Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, ~~Contingent put~~ and ~~call options in debt instruments.~~ The new guidance clarifies that an exercise contingency does not need 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 effectiveallows for the ~~quarter ended March 31, 2017 with no material impact on our consolidated balance sheets, results of operations and financial condition.~~

~~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~~removal of certain ~~types of cash flows. The~~disclosures, while adding certain new disclosure requirements. This 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 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 limited to the service cost component. This amendment is effective on January 1, 2018. This amendment is required 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.

~~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 hedge accounting with an organization’s risk management activities in the financial statements. In addition, the ASU simplifies the application of hedge accounting guidance in areas where practice issues exist. The ASU is effective for fiscal years beginning after December 15, ~~2018,~~2020 and ~~interim periods within those fiscal years. Early~~ ~~adoption is permitted, including interim periods within those years.~~allows for early adoption. We do not expect this ~~ASU~~new standard to have a ~~minimal~~significant impact onto our ~~consolidated balance sheets, results of operations and financial condition.~~disclosures.

	Quarter Ended September 30,				Nine Months Ended September 30,				Quarter Ended March 31,
(In millions, except per share data)	2017		2016		2017		2016		2019		2018
Basic net income per common share:
Net income	$	69.7	$	68.2	$	195.9	$	190.3	$	72.2	$	61.6
Weighted average common shares outstanding		90.1		92.7		90.7		93.1		85.0		90.0

Basic net income per common share	$	0.77	$	0.74	$	2.16	$	2.04	$	0.85	$	0.68

Diluted net income per common share:
Net income		69.7		68.2		195.9		190.3		72.2		61.6

Weighted average common shares outstanding — Basic		90.1		92.7		90.7		93.1		85.0		90.0
Plus incremental shares from assumed conversions:
Restricted stock units		0.4		0.4		0.4		0.5		0.4		0.5
Stock options		0.9		1.0		1.0		1.0		0.6		0.7
Weighted average common shares outstanding — Dilutive		91.4		94.1		92.1		94.6		86.0		91.2

Diluted net income per common share	$	0.76	$	0.72	$	2.13	$	2.01	$	0.84	$	0.68

Total shares underlying stock options of ~~0.1~~0.3 million and 0.2 million, respectively, were excluded from the computation of diluted net income per share for the ~~quarter and nine~~three months ended ~~September 30, 2017,~~March 31, 2019 and March 31, 2018, as they were anti-dilutive. Total shares underlying stock options of 0.4 million and 0.5 million were excluded from the computation of diluted net income per share for the quarter and nine months ended September 30, 2016, as they were anti-dilutive.

	September 30,		December 31,
(In millions)	2017		2016		March 31, 2019		December 31, 2018
Raw materials	$	133.6	$	120.6	$	170.3	$	131.4
Work in progress		46.8		53.7		40.8		43.6
Finished goods		133.0		116.7		123.4		122.8
Total Inventory	$	313.4	$	291.0	$	334.5	$	297.8

The Company regularly enters into operating leases for certain buildings, equipment, parcels of land, and vehicles. As of January 1, 2019, we adopted the provisions of ASC 842, accounting for leases. Accordingly, we capitalized all agreements with terms for more than one year, where a right of use asset was identified. In connection with the adoption of ASC 842 on January 1, 2019 we elected certain practical expedients available under ASC 842-10-65-1 that provide certain concessions to ease the burden of transition, such as the treatment of indirect lease costs, and service contracts which may contain embedded leases. In addition, we elected certain expedients not related to the transition, such as the election to capitalize lease and non-lease components of an agreement as a single component for purposes of simplicity, with the exception of those related to equipment and machinery.

Generally, amounts capitalized represent the present value of minimum lease payments over the term, and the duration is equivalent to the base agreement, however, in certain instances management used certain assumptions when determining the value and duration of certain leases. These assumptions include, but are not limited to, the probability of renewing a lease term, certain future events impacting lease payments, as well as fair values not explicit in an agreement. Such assumptions impacted the duration of many of our building leases, as well as certain of our equipment leases.

In determining the lease renewal, management considered the need and ability to substitute a given asset, as well as certain conditions such as related contractual obligations to our customers (i.e. a contractual obligation of a customer requiring certain manufacturing proximities). In determining fair value management considered the stand alone value of an asset in an ordinary market as well as incurring certain costs to terminate an agreement. Most of our leases do not include variable payments but contain

scheduled escalations. Any lease payments tied to certain future indexes are adjusted on a go forward basis as those indexes become known.

At March 31, 2019, we had approximately $61.4 million of right of use assets recorded in other non-current assets, and $61.8 million of related liabilities, $50.3 of which was included in other non-current liabilities with the remainder in other current liabilities. The weighted average of the remaining lease terms was approximately 8 years.

We discount the future lease payments of our leases using the prevailing rates extended to us by our lenders relevant to the period of inception. These rates are comprised of LIBOR plus a stated spread less a component related to collateralization. The rates are relative to the duration of the lease at inception and the country to which the lease agreement pertains to. The weighted average interest rate used in calculating the fair values listed above was 2.5%.

The following table lists the schedule of cash payments related to right of use assets by year:

Operating lease expense recognized during the quarter ending March 31, 2019, relating to right of use assets, was $2.9 million, and was recorded in cost of goods sold as well as in operating expenses, in our condensed consolidated statements of operations. Expense related to operating leases which have a duration of a year or less were not material for the same period. Finance leases at March 31, 2019, were immaterial.

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 and nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 were as follows:

	Quarter Ended September 30,					Nine Months Ended September 30,				Quarter Ended March 31,
(In millions)	2017		2016			2017		2016		2019		2018
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.4	$	0.3		$	1.1	$	0.9	$	0.3	$	0.3
Interest cost		0.1		0.2			0.4		0.5		0.2	0.1
Settlement expense		0.2		―			0.3		―
Net amortization and deferral		0.1			—		0.3		0.2
Net periodic benefit cost	$	0.8	$	0.5		$	2.1	$	1.6	$	0.5	$	0.4

		September 30, 2017			December 31, 2016
(In millions)						March 31, 2019		December 31, 2018
Amounts recognized on the balance sheet:
Noncurrent asset	$	32.9		$	23.9	$	46.6	$	42.6

Accrued liabilities			1.0		0.4		1.2		0.4
Other non-current liabilities			19.7		16.2		20.0		18.8
Total accrued benefit	$	20.7		$	16.6	$	21.2	$	19.2

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 March 31, 2019 and 2018, amounts unrelated to service costs were a benefit of $0.8 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~~$0.2 million in the first ~~nine~~three months of ~~2017~~2019 to cover unfunded benefits. We expect to contribute a total of ~~$1.1~~$0.9 million in ~~2017.~~2019 to cover unfunded benefits. We contributed ~~$0.2~~$0.1 million to our U.S. non-qualified defined benefit retirement plans during ~~2016.~~the quarter ended March 31, 2018.

We contributed ~~$0.9~~$1.2 million and ~~$1.2~~$1.6 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~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively. We plan to contribute approximately ~~$4.6~~$5.0 million during ~~2017~~2019 to our European plans. ~~We contributed $6.0 million to our European plans during 2016.~~

We recorded $0.3 million of net amortization gain deferral for the ~~quarter~~quarters ended March 31, 2019 and ~~$0.9 million for the nine months ended September 30, 2017.~~March 31, 2018. Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the ~~quarters and nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 were ~~not material.~~immaterial.

	September 30, 2017		December 31, 2016
(In millions)					March 31, 2019		December 31, 2018
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.5	$	0.5	$	0.5	$	0.5
Other non-current liabilities		3.7		3.9	3.9		2.8
Total accrued benefit	$	4.2	$	4.4	$	4.4	$	3.3

InAmounts contributed in connection with our postretirement plans, ~~we contributed about $0.1 million during each of~~were immaterial for both the ~~quarters~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016.~~March 31, 2018. We periodically fund our postretirement plans to pay covered expenses as they are incurred. We expect to contribute ~~approximately~~less than $0.5 million in ~~2017~~2019 to cover unfunded benefits. ~~We contributed $0.2 million to our postretirement plans during 2016.~~

(In millions)

September 30, 2017

December 31, 2016

Current portion of capital lease

$
—

$
0.5

Current portion of Euro term loan

4.2

3.8

Current portion of debt

$
4.2

$
4.3

Non-current portion of Euro term loan

62.4

22.6

Senior unsecured credit facility- revolving loan due 2021

75.0

365.0

4.7% senior notes due 2025

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

―

Senior notes due 2027 - original issue discount and deferred financing costs

(5.1
)

―

Other debt

0.2

―

Long-term debt

829.6

684.4

Total debt

$
833.8

$
688.7

(In millions)	March 31, 2019			December 31, 2018
Current portion of finance lease	$	0.7		$	0.3
Current portion of Euro term loan		9.0			9.1
Current portion of debt		9.7			9.4
Non-current portion of Euro term loan		50.5			51.4
Senior unsecured credit facility due 2021		414.0			202.0
4.7% senior notes — due 2025		300.0			300.0
3.95% senior notes — due 2027		400.0			400.0
Senior notes — original issue discount		(1.9	)		(2.0	)
Senior notes — deferred financing costs		(4.7	)		(4.8	)
Non-current portion of finance lease and other debt		2.1			0.8
Long-term debt		1,160.0			947.4
Total debt	$	1,169.7		$	956.8

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~~three months ended March 31, 2019 was ~~3.86%~~3.88% inclusive of approximately a 0.25% benefit of treasury locks. ~~The~~Based on quoted prices the fair value of the senior notes due in 2027 ~~based on quoted prices utilizing Level 2 inputs~~ was ~~$410.0~~$400.3 million at ~~September 30, 2017.~~March 31, 2019.

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~~three months ended March 31, 2019 was ~~4.85%~~4.83%. ~~The~~Based on quoted prices, the fair value of the notes due in 2025 ~~based on quoted prices utilizing Level 2 inputs~~ was ~~$323.4~~$314.1 million at ~~September 30, 2017.~~March 31, 2019.

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~~March 31, 2019 was LIBOR + 1.25%. The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.875%, depending on 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,~~Facility 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 March 31, 2019, total borrowings under the Facility were $414.0 million, which approximates fair value due to its revolving nature. 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 Facility. As of March 31, 2019, there were no outstanding letters of credit under the Facility, resulting in undrawn availability under the Facility as of March 31, 2019 of $286.0 million. The weighted average interest rate onfor the Facility was ~~2.36%~~4.17% for the ~~nine~~three months ~~of 2017. The average interest rate was 1.8% for 2016.~~ended March 31, 2019.

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 30, 2017 and December~~March 31, ~~2016~~2019 were ~~€56.4~~$59.4 million ~~(or $66.6 million) and €25 million (or $26.4 million),~~ which approximates fair ~~value. The term loan is guaranteed by Hexcel Corporation.~~value under the market approach.

As of ~~September 30, 2017,~~March 31, 2019, 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 loan. To ensure the swaps were highly

effective, all of the critical terms of the swaps matched the terms of the bank loan. The fair value of the interest rate swaps was an asset of $0.3 millionat March 31, 2019 and $0.6 million at December 31, 2018.

At March 31, 2019 we had interest rate swaps related to European debt obligations which had a combined notional value of approximately €52.9 million. These derivatives swapped floating rate obligations for fixed rate obligations at a weighted average rate of 0.51% against Euribor in Euros. The swaps amortize through the final maturities of the obligations, on June 30, 2023 and June 30, 2024, in annual installments. The derivatives are accounted for as cash flow hedges of the floating rate term loans. To ensure the swaps were highly effective, all of the ~~principal~~critical terms of the ~~swaps~~swap matched the terms of the bank loans. The fair value of the interest rate swaps ~~were assets~~was a liability of ~~$0.6 million and~~ $0.7 million at ~~September 30, 2017~~March 31, 2019, and $0.5 million at December 31, ~~2016, respectively.~~2018.

In December 2016, we swapped €25.0 million of floating rate obligations for fixed rate obligations at a rate of 0.365% against EURIBOR in Euros. The swap amortizes over seven equal annual installments, which began on June 30, 2017 until the final maturity on June 30, 2023. In April 2017, we swapped €35.0 million of floating rate obligations at a rate of 0.59% against EURIBOR in Euros. 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. To ensure the swap is highly effective, all of the principal terms of the swap matched the terms of the bank loan. The fair value of the interest rate swaps were liabilities of $0.4 million and $0.1 million at September 30, 2017 and December 31, 2016, respectively.

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 sotherefore 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~~we net settled these derivatives and ~~received $10.0 million in cash in settlement of~~therefore 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 treasury locks ~~is to reduce~~reduced the effective interest rate on ~~these~~the 2017 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 2020,~~September 2021, which we account for as cash flow hedges. The aggregate notional amount of these contracts was ~~$317.6~~$418.5 million and ~~$423.8~~$416.5 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. The purpose of these contracts is to hedge a portion of the forecasted transactions of our European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. The effective portion of the hedges, ~~gains~~losses of ~~$9.7~~$3.6 million ~~and $31.7 million, respectively,~~ were recorded in other comprehensive income (“OCI”) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~losses~~gains of ~~$1.4~~$8.4 million ~~and $10.7 million, respectively, were recorded in OCI~~ for the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2018. We classified the carrying amount of these contracts of ~~$13.5~~$1.1 million in other assets and ~~$4.3~~$17.1 million in other liabilities, of which $10.0 million is recorded in noncurrent liabilities, on the Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2019 and ~~$33.9~~$1.3 million in other assets and $15.3 million in other liabilities at December 31, ~~2016. During the three and nine months ended September 30, 2017, we~~2018. We recognized net losses of ~~$0.6 million and $11.4~~$1.8 million in gross margin ~~respectively. During~~during the three ~~and nine~~ months ended ~~September 30, 2016, we recognized~~March 31, 2019 and net ~~losses~~gains of ~~$5.0~~$2.3 million ~~and $13.5 million in gross margin, respectively. For~~for the ~~quarters and nine~~three months ended ~~September 30, 2017 and 2016, hedge ineffectiveness was immaterial.~~March 31, 2018.

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 30, 2017~~March 31, 2019 and ~~2016,~~2018, we recognized net foreign exchange gains of ~~$4.0~~$0.3 million and $0.8 million, respectively, in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2017 and 2016, we recognized net foreign exchange gains of $15.4 million and of $3.4$2.0 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 million classified in other assets and ~~$1.6~~$0.2 million in other liabilities ~~and $1.0 million classified in other assets~~at March 31, 2019, and $0.3 million in other ~~liabilities on the September 30, 2017 and~~assets at December 31, ~~2016~~2018, in the Condensed Consolidated Balance ~~Sheets, respectively.~~Sheets.

The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters ended March 31, 2019 and ~~nine months ended September 30, 2017 and 2016~~March 31, 2018 was as follows:

~~We expect~~Unrealized losses of $6.5 million recorded in accumulated other comprehensive loss, net of tax of $2.5 million, as of March 31, 2019, are expected to ~~reclassify $1.7 million of unrealized gains~~be reclassified into earnings over the next twelve months as the hedged sales are recorded.

On occasion we enter into commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile). As of March 31, 2019, we had commodity swap agreements with a notional value of $20.1 million. The swaps mature monthly through March 2021. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items. The fair value of the commodity swap agreements was a liability of $4.6 million at March 31, 2019.

The income tax ~~provisions~~provision 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$20.6 million ~~from the reversal of provisions for uncertain tax provisions. The income tax provision~~compared to $14.1 million for the quarter ended September 30, 2016 was $16.1 million, including a net benefit of $6.6 million from the release of reserves for uncertain tax positions. The provision for the first nine months of 2017 also included a nonrecurring discrete benefit of $9.1 million from the release of a valuation allowance in a foreign jurisdiction. The effective tax rate, excluding these benefits, for the nine months of 2017 was 24.2% as compared to 30.5% in 2016, as bothMarch 31, 2018. Both periods ~~benefitted~~benefited from deductions associated with ~~share-based~~share based compensation ~~payments in addition~~payments. Our underlying estimated annual effective income tax rate is expected to ~~the tax credits identified in 2017.~~
remain at 24%.

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 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~~$1.5 million and ~~$6.3~~$22.6 million, respectively, at ~~September 30, 2017.~~March 31, 2019. 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 months~~quarter ended ~~September 30, 2017~~March 31, 2019 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 represents contingent consideration that was recognized in connection with the Company’s Oxford Performance Materials acquisition. This amount was estimated based on certain contractual stipulations which require payments to be made to the seller in the future based upon the achievement of certain results. We used forecasted results which were discounted using an internally derived discount rate. Future amounts payable may differ from this estimate by the difference between the actual and forecasted results. The amount of interest related to this liability accreted during the three months ended March 31, 2019 was not material.

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

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

We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the three months ended March 31, 2019 and 2018:

Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled. Contract assets are included in our Consolidated Balance Sheets as a component of current assets. The activity related to contract assets for the three months ended March 31, 2019 is as follows:

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

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

Financial information for our operating segments for the ~~quarters and nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 were as follows:

	(Unaudited)									(Unaudited)
	Composite		Engineered		Corporate &					Composite		Engineered		Corporate &
(In millions	Materials		Products		Other (a)			Total		Materials		Products		Other (a)			Total
Third Quarter 2017
First Quarter 2019
Net sales to external customers	$	398.9	$	92.6	$	—		$	491.5	$	487.7	$	122.2	$	—		$	609.9
Intersegment sales		16.4		—		(16.4	)		—		19.2		0.1		(19.3	)		—
Total sales		415.3		92.6		(16.4	)		491.5	$	506.9	$	122.3	$	(19.3	)	$	609.9
Operating income		90.0		12.1		(13.0	)		89.1		112.5		14.8		(24.5	)		102.8
Depreciation and amortization		24.8		1.9		0.1			26.8		34.9		3.8		—			38.7
Stock-based compensation		1.1		0.1		1.0			2.2		4.1		0.8		6.2			11.1
Accrual basis additions to capital expenditures		47.4		0.5		—			47.9		56.8		0.7		—			57.5

Third Quarter 2016
First Quarter 2018
Net sales to external customers	$	398.2	$	102.3	$	—		$	500.5	$	444.6	$	95.5	$	—		$	540.1
Intersegment sales		16.2		—		(16.2	)		—		19.2		—		(19.2	)		—
Total sales		414.4		102.3		(16.2	)		500.5	$	463.8	$	95.5	$	(19.2	)	$	540.1
Operating income		88.8		12.9		(12.6	)		89.1		91.0		9.9		(18.5	)		82.4
Depreciation and amortization		21.7		1.8		—			23.5		27.5		2.3		—			29.8
Stock-based compensation		0.7		0.1		—			0.8		3.6		0.7		5.6			9.9
Accrual basis additions to capital expenditures		84.4		5.9		0.1			90.4		45.3		—		—			45.3

Nine Months Ended September 30, 2017
Net sales to external customers	$	1,183.7	$	277.9	$	—		$	1,461.6
Intersegment sales		48.6		—		(48.6	)		—
Total sales		1,232.3		277.9		(48.6	)		1,461.6
Operating income		264.0		37.2		(43.8	)		257.4
Depreciation and amortization		70.6		5.6		0.1			76.3
Stock-based compensation		5.7		1.0		8.8			15.5
Accrual basis additions to capital expenditures		208.5		9.5		—			218.0

Nine Months Ended September 30, 2016
Net sales to external customers	$	1,219.3	$	301.5	$	—		$	1,520.8
Intersegment sales		53.2		—		(53.2	)		—
Total sales		1,272.5		301.5		(53.2	)		1,520.8
Operating income		281.2		36.8		(44.9	)		273.1
Depreciation and amortization		63.5		5.4		0.1			69.0
Stock-based compensation		4.9		0.9		7.8			13.6
Accrual basis additions to capital expenditures		221.6		10.9		0.1			232.6
_________________

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

due to the acquisition of ARC Technologies LLC, discussed in Note 13. At March 31, 2019, the balance of goodwill and intangible assets was $189.4 million and $96.8 million, respectively. No impairments have been recorded against these amounts.

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 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 were as follows:

(In millions)

Unrecognized Defined Benefit and Postretirement Plan Costs

Change in Fair Value of Derivatives
Products (a)

Foreign Currency Translation

Total

Balance at December 31, 2016

$

(14.6
)

$

(18.7
)

$

(141.1
)

$

(174.4
)
Other comprehensive (loss) income before reclassifications

(1.1
)

23.1

87.2

109.2

Amounts reclassified from accumulated other comprehensive loss

(0.5
)

8.5

—

8.0

Other comprehensive (loss) income

(1.6
)

31.6

87.2

117.2

Balance at September 30, 2017

$

(16.2
)

$

12.9

$

(53.9
)

$

(57.2
)

(In millions)	Unrecognized Net Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2018	$	(15.4	)	$	(5.8	)	$	(86.8	)	$	(108.0	)
Other comprehensive loss before reclassifications		(0.2	)		(4.3	)		(2.8	)		(7.3	)
Amounts reclassified from accumulated other comprehensive loss	(0.2		)		1.6		―				1.4
Other comprehensive loss		(0.4	)		(2.7	)		(2.8	)		(5.9	)
Balance at March 31, 2019	$	(15.8	)	$	(8.5	)	$	(89.6	)	$	(113.9	)

The amounts reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs component of accumulated other comprehensive loss for the ~~quarter~~three months ended March 31, 2019, 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 months ended September 30, 2017.~~with no material tax impact. 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 months~~quarter ended ~~September 30, 2017~~March 31, 2019 were net losses of $1.8 million less taxes of $0.4 million related to foreign currency forward exchange contracts and $0.7 million less taxes of $0.2 million related to commodity swaps. We also recorded net gains of $0.4 million less taxes of $0.1 million ~~and net losses of $10.7 million less taxes of $2.2 million, respectively. The currency translation adjustments are not currently adjusted for income taxes as they relate~~related to ~~indefinite investments in non-U.S. subsidiaries.~~interest rate swaps.

During the quarter ended March 31, 2019, we acquired all of the outstanding equity interests in ARC Technologies LLC, a leading supplier of customer RF/EMI and microwave absorbing composite materials for military, aerospace and industrial applications, for approximately $158.4 million in cash, plus a future payment of $5.4 million, that will be paid in 2019. This acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations.

In connection with the acquisition, the Company recognized approximately $82.8 million of goodwill, and approximately $63.0 million of intangible assets which are included in our Engineered Products segment.

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~~predict the ultimate ~~legal~~resolution of litigation, investigations and ~~financial liability with respect to certain contingent liabilities and~~ claimsasserted against us, 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~~account our existing insurance coverage and amounts already provided for, the currently pending legal proceedings against us will not have a material adverse impact on our consolidated results of operations, financial position or cash flows.

We 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~~the below 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~~the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) allows for joint and several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs. We believe, based on the amount and nature of our waste, ~~our existing insurance coverage, the amounts already provided for~~ and the number of other financially viable PRPs, that our liability in connection with such environmental matters will not be material.

Hexcel ~~and a group of~~together with approximately 5148 other PRPs that comprise the Lower Passaic Cooperating Parties Group (the “CPG”)~~. Hexcel and the CPG~~, are subject to a May 2007 Administrative Order on Consent (“AOC”) with the EPA requiring the CPG to perform a Remedial Investigation/Feasibility Study ~~(“RI/FS”)~~ of environmental conditions inof a 17-mile stretch of the ~~Lower~~ Passaic River ~~watershed.~~in New Jersey (the “Lower Passaic River”). We were included in the CPG based on our operations at our former manufacturing site in Lodi, New Jersey.

In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower eight miles of the ~~river. The ROD calls for capping and dredging of the lower eight miles of the~~Lower 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. Because the EPA has not yet selected a remedy for the upper nine miles of the Lower Passaic River, this~~billion. This estimate ~~range~~ does not include any costs related to a future remedy for the upper ~~portion~~nine miles of the ~~river. Now that it has issued the final ROD,~~Lower Passaic River. In August 2017, the EPA ~~will seek~~appointed an independent third party allocation expert to ~~hold some combination~~make recommendations on the relative liability of approximately 120 identified non-government PRP’s, which is not expected to be completed until 2020.

In October 2016, pursuant to a settlement agreement with the EPA, Occidental Chemical Corporation (“OCC”), one 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. However, based on a review~~commenced performance of the ~~Company’s position,~~remedial design required by the ROD, reserving its right of cost contribution from all other PRPs. In June 2018, OCC filed suit against approximately 120 parties, including Hexcel, in the U.S. District Court of the District of New Jersey seeking cost recovery and ~~as no point within~~contribution under CERCLA related to the ~~range is a more probable~~Lower Passaic River. We do not know whether this litigation will impact the EPA’s allocation process or the ultimate outcome ~~than any other point,~~of the ~~Company has determined that its accrual is sufficient at this time.~~ matter.

The accrual ~~balance~~ was ~~$2.0~~$2.1 million as of ~~September 30, 2017~~March 31, 2019 and ~~$2.1 million~~ at December 31, ~~2016. Despite~~2018. Given the ~~issuance of the final ROD, there continue to be many uncertainties~~uncertainty associated with the ~~selected remedy, the Company’s allocable share~~many elements of the ~~remediation and~~Superfund process for the ~~amount of insurance coverage. Given those uncertainties,~~Lower Passaic River, the amounts accrued may not be indicative of the amounts for which ~~the Company is~~we will ultimately ~~responsible and will~~ be ~~refined as events in the remediation process develop.~~responsible.

We are a PRP at a former chemical waste site in Whittier, California. The PRPs at Omega have established aThe Omega Chemical Site PRP Organized Group, (the ~~“Omega PRP Group”~~“OPOG”), and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. ~~The Omega PRP Group~~OPOG has attributed ~~approximately 1.07%~~either 1.21% or 2.07% of the waste tonnage (dependent on the specific location within the Omega Chemical Site) 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;~~an ROD; the ~~Omega PRP Group~~OPOG members have been served notice by the EPA as PRPs who will be required to be involved in the remediation of the regional groundwater contamination in that vicinity as well. As a member of ~~the Omega PRP Group,~~OPOG, Hexcel will incur costs associated with the investigation and remediation of the Omega site and the regional groundwater remedy, although our ultimate liability, if any, in connection with this matter cannot be determined at this time. The total accrued liability relating to potential liability for both the Omega site and regional groundwater remedies was ~~$0.6~~$0.3 million at ~~both September 30, 2017~~March 31, 2019 and at December 31, ~~2016, respectively.~~2018.

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 30, 2017,~~March 31, 2019 and December 31, 2018, our aggregate environmental related accruals were ~~$2.8~~$2.6 million and $2.7 million, respectively, of which ~~$0.9~~$0.7 million ~~was included in accrued liabilities with the remainder included in non-current liabilities. As of December 31, 2016, our aggregate environmental related accruals were $3.2~~and $0.8 million, ~~of which $1.4 million~~respectively, 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, at the high end of the range of possible outcomes, our accrual would have been $16 million ~~higher.~~ higher at March 31, 2019.

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 30, 2017 and 2016 was $0.1 million and $0.2 million, respectively, and $0.3 million and $0.7 million for the nine months ended September 30, 2017 and 2016, respectively. In addition, our operating costs relating to environmental compliance charged to expense were $2.4 million and $2.6 million for the quarters ended September 30, 2017 and 2016, respectively and $7.1 million and $7.5 million for the nine months ended September 30, 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 months~~ ended ~~September 30, 2017,~~March 31, 2019, and accrued warranty cost, included in “accrued liabilities” in the Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, 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~~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, RF/EMI and microwave absorbing materials, 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, India and Africa. We are also a partner in a joint venture in Malaysia, which manufactures composite structures for Commercial Aerospace applications.

~~Hexcel has~~On January 3, 2019, we acquired ARC Technologies, LLC (“ARC”), a leading supplier of custom RF/EMI and microwave absorbing composite materials for military, aerospace and industrial applications. The acquisition strengthens our existing advanced materials portfolio in structural composites and thermoplastics.

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, RF/EMI and microwave absorbing materials, engineered core and specialty machined honeycomb products with added functionality.

Net sales for the quarter were ~~$491.5~~$609.9 million, ~~1.8% lower (2.4% lower~~12.9% greater (14.9% in constant currency) than the ~~$500.5~~$540.1 million reported for the ~~third~~first quarter of ~~2016. Year to date net sales were 3.5% lower~~2018. The increase in ~~constant currency~~sales the quarter was driven by ~~declines in both~~strong growth across all markets and included sales from the ~~commercial aerospace and industrial markets.~~ARC acquisition.

Commercial ~~aerospace~~Aerospace sales of ~~$352.6~~$415.5 million ~~decreased 2.2% (2.5%~~increased 8.6% (9.6% in constant currency) for the quarter as compared to the ~~third~~first quarter of ~~2016 and decreased 2.8% (2.7% in constant currency)~~2018. The first quarter benefited from increased growth for most programs with particularly strong performance for the ~~nine month period~~A320neo and 737 MAX, as ~~compared to 2016. The sales declines in certain legacy widebody aircraft (A380, B777~~well as continued growth for the 787 and ~~B747) slightly more than offset the growth of the A350 and the new narrowbody aircraft.~~ A350.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were ~~down 6%~~up 7% for the ~~third~~first quarter ~~2017 and down about 7% for first nine months~~ of ~~2017~~2019, as compared to ~~2016, driven by lower~~2018, reflecting strengthening of business jet sales.

Space & Defense sales of ~~$82.7~~$107.8 million increased ~~1.5% (0.7%~~19.6% (21.8% in constant currency) for the quarter as compared to the ~~third~~first quarter of ~~2016. Rotorcraft~~2018 including sales ~~comprise just over half of Space & Defense with strong military performance offset by weaker commercial sales. Space & Defense sales for~~from the ~~first nine months of $247.3 million were 2.6% higher~~ARC acquisition. Growth in ~~constant currency than sales for~~ the ~~first nine months of 2016. The increase was driven by U.S. military rotorcraft and the~~F-35 Joint Strike Fighter (“JSF”) ~~program.~~ was the primary driver along with continued strength in military rotorcraft. Rotorcraft accounted for just over 40% of Space & Defense sales in the quarter.

Total Industrial sales of ~~$56.2~~$86.6 million for the ~~third~~first quarter of ~~2017 were 3.8% lower (6.5%~~2019 increased 28.7% (36.8% in constant currency) ~~than~~as compared to the ~~third~~first quarter of ~~2016.~~2018. Wind energy sales ~~were down more than 25% for the third quarter~~improved 66.6% (78.0% in constant currency) compared to the ~~2016 quarter. Industrial sales for~~prior year period as the ~~first nine months~~transition to the new generation of ~~2017 were $165.6 million or 15.4% lower~~composite blades started in constant currency than the sales for the first nine months of 2016. 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.mid-2018.

Gross margin for the ~~third~~first quarter of 2019 was ~~27.6%~~27.4% as compared to ~~27.1% in the third quarter of 2016, and 28.0% and 28.2%~~26.4% for the first ~~nine months~~quarter of ~~2017~~2018, as 2018 was negatively impacted by several headwinds including acrylonitrile (AN) and ~~2016, respectively, as all periods reflected strong operating performance. As expected, the first nine months of 2017 included about $8 million of costs related to the startup~~wind energy resin pricing. Our new plant in Roussillon, France is now fully operational and ~~training for the new greenfield sites in France~~producing qualified precursor and ~~Morocco.~~aerospace grade carbon fiber.

Selling, general and administrative expenses for the ~~third~~first quarter ~~and first nine months~~2019 were ~~slightly~~ lower as a percentage of sales and in constant currency ~~(3% for the first nine months)~~ than the prior year period as we maintained tight cost control. Research and technology expenses for the first ~~nine months~~quarter of ~~$36.5 million was~~2019 were about 7%8% higher in constant currency than the comparable ~~2016~~2018 period, as we continued to invest in ~~innovative~~advance composite ~~products~~technology and ~~solutions~~innovation.

Operating cash flow for the first three months of 2019 was $45.9 million compared to ~~support our customers and next generation products.~~

$62.6 million in 2018, as working capital increased resulting in a cash use of $78.4 million in 2019 as compared to a use of $46.2 million in 2018 reflecting growth in the underlying business. For the first three months of 2019, capital expenditures were $61.1 million as compared to $59.5 million in the first three months of 2018. Free cash flow (defined as cash provided by operating activities less capital expenditures) for the first ~~nine~~three months of ~~2017~~2019 was a cash use $15.2 million versus a source of ~~$87 million versus $55~~$3.1 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. 2018.

Accrual basis additions to capital expenditures were ~~$218~~$57.5 million for the first three months of 2019 and $45.3 million in ~~2017 and $233 million in 2016.~~2018. 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.~~ for 2019.

	Quarter Ended September 30,											Nine Months Ended September 30,											Quarter Ended March 31,
(In millions, except per share data)	2017				2016				% Change			2017				2016				% Change			2019			2018			% Change
Net sales	$	491.5			$	500.5				(1.8	)%	$		1,461.6		$		1,520.8			(3.9	)%	$	609.9		$	540.1			12.9	%
Net sales change in constant currency										(2.4	)%										(3.5	)%								14.9	%
Operating income			89.1			89.1				(0.0	)%		257.4					273.1			(5.7	)%	$	102.8		$	82.4			24.8	%
As a percentage of net sales	18.1			%	17.8			%						17.6	%	18.0			%					16.9	%		15.3	%
Net income		69.7				68.2				2.2	%		195.9				190.3				2.9	%	72.2			61.6				17.2	%
Diluted net income per common share	$		0.76		$		0.72					$		2.13		$		2.01					$	0.84		$	0.68			23.5	%

Non-GAAP measures:
Adjusted net income	$	65.5			$	61.6				6.3	%	$	182.6			$		184.0			(0.8	)%
Adjusted diluted earnings per share	$		0.71		$		0.65					$		1.98		$		1.94

The Company’s performance ~~measurements include sales measured in constant dollars, net income adjusted for special items and~~measurement includes free cash flow, ~~all of~~ which ~~are~~is a non-GAAP ~~measures.~~measure. Management believes ~~these~~this non-GAAP ~~measurements are~~measurement is meaningful to investors because ~~they provide~~it provides 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~~This non-GAAP ~~measurements are~~measurement is not recognized in accordance with generally accepted accounting principles and should not be viewed as an alternative to a GAAP ~~measures~~measure of performance. The following is a reconciliation from GAAP to non-GAAP amounts.

The following table summarizes net sales to third-party customers by segment and end market for the ~~quarters and nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018:

	Quarter Ended September 30,									Nine Months Ended September 30,									Quarter Ended March 31,
(In millions)	2017			2016			% Change			2017			2016			% Change			2019		2018		% Change
Consolidated Net Sales	$		491.5	$		500.5		(1.8	)%			1,461.6	$		1,520.8		(3.9	)%	$	609.9	$	540.1		12.9	%
Commercial Aerospace	352.6			360.6				(2.2	)%	1,048.7			1,079.4				(2.8	)%		415.5		382.7		8.6	%
Space & Defense	82.7			81.5				1.5	%	247.3			242.6				1.9	%		107.8		90.1		19.6	%
Industrial	56.2			58.4				(3.8	)%	165.6			198.8				(16.7	)%		86.6	67.3			28.7	%

Composite Materials	$	398.9		$	398.2			0.2	%	$		1,183.7	$		1,219.3		(2.9	)%	$	487.7	$	444.6		9.7	%
Commercial Aerospace	277.1			276.0				0.4	%	820.2			828.3				(1.0	)%		323.4		303.2		6.7	%
Space & Defense	65.6			63.8				2.8	%	197.9			192.2				3.0	%		77.7		74.1		4.9	%
Industrial	56.2			58.4				(3.8	)%	165.6			198.8				(16.7	)%		86.6	67.3			28.7	%

Engineered Products	$		92.6	$	102.3			(9.5	)%	$	277.9		$	301.5			(7.8	)%	$	122.2	$	95.5		28.0	%
Commercial Aerospace	75.5			84.6				(10.8	)%	228.5			251.1				(9.0	)%	92.1		79.5			15.8	%
Space & Defense	17.1			17.7				(3.4	)%	49.4			50.4				(2.0	)%		30.1		16.0		88.1	%
Industrial	—			—			N/A			—			—			N/A

Composite Materials: Net sales of ~~$398.9~~$487.7 million in the ~~third~~first quarter of ~~2017~~2019 increased ~~$0.7~~$43.1 million from the ~~$398.2~~$444.6 million in sales for the prior year quarter, ~~as a 3.8% decrease~~driven by strong growth in ~~Industrial sales was offset by a slight increase in~~ Commercial Aerospace and ~~Space & Defense sales.~~ ~~Net sales for the first nine months of 2017 declined by 2.9% as compared with the first nine months of 2016. As expected, wind energy sales were down about 30%~~ in ~~the quarter and the first nine months of 2017. However, the Company expects~~ wind energy sales in ~~2018 to exceed 2016 levels, once~~Industrial. The increase in Commercial Aerospace for the first three months of 2019 benefitted from increased production rates and higher composite content on the new narrow body planes. Space & Defense sales primarily benefitted from growth in the JSF program. Wind energy sales were up in 2019 as the transition ~~from certain blade models~~to new generation blades that are longer with ~~lower~~a higher composite content ~~to longer blades with higher content~~started in ~~2018 is completed.~~mid-2018.

Engineered Products: Net sales of ~~$92.6~~$122.2 million in the ~~third~~first quarter of ~~2017 decreased $9.7~~2019 increased $26.7 million from the ~~$102.3~~$95.5 million for ~~2016 as driven by a decline~~2018. This was attributable to an increase in Commercial Aerospace sales ~~primarily due to~~benefitting from the ~~decline~~ARC acquisition as well as reflecting strong growth in ~~legacy widebody aircraft rates~~. ~~The decrease of 7.8% in net sales to $277.9 million for~~ the ~~first nine months of 2017 was also driven by a decline in Commercial Aerospace sales.~~A320neo and 737 MAX.

Commercial ~~Aerospace:~~ ~~Commercial~~ Aerospace sales of ~~$352.6~~$415.5 million ~~were 2.2% lower (2.5%~~increased 8.6% (9.6% in constant currency) for the quarter as compared to the ~~third~~first quarter of ~~2016. Net sales~~2018. The first quarter benefited from increased growth for most programs with particularly strong performance for the ~~first nine months of 2017 declined 2.7% on a constant currency basis to $1,048.7 million~~A320neo and 737 MAX, as ~~compared to~~well as continued growth for the ~~first nine months of 2016. Sales declines in certain legacy widebody aircraft (i.e. A380, B777~~787 and ~~B747) slightly more than offset the growth of the A350 and new narrowbody aircraft.~~A350.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were ~~down 6% for the third quarter 2017 and down about~~up 7% for the first ~~nine months~~quarter of ~~2017~~2019, as compared to ~~2016, driven by lower~~2018, reflecting strengthening of business jet sales.

Space & Defense~~: Space & Defense~~ sales of ~~$82.7~~$107.8 million increased ~~1.5% (0.7%~~19.6% (21.8% in constant currency) for the quarter as compared to the ~~third~~first quarter of ~~2016.~~2018 including sales from the ARC acquisition. Growth in the F-35 Joint Strike Fighter (“JSF”) was the primary driver along with continued strength in military rotorcraft. Rotorcraft ~~sales comprise~~accounted for just over ~~half~~40% of Space & Defense ~~with strong military performance offset by weaker commercial sales. Space & Defense~~ sales in the quarter.

Total Industrial sales of $86.6 million for the first ~~nine months of $247.3 million were 2.6% higher in constant currency than sales for the first nine months of 2016. The increase was driven by U.S. military rotorcraft and the JSF program~~

~~Industrial:~~ ~~Sales of $56.2 million for the third~~ quarter of ~~2017 were 3.8% lower (6.5%~~2019 increased 28.7% (36.8% in constant currency) ~~than~~as compared to the ~~third~~first quarter of ~~2016.~~2018. Wind energy sales ~~were down more than 25% for the third quarter~~improved 66.6% (78.0% in constant currency) compared to the ~~2016 quarter. Industrial sales for~~prior year period as the ~~first nine months~~transition to the new generation of ~~2017 were $165.6 million or 15.4% lower~~composite blades started 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.mid-2018.

	Quarter Ended September 30,									Nine Months Ended September 30,									Quarter Ended March 31,
(In millions)	2017			2016			% Change			2017			2016			% Change			2019			2018			% Change
Gross margin	$	135.6		$	135.7			(0.1	)%	$	409.6		$	429.0			(4.5	)%	$	167.2		$	142.6			17.3	%
Percentage of sales	27.6		%	27.1		%				28.0		%	28.2		%					27.4	%		26.4	%

Gross margin for the ~~third~~first quarter was ~~27.6%~~27.4% compared to ~~27.1%~~26.4% in the ~~third~~first quarter of ~~2016,~~2018, as 2018 was negatively impacted by several headwinds including AN and ~~28.0%~~wind energy resin pricing. Our new plant in Roussillon, France is now fully operational and ~~28.2% for the first nine months of 2017~~producing qualified precursor and 2016, respectively, as all periods reflected strong operating performance. As expected, the first nine months of 2017 included about $8 million of costs related to the startup and training for the new greenfield sites in France and Morocco.aerospace grade carbon fiber.

	Quarter Ended September 30,									Nine Months Ended September 30,											Quarter Ended March 31,
(In millions)	2017			2016			% Change			2017				2016				% Change			2019			2018			% Change
SG&A expense	$	34.7		$	35.1			(1.1	)%	$		115.7		$		121.1			(4.5	)%	$	49.5		$	46.4			6.7	%
Percentage of sales	7.1		%	7.0		%				7.9			%	8.0			%					8.1	%		8.6	%

R&T expense	$	11.8		$	11.5			2.6	%	$	36.5			$	34.8				4.9	%	$	14.9		$	13.8			8.0	%
Percentage of sales	2.4		%	2.3		%				2.5			%	2.3			%					2.4	%		2.6	%

Selling, general and administrative expenses for the ~~third~~first quarter ~~and first nine months~~of 2019 were ~~slightly~~ lower ~~in constant currency (3% for the first nine months in constant currency)~~as a percentage of sales than the ~~prior year~~comparable periods in 2018 as we maintained tight cost ~~controls.~~control. Research and technology expense increased for the first ~~nine months~~quarter of ~~$36.5~~2019 by $1.1 million, ~~was about 7% higher in constant currency than the comparable 2016 period~~or 8% 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,

(In millions)

2017

2016

% Change

2017

2016

% Change

Consolidated operating income

89.1

$
89.1

(0.0
)%

$
257.4

$

273.1

(5.7
)%
Operating margin

18.1

%

17.8

%

17.6

%

18.0

%

Composite Materials

90.0

88.8

1.4
%

264.0

281.2

(6.1
)%
Operating margin

21.7

%

21.4

%

21.4

%

22.1

%

Engineered Products

12.1

12.9

(6.2
)%

37.2

36.8

1.1
%
Operating margin

13.1

%

12.6

%

13.4

%

12.2

%

Corporate & Other

(13.0
)

(12.6
)

3.2
%

(43.8
)

(44.9
)

(2.4
)%

~~Operating~~Operating income for ~~each of~~ the ~~third~~first quarters of ~~2017~~2019 and ~~2016~~2018 was ~~$89.1 million. The quarter~~$102.8 million and ~~first nine months of 2017 were~~$82.4 million, respectively. Exchange rates favorably impacted ~~from exchange rates~~the first quarter of 2019 by ~~about 40 basis points and~~ 50 basis points compared to ~~the corresponding 2016 periods, respectively. For the first nine months of 2017, depreciation~~2018. Depreciation and amortization expense for the first three months of 2019 was $8$8.9 million higher ~~in constant currency~~ than the comparable period for ~~2016.~~2018.

	Quarter Ended September 30,							Nine Months Ended September 30,							Quarter Ended March 31,
(In millions)	2017		2016		% Change			2017		2016		% Change			2019		2018		% Change
Interest expense, net	$	7.0	$	5.5		27.3	%	$	20.0	$	16.8		19.0	%	$	12.0	$	8.0		50.0	%

Interest expense for the ~~third~~first quarter ~~and nine months~~ ended ~~September 30, 2017~~March 31, 2019 increased ~~over~~$4.0 million as compared to the ~~comparable~~same period ~~of 2016~~last year. The increase was primarily due to a higher ~~average interest rate on~~ debt ~~outstanding~~levels as a result of the Company issuance, in February 2017, of $400 million of 3.95% senior unsecured notes due in 2027. In addition, debt increased as we continue to invest in capacity, while also returning funds to stockholders through stock buybacks and dividends.ARC acquisition.

	Quarter Ended September 30,								Nine Months Ended September 30,								Quarter Ended March 31,
(In millions)	2017				2016				2017				2016				2019			2018
Income tax expense	$	13.6			$	16.1			$	44.3			$	67.5			$	20.6		$	14.1
Effective tax rate			16.5	%			19.3	%			18.6	%			26.4	%		22.7	%		18.9	%

The ~~effective~~income tax ~~rate~~provision for the ~~third~~current quarter was ~~16.5%~~$20.6 million compared to ~~19.3%~~$14.1 million for the ~~third~~ quarter of 2016, and the effective tax rate for the first nine months of 2017 was 18.6% compared to 26.4% in 2016. The quarter benefitted from the impact of tax credits identified during the quarter, while both the quarter and the first nine months’ provisions benefittedended March 31, 2018. Both periods benefited from deductions associated with ~~share-based~~share based compensation payments. The third quarter provisions in 2017 and 2016 included non-recurring discrete benefits of $4.2 million and $6.6 million from the reversal of provisions for uncertain tax provisions. The provision for the first nine months of 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 discrete benefits, theOur underlying estimated annual effective income tax rate ~~for the first nine months was 24.2%~~is expected to remain at 24%.

Liquidity: As of ~~September 30, 2017,~~March 31, 2019, our total debt, net of cash, was ~~$714.7~~$1,126.0 million, as compared to ~~$653.5~~$924.1 million at December 31, ~~2016.~~2018. The increase in debt in the first ~~nine~~three months of ~~2017~~2019 primarily reflects ~~$122.0 million in stock repurchases and dividends of $31 million partially offset by free cash flow of $87 million.~~the ARC acquisition. 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 30, 2017,~~March 31, 2019, total borrowings under our $700 million Senior Unsecured Revolving Credit Facility (“the Facility”) were ~~$75~~$414 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.~~Facility. As of ~~September 30, 2017,~~March 31, 2019, we had not issued any letters of credit under the Facility, resulting in undrawn availability under the Facility as of ~~September 30, 2017 of $625.0~~$286 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 30, 2017,~~March 31, 2019, 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 30, 2017,~~March 31, 2019, 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~~$45.9 million in the first ~~nine~~three months of ~~2017,~~2019, as compared to ~~$286.8~~$62.6 million in the first ~~nine~~three months of ~~2016. Working~~2018. The change in working capital ~~generated $4.6~~was a use of $78.4 million ~~of cash~~in 2019 as compared to $46.2 million in 2018, driven by growth in the ~~first nine months of 2017 versus a usage of $38.2 million in the first nine months of 2016, as accounts receivable collections remain strong.~~underlying business.

Investing Activities: Net cash used for investing activities ~~of $233~~was $219.5 million and ~~$265~~$59.5 million in the first ~~nine~~three months of ~~2017~~2019 and ~~2016, respectively, was~~2018, respectively. The first quarter of 2019 includes $158.4 million for ~~capital expenditures and investments.~~the ARC acquisition. Capital expenditures were ~~$221.3~~$61.1 million and ~~$231.8~~$59.5 million in ~~the first nine months of 2017~~2019 and ~~2016,~~2018, respectively.

In 2017, we made additional investments for a total of $12 million 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~~provided $184.9 million ~~and used $27.3 million~~ of ~~net~~ cash in the first ~~nine~~three months of ~~2017~~2019, and ~~2016, respectively. The first nine months ended September 30, 2017 reflects $400~~were a use of $15.5 million in the same period in 2018. This increase in cash provided was primarily due to amounts borrowed from our Facility to fund the ~~issuance of the 3.95% senior notes and $37~~ARC acquisition. We returned $23.9 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 2019 compared to $41.3 million ~~from the Facility and $27 million from the Euro term loan less $115 million returned to stockholders from stock repurchases and dividends.~~

In the first nine months of 2017, the Company repurchased $122 million of shares of common stock under the repurchase plans. In October 2015, our Board authorized the repurchase of $250 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.2018.

Financial Obligations and Commitments: As of ~~September 30, 2017,~~March 31, 2019, the current portion of debt ~~includes $4.2~~included $9.0 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~~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.~~2018. Significant changes to our accounting policies subsequent to the filing of our Form 10-K, relate to the adoption of Topic 842, Leases, as discussed in Notes 1 and 4 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~~potentially responsible party and our remaining costs associated with our responsibility to remediate the Lower Passaic River in New Jersey and other sites are accrued in the consolidated balance sheets. As of ~~September 30, 2017,~~March 31, 2019, our aggregate environmental related accruals were ~~$2.8~~$2.6 million, of which ~~$0.9~~$0.7 million was included in accrued liabilities, with the remainder included in non-current liabilities. As related to certain environmental matters, the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount. If we had accrued at the high end of the range of possible outcomes, for those sites where we are able to estimate our liability, our accrual would have been approximately $16 million higher. These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required, changes in the apportionment of costs among responsible parties, the amount of insurance coverage and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.

~~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 21E of the ~~Private~~ Securities ~~Litigation Reform~~Exchange Act of ~~1995.~~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) expectations regarding 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) expectations regarding the outcome of legal ~~matters;~~matters or the impact of changes in laws or regulations; (k) our projections regarding our income tax rate and 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 theanticipated impact of the above factors and various market risks on our expectations of ~~2017~~ financial results for 2019 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;~~Vestas, including any reduction in sales to Boeing related to a decrease in production volume of the 737 MAX; changes in sales mix; changes in current pricing and cost levels; changes in aerospace delivery rates; changes in government defense procurement budgets; changes in military aerospace program technology; timely new product development or introduction; industry capacity; increased competition; ~~disruptions~~availability and cost of ~~established~~raw materials; supply ~~channels, particularly where raw materials are obtained from a single~~chain disruptions; inability to install, staff and qualify necessary capacity or achievement of planned manufacturing improvements; cybersecurity breaches or intrusions; currency exchange rate fluctuations; changes in political, social and economic conditions; including but not limited ~~number~~to, the effect of ~~sources~~change in U.S. trade policies and ~~cannot be substituted by unqualified alternatives; manufacturing capacity constraints; uncertainty regarding~~ the exit of the U.K. from the European Union; work stoppages or other labor disruptions; and ~~unforeseen vulnerability~~the unexpected outcome of ~~our network and systems to interruptions~~legal matters or ~~failures.~~impact of changes in laws or regulations.

~~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, 2018. 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~~2018 Annual Report on Form 10-K.

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of ~~September 30, 2017~~March 31, 2019, 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 March 31, 2019 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,~~2018, which could materially affect our business, financial condition or future results. With the exception of the below risk factor, there were no material changes in the Company’s risk factors from 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.

If we fail to comply with government procurement laws and regulations, we could lose business and be liable for various penalties or sanctions.

We must comply with laws and regulations relating to the formation, administration, and performance of U.S. government contracts, including the government security requirements and government export control laws and regulations. In complying with these laws and regulations, we may incur significant costs, and non-compliance may result in the imposition of fines and penalties, including contractual damages. If we fail to comply with these laws and regulations or if a government audit, review, or investigation uncovers improper or illegal activities, we may be subject to civil penalties, criminal penalties, or administrative sanctions, including suspension or debarment from contracting with the U.S. government.

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

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs			(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1 – January 31, 2019	193,603	$	57.75	193,603		$	373,594,906
February 1 – February 28, 2019	—		—	—			373,594,906
March 1 – March 31, 2019	—		—	—			373,594,906
Total	193,603	$	57.75	193,603	₍₁₎	$	373,594,906

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~~thereunto 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~~April 15, 2019
COMMON STOCK		~~89,825,472~~84,888,081

			Page
PART I.	FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)

	●	Condensed Consolidated Balance Sheets — ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018	3

	●	Condensed Consolidated Statements of Operations — The ~~quarters and nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	4

	●	Condensed Consolidated Statements of Comprehensive Income — The ~~quarters and nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	4

	●	Condensed Consolidated Statements of Cash Flows — The ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	5

	●	Condensed Consolidated Statements of Stockholders’ Equity — The three months ended March 31, 2019 and March 31, 2018	6

	●	Notes to Condensed Consolidated Financial Statements	67

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1619

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

Exhibit No.		Description

~~10.1~~		Credit Agreement, dated as of June 9, 2016, by and among 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-K dated June 14, 2016).

~~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.

(In millions)
Remainder of 2019	$	8.9
2020		11.3
2021		9.9
2022		7.2
2023		7.2
Thereafter		25.7
Total	$	70.2

`
(In millions)	Composite Material			Engineered Products		Total
Balance at December 31, 2018	$	12.9		$	37.6	$	50.5
Net revenue billed		(1.4	)		4.6		3.2
Balance at March 31, 2019	$	11.5		$	42.2	$	53.7

(In millions)		Unrecognized Defined Benefit and Postretirement Plan Costs				Change in Fair Value of Derivatives Products (a)				Foreign Currency Translation				Total
Balance at December 31, 2016	$		(14.6	)	$		(18.7	)	$		(141.1	)	$		(174.4	)
Other comprehensive (loss) income before reclassifications			(1.1	)			23.1				87.2				109.2
Amounts reclassified from accumulated other comprehensive loss			(0.5	)			8.5				—				8.0
Other comprehensive (loss) income			(1.6	)			31.6				87.2				117.2
Balance at September 30, 2017	$		(16.2	)	$		12.9		$		(53.9	)	$		(57.2	)

	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

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

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~~Form of Executive Severance Agreement ~~dated as of June 9, 2016, by and among~~entered into 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 ReportColleen Pritchett on ~~Form 8-K dated June 14, 2016).~~

~~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).March 20, 2019.

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,~~March 31, 2019, 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, (v) Condensed Consolidated Statements of Stockholders’ Equity, and ~~(v)~~(vi) related notes.

Exhibit No.		Description

10.1*		Form of Executive Severance Agreement entered into between Hexcel Corporation and Colleen Pritchett on March 20, 2019.

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 March 31, 2019, 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, (v) Condensed Consolidated Statements of Stockholders’ Equity, and (vi) related notes.

		Hexcel Corporation

~~October 18, 2017~~April 23, 2019		/s/ Kimberly Hendricks
(Date)		Kimberly Hendricks
		Senior Vice President, Corporate Controller and
		Chief Accounting Officer