HXL 10-K & 10-Q changes, risk factors and insider trading

Since 2022, air traffic has continued to grow and led to record demand for aircraft. However, supply chain challenges in the Commercial Aerospace industry, as well as labor disruptions and regulatory issues experienced by certain participants in the industry, continue to delay planned production and negatively impact aircraft build rates.rates in 2025. Ongoing or additional deferrals, cancellations, or reductions in demand that result in decreased aircraft build rates would, if significant, have a negative impact on sales for our Commercial Aerospace products and as a result reduce our operating income. Approximately 63%61% of our sales for 20242025 were derived from sales to the Commercial Aerospace industry. Ongoing pressures on build rates, or reductions in demand, for commercial aircraft or a delay in deliveries could result from many factors, including delays in the startup or ramp-up of new programs, suspension or discontinuation of current commercial aircraft programs, changes in the propensity for the general public to travel by air (including as a result of terrorist events and any subsequent military response, a public health crisis or a global conflict), a significant change in the cost of aviation fuel, a change in technology resulting in the use of alternative materials, environmental concerns (including climate change), consolidation and liquidation of airlines, availability of funding for new aircraft purchases or leases, inventory corrections or disruptions throughout the supply chain, quality issues or product defects, labor disruptions and work stoppages and slower macroeconomic growth.

At different times, both Airbus and Boeing have experienced various delays in the start and ramp up of several aircraft programs. For instance, both Boeing and Airbus have, in recent years, experienced difficulties meeting production goals due to supply chain delays,delays and disruptions, including quality issues, and, induring fallrecent 2024,years, Boeing experienced delays in production due to strikes by factory workers, impacting both 737 MAX and other commercial aircraft production dueand tomilitary aaircraft strikeand bydefense factory workers.systems. In the past, thesesuch matters have delayed our expected growth, or our effective utilization of capacity installed for such growth. Future delays, or production cuts arising from the impact of macroeconomic events, geopolitical conditions, global conflict or supply chain and labor disruptions, in these or other major new customer programs could similarly impact our results.

We have concentrated customers in the Commercial Aerospace and the Defense, Space & DefenseOther markets. In the Commercial Aerospace market, approximately 80%,77%, and in the Defense, Space & DefenseOther market, approximately 19%,16%, of our 20242025 sales were made to Airbus and Boeing and their related subcontractors. For the years ended December 31, 20242025 and December 31, 2023,2024, approximately 40%39% and 39%40% of our total consolidated sales, respectively, were to Airbus, and its related subcontractors and approximately 15%13% and 15% of our total consolidated sales, respectively, were to Boeing and its related subcontractors. Significant changes in the demand for our customers’ end products, program delays, the share of their requirements that is awarded to us or changes in the design or materials used to construct their products could result in a significant loss of business with these customers. The loss of, or significant reduction in, purchases by Airbus or Boeing or any of our other significant customers could materially impair our business, operating results, prospects and financial condition. The level of purchases and product mix demanded by our customers is often affected by events beyond their control, including general economic conditions, demand for their products, conditions in the airline industry, regulatory scrutiny and/or suspension or discontinuation of aircraft, disruptions in deliveries, business disruptions, strikes and other factors, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Reductions in spacedefense and defensespace spending could result in a decline in our sales.

SpaceDefense and defensespace production that has occurred in recent years may not be sustained, individual programs important to Hexcel may be cancelled, production may not continue to grow or may decrease and the increased demand for composite-intensive programs may not continue. In addition, the production of military aircraftaircraft, unmanned aerial vehicles and missiles depends upon defense budgets and the related demand for defense and related equipment. Approximately 30%39% of our 20242025 sales were to the Defense, Space & DefenseOther market, of which approximately 79%88% were related to military programs in the United States and other countries. In addition to normal business risks, our indirect supply of products to the U.S. and foreign government is subject to unique risks largely beyond our control. The level of U.S. and foreign defense spending is hard to predict, and U.S. Department of Defensedefense budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy as a result of the current political environment or otherwise, military aid to countries experiencing global conflict, the U.S. government’s budget deficits or the breach of the debt ceiling,ceilings, other spending priorities, increased defense regulatory requirements resulting in additional expenses, the cost of sustaining the U.S. military presence internationally, potential political pressure to reduce military spending and future potential government shutdowns, each of which could cause the U.S. Departmentand offoreign Defensedefense budgetbudgets to remain unchanged or to decline.

We must comply with laws and regulations relating to the formation, administration, and performance of U.S. government contracts, including government security requirements and additional government export control laws and regulations, as well as certain cybersecurity certifications and other cybersecurity requirements. We must follow similar requirements when doing business with foreign governments. These regulations and other requirements regularly evolve, and new laws, regulations or procurement requirements or changes to current ones (including, for example, regulations related to cybersecurity, privacy, information classification and protection, greenhouse gas emissions and climate risk, cost accounting, recovery of employee compensation costs, counterfeit parts, pensions, anti-human trafficking, specialty metals, conflict minerals and use of certain non-U.S. equipment and materials) could significantly increase our costs and risks and reduce our profitability. 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 or suspension or debarment from contracting with the U.S. government.government and the foreign governments with whom we do business. In addition, failure to follow the requirements of the National Industrial Security Program Operating Manual or any other applicable U.S. government industrial security regulations could, among other things, result in termination of any facility security clearance, which in turn would preclude us from being awarded classified contracts or, under certain circumstances, performing on our existing classified contracts.

OverIn the past severalrecent years, as part of our strategy to streamline operations and focus on our core competencies, we have completedengaged in strategic acquisitionsactivities, ofincluding complementarybusiness manufacturing companies, as well as strategic investments in companiesrestructuring and divestitures or closures of certain interests.facilities and investments. We expect to continue to explore complementary mergers, acquisitions, investments and joint ventures and may also pursue additional divestures or closures of business lines or investments that do not fit with our core strategy. We may also engage in further vertical integration and business restructuring. We may face competition for attractive targets and may not be able to acquire potential targets on terms or at prices acceptable to us, if at all. In addition, these types of transactions may require significant liquidity, which may not be available on terms favorable to us, or at all.

WeFurther, we cannot provide any assurance that we will realize the intended benefits from any such transactions. The process of integrating acquired businesses into our existing operations may result in unforeseen operating difficulties and may require additional financial resources and attention from management that would otherwise be available for the ongoing development or expansion of our existing operations. Even if successfully integrated, the acquired business may not achieve the results we expect or produce expected benefits in the time frame planned. In addition, we may not be able to successfully complete any strategic divestures in a timely manner, or at all.

Our business, financial position, results of operations and cash flows have been and may continue to be adversely impacted by the global macroeconomic environment, which has experienced, and continues to experience, extraordinary challenges, including high rates of inflation; increasingand interest rates; volatile energy costs; widespread disruptions in supply chainschains, including constrained raw material availability; workforce challenges, including labor shortages; political and social unrest; and market volatility. In addition, our business has been negatively impacted as a result of the tariffs, sanctions, and other restrictions on goods imposed by the U.S. government and similar measures imposed by governments outside the United States, and we expect to continue to experience impacts to our business in the future. In particular, tariffs have increased the cost of materials used to manufacture our products and may in the future reduce our ability to sell products globally and/or increase costs of domestic goods, energy, freight and other related costs. These challenges have, among other things, led to increased costs, labor and supply shortages, and transportation and performance delays and disruptions and have adversely affected us, our industry, our customers and suppliers and others with whom we do business. We (including our suppliers and other partners) have and may continue to experience inflationary pressures, supply chain disruptiondisruption, including as a result of tariffs, trade restrictions and other barriers, and labor, material and transportation cost increases at a rate higher than anticipated. Given the nature of our business and our contracts (many of which are fixed price and of long duration), we have been,been and may, in the futurefuture, maycontinue to be unable to recover some of these increased costs or to offset such costs with greater than expected efficiencies. While some aspects of the macroeconomic environment appear to be improving, and we have been able to mitigate some of the challenges, including seeking exemptions and alternative sourcing, where available, engaging in industry advocacy and implementing price increases, where feasible, other challenges persist. We cannot predict how long these challenges will persist or how they will change over time, or how the macroeconomic environment will evolve and continue to impact us. While we continue to work proactively to mitigate these challenges, if we are unable to do so successfully, our financial position, results of operations and/or cash flows could be materially adversely affected.

Our success, competitiveness and ability to execute on our global strategies and maintain a culture of innovation depend in large part on our ability to attract, retain and motivate qualified employees and leaders with expertise and capabilities, representing diverse backgrounds and experiences.capabilities. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, such as the impact of inflation, management changes, increasing local and global competition for talent, particularly due to the increase in remote working opportunities, the availability of qualified employees, restructuring and alignment activities (including workforce reductions), and the attractiveness of our compensation and benefit programs. If we are unable to attract, retain and motivate qualified employees and leaders, we may be unable to fully capitalize on current and new market opportunities, which could adversely impact our business and results of operations. The loss or retirement of employees presents particular challenges to the extent they involve the departure of knowledgeable and experienced employees and the resulting need to identify and train existing or new candidates to perform necessary functions, and ineffective succession planning could result in unexpected costs, reduced productivity, and/or difficulties with respect to internal processes and controls. If we are unable to attract and retain a qualified and inclusive workforce, we may be unable to maintain our competitive position and our future success could be materially adversely affected.

From time to time, we have responded to changes in our industry and the markets we serve, or other changes in our business, by restructuring or aligning our operations, including the closuredivestiture of our Tianjin, China wind energy prepreg production facilityoperations in 2022,Austria in 2025 and the movementdivestiture of our ResearchHartford, Connecticut business and Technologyclosure Center from Dublin, California to Salt Lake City, Utah, andof the saleWelkenraedt, Belgium plant during 2025 as part of our 50%strategy interestto instreamline aoperations Malaysianand jointfocus venture.on core competencies. Due to necessary cost reduction measures or changes in the industry and markets in which we compete, we may decide to implement additional restructuring or alignment activities in the future, such as closing plants, selling or idling certain equipment or operations, or making additions, reductions or other changes to our management or workforce. These restructuring and/or alignment activities generally result in charges and expenditures that may adversely affect our financial results for one or more periods. Restructuring and/or alignment activities can also create unanticipated consequences, such as instability or distraction among our workforce, and we cannot provide any assurance that any restructuring or alignment efforts that we undertake will result in the intended benefits. A variety of risks could cause us not to realize expected cost savings, including, among others: (a) higher than expected severance costs related to headcount reductions; (b) higher than expected costs of closing plants; (c) incurring costs to hire new employees or delays or difficulty hiring the employees needed; and (d) delays in the anticipated timing of activities related to our cost-saving plan. If we are unable to align our operations in light of evolving market conditions, it could have an adverse effect on our business, financial condition, results of operations, and cash flows.

Our profitability depends largely on the price and continuity of the supply of raw materials, which may be supplied through a sole source or a limited number of sources. We purchase large volumes of raw materials, such as epoxy and phenolic resins, acrylonitrile, carbon fiber, fiberglass yarn, aramid paper and, to a lesser extent, aluminum foil. Any restrictions on supply resulting from geopolitical conditions, extreme weather events, availability of global logistics, increase in the cost of our raw materials including increases resulting from inflation or tariffs, or other unforeseen disruptions in the supply chain could significantly reduce our profit margins. Efforts to mitigate restrictions on the supply or price increases of these raw materials through long-term purchase agreements, productivity improvements, multi-source qualifications, use of alternative materials, hedging or flowing through cost increases to our customers may not be successful. In addition, increasing prices of our products could put such products at a competitive disadvantage. During recent years, as a result of the challenges created by global supply and transportation constraints, the impact of tariffs and other trade barriers and restrictions, ongoing global conflict and market volatility, we experienced supply disruptions and cost increases and anticipate that the risk of supply disruptions and material shortages, as well as cost increases, may continue. While we have not experienced materially significant issuesdisruptions in the purchase ofsourcing key raw materials, we continue to monitorproactively mitigate any risks to the extent possible while monitoring the availability (including transportation) and price of raw materials on a regular basis, as well as any potential impact on our operations.

The occurrence of material operational problems or interruptions, including, but not limited to, as a result of the failure of key equipment, a quality or financial failure of a sole source or major supplier, the effects of natural disasters or climate change-related events, the impact of any public health crises, ongoing supply chain disruptions and supply shortages, the impact of tariffs and other trade barriers and restrictions, energy disruption caused by ongoing global conflict, the inability to install, staff and/or qualify necessary capacity, political or social unrest, the failure to achieve planned manufacturing improvements or other causes, or any other inability to meet customer requirements, may have a material adverse effect on the productivity and profitability of a particular manufacturing facility, and could have a material effect on the Company as a whole.

We believe that revenue from sales outside the U.S. will continue to account for a material portion of our total revenue for the foreseeable future. In 2024,2025, 50%47% of our production and 59%57% of our customer sales occurred outside of the United States. Additionally, we have invested significant resources in our international operations, and we intend to continue to make such investments in the future. Our business and results of operations are subject to numerous risks of doing business internationally including: (a) general economic, political, legal, social and health conditions unfavorable to our growth strategy, including the impact of rising inflation and other global economic conditions on labor and supply costs and availability, changes in currency exchange rates, geopolitical conditions and global conflicts; (b) longer payment cycles of foreign customers or challenges in enforcing agreements and collecting receivables through certain foreign legal systems; (c) the cost of compliance with international trade laws of all of the countries in which we do business, including export control laws, relating to sales and purchases of goods and equipment and transfers of technology; (d) government actions having a direct or indirect adverse impact on our international business and market opportunities, including, but not limited to, tariffs and other trade restrictions imposed by the United States, China and other jurisdictions; (e) adverse tax consequences, such as fluctuating tax rates, withholding requirements on foreign earnings or limitations on repatriations of earnings; and (f) the potential difficulty in enforcing our intellectual property rights in certain foreign countries, and the potential for the intellectual property rights of others to affect our ability to sell products in certain markets. Any one of these could adversely affect our financial condition and results of operations. WithFor respectinstance, as a result of the tariffs, sanctions, and other restrictions imposed on goods imported into the U.S. during 2025, and similar measures imposed by governments outside the U.S., we are experiencing, and expect to tariffs,continue implementationto experience, impacts to our business, including increases in the cost of newmaterials tariffused schemesto bymanufacture variousour governments,product. Such measures may in the future reduce our ability to sell products globally and/or increase costs of domestic goods, energy, freight and other related costs. While we have taken actions to mitigate these risks, such as thoseseeking implementedexemptions and alternative sourcing, where available, engaging in industry advocacy and implementing price increases, where feasible, there can be no assurance that these actions will be effective, and we could continue to be adversely impacted by thesuch United Statestariffs and Chinaother in recent years, could potentially increase the costs of our materials, increase our cost of production, and ultimately increase the landed cost of our products sold from one country into another country.restrictions. In addition, although we are not experiencing direct material adverse effects on our business resulting from ongoing global conflicts, the global implications, including increased inflation, escalating energy costs, and constrained raw material availability, and thus increasing costs, as well as embargos on flights from certain countries, are impacting the global economy and the aerospace industry in particular.

In addition, concerns about the relationship between greenhouse gases and global climate change, and an increased focus on carbon neutrality, hashave resulted, and may continue to result, in additional regulations at the national and international level to address topics of concern such as carbon neutrality and to monitor, regulate, control and tax emissions of carbon dioxide and other greenhouse gases. A number of governmental bodies have introduced or are contemplating legislative or regulatory changes in response to climate change, including regulating greenhouse gas emissions and increasing mandatory disclosures. The continued lack of consistent climate legislation creates economic and regulatory uncertainty. The outcome of new legislation or regulation in the U.S. and other jurisdictions in which we operate has resulted in, and may in the future result in, new or additional requirements, including mandatory disclosure requirements, and fees or restrictions on certain activities. Our manufacturing plants use energy, including electricity and natural gas, and some of our plants emit amounts of greenhouse gases that are, and may in the future be affected by these legislative and regulatory efforts. Compliance with greenhouse gas and climate change initiatives has resulted, and may in the future result in, additional costs to us, including increased energy, transportation and raw material costs, additional taxes, additional compliance costs, reduced emission allowances or additional restrictions on production or operations. We expect we will be required to make additional investments in our facilities and equipment, change our manufacturing processes, obtain substitute materials, which may cost more or be less available or harder to source, fund offset projects, or undertake other costly activities as a result of these laws and regulations. In addition, failure to comply with applicable regulations could result in fines or government investigations or actions, which could affect our business, financial condition, results of operations and cash flows. We could also face increased costs related to defending and resolving legal claims and other litigation related to climate change and the alleged impact of our operations on climate change.

In addition to compliance obligations related to climate change, growing customer environmental and sustainability requirements, including procurement policies that include social and emissions reduction or other environmental standards and requirements that suppliers are required comply with, as well as sustainability goals and targets that we have adopted, could cause us to alter our manufacturing, operations oroperations, equipment processes, or product offerings, and incur substantial expense to meet these requirements. We are actively reviewing and implementing projects to reduce our energy intensity and greenhouse gas emissions, but there is no guarantee that such options or projects will be technologically and/or environmentally feasible, or that we will be able to implement any such projects on a timely or cost-effective basis. The failure to comply with customer environmental or sustainability requirements, or similar types of requests, could adversely affect our relationships with such customers, which in turn could adversely affect our business, financial condition, results of operations and cash flows. Furthermore, our reputation could be damaged if we or others in our industry do not act, or are perceived not to act, responsibly with respect to our impact on the environment, or if we fail to achieve our sustainability goals or targets, which could limit our ability to grow and otherwise adversely affect our results of operations.

We depend heavily on information technology and computerized systems to communicate and operate effectively. We store sensitive data, including proprietary business information, intellectual property, regulated data (U.S. government and other), customer data and confidential employee or other personal data, in our systems. In addition to internal information technology systems, we leverage cloud-based systems, where data is stored and exchanged with external third-party vendors. From time to time, we experience attempted cyberattacks on our information technology systems, either directly or indirectly via our supply chain or third-party vendors, which are becoming more sophisticated and could have a material impact on us. These cyberattacks, which could be related to industrial or foreign government espionage, activism, or financial motivations, continue to evolve and become more sophisticated and include attempting to covertly introduce malware to our systems, performing reconnaissance, phishing and other means of social engineering, impersonating authorized users, and stealing, corrupting, restricting our access to data or otherwise compromising the integrity, confidentiality, and/or availability of our systems hardware and networks and the information on them, among other activities. ToIn addition, as we increase our use of artificial intelligence tools into our operations, the extentrisk of unauthorized access to our data and of making errors or erroneous decisions based on our reliance on such tools will increase. Further, as artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and craft increasingly sophisticated cybersecurity attacks, and vulnerabilities may be introduced from the use of artificial intelligence by us, our customers, suppliers and other business partners and third-party providers.

Our customers, partners, vendors, suppliers, subcontractors and others to whom we entrust confidential data, and on whom we rely to provide products and services, face similar threats and growing requirements, including ones for which others may seek to hold us responsible. While we reviewimpose cybersecurity capabilitiesrequirements on with our top-tier suppliers and have implemented cybersecurity requirements in our standard supplier contract terms,”terms as well as our Supplier Code of Conduct, we do not control such third parties and our ability to monitor their cybersecurity is limited,limited. As such, we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them or prevent any disruption arising from a technology failure, cyberattack or other information or security breach. We depend on such parties to implement adequate controls and safeguards to protect against and report cyber incidents. If such parties fail to deter, detect or report cyber incidents in a timely manner, we may suffer from financial and other harm, including to our information, operations, financial results, performance, employees and reputation.

Our business could be negatively impacted by sustainability/environmental, social and governance (“ESG”) matters and/or our reporting of such matters.

ThereThe islegislative an increasing focus from certain investors, customers, employees,environment and otherstakeholders’ stakeholdersviews concerning sustainability matters, and an increasing number of stakeholders are requiring companiesrelating to disclose sustainability and related policies, practices and metrics.metrics Ourcould result in additional costs, and could adversely impact our reputation, consumer perception, employee retention, and willingness of third parties to do business with us. For instance, our customers may require us to implement sustainability or other environmental,corporate social and governance responsibility procedures or standards before they continue to do business with us. If our sustainability and social policies and practices fail to meet regulatory requirements or stakeholders’ evolving expectations and standards for responsible corporate citizenship, our reputation and employee retention may be negatively impacted, and we may face reputational challenges in the event that our sustainability and social policies, practices and metrics do not meet the standards set by certain constituencies, which are often inconsistent in approach. At the same time, there also exists anti-environmental, social and governanceanti-sustainability sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, lawsuits or market access restrictions from these parties regarding any such initiatives we have adopted. In addition, some investors and customers may use sustainability criteria to guide their investment and buying strategies, and may not invest in or do business with us, or divestcontinue theirto holdingsdo of us,so, if they believe our policies relating to environmental, social and governancesustainability matters are inadequate or, on the other hand, have a negative response to such policies as a result of anti-environmental,anti-sustainability socialsentiment. Inconsistency of legislation and governanceregulations sentiment.among Additionally,jurisdictions, weincluding anti-sustainability or legislation, and expected additional regulations may facealso reputational challenges inaffect the eventcosts thatof ourcompliance sustainabilitywith such laws and other environmental, social and governance policies, practices and metrics do not meet the standards set by certain constituencies, which are often inconsistent in approach.regulations.

In addition, from time to time, we communicate certain initiatives, targets or goals regarding sustainability/ESG matters. Although we intend to meet these commitments, we may be required to expend significant resources to do so, which could increase our operational costs. Further, there can be no assurance of the extent to which any of our commitments will be achieved, if at all; we could fail, or be perceived to fail, in our achievement of such initiatives, targets or goals, or we could fail in fully and accurately reporting our progress on such initiatives, targets and goals. In addition, we could be criticized for the scope of such initiatives, targets or goals or perceived as not acting responsibly in connection with these matters. Any such matters could have a material adverse effect on our business.

Our share repurchase program does not have an expiration date, and we are not obligated to repurchase a specified number or dollar value of shares, on any particular timetable or at all. There can be no assurance that we will repurchase stock at favorable prices. On FebruaryOctober 19,22, 2024,2025, ourthe Board of Directors approved aan $300additional $600 million share repurchase plan,plan (the "2025 Share Repurchase Plan"), which amount was in addition to the amountremaining that remained available for repurchaseavailability under the existing2024 2018Share Repurchase Plan (which was fully utilized as of December 31, 2025). In connection with the 2025 Share Repurchase Plan, on October 22, 2025, the Company entered into accelerated share repurchase plan,agreements, however,pursuant to which the Company agreed to repurchase programan mayaggregate of $350 million of shares, which repurchase is scheduled to be suspendedcompleted orin terminatedthe atfirst anyquarter timeof and,2026. The share repurchase program, even if fully implemented, may not enhance long-term stockholder value. The 2018 share repurchase plan was fully utilized as of June 30, 2024.

Since 2022, the Commercial Aerospace market and our business hashave seen signs of recovery from the economic impacts of the COVID-19 pandemic that began in 2020,pandemic, driven by growth in air travel and an increase in aircraft build rates. However, theThe post-recovery period, however, continueshas to havehad many challenges across the markets Hexcel operates in, including delays in aircraft production rates, related to, among other impacts, global logistics, supply chain issues, economic conditions, inflationary pressures, tariff impacts, and effects from geopolitical issues and conflicts. TheseWhile these challenges have had and may continue to have further negative impacts on our operations, supply chain, transportation networks and customers, all of which have and may continue to compress our financial results.results, we see positive indicators for a sustained recovery in commercial aircraft production and strong demand in the defense and space market as global defense budgets continue to increase as a result of an uncertain geopolitical environment and the development of new platforms.

In 2024,2025, our Commercial Aerospace sales increaseddecreased 11.8%4.0% compared to 2023. The 2024 increaseprimarily indue to lower sales wasfor primarilycertain Airbus and Boeing programs, partially offset by increased Other Commercial Aerospace sales driven by growth in wide-bodies. Other Commercial Aerospace, which includes business jets and regional aircraft saw an increase in sales as well, driven by growthstrength in regional jets. The demand for new commercial aircraft continues to be principally driven by airline passenger traffic (measured by revenue passenger miles) and the replacement rate for existing aircraft. The Commercial Aerospace industry continues to utilize a greater proportion of advanced composite materials with each new generation of aircraft.

Defense, Space & DefenseOther sales in 20242025 increased 4.5%5.4% compared to 2024. GrowthYear over year growth was led by military helicoptershelicopters, including the Black Hawk and CH-53-K, as well as theother F-35,military partiallyaircraft offsetstructures, bylaunchers significantlyand lower Bell Boeing V-22 sales.satellites.

We have two reportable segments: Composite Materials and Engineered Products. Although these segments provide customers with different products and services, they often overlap within our threetwo end business markets: Commercial Aerospace,Aerospace and Defense, Space & Defense and Industrial.Other. Therefore, we also find it meaningful to evaluate the sales of our segments through these business markets. Further discussion and additional financial information about our segments may be found in Note 18 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

Composite Materials: Net sales of $1,531.0$1,516.2 million for 2024the increasedyear 3.9%ended December 31, 2025 decreased $14.8 million or 1.0% from 2023.the prior year. Commercial Aerospace sales increaseddecreased 10.5%2.8% in 20242025 as compared to 20232024 primarily driven by growthlower insales thefor certain Airbus A350 and Boeing 787programs. programs as well as regional jet growth.Defense, Space & DefenseOther sales werefor relatively2025 flat.increased Industrialby 2.5% over the prior year primarily driven by higher sales inof 2024 decreased 21.1% from 2023 due to the decline in all industrial sub-markets.launchers.

Commercial Aerospace: Net sales of $1,194.2$1,146.9 million increaseddecreased 11.8% (11.9% in constant currency)4.0% for the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024 Widebodiesprimarily leddue to lower sales for the growthAirbus including theA350, Boeing 787 and Airbus737 A350,MAX, followedpartially offset by theincreased Airbus A320neo.A320neo Sales for the Boeing 737 MAX were down year-over-year.sales. Other Commercial Aerospace sales increased reflecting growth in regional jets.

Gross Margin: Gross margin for 20242025 was $434.8 million or 23.0% of net sales as compared to $469.8 million or 24.7% of net sales in 2024. Lower margins for 2025 as compared to $433.2the millionprior oryear 24.2% of net sales in 2023. The improvement in 2024 waswere due to the higher sales volumemix, tariffs, and inventory reduction actions which drove unfavorable cost leverage.

Selling, General and Administrative (“SG&A”) Expenses: SG&A expenses for 20242025 were $169.0 million or 8.9% of net sales as compared to $176.6 million or 9.3% of net sales asfor compared2024. toThe $163.8$7.6 million or 9.2% of net sales for 2023. The increasedecrease in SG&A expenses in 20242025 compared to 20232024 was primarily due to higherlower employee-related costs.costs partially offset by higher professional fees.

Research and Technology (“R&T”) Expenses: R&T expenses for 20242025 were $57.1$56.4 million or 3.0% of net sales and in 20232024 were $52.7$57.1 million or 2.9%3.0% of net sales. The year-over-year increasedecrease inof expenses$0.7 million was primarily attributable to employee-relatedlower costsmaterial and developmentsupplies projects expense.costs.

Operating income: Operating income for 2024the year ended December 31, 2025 was $171.6 million as compared to $186.1 million comparedfor withthe operatingyear incomeended inDecember 202331, of $215.3 million.2024. Operating income as a percent of sales was 9.8%9.1% and 12.0%9.8% in 20242025 and 2023,2024, respectively. The decrease in operating income in 20242025 compared to 20232024 was driven by abovelower mentioned charges in Other operating expense,margins, partially offset by thelower higherSG&A salesexpenses and improvedOther margin.operating expense as mentioned above.

Depreciation and amortization expense of $124.0$122.3 million for 2024the year ended December 31, 2025 decreased $0.8$1.7 million from 2023.the year ended December 31, 2024.

Interest expense: Interest expense was $37.7 million and $31.2 million for 2024the years ended December 31, 2025 and $34.02024, million for 2023respectively, with the decreaseyear over year increase due to lowerhigher average debt levels, partially offset by higher interest rates.levels.

Net income: Net income was $109.4 million or $1.37 per diluted share for the year ended December 31, 2025 compared to net income of $132.1 million or $1.59 per diluted share for the year ended December 31, 2024 compared to net income of $105.7 million or $1.24 per diluted share for the year ended December 31, 2023.2024. The increasedecrease in 20242025 was driven by higherlower sales as well as the impacts of the items discussed above.margins.

As of December 31, 2024,2025, there were nototal outstanding borrowings under the Facility.Facility were $295.0 million. The Creditcredit Agreementagreement for the Facility permits us to issue letters of credit up to an aggregate amount of $50 million. Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of December 31, 2024,2025, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $750$455.0 million.

Short-term liquidity requirements consist primarily of normal recurring operating expenses and working capital needs, capital expenditures, dividend payments, debt obligations and debt service requirements. We expect to meet our short-term liquidity requirements through net cash from operating activities, cash on hand and the Facility. As of December 31, 2024,2025, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until AugustFebruary 20252027 when our 4.7%3.95% Senior Unsecured Notes are due.

The remaining authorization under the share2025 repurchaseShare programRepurchase Plan at December 31, 20242025 was $234.9$380.6 million. On January 21,28, 2025,2026, our Board of Directors declared a quarterly dividend of $0.17$0.18 per share payable to stockholders of record as of February 7,9, 2025,2026, with a payment date of February 14,17, 2025.2026.

Operating Activities: We generated $289.9$230.5 million in cash from operating activities during 2024,2025, ana increasedecrease of $32.8$59.4 million from 2023.2024. The increasedecrease in the current year was primarily due to higherlower net income and loweruse of cash for long term assets and liabilities including amounts related to retirement plans. Working capital was of slight use of workingcash capital.for Lowerboth working2025 and 2024. Working capital for the year ended December 31, 20242025 wasreflects primarily due to lowerhigher accounts receivable and higherlower accruals, partially offset by higherlower inventories.

Investing Activities: Net cash used for investing activities was $76.0 million in 2025 compared to $87.0 million in 2024 compared to $50.7 million in 2023.2024. Capital expenditures for 20242025 were $87.0$73.3 million compared to $108.2$87.0 million in 2023,2024. whichPayments includedrelated $38.0 million forto the acquisitiondivestiture of the landAustria and buildingHartford atbusinesses ourwere Amesbury, Massachusetts facility. 2023 also included net proceeds of $44.7$2.7 million from the sale of our 50% interest in the joint venture in Malaysia and $10.3 million from the sale of the Windsor, Colorado facility.2025.

Financing Activities: Net cash used for financing activities was $301.7$212.3 million in 20242025 as compared to $92.6$301.7 million in 2023. Borrowings and repayments under the Facility during 2024 were both $160 million.2024. In 2023,2025, borrowings were $103$480.0 million, while repayments were $128$185.0 million. During 2025, the Company issued $300.0 million in aggregate principal amount of 5.875% Senior Unsecured Notes due in 2035 and in conjunction with this issuance, the Company redeemed the $300.0 million in aggregate principal amount of 4.7% Senior Unsecured Notes that were due in August 2025. In 2024, borrowings and repayments were both $160.0 million. Dividend payments to shareholders were $49.3$53.9 million and $42.2$49.3 million in the years ended December 31, 20242025 and 2023,2024, respectively. Repurchases of common stock totaled $252.2$454.3 million and $30.1$252.2 million in the years ended December 31, 20242025 and 2023,2024, respectively.

Financial Obligations and Commitments: We had $0.1 million of current debt maturities as of December 31, 2024. The next significant scheduled debt maturity will not occur until AugustFebruary 20252027 when our 4.7%3.95% Senior Unsecured Notes are due. In addition, certain sales and administrative offices, data processing equipment, vehicles and manufacturing equipment, land and facilities are leased under operating leases.

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

The year ended December 31, 20242025 included benefitsa associatedtax withcharge our R&D expenditures, partially offset by the recording offor a valuation allowance inrelated ato foreignthe jurisdiction.closure Theof yearthe endedWelkenraedt, DecemberBelgium 31,facility, 2024the alsorelease includedof aFIN discrete48 taxreserves benefitand provision adjustments related to adjustments to our provision based on the finalization of prior year tax returns. TheTax benefit for the year ended December 31, 20232024 included a discreteprovision tax benefit primarily relatedadjustment to adjustments to our provision based on the finalization offinalize prior year tax returns.returns and benefits associated with our R&T expenditures.

Outstanding balances that exist under our Facility are included in our long-term debt bearsbear interest at variable rates. From time to time we have entered into interest rate swap agreements to change the underlying mix of variable and fixed interest rate debt. These interest rate swap agreements have modified the percentage of total debt that is exposed to changes in market interest rates. Assuming a 10% favorable and a 10% unfavorable change in the underlying weighted average interest rates of our variable rate debt and swap agreements, interest expense for 20242025 of $31.2$37.7 million would not be materially impacted.

WeAs of December 31, 2025, we operated twelveten manufacturing facilities in Europe, AsiaEurope and Africa which generated approximately 50%47% of our 20242025 consolidated net sales. Our European business activities primarily involve three major currencies — the U.S. dollar, the British pound sterling, and the Euro. We also conduct business and sell products to customers throughout the world. Most of the sales in these countries are denominated in U.S. dollars and they have local currency expenses. Currency risk for the Asia and Africa locationslocation is not considered material.

Recent growth in global air travel and an increase in aircraft build rates has favorably impacted both the Commercial Aerospace market and our business. While our recent performance has benefitted from the positive drivers of air travel demand, weWe have, however, in the last several years,years been impacted by delays in aircraft production rates, related to, among other factors, global logistics, supply chain destocking and other supply chain constraints. Hexcel has also been negatively impacted by macroeconomic and geopolitical conditions, including inflationary pressures, tariffs, and global conflicts. While these challenges have had and may continue to have further negative impacts on our operations and financial results, we see indicators for a long-term positive outlook in commercial aircraft production and strong demand in the defense and space market as global defense budgets continue to increase as a result of an uncertain geopolitical environment and the development of new platforms. FollowingAs thea conflictresult escalation inof the Middle East,East conflict, we are actively monitoring the markets and are taking actions to mitigate the near-term impact to our cost base. Currently, we have limited direct exposure, but a prolonged conflict is likely to precipitate cost and logistic pressures as well as inventory challenges.

The following table summarizes net sales to third-party customers by segment and end market for the quarters and six months ended MarchJune 31,30, 2026 and 2025:

Composite Materials: Net sales of 398.8million$421.5 million in the firstsecond quarter of 2026 increased by $33.5$28.3 million or 9.2%7.2% from the prior year quarter. Commercial Aerospace sales increased $39.4$39.3 million or 16.3%15.7% in the firstsecond quarter of 2026 and Defense, Space & Other sales decreased $5.9 million or 4.8% as compared to the prior year quarter duedriven by higher sales to Boeing and Airbus. Defense, Space & Other net sales in partthe tosecond quarter of 2026 decreased $11.0 million or 7.7% primarily driven by the September 30, 2025 divestment of the Austrian-based industrial businessbusiness. whichNet impactedsales for the Othersegment category.in the first half of 2026 of $820.3 million increased 8.1% compared to the same period last year.

Engineered Products: For the firstsecond quarter of 2026, net sales of $102.7$107.8 million increased $11.5$11.1 million or 12.6%11.5% as compared to the prior year quarter leddriven by higher Commercial Aerospace sales. Net sales of $13.2$210.5 million.million for the first six months of 2026 increased 12.0% compared to the same period last year.

For the second quarter of 2026, Commercial Aerospace sales of $332.7$346.6 million increased 18.8%by 18.3% as compared to the second quarter of 2025. Sales growth was driven by the Airbus A350 and Boeing 787 widebodies. Narrowbody sales, which include Boeing's 737 MAX and Airbus' A320neo and A220, also increased year over year. Other Commercial Aerospace sales for the second quarter of 2026 increased compared to the prior year quarter due to growth in regional jets. Sales of $679.3 million increased 18.5% for the first quartersix months of 2026 compared to the first quartersix months of 2025 drivendue byto growth in all four major programsplatforms includingwhich included the Airbus A350 and A320A320neo and Boeing'sthe Boeing 787 and 737 Max.MAX. Other Commercial Aerospace sales increased 15.6%9.2% for the first quartersix months of 2026 compared to the firstsame quarterperiod ofin 2025 due to higherwith sales increasing for both regional and business jets.

Gross margin for the second quarter of 2026 was 26.1% compared to 22.8% in the second quarter of 2025 and was 26.5% and 22.6% for the first quarterssix months of 2026 and 20252025, wasrespectively. 26.9%The higher margins for both the second quarter and 22.4%,six respectively.months Higherof gross2026 margincompared forto the quarterprior endedyear Marchperiods 31,benefited 2026from reflects the impact of favorablehigher sales leverage and mix.leverage.

Selling, general and administrative expenses were higher for both the threesecond quarter and six months ended MarchJune 31,30, 2026 as compared to the sameprior periodyear in 2025periods primarily due to higher employee-related costs and professional fees.costs. Research and development expenses for the second quarter endedand Marchfirst 31,six months of 2026 increased when compared to the priorsame yearperiods periodof 2025 primarily due to higher employee-related expenses and higher material and supplies costs. Other operating expense for the three months ended March 31, 2026 included restructuring expenses related to the expected shutdown of industrial manufacturing at the Leicester, UK facility and fees for a legal matter.

Operating income for the firstsecond quarterquarters of 2026 and 2025 was $57.6$72.6 million and $44.2$30.0 million, respectively. The increase in operatingOperating income for the first quartersix months of 2026 was $130.2 million compared to $74.2 million for the same period last yearyear. Overall, operating income for both the second quarter and six months of 2026 was drivenfavorably impacted by the higher sales and gross margin.margins.

Net interestInterest expense for both the first quarter and six months ended MarchJune 31,30, 2026 was higher compared to the firstprior quarteryear of 2025periods due to higher average borrowings underfor the Facility.first six months of 2026.

Liquidity: Cash on hand at June 30, 2026 was $62.2 million as compared to $71.0 million at December 31, 2025. As of June 30, 2026, total debt was $959.4 million as compared to $993.0 million at December 31, 2025 On March 31, 2026, the Company entered into a new credit agreement (the “Credit Agreement”) to refinance its senior unsecured credit facility (the “Facility”). Under the terms of the Credit Agreement the borrowing capacity will remainremained at $750 million. The Facility matures March 31, 2031. The prior Facility that was scheduled to mature in 2028 was terminated in March 2026. For further discussion, see Note 5.5, Debt, to the accompanying condensed consolidated financial statements.

Under the Facility, total borrowings at MarchJune 31,30, 2026 were $300.0$265.0 million, which approximatesapproximated fair value. The Credit Agreement permits us to issue letters of credit up to an aggregate amount of $50.0 million. As of MarchJune 31,30, 2026, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $450.0$485.0 million. The weighted average interest rate for the Facility was 5.0%4.77% for the three months ended MarchJune 31,30, 2026.

Short-term liquidity requirements consist primarily of normal recurring operating expenses and working capital needs, capital expenditures, dividend payments, debt obligations and debt service requirements. We expect to meet our short-term liquidity requirements through net cash from operating activities, cash on hand and the Facility. We do not have any significant required debt repayments until FebruaryMarch 20272031 when ourthe 3.95%Facility Senior Unsecured Notes are due.matures. For further information regarding debt, including ourthe Facility, see Note 5, Debt, to the accompanying condensed consolidated financial statements of this Form 10-Q.

There were no repurchases of shares during the second quarter of 2026. The remaining authorization under the 2025 Share Repurchase ProgramPlan at MarchJune 31,30, 2026 was $380.6 million. On AprilJuly 22,29, 2026, our Board of Directors declared a quarterly dividend of $0.18 per share payable to stockholders of record as of MayAugust 4,10, 2026, with a payment date of MayAugust 11,17, 2026.

Operating Activities: Net cash provided by operating activities for the first threesix months of 2026 was $19.0$96.7 million compared to a net cash use of $28.5$5.2 million for the same period last year. The improvement compared to the prior year period was due to the higher net income and lower working capital cash use during the first six months of 2026. Working capital was a cash$72.2 million use of $63.1 millioncash for the first threesix months of 2026 as compared to a use of $97.7$124.5 million infor the same period in 2025. The lower2026 decrease in use of working capital useas incompared theto current year2025 was primarily driven by lower cash payments forhigher payables and accrualsaccruals, comparedpartially tooffset theby samehigher periodaccounts inreceivable theand priorinventory year.balances.

Investing Activities: Net cash used for investing activities was $25.2$44.9 million and $27.2$42.5 million in the first threesix months of 20252026 and 2025, respectively. Capital expenditures for the first six months of 2026 were $44.9 million as compared to $41.4 million for the same period last year. Payments onrelated to the divestiture of the Hartford,Hartford Connecticut businessfacility were $1.1 million in the first threesix months of 2025.

Financing Activities: Net cash used for financing activities was $10.3$59.7 million for first threesix months of 20252026 compared to net cash providedused of $18.2$4.1 million in the same period in 2025. Borrowings under the Facilities during the first quartersix months of 2026 were $315.0$595.0 million compared to $90.0$160.0 million in borrowings for the sameprior periodyear in 2025.period. Repayments under the Facilities was $310 million during the first quartersix of 2026. Quarterly dividend payments to shareholders were $13.7 million during the first quartermonths of 2026 were $625 million compared to $13.8$30.0 million in the firstprior quarteryear of 2025. Share repurchases for the quarter ended March 31, 2025 totaled $50.4 million.period. During the threesix months ended MarchJune 31,30, 2026,2025, issuance costs related to our new Facility were $1.9 million and financing fees paid during the first three monthsrepurchases of 2025,common relatedstock tototaled the issuance of the 5.875% Senior Unsecured Notes due in 2035, were $3.9$100.9 million.

Financial Obligations and Commitments: The next significant scheduled debt maturity will not occur until 2027,2031, when both the 3.95%Facility and the 4.9% Senior Unsecured Notes mature. Certain sales and administrative offices, data processing equipment, vehicles and manufacturing equipment, and facilities are leased under operating leases.

Such forward-looking statements include, but are not limited to: (a) the estimates and expectations based on aircraft production rates provided by Airbus, Boeing and others and the revenues we may generate from an aircraft model or program; (b) expectations with regard to the impact of regulatory activity related to the Boeing 737 MAX on our revenues; (c) expectations with regard to raw material cost and availability, including any impact associated with quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of materials or the Middle East conflict; (d) expectations of composite content on new commercial aircraft programs and our share of those requirements; (e) expectations regarding revenues from defense and space applications, including whether certain programs might be curtailed or discontinued, and government funding opportunities; (f) expectations regarding sales for industrial applications; (g) expectations regarding cash generation, working capital trends, and inventory levels; (h) expectations as to the level of research and development investment, capital expenditures, capacity, including the timing of completion of capacity expansions, and qualification of new products; (i) expectations regarding our ability to improve or maintain margins; (j) expectations regarding our ability to attract, motivate, and retain the workforce necessary to execute our business strategy; (k) projections regarding our tax rate or restructuring or alignment activities; (l) expectations with regard to the continued impact of macroeconomic factors or geopolitical issues or conflicts, including the Middle East conflict; (m) expectations regarding our strategic initiatives, including our sustainability goals and restructuring or alignment activities; (n) expectations with regard to the effectiveness of cybersecurity measures; (o) expectations regarding the outcome of legal matters or the impact of changes in laws or regulations; (p) expectations relating to our accelerated share repurchase program and dividends; and (q) our expectations of financial results for 2026 and beyond.