Hexcel (NYSE: HXL) doubles first-half earnings on strong aerospace demand
Rhea-AI Filing Summary
Hexcel Corporation reported stronger results for the quarter and six months ended June 30, 2026. Net sales reached $529.3 million in the quarter and $1,030.8 million year‑to‑date, increases of 8.0% and 8.9% over 2025. Quarterly operating income rose to $72.6 million from $30.0 million, lifting operating margin to 13.7% from 6.1%. Net income for the quarter was $49.3 million versus $13.5 million, with diluted EPS improving to $0.64 from $0.17.
Growth was driven by Commercial Aerospace, where sales increased 18.3% in the quarter to $346.6 million and 18.5% year‑to‑date to $679.3 million, reflecting higher deliveries on Airbus and Boeing programs. Defense, Space & Other sales declined 7.2% in the quarter, partly reflecting a 2025 industrial divestiture. First‑half operating cash flow improved to $96.7 million from a $5.2 million outflow, while long‑term debt stood at $959.4 million and total assets at $2,730.6 million. The company refinanced its revolving credit facility, issued $400 million of 4.9% senior notes due 2031, redeemed $400 million of 3.95% notes due 2027, and completed a $350 million accelerated share repurchase totaling 4.52 million shares, leaving $380.6 million authorized for further buybacks.
Positive
- Net income surged to $49.3 million in Q2 2026 from $13.5 million, with diluted EPS rising to $0.64 from $0.17.
- Operating margin expanded to 13.7% in Q2 2026 from 6.1%, and to 12.6% for the first half from 7.8%, reflecting improved sales leverage.
- Commercial Aerospace sales grew 18.3% in Q2 2026 to $346.6 million and 18.5% year‑to‑date to $679.3 million, led by Airbus A350/A320neo and Boeing 787/737 MAX platforms.
- Operating cash flow strengthened to $96.7 million for the first six months of 2026 compared with a $5.2 million outflow in the prior‑year period.
Negative
- None.
Key Figures
Key Terms
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AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did Hexcel (HXL) perform financially in Q2 2026?
What drove Hexcel (HXL) revenue growth in Q2 2026?
How did Hexcel’s Defense, Space & Other business perform in 2026?
What is Hexcel (HXL)'s debt and liquidity position as of June 30, 2026?
How strong were Hexcel (HXL)'s operating cash flows in the first half of 2026?
What major financing actions did Hexcel (HXL) take in early 2026?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Quarterly Period Ended
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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HEXCEL CORPORATION AND SUBSIDIARIES
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FINANCIAL INFORMATION |
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Controls and Procedures |
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OTHER INFORMATION |
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Legal Proceedings |
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SIGNATURE |
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
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June 30, |
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December 31, |
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2026 |
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2025 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Property, plant and equipment |
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Less accumulated depreciation |
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Investments in affiliated companies |
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Total assets |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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Financial instruments |
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Long-term debt |
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Total liabilities |
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Stockholders' equity: |
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Common stock, $ |
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Retained earnings |
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Accumulated other comprehensive loss |
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Less – Treasury stock, at cost, |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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Hexcel Corporation and Subsidiaries |
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Condensed Consolidated Statements of Operations |
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(Unaudited) |
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(Unaudited) |
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Quarters Ended June 30, |
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Six Months Ended June 30, |
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(In millions, except per share data) |
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2026 |
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2025 |
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2026 |
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2025 |
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Net sales |
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Cost of sales |
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Gross margin |
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Selling, general and administrative expenses |
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Research and development expenses |
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Other operating expense |
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Operating income |
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Interest expense, net |
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Other (income) expense |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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$ |
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Basic net income per common share |
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$ |
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$ |
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Diluted net income per common share |
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Weighted-average common shares: |
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Basic |
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Diluted |
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Hexcel Corporation and Subsidiaries |
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Condensed Consolidated Statements of Comprehensive Income |
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(Unaudited) |
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(Unaudited) |
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Quarters Ended June 30, |
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Six Months Ended June 30, |
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(In millions) |
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2026 |
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2025 |
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2026 |
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2025 |
Net income |
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$ |
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$ |
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$ |
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$ |
Currency translation adjustments |
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( |
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( |
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Net unrealized pension and other benefit actuarial losses and prior service credits (net of tax) |
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( |
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( |
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( |
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Net unrealized (losses) gains on financial instruments (net of tax) |
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( |
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( |
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Total other comprehensive income (loss) |
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( |
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( |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
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(Unaudited) |
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Six Months Ended June 30, |
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(In millions) |
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2026 |
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2025 |
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Cash flows from operating activities |
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Net income |
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$ |
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$ |
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Reconciliation to net cash provided by (used for) operating activities: |
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Depreciation and amortization |
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Amortization related to financing |
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Deferred income taxes |
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Stock-based compensation |
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Restructuring expenses, net of payments |
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Debt extinguishment costs |
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Loss on divestiture of assets |
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Changes in assets and liabilities: |
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Increase in accounts receivable |
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(Increase) decrease in inventories |
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Increase in prepaid expenses and other current assets |
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Increase (decrease) in accounts payable/accrued liabilities |
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Other – net |
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Net cash provided by (used for) operating activities |
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Cash flows from investing activities |
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Capital expenditures |
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Payments on divestiture of assets |
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Net cash used for investing activities |
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Cash flows from financing activities |
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Borrowing from senior unsecured credit facility - 2028 |
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Repayment of senior unsecured credit facility - 2028 |
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Borrowing from senior unsecured credit facility - 2031 |
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Repayment of senior unsecured credit facility - 2031 |
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Redemption of 4.7% senior notes due 2025 |
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Proceeds from issuance of 5.875% senior notes due 2035 |
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Redemption of 3.95% senior notes due 2027 |
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Proceeds from issuance of 4.9% senior notes due 2031 |
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Repurchases of common stock |
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Issuance costs related to senior unsecured credit facilities |
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Issuance costs related to senior notes |
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Repayment of finance lease obligation and other debt, net |
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Dividends paid |
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( |
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Activity under stock plans |
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Net cash used for financing activities |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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Net decrease in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental data: |
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Accrual basis additions to plant, property and equipment |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
For the Quarters and Six Months ended June 30, 2026, and June 30, 2025
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Accumulated |
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Other |
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Total |
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Paid-In |
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Retained |
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Comprehensive |
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(In millions) |
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Capital |
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Earnings |
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Loss |
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Stock |
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Equity |
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Balance, December 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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Net income |
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Dividends on common stock ($ |
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Repurchases of common stock |
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Change in other comprehensive loss– net of tax |
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Stock-based activity |
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Balance, March 31, 2025 |
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$ |
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$ |
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Net income |
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Dividends on common stock ($ |
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— |
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— |
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Repurchases of common stock |
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— |
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— |
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— |
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Change in other comprehensive loss– net of tax |
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Stock-based activity |
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— |
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Balance, June 30, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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|
|
|
|
Accumulated |
|
|
|
|
|
|
|
||||||
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
|
|
|
Total |
|
||||||
|
|
|
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury |
|
|
Stockholders’ |
|
||||||
(In millions) |
|
Par |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Stock |
|
|
Equity |
|
||||||
Balance, December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
||||||
Dividends on common stock ($ |
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
— |
|
|
|
( |
) |
||||
Repurchases of common stock |
|
— |
|
|
|
( |
) |
|
— |
|
|
— |
|
|
|
|
|
|
|
|||||
Change in other comprehensive (loss) income– net of tax |
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
|
( |
) |
||||
Stock-based activity |
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
|
|||||
Balance, March 31, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
|
||||||
Dividends on common stock ($ |
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
— |
|
|
|
( |
) |
||||
Change in other comprehensive loss– net of tax |
|
— |
|
|
|
|
— |
|
|
|
( |
) |
|
— |
|
|
|
( |
) |
|||||
Stock-based activity |
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
|
|||||
Balance, June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
HEXCEL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Significant Accounting Policies
In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying condensed consolidated financial statements are those of Hexcel Corporation. Refer to Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of our significant accounting policies.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC. In the opinion of management, the condensed consolidated financial statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholders’ equity for the interim periods presented. The Condensed Consolidated Balance Sheet as of December 31, 2025 was derived from the audited 2025 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 2025 Annual Report on Form 10-K.
Commencing with the first quarter of 2026, we have renamed our Research and Technology ("R&T") function to Research and Development ("R&D").
Note 2 — Net Income Per Common Share
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In millions, except per share data) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Basic net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net income per common share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding — Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Plus incremental shares from assumed conversions: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding — Dilutive |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net income per common share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total common stock equivalents of
7
Note 3 — Inventories
|
|
|
|
|
|
|
||
(In millions) |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total Inventory |
|
$ |
|
|
$ |
|
||
Note 4 — Retirement and Other Postretirement Benefit Plans
We maintain qualified defined benefit retirement plans covering certain current and former European employees, as well as nonqualified defined benefit retirement plans, and retirement savings plans covering certain eligible U.S. and European employees and participate in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliations. In addition, we provide certain postretirement health care and life insurance benefits to eligible U.S. retirees.
Defined Benefit Retirement Plans
We have nonqualified defined benefit retirement plans covering certain current and former employees that are funded as benefits are incurred. Expense related to the defined benefit retirement plans for the quarters ended June 30, 2026 and 2025 was $
Postretirement Health Care and Life Insurance Benefit Plans
We provide certain postretirement health care and life insurance benefits to eligible retirees. Depending upon the plan, benefits are available to eligible employees who retire after meeting certain age and service requirements and were employed by Hexcel as of February 1996. Our funding policy for the postretirement health care and life insurance benefit plans is generally to pay covered expenses as they are incurred. Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarters and six months ended June 30, 2026 and 2025 were not material.
Note 5 –– Debt
(In millions) |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Senior unsecured credit facility |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
Senior notes --- original issue discount |
|
|
( |
) |
|
|
( |
) |
Senior notes --- deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Non-current portion of finance lease and other debt |
|
|
|
|
|
|
||
Long-term debt |
|
|
|
|
|
|
||
Total debt |
|
$ |
|
|
$ |
|
||
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 remained at $
8
As of June 30, 2026, total borrowings under the Facility were $
During the second quarter of 2026, the Company issued $
In conjunction with the issuance of the
During the first quarter of 2025, the Company issued $
In conjunction with the issuance of the
Note 6 — Derivative Financial Instruments
The Company entered into treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our
During the second quarter of 2026, in conjunction with the redemption of the $
Foreign Currency Forward Exchange Contracts
9
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 have entered into contracts to exchange U.S. dollars for Euros and British pound sterling through December 2028. The aggregate notional amount of these contracts was $
In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the remeasurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the Statement of Operations. There are
The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive (loss) income for the quarters and six months ended June 30, 2026 and June 30, 2025 was as follows:
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Unrealized gains (losses) at beginning of period, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
(Gains) losses reclassified to net sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Increase (decrease) in fair value |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Unrealized (losses) gains at end of period, net of tax |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Unrealized gains of $
Commodity Swap Agreements
We use commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile). As of June 30, 2026, we had commodity swap agreements with a notional value of $
The fair values of outstanding derivative financial instruments as of June 30, 2026 and December 31, 2025 were as follows:
|
Prepaid and Other Current Assets |
|
Other Assets |
|
Current Liabilities |
|
Non-Current Liabilities |
|
||||||||||||||||
(In millions) |
June 30, 2026 |
|
December 31, 2025 |
|
June 30, 2026 |
|
December 31, 2025 |
|
June 30, 2026 |
|
December 31, 2025 |
|
June 30, 2026 |
|
December 31, 2025 |
|
||||||||
Derivative Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Undesignated hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commodity swaps |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
||||||||
Total Derivative Products |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
10
Note 7 — Fair Value Measurements
The authoritative guidance for fair value measurements establishes a hierarchy for observable and unobservable inputs used to measure fair value, into three broad levels, which are described below:
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 our own and counterparty credit risk in our assessment of fair value.
We have no assets or liabilities that utilize 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). For further information on the fair value of our derivative financial instruments see Note 6, Derivative Financial Instruments. In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the Condensed Consolidated Balance Sheets.
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,
Note 8 — Revenue
Our revenue is primarily derived from the sale of inventory under long-term contracts with our customers. We have determined that individual purchase orders (“PO”), the terms and conditions of which are taken with a master agreement, create the ASC 606 contracts, which are generally short-term in nature. For those sales that are not tied to a long-term agreement, we generate a PO that is subject to our standard terms and conditions. In instances where our customers acquire our goods related to government contracts, the contracts are typically subject to terms similar, or equal to, the Federal Acquisition Regulation Part 52.249-2. This regulation contains a termination for convenience clause (“T for C”), which requires that the customer pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit.
We recognize revenue over time for those agreements that have T for C, and where the products being produced have no alternative use.
We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the quarters and six months ended June 30, 2026 and 2025:
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Consolidated Net Sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial Aerospace |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Defense, Space & Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
11
Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled. Contract assets are included in our Condensed Consolidated Balance Sheets as a component of current assets.
(In millions) |
|
Composite Material |
|
|
Engineered Products |
|
|
Total |
|
|||
Balance at December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net revenue billed |
|
|
|
|
|
|
|
|
|
|||
Balance at March 31, 2026 |
|
|
|
|
|
|
|
|
|
|||
Net revenue billed |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accounts receivable, net, includes amounts billed to customers where the right to payment is unconditional.
Note 9 — Segment Information
The financial results for our operating segments are prepared using a management approach, which is consistent with the basis and manner in which we internally segregate financial information for the purpose of assisting in making internal operating decisions. We evaluate the performance of our operating segments based on operating income, and generally account for intersegment sales based on arm’s length prices. Corporate and certain other expenses are not allocated to the operating segments, except to the extent that the expense can be directly attributable to the business segment.
We have
Financial information for our operating segments for the quarters and six months ended June 30, 2026 and 2025 were as follows:
12
|
|
|
|
|||||||||||||
|
|
Composite |
|
|
Engineered |
|
|
Corporate & |
|
|
|
|
||||
(In millions) |
|
Materials |
|
|
Products |
|
|
Other (a) |
|
|
Total |
|
||||
Quarter Ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales to external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Cost of sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Gross margin |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income (loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accrual basis additions to capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Quarter Ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales to external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Cost of sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Gross margin |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income (loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accrual basis additions to capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Six Months Ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales to external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Cost of sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Gross margin |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income (loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accrual basis additions to capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Six Months Ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales to external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total sales |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Cost of sales |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Gross margin |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income (loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
13
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accrual basis additions to capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and Intangible Assets |
|
Composite |
|
|
Engineered |
|
|
|
|
|||
(In millions) |
Materials |
|
|
Products |
|
|
Total |
|
||||
Balance at December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Amortization expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Currency translation adjustments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
At June 30, 2026, the balance of goodwill and intangible assets was $
|
|
Composite |
|
|
Engineered |
|
|
Corporate & |
|
|
|
|
||||
(In millions) |
|
Materials |
|
|
Products |
|
|
Other |
|
|
Total |
|
||||
Segment assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 10 — Accumulated Other Comprehensive Loss
Comprehensive loss represents net loss and other gains and losses affecting stockholders’ equity that are not reflected in the Condensed Consolidated Statements of Operations.
(In millions) |
|
Unrecognized |
|
|
Change in Fair |
|
|
Foreign |
|
|
Total |
|
||||
Balance at December 31, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive loss before reclassifications |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2026 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
The amount of net (gains) losses reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs and derivative products components of accumulated other comprehensive loss for the quarters and six months ended June 30, 2026 and 2025 were as follows:
14
|
|
Quarter Ended June 30, 2026 |
|
|
Quarter Ended June 30, 2025 |
|
|
Six Months Ended June 30, 2026 |
|
|
Six Months Ended June 30, 2025 |
|
||||||||||||||||||||
(In millions) |
|
Pre-tax loss (gain) |
|
|
Net of tax loss (gain) |
|
|
Pre-tax (gain) loss |
|
|
Net of tax (gain) loss |
|
|
Pre-tax loss (gain) |
|
|
Net of tax loss (gain) |
|
|
Pre-tax (gain) loss |
|
|
Net of tax (gain) loss |
|
||||||||
Defined Benefit and Postretirement Plan Costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Commodity swaps |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Derivative Products |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Note 11 — Commitments and Contingencies
We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. While it is impossible to predict the ultimate resolution of litigation, investigations and claims asserted against us, we believe, based upon our examination of currently available information, our experience to date, and advice from legal counsel, that, after taking into account our existing insurance coverage and amounts already provided for, the currently pending legal proceedings against us will not have a material adverse impact on our consolidated results of operations, financial position or cash flows.
Environmental Matters
We have been named as a potentially responsible party (“PRP”) with respect to the below and other hazardous waste disposal sites that we do not own or possess, which are included on, or proposed to be included on, the Superfund National Priority List of the U.S. Environmental Protection Agency (“EPA”) or on equivalent lists of various state governments. Because the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) allows for joint and several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs. We believe, based on the amount and nature of the hazardous waste at issue, and the number of other financially viable PRPs at each site, that our liability in connection with such environmental matters will not be material.
Lower Passaic River Study Area
Hexcel, together with approximately
In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower
In October 2016, pursuant to a settlement agreement with the EPA, Occidental Chemical Corporation (“OCC”), one of the PRPs, commenced performance of the remedial design required by the ROD for the lower eight miles of the Lower Passaic River, reserving its right of cost contribution from all other PRPs. In June 2018, OCC filed suit against approximately 120 parties, including Hexcel, in the U.S. District Court of the District of New Jersey seeking cost recovery and contribution under CERCLA related to the Lower Passaic River. In July 2019, the court granted in part and denied in part the defendants’ motion to dismiss. In August 2020, the court granted defendants’ motion for summary judgment for certain claims. Discovery for the remaining claims has been stayed indefinitely based on agreement of the parties. On February 24, 2021, Hexcel and certain other defendants filed a third-party complaint against the Passaic Valley Sewerage Commission and certain New Jersey municipalities seeking recovery of Passaic-related cleanup costs incurred by defendants, as well as contribution for any cleanup costs incurred by OCC for which the court deems the defendants
15
liable. In March 2023, the EPA issued a Unilateral Administrative Order (“UAO”) to OCC ordering OCC to commence remedial design work for the interim remedy for the cleanup of the upper nine miles of the Lower Passaic River. On March 24, 2023, OCC filed suit against Hexcel and approximately
On December 16, 2022, the EPA lodged a Consent Decree with the U.S. District Court for the District of New Jersey requesting court approval of a $
Summary of Environmental Reserves
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 both June 30, 2026 and December 31, 2025, our aggregate were $
These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required, changes in the apportionment of costs among responsible parties and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.
Product Warranty
We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the six months ended June 30, 2026, and accrued warranty cost, included in “accrued liabilities” in the Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025, were as follows:
|
|
Product |
|
|
(In millions) |
|
Warranties |
|
|
Balance as of December 31, 2025 |
|
$ |
|
|
Warranty expense |
|
|
|
|
Deductions and other |
|
|
( |
) |
Balance as of March 31, 2026 |
|
$ |
|
|
Warranty expense |
|
|
|
|
Deductions and other |
|
|
( |
) |
Balance as of June 30, 2026 |
|
$ |
|
|
Note 12 — Restructuring
We recognized restructuring charges of $
|
|
|
|
Activity for the Quarter Ended June 30, 2026 |
|
|
|
|
|||||||||||||||
|
March 31, |
|
|
Restructuring |
|
|
|
|
|
Cash |
|
|
|
|
|
June 30, |
|
||||||
(In Millions) |
2026 |
|
|
Charge |
|
|
FX Impact |
|
|
Paid |
|
|
Non-Cash |
|
|
2026 |
|
||||||
Employee termination |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Impairment and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Activity for the Six Months Ended June 30, 2026 |
|
|
|
|
|||||||||||||||
|
December 31, |
|
|
Restructuring |
|
|
|
|
|
Cash |
|
|
|
|
|
June 30, |
|
||||||
(In Millions) |
2025 |
|
|
Charge |
|
|
FX Impact |
|
|
Paid |
|
|
Non-Cash |
|
|
2026 |
|
||||||
Employee termination |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Impairment and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Total |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
16
Note 13 — Capital Stock
On February 19, 2024, the Board approved a $
On October 22, 2025, the Board approved an additional $
The final settlement under the ASR program with Bank of America occurred on February 27, 2026 and with Goldman Sachs & Co. LLC on March 3, 2026, at which time we received additional shares of approximately
During the second quarter of 2026, there were no repurchases of Company shares. As of June 30, 2026, the Company had approximately $
17
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
We are a global leader in advanced lightweight composites technology. We propel the future of flight and transportation through excellence in advanced material lightweighting solutions that create a better world for us all. Our broad and unrivaled product range includes carbon fiber, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, resins, engineered core and composite structures for use in commercial aerospace, defense and space, and industrial applications.
We serve international markets through manufacturing facilities, sales offices and representatives located in the Americas, Europe, Asia Pacific, India, and Africa.
We are a manufacturer of products within a single industry: Advanced Composites. We have two reportable segments: Composite Materials and Engineered Products. The Composite Materials segment is comprised of our carbon fiber, specialty reinforcements, resin systems, prepregs and other fiber-reinforced matrix materials, and honeycomb core product lines and pultruded profiles. The Engineered Products segment is comprised of lightweight high strength composite structures, radio frequency/electromagnetic interference (“RF/EMI”) and microwave absorbing materials, engineered core and specialty machined honeycomb products with added functionality.
Recent growth in aircraft build rates has favorably impacted our business. We have, however, in the last several 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. As a result of the Middle East conflict, we are actively monitoring the markets and are taking actions to mitigate 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.
Financial Overview
Results of Operations
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In millions, except per share data) |
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
||||||
Net sales |
|
$ |
529.3 |
|
|
$ |
489.9 |
|
|
|
8.0 |
% |
|
$ |
1,030.8 |
|
|
$ |
946.4 |
|
|
|
8.9 |
% |
Operating income |
|
$ |
72.6 |
|
|
$ |
30.0 |
|
|
|
142.0 |
% |
|
$ |
130.2 |
|
|
$ |
74.2 |
|
|
|
75.5 |
% |
As a percentage of net sales |
|
|
13.7 |
% |
|
|
6.1 |
% |
|
|
|
|
|
12.6 |
% |
|
|
7.8 |
% |
|
|
|
||
Net income |
|
$ |
49.3 |
|
|
$ |
13.5 |
|
|
|
265.2 |
% |
|
$ |
86.5 |
|
|
$ |
42.4 |
|
|
|
104.0 |
% |
Diluted net income per common share |
|
$ |
0.64 |
|
|
$ |
0.17 |
|
|
|
276.5 |
% |
|
$ |
1.13 |
|
|
$ |
0.52 |
|
|
|
117.3 |
% |
18
Net Sales
The following table summarizes net sales to third-party customers by segment and end market for the quarters and six months ended June 30, 2026 and 2025:
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In millions) |
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
||||||
Consolidated Net Sales |
|
$ |
529.3 |
|
|
$ |
489.9 |
|
|
|
8.0 |
% |
|
$ |
1,030.8 |
|
|
$ |
946.4 |
|
|
|
8.9 |
% |
Commercial Aerospace |
|
|
346.6 |
|
|
|
293.1 |
|
|
|
18.3 |
% |
|
|
679.3 |
|
|
|
573.2 |
|
|
|
18.5 |
% |
Defense, Space & Other |
|
|
182.7 |
|
|
|
196.8 |
|
|
|
(7.2 |
)% |
|
|
351.5 |
|
|
|
373.2 |
|
|
|
(5.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Composite Materials |
|
$ |
421.5 |
|
|
$ |
393.2 |
|
|
|
7.2 |
% |
|
$ |
820.3 |
|
|
$ |
758.5 |
|
|
|
8.1 |
% |
Commercial Aerospace |
|
|
289.2 |
|
|
|
249.9 |
|
|
|
15.7 |
% |
|
|
570.4 |
|
|
|
491.7 |
|
|
|
16.0 |
% |
Defense, Space & Other |
|
|
132.3 |
|
|
|
143.3 |
|
|
|
(7.7 |
)% |
|
|
249.9 |
|
|
|
266.8 |
|
|
|
(6.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Engineered Products |
|
$ |
107.8 |
|
|
$ |
96.7 |
|
|
|
11.5 |
% |
|
$ |
210.5 |
|
|
$ |
187.9 |
|
|
|
12.0 |
% |
Commercial Aerospace |
|
|
57.4 |
|
|
|
43.2 |
|
|
|
32.8 |
% |
|
|
108.9 |
|
|
|
81.5 |
|
|
|
33.6 |
% |
Defense, Space & Other |
|
|
50.4 |
|
|
|
53.5 |
|
|
|
(5.8 |
)% |
|
|
101.6 |
|
|
|
106.4 |
|
|
|
(4.5 |
)% |
Sales by Segment
Composite Materials: Net sales of $421.5 million in the second quarter of 2026 increased by $28.3 million or 7.2% from the prior year quarter. Commercial Aerospace sales increased $39.3 million or 15.7% in the second quarter of 2026 as compared to the prior year quarter driven by higher sales to Boeing and Airbus. Defense, Space & Other net sales in the second quarter of 2026 decreased $11.0 million or 7.7% primarily driven by the September 30, 2025 divestment of the Austrian-based industrial business. Net sales for the segment in the first half of 2026 of $820.3 million increased 8.1% compared to the same period last year.
Engineered Products: For the second quarter of 2026, net sales of $107.8 million increased $11.1 million or 11.5% as compared to the prior year quarter driven by higher Commercial Aerospace sales. Net sales of $210.5 million for the first six months of 2026 increased 12.0% compared to the same period last year.
Sales by Market
For the second quarter of 2026, Commercial Aerospace sales of $346.6 million increased 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 six months of 2026 compared to the first six months of 2025 due to growth in all four major platforms which included the Airbus A350 and A320neo and the Boeing 787 and 737 MAX. Other Commercial Aerospace sales increased 9.2% for the first six months of 2026 compared to the same period in 2025 with sales increasing for both regional and business jets.
Defense, Space & Other sales of $182.7 million decreased 7.2% in the second quarter of 2026 as compared to the second quarter of 2025. Sales of $351.5 million decreased 5.8% for the first six months of 2026 as compared to the first six months of 2025. Both the quarter and six months ended June 30, 2026 decreased over the respective prior year periods which reflected the September 30, 2025 divestment of the Austrian-based industrial business.
Gross Margin
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In millions) |
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
||||||
Gross margin |
|
$ |
138.1 |
|
|
$ |
111.5 |
|
|
|
23.9 |
% |
|
$ |
272.8 |
|
|
$ |
213.9 |
|
|
|
27.5 |
% |
Percentage of sales |
|
|
26.1 |
% |
|
|
22.8 |
% |
|
|
|
|
|
26.5 |
% |
|
|
22.6 |
% |
|
|
|
||
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 six months of 2026 and 2025, respectively. The higher margins for both the second quarter and six months of 2026 compared to the prior year periods benefited from higher sales leverage.
19
Operating Expenses
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In millions) |
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
||||||
SG&A expense |
|
$ |
47.2 |
|
|
$ |
43.0 |
|
|
|
9.8 |
% |
|
$ |
96.6 |
|
|
$ |
86.3 |
|
|
|
11.9 |
% |
Percentage of sales |
|
|
8.9 |
% |
|
|
8.8 |
% |
|
|
|
|
|
9.4 |
% |
|
|
9.1 |
% |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
R&D expense |
|
$ |
17.3 |
|
|
$ |
14.3 |
|
|
|
21.0 |
% |
|
$ |
35.1 |
|
|
$ |
28.1 |
|
|
|
24.9 |
% |
Percentage of sales |
|
|
3.3 |
% |
|
|
2.9 |
% |
|
|
|
|
|
3.4 |
% |
|
|
3.0 |
% |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other operating expense |
|
$ |
1.0 |
|
|
$ |
24.2 |
|
|
|
(95.9 |
)% |
|
$ |
10.9 |
|
|
$ |
25.3 |
|
|
|
(56.9 |
)% |
Selling, general and administrative expenses were higher for both the second quarter and six months ended June 30, 2026 as compared to the prior year periods primarily due to higher employee-related costs. Research and development expenses for the second quarter and first six months of 2026 increased compared to the same periods of 2025 primarily due to higher employee-related expenses and material and supplies costs.
Other operating expense for the second quarter of 2026 reflected restructuring charges related to the shutdown of industrial-related manufacturing at the Leicester, UK facility. For the six months ended June 30,2026, other operating expense included restructuring charges related to the Leicester, UK facility and non-recurring professional fees. Other operating expense for the second quarter and first six months of 2025 included restructuring charges related to the closure of the Welkenraedt, Belgium facility. The six months ended June 30, 2025 also included a loss for the divestiture of the Hartford, Connecticut business.
Operating Income
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In millions) |
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
||||||
Consolidated operating income |
|
$ |
72.6 |
|
|
$ |
30.0 |
|
|
|
142.0 |
% |
|
$ |
130.2 |
|
|
$ |
74.2 |
|
|
|
75.5 |
% |
Operating margin |
|
|
13.7 |
% |
|
|
6.1 |
% |
|
|
|
|
|
12.6 |
% |
|
|
7.8 |
% |
|
|
|
||
Composite Materials |
|
$ |
74.2 |
|
|
$ |
58.3 |
|
|
|
27.3 |
% |
|
$ |
143.9 |
|
|
$ |
112.9 |
|
|
|
27.5 |
% |
Operating margin |
|
|
16.5 |
% |
|
|
14.1 |
% |
|
|
|
|
|
16.4 |
% |
|
|
14.1 |
% |
|
|
|
||
Engineered Products |
|
$ |
16.4 |
|
|
$ |
(13.6 |
) |
|
|
(220.6 |
)% |
|
$ |
31.6 |
|
|
$ |
(8.5 |
) |
|
|
(471.8 |
)% |
Operating margin |
|
|
15.0 |
% |
|
|
(14.0 |
)% |
|
|
|
|
|
14.8 |
% |
|
|
(4.5 |
)% |
|
|
|
||
Corporate & Other |
|
$ |
(18.0 |
) |
|
$ |
(14.7 |
) |
|
N/M |
|
|
$ |
(45.3 |
) |
|
$ |
(30.2 |
) |
|
N/M |
|
||
Operating income for the second quarters of 2026 and 2025 was $72.6 million and $30.0 million, respectively. Operating income for the first six months of 2026 was $130.2 million compared to $74.2 million for the same period last year. Overall, operating income for both the second quarter and six months of 2026 was favorably impacted by the higher sales and gross margins.
Interest Expense, Net
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In millions) |
|
2026 |
|
|
2025 |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
||||||
Interest expense, net |
|
$ |
12.0 |
|
|
$ |
9.1 |
|
|
|
31.9 |
% |
|
$ |
23.8 |
|
|
$ |
16.9 |
|
|
|
40.8 |
% |
Interest expense for both the quarter and six months ended June 30, 2026 was higher compared to the prior year periods due to higher average borrowings for the first six months of 2026.
Provision for Income Taxes
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Income tax expense |
|
$ |
11.4 |
|
|
$ |
8.3 |
|
|
$ |
19.7 |
|
|
$ |
15.4 |
|
Effective tax rate |
|
|
18.7 |
% |
|
|
38.3 |
% |
|
|
18.5 |
% |
|
|
26.6 |
% |
Tax expense for the quarter and six months ended June 30, 2026 was $11.4 million and $19.7 million, respectively, as compared to $8.3 million and $15.4 million for the comparative periods in 2025, respectively. The quarter and six months ended June 30, 2025 included a tax charge of approximately $3.4 million for a valuation allowance related to the closure of our Welkenraedt, Belgium
20
facility.
Financial Condition
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 remained at $750 million. For further discussion, see Note 5, Debt, to the accompanying condensed consolidated financial statements.
Under the Facility, total borrowings at June 30, 2026 were $265.0 million, which approximated fair value. The Credit Agreement permits us to issue letters of credit up to an aggregate amount of $50.0 million. As of June 30, 2026, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $485.0 million. The weighted average interest rate for the Facility was 4.77% for the three months ended June 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 March 2031 when the Facility matures. For further information regarding debt, including the 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 Plan at June 30, 2026 was $380.6 million. On July 29, 2026, our Board of Directors declared a quarterly dividend of $0.18 per share payable to stockholders of record as of August 10, 2026, with a payment date of August 17, 2026.
Operating Activities: Net cash provided by operating activities for the first six months of 2026 was $96.7 million compared to cash use of $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 $72.2 million use of cash for the first six months of 2026 as compared to a use of $124.5 million for the same period in 2025. The 2026 decrease in use of working capital as compared to 2025 was driven by higher payables and accruals, partially offset by higher accounts receivable and inventory balances.
Investing Activities: Net cash used for investing activities was $44.9 million and $42.5 million in the first six months of 2026 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 related to the divestiture of the Hartford facility were $1.1 million in the first six months of 2025.
Financing Activities: Net cash used for financing activities was $59.7 million for first six months of 2026 compared to net cash used of $4.1 million in the same period in 2025. Borrowings under the Facilities during the first six months of 2026 were $595.0 million compared to $160.0 million in the prior year period. Repayments during the first six months of 2026 were $625 million compared to $30.0 million in the prior year period. During the six months ended June 30, 2025, repurchases of common stock totaled $100.9 million.
Financial Obligations and Commitments: The next significant scheduled debt maturity will not occur until 2031, when both the 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.
Critical Accounting Estimates
Our Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors management believes to be relevant at the time our Condensed Consolidated Financial Statements are prepared. On a regular basis, management reviews accounting policies, assumptions, estimates and judgments to ensure our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results may differ from our assumptions and estimates, and such differences could be material.
21
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, 2025.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to future prospects, developments and business strategies. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “seek,” “target,” “would,” “will” and similar terms and phrases, including references to assumptions. Such statements are based on current expectations, are inherently uncertain and are subject to changing assumptions.
Such forward-looking statements include, but are not limited to: (a) the estimates and expectations based on aircraft production rates provided by Airbus, Boeing and others 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 share repurchase program and dividends; and (q) our expectations of financial results for 2026 and beyond.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control, that may cause actual results to be materially different. Such factors include, but are not limited to, the following: the extent of the impact of macroeconomic factors or geopolitical issues or conflicts, including U.S. trade policy and retaliatory actions taken in response and the Middle East conflict; reductions in sales to any significant customers, particularly Airbus or Boeing, including related to regulatory activity or public scrutiny impacting the Boeing 737 MAX; our ability to effectively adjust production and inventory levels to align with customer demand; our ability to effectively motivate, retain and hire the necessary workforce; the availability and cost of raw materials, including the impact of supply disruptions, inflation, tariffs and the Middle East conflict; our ability to successfully implement or realize our strategic initiatives, including our sustainability goals and any restructuring or alignment activities in which we may engage; changes in sales mix; changes in current pricing due to cost levels; changes in aerospace build or delivery rates; any impact from a prolonged shutdown of the U.S. federal government; changes in government defense procurement or investment budgets; timely new product development or introduction; our ability to install, staff and qualify necessary capacity or complete capacity expansions to meet customer demand; our ability to execute future share repurchases or dividends and the source of funds used for such repurchases or dividends; cybersecurity-related risks, including the potential impact of breaches or intrusions; currency exchange rate fluctuations; uncertainty related to governmental actions and changes in political, social and economic conditions, including the effect of change in global trade policies, tariff rates, economic sanctions and embargoes; work stoppages or other labor disruptions; our ability to successfully complete any strategic acquisitions, investments or dispositions; compliance with environmental, health, safety and other related laws and regulations, including those related to climate change; the effects of natural disasters or other severe weather events, which may be worsened by the impact of climate change, and other severe catastrophic events, including any public health crisis; and the unexpected outcome of legal matters or impact of changes in laws or regulations.
Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. As a result, the foregoing factors should not be construed as exhaustive and should be read together with other cautionary statements included in this and other reports we file with the SEC. For additional information regarding certain factors that may cause our actual results to differ from those expected or anticipated, see the information under the caption “Risk Factors,” which is located in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. We caution you not to place undue reliance upon these forward-looking statements, which speak only as of the date they are made. We do
22
not undertake any obligation to update our forward-looking statements or risk factors to reflect future events or circumstances, except as otherwise required by law.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our market risk from the information provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of June 30, 2026, and with the participation of the Company's management have concluded that these disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
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 quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The information required by Item 1 is contained within Note 11 on pages 15 through 16 of this Form 10-Q and is incorporated herein by reference.
ITEM 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results. There have been no material changes in the Company's risk factors from the aforementioned Form 10-K.
ITEMS 2, 3, 4 and 5 are
23
ITEM 6. Exhibits
EXHIBIT INDEX
Exhibit No. |
|
Description |
1.1 |
|
Underwriting Agreement, dated April 27, 2026, by and among the Company and BofA Securities, Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and U.S. Bancorp Investments, Inc., as representatives of the several underwriters listed on Schedule A thereto (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K dated April 30, 2026). |
4.1 |
|
Indenture, dated as of August 3, 2015, between Hexcel Corporation and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 3, 2015). |
4.2 |
|
Supplemental Indenture, dated as of April 30, 2026, between Hexcel Corporation and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated April 30, 2026). |
4.3 |
|
Form of 4.900% Note due 2031 (incorporated by reference to Exhibit A of 4.2 to the Company’s Current Report on Form 8-K dated April 30, 2026). |
10.1* |
|
Form of Officer Severance Agreement entered into between Hexcel Corporation and James Coogan, dated May 1, 2026 (incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023). |
10.2* |
|
Hexcel Corporation Director Compensation Program, effective May 7, 2026. |
10.3* |
|
Hexcel Corporation Long-Term Incentive Plan (conformed to incorporate Amendment No. 1 and effective May 14, 2026) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 15, 2026). |
10.4* |
|
Form of Restricted Stock Unit Agreement for Non-Employee Directors (2026 Annual Grant) (Long-Term Incentive Plan) (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 (File No. 333-295990) dated May 18, 2026). |
10.5* |
|
Form of Restricted Stock Unit Agreement for Non-Employee Directors (2026 Deferred Annual Grant) (Long-Term Incentive Plan) (incorporated by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 (File No. 333-295990) dated May 18, 2026). |
10.6* |
|
Form of Restricted Stock Unit Agreement for Non-Employee Directors (2026 Retainer Grant) (Long-Term Incentive Plan) (incorporated by reference to Exhibit 99.4 to the Company’s Registration Statement on Form S-8 (File No. 333-295990) dated May 18, 2026). |
10.7* |
|
Form of Restricted Stock Unit Agreement for Non-Employee Directors (2026 Deferred Retainer Grant) (Long-Term Incentive Plan) (incorporated by reference to Exhibit 99.5 to the Company’s Registration Statement on Form S-8 (file No. 333-295990) dated May 18, 2026). |
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 (furnished herewith) |
101
|
|
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline XBRL: (i) 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) Notes to Condensed Consolidated Financial Statements.
|
104 |
|
Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101. |
* Indicates management contract or compensatory plan or arrangement
24
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Hexcel Corporation |
|
|
|
July 29, 2026 |
|
/s/ Amy S. Evans |
(Date) |
|
Amy S. Evans |
|
|
Senior Vice President, |
|
|
Chief Accounting Officer |
25