UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C.  20549

 

FORM 10–K

 

ý        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

For the Fiscal Year Ended December 31, 2003

 

or

o        Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934

 

For the transition period from                          to                          

 

Commission File Number 1-8472

 

Hexcel Corporation

(Exact name of registrant as specified in its charter)

 

 

281 Tresser Boulevard

Stamford, Connecticut  06901

(Address of principal executive offices and zip code)

 

Registrant’s telephone number, including area code:  (203) 969-0666

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Securities registered pursuant to Section 12(g) of the Act:

 

7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2011

 

9 3/4% SENIOR SUBORDINATED NOTES DUE 2009

 

9 7/8% SENIOR SECURED NOTES DUE 2008

 

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

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ý

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   Yes     ý     No     o

 

The aggregate market value of the registrant’s common stock held by non-affiliates was $75,673,424 based on the reported last sale price of common stock on June 30, 2003, which is the last business day of the registrants most recently completed second fiscal quarter.

 

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

 

 

Documents Incorporated by Reference:

Proxy Statement for Annual Meeting of Stockholders (to the extent specified herein) — Part III.

 

 

PART I

 

ITEM 1.  Business.

 

General Development of Business

 

Hexcel Corporation, founded in 1946, was incorporated in California in 1948, and reincorporated in Delaware in 1983.  Hexcel Corporation and its subsidiaries (herein referred to as “Hexcel” or “the Company”), is a leading producer of advanced structural materials.  The Company develops, manufactures and markets lightweight, high-performance reinforcement products, composite materials and composite structures for use in the commercial aerospace, industrial, space and defense, and electronics markets.  The Company’s products are used in a wide variety of end products, such as commercial and military aircraft, space launch vehicles and satellites, printed wiring boards for computers and cellular telephones, soft body armor, high-speed trains and ferries, cars and trucks, wind turbine blades, window blinds, bikes, skis and a wide variety of recreational equipment.

 

The Company serves international markets through manufacturing facilities and sales offices located in the United States and Europe, and through sales offices located in the Peoples Republic of China and Australia.  The Company is also an investor in four joint ventures; one of which manufactures and markets reinforcement products in the United States; one of which manufactures and markets composite materials in Japan; and two of which manufacture composite structures and interiors in Asia.

 

Narrative Description of Business and Business Segments

 

Hexcel is a vertically integrated manufacturer of products within a single industry:  Advanced Structural Materials.  Hexcel’s advanced structural materials business is organized around three strategic business segments: Reinforcements, Composites and Structures.

 

Reinforcements

 

The Reinforcements business segment manufactures and markets industrial fabrics and other specialty reinforcement products.  The following table identifies the Reinforcements business segment’s principal products and examples of the primary end-uses:

 

BUSINESS SEGMENT		PRODUCTS		PRIMARY END-USE
REINFORCEMENTS		Industrial Fabrics and Specialty Reinforcements		•    Structural materials/components used in aerospace, wind energy, automotive, marine, recreation and other industrial applications
				•    Raw materials for prepregs and honeycomb
				•    Soft body armor and other security applications
				•    Electronic applications, primarily printed wiring board substrates
				•    Window screens and blinds
				•    Civil engineering and construction applications

 

Industrial Fabrics and Specialty Reinforcements:  Industrial fabrics and specialty reinforcements are made from a variety of fibers, including several types of fiberglass as well as carbon, aramid, quartz, ceramic and other specialty fibers.  These reinforcement products are sold to third-party customers for use in a wide range of applications, including a variety of structural materials and components used in aerospace, wind energy, marine, recreation and other industrial applications, soft body armor and other security products, printed wiring boards, window screens and other architectural products.  They are also used internally to manufacture prepregs and other composite materials.

 

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Reinforcements

 

 

The Reinforcements business segment’s net sales to third party customers were $232.8 million in 2003, $217.9 million in 2002, and $245.7 million in 2001, which represented approximately 26%, 26% and 25% of the Company’s net sales, respectively.  In addition, approximately 26%, 24% and 27% of the Company’s total production of reinforcement products was used internally to manufacture composite materials in 2003, 2002, and 2001, respectively.

 

The Company also has, or had during the three year period ended December 31, 2003, equity ownership interests in three joint ventures in the Reinforcements business segment: a 43.6% share in Interglas Technologies AG (“Interglas”), headquartered in Germany; a 33.3% share in Asahi-Schwebel Co., Ltd. (“Asahi-Schwebel”), headquartered in Japan, which in turn owns interests in two joint ventures in Taiwan – a 50% interest in Nittobo Asahi Glass and 51% interest in Asahi-Schwebel Taiwan; and a 50% share in TechFab LLC (“Tech-Fab”), headquartered in the United States.  Interglas and Asahi-Schwebel are fiberglass fabric producers serving the European and Asian electronics and telecommunications industries.  Tech-Fab manufactures non-woven reinforcement materials for roofing, construction, sail cloth and other specialty applications.

 

In 2002, the Company agreed with its partner in Asahi-Schwebel to restructure its minority interest in the joint venture.  Under the terms of this agreement, the Company reduced its ownership interest in the joint venture from 43.3% to 33.3% and received cash proceeds of $10.0 million.  The agreement also included, among other matters, a put option effective for a six-month period beginning July 1, 2003 in favor of the Company to sell and a call option in favor of the Company’s joint venture partner to purchase the Company’s remaining ownership interest in the joint venture for $23.0 million.   In July 2003, the Company exercised its option to sell the remaining interest in Asahi-Schwebel for $23.0 million in cash.  No gains or losses were recorded as a result of the sale, as the Company had previously written-down the carrying value of its remaining equity investment in Asahi-Schwebel to its estimated fair market value of $23.0 million in 2002.

 

Also in 2003, the Company sold its equity interest in its European reinforcement products joint venture, Interglas, for a nominal amount in conjunction with a bank sponsored financial restructuring of the affiliated company.  No gains or losses were recorded as a result of this transaction, as the Company had recognized a full impairment of its remaining equity interest in Interglas in 2001.

 

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Composites

 

The Composites business segment manufactures and markets carbon fibers, prepregs, structural adhesives, honeycomb, specially machined honeycomb parts and composite panels, fiber reinforced thermoplastics, sheet moulding compounds, polyurethane systems, gel coats and laminates.

 

The following table identifies the Composites business segment’s principal products and examples of the primary end-uses:

 

BUSINESS SEGMENT		PRODUCTS		PRIMARY END-USE
COMPOSITES		Carbon Fibers		•    Raw materials for industrial fabrics and prepregs •    Filament winding for various space, defense and industrial applications
		Prepregs and Other Fiber-Reinforced Matrix Materials		•    Composite structures •    Commercial and military aircraft components •    Satellites and launchers •    Aeroengines •    Wind turbine rotor blades •    Yachts, trains and motor racing vehicles •    Skis, snowboards, hockey sticks, tennis rackets and bicycles
		Structural Adhesives		•    Bonding of metals, honeycomb and composite materials •    Aerospace, ground transportation and industrial applications
		Honeycomb, Honeycomb Parts & Composite Panels		•    Composite structures and interiors •    Semi-finished components used in: Helicopter blades Aircraft surfaces (flaps, wing tips, elevators and fairings) High-speed ferries, truck and train components Automotive components and impact protection

 

Carbon Fibers: Carbon fibers are manufactured for sale to third party customers and for use by Hexcel in manufacturing certain reinforcements and composite materials.  Carbon fibers are woven into carbon fabrics, used as reinforcement in conjunction with a resin matrix to produce pre-impregnated composite materials (referred to as “prepregs”) and used in filament winding and advanced fiber placement to produce various other composite materials.  Key product applications include structural components for commercial and military aircraft, space launch vehicles, wind blade components, and certain other applications such as recreational equipment.

 

Prepregs:  HexPly® prepregs are manufactured for sale to third party customers and for use in manufacturing composite laminates and monolithic structures, including finished components for aircraft structures and interiors.  Prepregs are manufactured by combining high performance reinforcement fabrics or unidirectional fibers with a resin matrix to form a composite material with exceptional structural properties not present in either of the constituent materials.  Industrial fabrics used in the manufacture of prepregs include glass, carbon, aramid, quartz, ceramic, polyethylene and other specialty reinforcements.  Resin matrices include bismaleimide, cyanate ester, epoxy, phenolic, polyester, polyimide and other specialty resins.

 

Other Fiber-Reinforced Matrix Materials:  New fiber reinforced matrix developments include HexMC®, a carbon fiber/epoxy sheet moulding compound that enables small to medium sized composite components to be mass produced.  Hexcel’s HexFIT^® film infusion material is a product that combines resin films and dry fiber reinforcements to save lay-up time in production and enables large contoured composite structures, such as wind turbine blades, to be manufactured.  Resin Film Infusion and Resin Transfer Moulding products are enabling quality aerospace components to be manufactured using highly cost-effective processes.

 

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Structural Adhesives:  Hexcel designs and markets a comprehensive range of Reduxâ film and paste adhesives.  These structural adhesives, which bond metal to metal, composites and honeycomb structures, are used in the aerospace industry and for many industrial applications.

 

Honeycomb, Honeycomb Parts and Composite Panels: HexWeb® honeycomb is a unique, lightweight, cellular structure generally composed of nested hexagonal cells.  The product is similar in appearance to a cross-sectional slice of a beehive.  It can also be manufactured in asymmetric cell configurations for more specialized applications.  Honeycomb is primarily used as a lightweight core material and is a highly efficient energy absorber.  When sandwiched between composite or metallic facing skins, honeycomb significantly increases the stiffness of the structure, while adding very little weight.

 

Hexcel produces honeycomb from a number of metallic and non-metallic materials.  Most metallic honeycomb is made from aluminum and is available in a selection of alloys, cell sizes and dimensions.  Non-metallic honeycomb materials include fiberglass, carbon, thermoplastics, non-flammable aramid papers and other specialty materials.

 

Hexcel sells honeycomb as standard blocks and in slices cut from a block.  Honeycomb is also supplied as sandwich panels, with facing skins bonded to either side of the core material.  Hexcel also possesses advanced processing capabilities that enable the Company to design and manufacture complex fabricated honeycomb parts and bonded assemblies to meet customer specifications.

 

Aerospace is the largest market for honeycomb products.  Hexcel also sells honeycomb for non-aerospace applications including, automotive parts, high-speed trains and mass transit vehicles, energy absorption products, marine vessel compartments, portable shelters, and other industrial uses.  In addition, the Company produces honeycomb for its Structures business segment for use in manufacturing finished parts for airframe Original Equipment Manufacturers (OEMs).

 

Composites

 

 

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In January 2004, the Company announced its intention to consolidate the activities of its Livermore, California facility into its other manufacturing facilities, principally into its Salt Lake City, Utah plant.  The Livermore, California facility will continue to operate until the Company has successfully transferred its production from Livermore to its other manufacturing facilities.

 

The Composites business segment’s net sales to third party customers were $584.8 million in 2003, $532.4 million in 2002 and $638.8 million in 2001, which represented approximately 65%, 62% and 63% of the Company’s net sales, respectively.  Net sales for Composites are highly dependent upon commercial aircraft build rates as further discussed under the captions “Significant Customers,” “Markets” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  In addition, about 3% of the Company’s total production of composite materials is sold internally to the Reinforcements and Structures business units.

 

The Company also owns a 45% equity interest in DIC-Hexcel Limited, a joint venture with Dainippon Ink and Chemicals, Inc.  This Composites joint venture is located in Komatsu, Japan, and produces and sells prepregs, honeycomb and decorative laminates using technology licensed from Hexcel and Dainippon Ink and Chemicals, Inc.

 

Structures

 

The Structures business segment manufactures and markets composite structures primarily for use in the aerospace industry.  Composite structures are manufactured from a variety of composite and other materials, including prepregs, honeycomb and structural adhesives, using such manufacturing processes as autoclave processing, multi-axis numerically controlled machining, press laminating, heat forming and other composite manufacturing techniques.  Composite structures include such items as flap track fairings, wing panels and other aircraft components.

 

The following table identifies the Structures business segment’s principal products and examples of the primary end-uses:

 

BUSINESS SEGMENT		PRODUCTS		PRIMARY END-USE
STRUCTURES		Composite Structures		•    Aircraft structures and finished aircraft components, including: Flap track fairings Wing panels Flight deck panels Door liners

 

The Structures business segment’s net sales to third party customers were $79.3 million in 2003, $100.5 million in 2002 and $124.9 million in 2001, which represented approximately 9%, 12% and 12% of the Company’s net sales, respectively.  The revenue decline in the Structures business segment reflects Boeing’s build rates and the continued transition of work to its Asian joint ventures.

 

The Structures business unit has equity investments in two Asian joint ventures.  They consist of BHA Aero Composite Parts Co., Ltd. (“BHA Aero”) and Asian Composites Manufacturing Sdn. Bhd. (“Asian Composites”).  In 1999, Hexcel formed BHA Aero with Boeing and Aviation Industries of China (now known as China Aviation Industry Corporation I) to manufacture composite parts for secondary structures and interior applications for commercial aircraft.  Hexcel has a 33% equity ownership interest in this joint venture, which is located in Tianjin, China.  Also in 1999, Hexcel formed Asian Composites with Boeing, Sime Link Sdn. Bhd., and Malaysia Helicopter Services Bhd. (now known as Naluri Berhadto), to manufacture composite parts for secondary structures for commercial aircraft.  Hexcel has a 25% equity ownership interest in this joint venture, which is located in Alor Setar, Malaysia.  Hexcel and Boeing have transferred the manufacture of certain composite components to these joint ventures.  Hexcel purchases the semi-finished composite components from the joint ventures, finishes them and delivers them to Boeing.  During 2003, these Asian joint ventures had combined revenues of $18.8 million.

 

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Structures

 

 

Financial Information About Business Segments and Geographic Areas

 

Financial information and further discussion of Hexcel’s business segments and geographic areas, including external sales and long-lived assets, are contained throughout the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 20 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

 

Significant Customers

 

Approximately 23%, 24% and 27% of Hexcel’s 2003, 2002 and 2001 net sales, respectively, were to The Boeing Company (“Boeing”) and related subcontractors.  Of the 23% of sales to Boeing and its subcontractors in 2003, 17% and 6% related to commercial aerospace and space and defense market applications, respectively.  Approximately 19%, 16% and 16% of Hexcel’s 2003, 2002 and 2001 net sales, respectively, were to EADS, including the business division Airbus Industrie (“Airbus”), and its subcontractors.  Of the 19% of sales to EADS and its subcontractors in 2003, 16% and 3% related to commercial aerospace and space and defense market applications, respectively.

 

Markets

 

Hexcel’s products are sold for a broad range of end uses.  The following tables summarize net sales to third-party customers by market and by geography for each of the three years ended December 31:

 

		2003		2002		2001
Net Sales by Market
Commercial aerospace		43	%	46	%	53	%
Industrial		31		30		25
Space and defense		20		17		14
Electronics		6		7		8
Total		100	%	100	%	100	%
Net Sales by Geography (a)
United States		48	%	50	%	52	%
U.S. exports		7		6		7
International		45		44		41
Total		100	%	100	%	100	%

 

(a)          Net Sales by Geography were based on the location in which the sale was manufactured.

 

Commercial Aerospace

 

Historically, the commercial aerospace industry has led the development of applications for advanced structural materials and components because it has the strongest need for the performance properties of these materials and is well positioned to maximize the economic benefits from their use.  Accordingly, the demand for advanced structural material products is closely correlated to the demand for commercial aircraft.

 

Commercial aerospace activity fluctuates in relation to two principal factors.  First, the number of revenue passenger miles flown by the airlines affects the size of the airline fleets and generally follows the level of overall economic activity.  The second factor, which is less sensitive to the general economy,

 

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is the replacement and retrofit rates for existing aircraft.  These retrofit rates, resulting mainly from obsolescence, are determined in part by the regulatory requirements established by various civil aviation authorities as well as public concern regarding aircraft age, safety and noise.  These rates may also be affected by the desire of the various airlines to improve operating costs with higher payloads and more fuel-efficient aircraft, which in turn is influenced by the price of fuel.

 

Each new generation of commercial aircraft has used increasing quantities of advanced structural materials, replacing traditional metals.  This follows the trend previously seen in military fighter aircraft where advanced structural materials may now exceed 50% of the weight of the airframe.  The most recently launched commercial aircraft programs continue the trend of increasing usage of advanced structural materials.  For instance, Airbus has indicated that the A380 is being built with 22% advanced structural materials by weight.  The first A380 aircraft are already in production with the first flight planned for 2005 and deliveries anticipated to start in 2006.  Hexcel has successfully contracted with its customers to supply a significant amount of the advanced structural materials for the initial production of this aircraft and is completing the qualification of its products.   During 2003, Boeing announced its plan to develop and launch the Boeing 7E7 which it anticipates will have an even greater content of advanced structural materials.  This trend continues to expand the market opportunity for advanced structural materials, and Hexcel and other composite materials manufacturers are developing a wide range of materials to meet the challenges of new commercial aircraft programs.  Of course, the benefit Hexcel ultimately derives from programs such as the 7E7 will depend upon a number of factors, including the design requirements of its customers, the suitability of the Company’s products to meet those requirements, the competitive position of the Company’s products against similar products offered by the Company’s competitors, and the requirements its customers and their subcontractors award to the Company.

 

Reflecting the demand factors noted above, the number of commercial aircraft delivered by Boeing and Airbus declined by 48% from 1992 to 1995.  At the lowest point during this period, Boeing and Airbus reported combined deliveries of 380 aircraft.  Beginning in 1996, however, aircraft deliveries by Boeing and Airbus began to rise, growing to a combined record peak of 914 aircraft in 1999.  Although relatively stable in 2000 and 2001, combined aircraft deliveries declined to 684 aircraft in 2002 and further declined to 586 aircraft in 2003.

 

In light of the tragic events that occurred on September 11, 2001 and the negative impact on the commercial aerospace market, Boeing and Airbus significantly reduced their build rates for 2002 and 2003 from rates previously expected.  Build rates are the number of aircraft the aircraft manufacturer plans to produce.  They may differ from deliveries when the manufacturer is increasing or reducing its inventories of finished aircraft.  This often happens when there are significant increases or reductions in demand for commercial aircraft.  The impact of these changes on Hexcel will be influenced by two factors:  the mix of aircraft produced and the inventory supply chain effects of reduced aircraft production.  The dollar value of Hexcel’s materials varies by aircraft type – twin aisle aircraft use more Hexcel materials and products than narrow body aircraft and newer designed aircraft use more Hexcel materials than older generations.  On average, Hexcel delivers products into the supply chain about four to six months prior to aircraft delivery.  Depending on the product, orders placed with Hexcel are received anywhere between one and eighteen months prior to delivery of the aircraft to the customer.  With the impact of the changes in demand for commercial aircraft, the Company’s annual commercial aerospace revenues have declined approximately 28% since 2001.

 

Set forth below are historical deliveries as announced by Boeing and Airbus:

 

		1992		1993		1994		1995		1996		1997		1998		1999		2000		2001		2002		2003
Boeing (including McDonnell Douglas)		572		409		312		256		271		375		563		620		491		527		381		281
Airbus		157		138		123		124		126		182		229		294		311		325		303		305
Total		729		547		435		380		397		557		792		914		802		852		684		586

 

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Industrial Markets

 

Hexcel groups under this market segment its revenues from applications for its products outside the aerospace and electronics markets.  A number of these applications represent emerging opportunities for the Company’s products.  In developing new applications, the Company seeks those opportunities where advanced structural material technology offers significant benefits to the end user, often applications that demand high physical performance.  Within this segment, key applications include soft body armor, wind energy, recreational equipment (i.e. bicycles, snowboards, tennis rackets and hockey sticks), and surface transportation (automobiles, mass transit and high-speed rail, and marine applications).  Hexcel’s participation in these market applications is a valuable complement to its commercial and military aerospace businesses, and the Company is committed to pursuing the utilization of advanced structural material technology where it offers the greatest customer value.

 

Space and Defense

 

The space and defense markets have historically been innovators in the use of, and sources of significant demand for, advanced structural materials.  The aggregate demand by space and defense customers is primarily a function of military aircraft procurement by the United States and certain European governments, that utilize advanced structural materials.  The Company is currently qualified to supply materials to a broad range of military aircraft and helicopter programs.  These programs include the F/A-18E/F Hornet, the F-22 Raptor, and the Eurofighter/Typhoon, as well as the C-17, the V-22 Osprey tiltrotor aircraft, and the Tiger and NH90 helicopters.  In addition, there are new programs in development such as the Joint Strike Fighter and the A400M military transport that may enter production later in the decade.  The benefits that the Company obtains from these programs will depend upon which ones are funded and the extent of such funding.  For example, the Department of Defense announced its plan to cancel the RAH-66 Comanche program on February 23, 2004.  Space applications for advanced structural materials include solid rocket booster cases; farings and payload doors for launch vehicles; and buss and solar arrays for military and commercial satellites.  The production of both launch vehicles and satellites has declined in recent years from a peak in the late 1990s.

 

Contracts to supply materials for military and some commercial projects contain provisions for termination at the convenience of the U.S. government or the buyer.  In the case of such a termination, Hexcel is entitled to recover reasonable costs incurred plus a provision for profit on the incurred costs.  In addition, the Company is subject to U.S. government cost accounting standards in accordance with applicable Federal Acquisition Regulations.

 

Electronics

 

The Company is one of the largest Western producers of high-quality, lightweight fiberglass fabric substrates used in the fabrication of printed wiring boards.  These printed wiring boards are integral to most advanced electronic products, including computers, networking equipment, telecommunications equipment, advanced cable television equipment, and automotive equipment.

 

Starting in the first quarter of 2001, the industry experienced a severe downturn, and a corresponding inventory correction began working its way through the supply chain significantly impacting demand for fiberglass fabric substrates.  As the downturn continued through 2002 and 2003, competition intensified for the business that remained and pricing pressure increased because of excess production capacity throughout the industry.  Meanwhile, a migration of electronics equipment production from the U.S. to Asia continues to put additional pressure on the Company’s electronics business.  However, the Company’s electronics customers, particularly those serving the high-technology end of the market, are more optimistic going into 2004 than they were this time last year.

 

Further discussion of Hexcel’s markets, including certain risks, uncertainties and other factors with respect to “forward-looking statements” about those markets, is contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

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Backlog

 

In recent years, Hexcel’s customers have increasingly demanded shorter order lead times and “just-in-time” delivery performance.   While the Company has many multi-year contracts with its major aerospace customers, most of these contracts specify the proportion of the customers’ requirements that will be supplied by the Company and the terms under which the sales will occur, not the specific quantities to be procured.  The Company’s electronic and industrial customers have always desired to order their requirements on as short a lead-time as possible.  The Company has recognized that over the last few years the twelve-month order backlog is no longer a meaningful trend indicator and, as a result, ceased monitoring it in the management of the business.

 

Raw Materials and Production Activities

 

Due to the vertically integrated nature of Hexcel’s operations, the Company produces several materials used in the manufacture of certain industrial fabrics, composite materials and composites structures, as well as the polyacrylonitrile (“PAN”) precursor material used in the manufacture of carbon fibers.  Although the Company purchases most of the raw materials used in production from third parties, it consumes internally approximately 50% and 25% of its carbon fiber and industrial fabric production, respectively.  Several key materials are available from relatively few sources, and in many cases the cost of product qualification makes it impractical to develop multiple sources of supply.  The unavailability of these materials, which the Company does not currently anticipate, could have a material adverse effect on the Company’s consolidated results of operations.

 

Hexcel’s production activities are generally based on a combination of “make-to-order” and “make-to-forecast” production requirements.  The Company coordinates closely with key suppliers in an effort to avoid raw material shortages and excess inventories.

 

Research and Technology; Patents and Know-How

 

Hexcel’s Research and Technology (“R&T”) departments support the Company’s businesses worldwide.  Through R&T activities, the Company maintains expertise in chemical and polymer formulation and curatives, fabric forming and textile architectures, advanced composite structures, process engineering, application development, analysis and testing of composite materials, computational design, and other scientific disciplines related to the Company’s worldwide business base.

 

Hexcel’s products rely primarily on the Company’s expertise in materials science, textiles, process engineering and polymer chemistry.  Consistent with market demand, the Company has been placing more emphasis on cost effective product design and lean manufacturing in recent years while seeking to improve the consistency of its products.  Towards this end, the Company has entered into formal and informal alliances, as well as licensing and teaming arrangements, with several customers, suppliers, external agencies and laboratories.  The Company believes that it possesses unique capabilities to design, develop and manufacture composite materials and structures.  The Company owns and maintains in excess of 100 patents worldwide, has licensed many key technologies, and has granted technology licenses and patent rights to several third parties in connection with joint ventures and joint development programs.  It is the Company’s policy to actively enforce its proprietary rights.  The Company believes that the patents and know-how rights currently owned or licensed by the Company are adequate for the conduct of its business.

 

Hexcel spent $17.7 million for R&T in 2003, $14.7 million in 2002 and $18.6 million in 2001.  Although a portion of the year-over-year increase was due to the impact of changes in foreign currency exchange rates, the Company increased its R&T spending in 2003, after cautious reductions during 2002, to support new products and new commercial aircraft qualification activities.  These expenditures were expensed as incurred.

 

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Environmental Matters

 

The Company is subject to federal, state and local laws and regulations designed to protect the environment and to regulate the discharge of materials into the environment.  The Company believes that its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and of associated financial liability.  To date, environmental control regulations have not had a significant adverse effect on the Company’s overall operations.  A discussion of environmental matters is contained in Item 3, “Legal Proceedings,” and in Note 17 to the accompanying consolidated financial statements included in this Annual Report on Form 10-K.

 

Sales and Marketing

 

A staff of salaried market managers, product managers and salespeople sell and market Hexcel products directly to customers worldwide.  The Company also uses independent distributors and manufacturer representatives for certain products, markets and regions.  In addition, the Company operates various sales offices in the United States, Europe, Australia and China.

 

Competition

 

In the production and sale of advanced structural materials, Hexcel competes with numerous U.S. and international companies on a worldwide basis.  The broad markets for the Company’s products are highly competitive, and the Company has focused on both specific markets and specialty products within markets to obtain market share.  In addition to competing directly with companies offering similar products, the Company competes with producers of substitute structural materials such as structural foam, wood and metal.  Depending upon the material and markets, relevant competitive factors include approvals, product performance, delivery, service and price.

 

Employees

 

As of December 31, 2003, Hexcel employed 4,084 full-time employees, 2,276 in the United States and 1,808 in other countries.  The number of full-time employees has declined from 4,245 and 5,376 as of December 31, 2002 and 2001, respectively, primarily due to Hexcel’s business consolidation and restructuring programs.  The business consolidation and restructuring program included the right-sizing of the Company in response to the forecasted reductions in commercial aircraft production, weakness in the electronics market and the closure of manufacturing facilities.  For further discussion, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and to Note 3 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

 

Other Information

 

The Company’s internet website is www.hexcel.com.  The Company makes available, free of charge through its website, its Form 10-K’s, 10-Q’s and 8-K’s, and any amendments to these forms, as soon as reasonably practicable after filing with the Securities and Exchange Commission.

 

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ITEM 2.  Properties

 

Hexcel owns and leases manufacturing facilities and sales offices located throughout the United States and in other countries, as noted below.  The corporate offices and principal corporate support activities for the Company are located in leased facilities in Stamford, Connecticut.   The Company’s research and technology administration and principal laboratories are located in Dublin, California; Duxford, United Kingdom; and Les Avenieres, France.

 

The following table lists the manufacturing facilities of Hexcel by geographic location, approximate square footage, and principal products manufactured.  This table does not include manufacturing facilities owned by entities in which the Company has a joint venture interest.

 

Manufacturing Facilities

 

Facility Location		Approximate Square Footage		Business Segment		Principal Products
United States:
Anderson, South Carolina		432,000		Reinforcements		Industrial Fabrics
Burlington, Washington		73,000		Composites		Honeycomb Parts
Casa Grande, Arizona		307,000		Composites		Honeycomb and Honeycomb Parts
Decatur, Alabama		159,000		Composites		PAN Precursor (used to produce Carbon Fibers)
Kent, Washington		433,000		Structures		Composite Structures
Livermore, California		141,000		Composites		Prepregs
Pottsville, Pennsylvania		134,000		Composites		Honeycomb Parts
Salt Lake City, Utah		457,000		Composites		Carbon Fibers; Prepregs
Seguin, Texas		204,000		Reinforcements		Industrial Fabrics; Specialty Reinforcements
Statesville, North Carolina		553,000		Reinforcements		Electronic Fabrics; Industrial Fabrics
Washington, Georgia		160,000		Reinforcements		Electronic Fabrics; Industrial Fabrics
International:
Dagneux, France		130,000		Composites		Prepregs
Decines, France		90,000		Reinforcements		Industrial Fabrics; Specialty Fabrics
Duxford, United Kingdom		440,000		Composites		Prepregs; Adhesives; Honeycomb and Honeycomb Parts
Les Avenieres, France		512,000		Reinforcements		Electronic Fabrics; Industrial Fabrics; Specialty Reinforcements
Linz, Austria		163,000		Composites		Prepregs
Parla, Spain		43,000		Composites		Prepregs
Welkenraedt, Belgium		223,000		Composites		Honeycomb and Honeycomb Parts

 

Hexcel leases the land on which the Burlington, Washington, facility is located.  The Company also leases portions of the facilities located in Casa Grande, Arizona and Les Avenieres, France.  During 2003, the Company retired a $25.6 million capital lease obligation that included facilities located in Anderson, South Carolina; Statesville, North Carolina; and Washington, Georgia.  The Company now owns these and all other remaining facilities.

 

The facilities located in Anderson, South Carolina; Burlington, Washington; Casa Grande, Arizona; Decatur, Alabama; Dublin, California; Kent, Washington; Livermore, California; Pottsville, Pennsylvania; Salt Lake City, Utah; Seguin, Texas; Statesville, North Carolina; and Washington, Georgia are subject to mortgages established to secure the senior secured notes issued March 19, 2003.  For further information, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and to Note 8 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

 

In January 2004, the Company announced its intention to consolidate the activities of its Livermore, California facility into its other manufacturing facilities, principally into its Salt Lake City, Utah plant.  The Livermore, California facility will continue to operate until the Company has successfully transferred its production from Livermore to its other manufacturing facilities.

 

11

 

ITEM 3.  Legal Proceedings

 

Hexcel is involved in litigation, investigations and claims arising out of the normal conduct of its business, including those relating to commercial transactions, environmental, employment, health and safety matters.  The Company estimates and accrues its liabilities resulting from such matters based on a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs.  Such estimates may or may not include potential recoveries from insurers or other third parties and are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the expenditures, which may extend over several years.

 

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

 

Environmental Claims and Proceedings

 

The Company is subject to numerous federal, state, local and foreign laws and regulations that impose strict requirements for the control and abatement of air, water and soil pollutants and the manufacturing, storage, handling and disposal of hazardous substances and waste.  These laws and regulations include the Federal Comprehensive Environmental Response, Compensation, and Liability Act (‘‘CERCLA’’ or ‘‘Superfund’’), the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and analogous state laws and regulations.  Regulatory standards under these environmental laws and regulations have tended to become increasingly stringent over time.

 

Hexcel has been named as a potentially responsible party with respect to several hazardous waste disposal sites that it does not own or possess, which are included on the Superfund National Priority List of the U.S. Environmental Protection Agency or on equivalent lists of various state governments.  Because CERCLA provides for joint and several liability, the Company could be responsible for all remediation costs at such sites, even if it is one of many potentially responsible parties (‘‘PRPs’’).  The Company believes, based on the amount and the nature of its waste, and the number of other financially viable PRPs, that its liability in connection with such matters will not be material.

 

Pursuant to the New Jersey Industrial Sites Recovery Act, Hexcel signed an administrative consent order and later entered into a Remediation Agreement to pay for the environmental remediation of a manufacturing facility it owns and formerly operated in Lodi, New Jersey.  Hexcel has commenced remediation of this site in accordance with an approved plan; however, the ultimate cost of remediating the Lodi site will depend on developing circumstances.

 

In October 2003, Hexcel, along with 66 other entities, received a directive from the New Jersey Department of Environmental Protection (“NJDEP”), which requires the entities to assess whether operations at various New Jersey sites, including Hexcel’s Lodi facility, caused damage to natural resources in the Lower Passaic River watershed.  In February 2004, Hexcel received a similar general notice letter from the U.S. Environmental Protection Agency (“EPA”) which requests Hexcel, along with 42 other entities, consider helping to finance an estimated $10 million EPA study of environmental conditions in the Lower Passaic River watershed.  Hexcel believes it has viable defenses to the EPA and NJDEP claims with respect to the Lower Passaic River and Hexcel expects than many yet unnamed parties also will receive directives and/or notices from the NJDEP and EPA, respectively, but Hexcel’s ultimate liability, if any, under these claims cannot be determined at this time.

 

Hexcel was party to a cost-sharing agreement regarding the operation of certain environmental remediation systems necessary to satisfy a post-closure care permit issued to a previous owner of the

 

12

 

Company’s Kent, Washington, site by the EPA.  Under the terms of the cost-sharing agreement, the Company was obligated to reimburse the previous owner for a portion of the cost of the required remediation activities.  Management has determined that the cost-sharing agreement terminated in December 1998; however, the other party disputes this determination.

 

The Company’s estimate of its liability as a PRP and the remaining costs associated with its responsibility to remediate the Lodi, New Jersey, and Kent, Washington sites is accrued in its consolidated balance sheets.

 

Other Proceedings

 

Hexcel has been advised that the Antitrust Division of the United States Department of Justice has closed its investigation of the carbon fiber and carbon fiber prepreg industries which commenced in 1999.  No indictments have been issued in the case to the Company or any of its employees or representatives.

 

As a result of the investigations, in 1999 Hexcel, along with others in the industry, was joined in a class action lawsuit alleging antitrust violations in the sale of carbon fiber, carbon fiber industrial fabrics and carbon fiber prepreg (Thomas & Thomas Rodmakers, Inc. et. al. v. Newport Adhesives and Composites, Inc., et. al., Amended and Consolidated Class Action Complaint filed October 4, 1999, United States District Court, Central District of California, Western Division, CV-99-07796-GHK (CTx)).  The Court has certified the case as a class action.  Discovery is continuing.  The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

 

Of the eleven companies that have opted out of the class in the Thomas & Thomas Rodmakers, Inc. case, one, Horizon Sports Technologies, Inc., has filed a case on its own behalf, with similar allegations (Horizon Sports Technologies, Inc., v. Newport Adhesives and Composites, Inc., et. al., First Amended Complaint filed October 15, 2002, United States District Court, Central District of California, Southern Division, SACV 02-911 DOC (MLGX)).  The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

 

The Company has also been joined as a party in numerous class action lawsuits in California and in Massachusetts spawned by the Thomas & Thomas Rodmakers, Inc. class action.  These actions also allege antitrust violations and are brought on behalf of purchasers located in California and in Massachusetts, respectively, who indirectly purchased carbon fiber products.  The California cases have been ordered to be coordinated in the Superior Court for the County of San Francisco and are currently referred to as Carbon Fibers Cases I, II and III, Judicial Council Coordinator Proceeding Numbers 4212, 4216 and 4222.  The California cases are Lazio v. Amoco Polymers Inc., et.al., filed August 21, 2000; Proiette v. Newport Adhesives and Composite, Inc. et. al., filed September 12, 2001; Simon v. Newport Adhesives and Composite, Inc. et. al., filed September 21, 2001; Badal v. Newport Adhesives and Composite, Inc. et.al., filed September 26, 2001; Yolles v. Newport Adhesives and Composite, Inc. et.al., filed September 26, 2001; Regier v. Newport Adhesives and Composite, Inc. et.al., filed October 2, 2001; and Connolly v. Newport Adhesives and Composite, Inc. et.al., filed October 4, 2001; Elisa Langsam v Newport Adhesives and Composites, Inc, et al., filed October 4, 2001; Jubal Delong et al. v Amoco Polymers, Inc. et al., filed October 26, 2001; and Louis V. Ambrosio v Amoco Polymers, Inc. et. al., filed October 25, 2001.  The Massachusetts case is Ostroff v. Newport Adhesives and Composites, Inc. et. al., filed June 7, 2002 in the Superior Court Department of the Trial Court of Middlesex, Massachusetts, Civil Action No. 02-2385. The Company is not in a position to predict the outcome of these lawsuits, but believes that the lawsuits are without merit as to the Company.

 

In 1999, a qui tam case was filed under seal by executives of Horizon Sports Technologies, Inc. alleging that Boeing and other prime contractors to the United States Government and certain carbon fiber and carbon fiber prepreg manufacturers, including the Company, submitted claims for payment to the U.S. Government which were false or fraudulent because the defendants knew of the alleged conspiracy to fix prices of carbon fiber and carbon prepreg described in the above cases (Beck, on behalf of the United States of America, v. Boeing Defense and Space Group, Inc., et. al., filed July 27, 1999, in the United States District Court for the Southern District of California, Civil Action No. 99 CV 1557 JM

 

13

 

JAH).  The case was unsealed in 2002 when the U.S. advised that it was unable to decide whether to intervene in the case based on the information available to it at that time and the Relators served the Company and other defendants.  The Company is not in a position to predict the outcome of the lawsuit, but believes that the lawsuit is without merit as to the Company.

 

ITEM 4.  Submission of Matters to a Vote of Security Holders

 

None.

 

14

 

PART II

 

ITEM 5.  Market for Registrant’s Common Equity and Related Stockholder Matters

 

Hexcel common stock is traded on the New York and Pacific Stock Exchanges.  The range of high and low sales prices of Hexcel common stock on the New York Stock Exchange Composite Tape is contained in Note 23 to the accompanying consolidated financial statements of this Annual Report on Form 10-K and is incorporated herein by reference.

 

Hexcel did not declare or pay any dividends in 2003, 2002 or 2001.  The payment of dividends is generally prohibited under the terms of certain of the Company’s debt agreements.

 

On March 9, 2004, there were 1,368 holders of record of Hexcel common stock.

 

ITEM 6.  Selected Financial Data

 

The information required by Item 6 is contained on page 31 of this Annual Report on Form 10-K under the caption “Selected Financial Data” and is incorporated herein by reference.

 

ITEM 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The information required by Item 7 is contained on pages 32 to 59 of this Annual Report on Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated herein by reference.

 

ITEM 7A.  Quantitative and Qualitative Disclosures about Market Risk

 

The information required by Item 7A is contained under the heading “Market Risks” on pages 54 to 57 of this Annual Report on Form 10-K and is incorporated herein by reference.

 

ITEM 8.  Consolidated Financial Statements and Supplementary Data

 

The information required by Item 8 is contained on pages 60 to 111 of this Annual Report on Form 10-K under “Consolidated Financial Statements and Supplementary Data” and is incorporated herein by reference.  The Report of the Independent Auditors is contained on page 62 of this Annual Report on Form 10-K under the caption “Report of Independent Auditors” and is incorporated herein by reference.

 

ITEM 9.  Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

 

None.

 

ITEM 9A.  Controls and Procedures

 

As of December 31, 2003, the Company’s Chief Executive Officer and Chief Financial Officer evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-14 and Rule 15d-14 under the Securities Exchange Act of 1934).  Based on their evaluation, they have concluded that the Company’s disclosure controls and procedures are effective to ensure that material information relating to

 

15

 

the Company, including its consolidated subsidiaries, would be made known to them, so as to be reflected in periodic reports that the Company files or submits under the Securities and Exchange Act of 1934.

 

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls.  As a result, no corrective actions were required or undertaken.

 

16

 

PART III

 

ITEM 10.  Directors and Executive Officers of the Registrant:

 

The information regarding directors and executive officers of the Company will be contained in Hexcel’s definitive proxy statement for the 2004 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2003.  Such information is incorporated herein by reference.

 

Code of Ethics

 

Hexcel has adopted the Code of Business Conduct, which applies to all directors, officers, and employees.  This Code is part of Hexcel’s Ethics and Business Conduct Program.  The Code will be available on Hexcel’s website prior to Hexcel’s 2004 Annual Meeting of Stockholders.  In addition, stockholders may obtain a copy of the Code free of charge by addressing a request to:

 

Hexcel Corporation

Attention:  Investor Relations Manager

281 Tresser Boulevard

Stamford, CT  06901

(203) 352-6826

http://www.hexcel.com

 

Any amendment to the Code of Business Conduct (other than technical, administrative or non-substantive amendments), or any waiver of a provision of the Code that applies to Hexcel’s Chief Executive Officer, Chief Financial Officer or Corporate Controller, will be promptly disclosed on Hexcel’s website.

 

Corporate Governance Guidelines and Committee Charters

 

Hexcel’s Corporate Governance Guidelines, as well as the charters of Hexcel’s Nominating and Corporate Governance, Audit, Compensation and Finance Committees, will be available on Hexcel’s website prior to Hexcel’s 2004 Annual Meeting of Stockholders.  In addition, stockholders may obtain a copy of these documents free of charge by making a request to the address indicated above.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

The information regarding Section 16(a) beneficial ownership reporting compliance will be contained in Hexcel’s definitive proxy statement for the 2004 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2003.  Such information is incorporated herein by reference.

 

ITEM 11.  Executive Compensation

 

The information required by Item 11 will be contained in Hexcel’s definitive proxy statement for the 2004 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2003.  Such information is incorporated herein by reference.

 

17

 

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The information required by Item 12 will be contained in Hexcel’s definitive proxy statement for the 2004 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2003.  Such information is incorporated herein by reference.

 

ITEM 13.  Certain Relationships and Related Transactions

 

The information required by Item 13 will be contained in Hexcel’s definitive proxy statement for the 2004 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2003.  Such information is incorporated herein by reference.

 

ITEM 14. Principal Accountant Fees and Services

 

The information required by Item 14 will be contained in Hexcel’s definitive proxy statement for the 2004 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2003.  Such information is incorporated herein by reference.

 

18

 

PART IV

 

ITEM 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

 

a.  1. Financial Statements

 

The consolidated financial statements of Hexcel, the notes thereto, and the Report of Independent Auditors are listed on page 60 of this Annual Report on Form 10-K and are incorporated herein by reference.

 

2. Financial Statement Schedule

 

The financial statement schedule and the Report of Independent Auditors required by Item 15(a)(2) are listed on page 60 of this Annual Report on Form 10-K and are incorporated herein by reference.

 

b.  Reports on Form 8-K

 

Current Report on Form 8-K dated October 22, 2003, relating to third quarter of 2003 financial results.

 

c.  Exhibits

 

Exhibit No.		Description
2.1		Asset Purchase Agreement dated March 31, 2000 between Hexcel Corporation and Britax Cabin Interiors, Inc. (incorporated herein by reference to Exhibit 2.1 to Hexcel’s Current Report on Form 8-K dated May 10, 2000).
3.1		Restated Certificate of Incorporation of Hexcel Corporation (incorporated herein by reference to Exhibit 1 to Hexcel’s Registration Statement on Form 8-A dated July 9, 1996, Registration No. 1-08472).
3.2		Certificate of Amendment of the Restated Certificate of Incorporation of Hexcel Corporation (incorporated herein by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
3.3		Amended and Restated Bylaws of Hexcel Corporation (incorporated herein by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
4.1		Indenture dated as of January 21, 1999 between Hexcel Corporation and The Bank of New York, as trustee, relating to the issuance of the 9 ¾% Senior Subordinated Notes due 2009 (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-4 (No. 333-71601), filed on February 2, 1999).
4.2		Indenture dated as of August 1, 1986 between Hexcel and the Bank of California, N.A., as trustee, relating to the 7% Convertible Subordinated Notes due 2011 of the Company (incorporated herein by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997).
4.2(a)		Instrument of Resignation, Appointment and Acceptance, dated as of October 1, 1993 (incorporated herein by reference to Exhibit 4.10 to the Company’s Annual Report on

 

19

 

		Form 10-K for the fiscal year ended December 31, 1993).
4.3		Indenture, dated as of March 19, 2003 among Hexcel Corporation, the Guarantors named therein and Wells Fargo Bank Minnesota, National Association, as trustee, relating to the 9.875% Senior Secured Notes due 2008 (incorporated herein by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
4.4		Certificate of Designation of Series A Convertible Preferred Stock of Hexcel Corporation (incorporated herein by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
4.5		Certificate of Designation of Series B Convertible Preferred Stock of Hexcel Corporation (incorporated herein by reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.1		Credit and Guaranty Agreement, dated as of March 19, 2003, by and among Hexcel Corporation, Hexcel Composites Limited, Hexcel Composites GmbH (Austria), Hexcel Composites GmbH (Germany), the Guarantors named therein, the lenders from time to time party thereto, Fleet Capital Corporation, as Administrative Agent, Fleet National Bank, London U.K. branch, trading as FleetBoston Financial, as Fronting Bank and Issuing Bank, Fleet National Bank, as Issuing Bank, and Fleet Securities Inc., as Lead Arranger (incorporated herein by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.1(a)		Consent, dated as of December 5, 2003, to Credit and Guaranty Agreement dated March 19, 2003, by and among Hexcel Corporation, Hexcel Composites Limited, Hexcel Composites GmbH (Austria), Hexcel Composites GmbH (Germany), the Guarantors named therein, the lenders from time to time party thereto, Fleet Capital Corporation, as Administrative Agent, Fleet National Bank, London U.K. branch, trading as FleetBoston Financial, as Fronting Bank and Issuing Bank, Fleet National Bank, as Issuing Bank, and Fleet Securities Inc., as Lead Arranger.
10.2		Security Agreement, dated as of March 19, 2003, by and among Hexcel Corporation, Clark-Schwebel Corporation, Hexcel Pottsville Corporation, Clark-Schwebel Holding Corp., CS Tech-Fab Holding, Inc. and Fleet Capital Corporation, as Administrative Agent (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.3*		Hexcel Corporation 2003 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.3(a)*		Hexcel Corporation 2003 Incentive Stock Plan as amended and restated December 11, 2003.
10.4*		Hexcel Corporation Incentive Stock Plan as amended and restated January 30, 1997 (incorporated herein by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8, Registration No. 333-36163).
10.4(a)*		Hexcel Corporation Incentive Stock Plan as amended and restated January 30, 1997 and further amended December 10, 1997 (incorporated herein by reference to Exhibit 10.5(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,

 

20

 

		1997).
10.4(b)*		Hexcel Corporation Incentive Stock Plan, as amended and restated on January 30, 1997, and further amended on December 10, 1997 and March 25, 1999 (incorporated herein by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 filed on July 26, 1999).
10.4(c)*		Hexcel Corporation Incentive Stock Plan, as amended and restated on January 30, 1997, and further amended on December 10, 1997, March 25, 1999 and December 2, 1999 (incorporated by reference to Exhibit 10.3(c) of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999).
10.4(d)*		Hexcel Corporation Incentive Stock Plan, as amended and restated on February 3, 2000 (incorporated herein by reference to Annex A of the Company’s Proxy Statement dated March 31, 2000).
10.4(e)*		Hexcel Corporation Incentive Stock Plan, as amended and restated on December 19, 2000 (incorporated herein by reference to Exhibit 10.3(e) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.4(f)*		Hexcel Corporation Incentive Stock Plan, as amended and restated on December 19, 2000 and further amended on January 10, 2002 (incorporated herein by reference to Exhibit 10.3(f) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.5*		Hexcel Corporation 1998 Broad Based Incentive Stock Plan (incorporated herein by reference to Exhibit 4.3 of the Company’s Form S-8 filed on June 19, 1998, Registration No. 333-57223).
10.5(a)*		Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as amended on February 3, 2000 (incorporated by reference to Exhibit 10.1 to Hexcel’s Quarterly Report on Form  10-Q for the Quarter ended June 30, 2000).
10.5(b)*		Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as amended on February 3, 2000, and further amended on February 1, 2001 (incorporated herein by reference to Exhibit 10.4(b) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.5(c)*		Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as amended on February 3, 2000, and further amended on February 1, 2001 and January 10, 2002 (incorporated herein by reference to Exhibit 10.4(c) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.5(d)*		Hexcel Corporation 1998 Broad Based Incentive Stock Plan, as amended on February 3, 2000, and further amended on February 1, 2001, January 10, 2002 and December 12, 2002 (incorporated herein by reference to Exhibit 10.4(d) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
10.6*		Hexcel Corporation Management Stock Purchase Plan (incorporated herein by reference to Exhibit 10.9 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.6(a)*		Hexcel Corporation Management Stock Purchase Plan, as amended on March 25, 1999 (incorporated herein by reference to Exhibit 4.3 of the Company’s Registration Statement

 

21

 

		on Form S-8 filed on July 26, 1999).
10.6(b)*		Hexcel Corporation Management Stock Purchase Plan, as amended on March 25, 1999 and December 2, 1999 (incorporated by reference to Exhibit 10.5(b) of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999).
10.6(c)*		Hexcel Corporation Management Stock Purchase Plan, as amended and restated on February 3, 2000 (incorporated herein by reference to Annex B of the Company’s Proxy Statement dated March 31, 2000).
10.6(d)*		Hexcel Corporation Management Stock Purchase Plan, as amended and restated on December 19, 2000 (incorporated herein by reference to Exhibit 10.5(d) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.6(e)*		Hexcel Corporation Management Stock Purchase Plan, as amended and restated on March 19, 2003 (incorporated herein by reference to Exhibit 10.6(e) to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.7*		Hexcel Corporation Management Incentive Compensation Plan, as amended and restated on December 19, 2000 and as further amended on February 27, 2002 (incorporated herein by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.8*		Hexcel Corporation Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.9*		Form of Employee Option Agreement (2004).
10.10*		Form of Employee Option Agreement (2003) (incorporated herein by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
10.11*		Form of Employee Option Agreement (2002) (incorporated herein by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.12*		Form of Employee Option Agreement (2000) (incorporated herein by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.13*		Form of Employee Option Agreement Special Executive Grant (2000) dated December 20, 2000 (incorporated by reference to Exhibit 10.8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.14*		Form of Employee Option Agreement Special Executive Grant (1999) dated December 2, 1999 (incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999).
10.15*		Form of Employee Option Agreement (1999) dated December 2, 1999 (incorporated by reference to Exhibit 10.8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999).

 

22

 

10.16*		Form of Employee Option Agreement (1999) (incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 1999).
10.17*		Form of Employee Option Agreement (1998) (incorporated herein by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 1998).
10.18*		Form of Employee Option Agreement (1997) (incorporated herein by reference to Exhibit 10.4 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.19*		Form of Employee Option Agreement (1996) (incorporated herein by reference to Exhibit 10.5 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
10.20*		Form of Employee Option Agreement (1995) (incorporated herein by reference to Exhibit 10.6 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
10.21*		Form of Retainer Fee Restricted Stock Unit Agreement for Non-Employee Directors (2004).
10.22*		Form of Retainer Fee Option Agreement for Non-Employee Directors (2003) (incorporated herein by reference to Exhibit 10.19 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
10.23*		Form of Retainer Fee Option Agreement for Non-Employee Directors (2000) (incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form  10-K for the fiscal year ended December 31, 2000).
10.24*		Form of Retainer Fee Option Agreement for Non-Employee Directors (1999) (incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999).
10.25*		Form of Retainer Fee Option Agreement for Non-Employee Directors (1998) (incorporated herein by reference to Exhibit 10.11 to Hexcel’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998).
10.26*		Form of Retainer Fee Option Agreement for Non-Employee Directors (1997) (incorporated herein by reference to Exhibit 10.8 to Hexcel’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997).
10.27*		Form of Option Agreement (Directors) (incorporated herein by reference to Exhibit 10.13 to Hexcel’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
10.28*		Form of Supplemental Compensation Option Agreement (Directors) (incorporated herein by reference to Exhibit 10.23 to Hexcel’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.29*		Form of Performance Accelerated Restricted Stock Unit Agreement (December 20, 2000) (incorporated herein by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.30*		Form of Restricted Stock Unit Agreement (2004).

 

23

 

10.31*		Form of Restricted Stock Unit Agreement (2003) (incorporated herein by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
10.32*		Form of Restricted Stock Unit Agreement (2002) (incorporated herein by reference to Exhibit 10.31 to Hexcel’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.33*		Form of Reload Option Agreement (1997) (incorporated herein by reference to Exhibit 10.8 of Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.34*		Form of Reload Option Agreement (1996) (incorporated herein by reference to Exhibit 10.10 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
10.35*		Form of Exchange Performance Accelerated Stock Option Agreement (incorporated Herein by reference to Exhibit 10.3 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 1998).
10.36*		Form of Performance Accelerated Stock Option Agreement (Director) (incorporated herein by reference to Exhibit 10.6 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.37*		Form of Performance Accelerated Stock Option (Employee) (incorporated herein by reference to Exhibit 10.7 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.38*		Form of Grant of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.3 to Hexcel’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 1999).
10.39*		Hexcel Corporation 1997 Employee Stock Purchase Plan, as amended and restated as of March 19, 2003 (incorporated herein by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.40*		Employment Agreement dated as of July 30, 2001 between Hexcel Corporation and David E. Berges (incorporated by reference herein to Exhibit 10.37 to Hexcel’s Registration Statement on Form S-4 (No. 333-66582), filed on August 2, 2001).
10.40(a)*		Amendment, dated December 12, 2002, to Employment Agreement dated as of July 30, 2001 between Hexcel Corporation and David E. Berges (incorporated herein by reference to Exhibit 10.43(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
10.40(b)*		Employee Option Agreement dated as of July 30, 2001 between Hexcel Corporation and David E. Berges (incorporated by reference herein to Exhibit 10.37(a) to Hexcel’s Registration Statement on Form S-4 (No. 333-66582), filed on August 2, 2001).
10.40(c)*		Employment Option Agreement (performance-based option) dated as of July 30, 2001 between Hexcel Corporation and David E. Berges (incorporated by reference herein to Exhibit 10.37(b) to Hexcel’s Registration Statement on Form S-4 (No. 333-66582), filed on August 2, 2001).

 

24

 

10.40(d)*		Supplemental Executive Retirement Agreement dated as of July 30, 2001 between Hexcel Corporation and David E. Berges (incorporated by reference herein to Exhibit 10.37(d) to Hexcel’s Registration Statement on Form S-4 (No. 333-66582), filed on August 2, 2001).
10.40(e)*		Letter Agreement dated August 1, 2001 between Hexcel Corporation and David E. Berges (incorporated by reference herein to Exhibit 10.37(e) to Hexcel’s Registration Statement on Form S-4 (No. 333-66582), filed on August 2, 2001).
10.40(f)*		Letter Agreement dated August 28, 2001 between Hexcel Corporation and David E. Berges (incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
10.41*		Letter dated December 2, 1999 from Hexcel Corporation to Stephen C. Forsyth, regarding the Company’s Management Incentive Compensation Plan for 1999 (incorporated by reference to Exhibit 10.35 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999).
10.41(a)*		Supplemental Executive Retirement Agreement dated as of May 10, 2000 between Hexcel Corporation and Stephen C. Forsyth (incorporated herein by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2000).
10.41(b)*		Amendment to Agreements, dated as of October 11, 2000 by and between Hexcel Corporation and Stephen C. Forsyth (incorporated herein by reference to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2000).
10.41(c)*		Amendment to Amendments to Agreements, dated as of November 21, 2000, by and between Hexcel Corporation and Stephen C. Forsyth (incorporated herein by reference to Exhibit 10.39(c) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.41(d)*		First Amendment to Supplemental Executive Retirement Agreement dated as of July 30, 2001 between Hexcel Corporation and Stephen C. Forsyth (incorporated herein by reference to Exhibit 10.43(d) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.42*		Letter dated December 2, 1999 from Hexcel Corporation to Ira J. Krakower, regarding the Company’s Management Incentive Compensation Plan for 1999 (incorporated herein by reference to Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.42(a)*		Supplemental Executive Retirement Agreement dated as of May 10, 2000 between Hexcel and Ira J. Krakower (incorporated herein by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2000).
10.42(b)*		Amendment to Agreements, dated as of October 11, 2000 by and between Hexcel Corporation and Ira J. Krakower (incorporated herein by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2000).
10.42(c)*		First Amendment to Supplemental Executive Retirement Agreement dated as of July 30, 2001 between Hexcel Corporation and Ira J. Krakower (incorporated herein by reference to Exhibit 10.44(c) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).

 

25

 

10.43*		Form of Executive Severance Agreement between Hexcel and certain executive officers dated as of February 3, 1999 (incorporated herein by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 1999).
10.44*		Form of Executive Severance Agreement between Hexcel and certain executive officers dated as of February 3, 1999 (incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 1999).
10.45*		Amendment to Agreements, dated as of October 11, 2000 by and between Hexcel Corporation and William Hunt (incorporated herein by reference to Exhibit 10.14 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2000).
10.45(a)*		Amendment to Amendments to Agreements, dated as of November 21, 2000, by and between Hexcel Corporation and William Hunt (incorporated herein by reference to Exhibit 10.45(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.45(b)*		Restricted Stock Unit Agreement dated as of February 12, 2004 between Hexcel Corporations and William Hunt.
10.46*		Amendment to Agreements, dated as of October 11, 2000 by and between Hexcel Corporation and David Tanonis (incorporated herein by reference to Exhibit 10.12 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2000).
10.47*		Amendment to Agreements, dated as of October 11, 2000 by and between Hexcel Corporation and Joseph Shaulson (incorporated herein by reference to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2000).
10.47(a)*		Amendment to Amendments to Agreements, dated as of November 21, 2000, by and between Hexcel Corporation and Joseph Shaulson (incorporated herein by reference to Exhibit 10.48(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
10.48		Amended and Restated Governance Agreement, dated as of March 19, 2003, among LXH L.L.C., LXH II, L.L.C., GS Capital Partners 2000 L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 Employee Fund, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, Stone Street Fund 2000, L.P. and Hexcel Corporation (incorporated herein by reference to Exhibit 10.53 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.49		Stockholders Agreement, dated as of March 19, 2003, among Berkshire Fund V, Limited Partnership, Berkshire Fund VI, Limited Partnership, Berkshire Fund V Investment Corp., Berkshire Fund VI Investment Corp., Berkshire Investors LLC, Greenbriar Co-Investment Partners L.P, Greenbriar Equity Fund, L.P. and Hexcel Corporation (incorporated herein by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.50		Amended and Restated Registration Rights Agreement, dated as of March 19, 2003, by and among Hexcel Corporation, LXH, L.L.C., LXH II, L.L.C., GS Capital Partners 2000 L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 Employee Fund, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG and Stone Street Fund 2000, L.P. (incorporated herein by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).

 

26

 

10.51		Registration Rights Agreement, dated as of March 19, 2003, among Hexcel Corporation, Berkshire Fund V, Limited Partnership, Berkshire Fund VI, Limited Partnership, Berkshire Investors LLC, Greenbriar Co-Investment Partners L.P. and Greenbriar Equity Fund, L.P. (incorporated herein by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.52		Agreement, dated October 11, 2000, by and among Hexcel Corporation, LXH, L.L.C. and LXH II, L.L.C. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 13, 2000).
10.53		Consent and Termination Agreement, dated as of October 11, 2000, by and between Hexcel Corporation and Ciba Specialty Chemicals Holding Inc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated October 13, 2000).
10.54		Purchase Agreement, dated as of June 15, 2001, among Hexcel Corporation and Credit Suisse First Boston Corporation, Deutsche Banc Alex. Brown Inc., Goldman, Sachs & Co. and J.P. Morgan Securities Inc (incorporated herein by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.55		Stock Purchase Agreement, dated as of December 18, 2002, by and among Hexcel Corporation, Berkshire Investors LLC, Berkshire Fund V, Limited Partnership, Berkshire Fund VI, Limited Partnership, Greenbriar Equity Fund, L.P. and Greenbriar Co-Investment Partners, L.P. (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated December 20, 2002).
10.56		Stock Purchase Agreement, dated as of December 18, 2002, by and among Hexcel Corporation, GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 Employee Fund, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG and Stone Street Fund 2000, L.P. (incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated December 20, 2002).
10.57		Purchase Agreement, dated as of March 7, 2003, among Goldman, Sachs & Co., Fleet Securities, Inc. and Hexcel Corporation (incorporated herein by reference to Exhibit 10.62 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.58		Exchange and Registration Rights Agreement dated as of March 19, 2003 among Hexcel Corporation, Clark-Schwebel Holding Corp., Clark-Schwebel Corporation, Hexcel Pottsville Corporation and CS Tech-Fab Holding, Inc. (incorporated herein by reference to Exhibit 10.63 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.59		Pledge and Security Agreement, dated as of March 19, 2003, between Hexcel Corporation, Clark-Schwebel Holding Corp., Clark-Schwebel Corporation, Hexcel Pottsville Corporation, CS Tech-Fab Holding, Inc. and Hexcel International, and HSBC Bank USA, as Joint Collateral Agent (incorporated herein by reference to Exhibit 10.64 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.60		Collateral Agency Agreement, dated as of March 19, 2003, by and among Hexcel Corporation, HSBC Bank USA, as Joint Collateral Agent, Well Fargo Bank Minnesota, National Association, as trustee, and the representatives of the holders of Parity Lien Debt

 

27

 

		who may become a party thereto (incorporated herein by reference to Exhibit 10.65 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
10.61		Intercreditor and Agency Agreement dated as of March 19, 2003, by and among HSBC Bank USA, as Joint Collateral Agent, Fleet Capital Corporation, as Intercreditor Agent and Security Trustee, Fleet Capital Corporation, as Administrative Agent under the Existing Credit Facility, Well Fargo Bank Minnesota, National Association, as trustee, and each other Credit Facility Agent that may become a party thereto (incorporated herein by reference to Exhibit 10.66 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002, filed on March 31, 2003).
12.1		Statement regarding the computation of ratio of earnings to fixed charges for the Company.
21		Subsidiaries of the Company.
23.1		Consent of Independent Accountants - PricewaterhouseCoopers LLP (Hexcel Corporation).
23.2		Consent of Independent Accountants - PricewaterhouseCoopers LLP (Hexcel Holdings Denmark ApS and Hexcel Holdings (UK) Limited).
23.3		Consent of Independent Auditors - Deloitte Touche Tohmatsu (BHA Aero Composite Parts Co. Ltd.).
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.
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

* Indicates management contract or compensatory plan or arrangement.

 

28

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Stamford, State of Connecticut.

 

			Hexcel Corporation
March 12, 2004			/s/ DAVID E. BERGES
(Date)			David E. Berges Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ DAVID E. BERGES		Chairman of the		March 12, 2004
(David E. Berges)		Board of Directors, President and
		Chief Executive Officer
		(Principal Executive Officer)
/s/ STEPHEN C. FORSYTH		Executive Vice President and Chief Financial Officer (Principal Financial Officer)		March 12, 2004
(Stephen C. Forsyth)
/s/ WILLIAM J. FAZIO		Corporate Controller (Principal Accounting Officer)		March 12, 2004
(William J. Fazio)
/s/ JOEL S. BECKMAN		Director		March 12, 2004
(Joel S. Beckman)
/s/ H. ARTHUR BELLOWS, JR.		Director		March 12, 2004
(H. Arthur Bellows, Jr.)
/s/ JEFFREY C. CAMPBELL		Director		March 12, 2004
(Jeffrey C. Campbell)
/s/ SANDRA L. DERICKSON		Director		March 12, 2004
(Sandra L. Derickson)
/s/ JAMES J. GAFFNEY		Director		March 12, 2004
(James J. Gaffney)

 

29

 

/s/ SANJEEV K. MEHRA		Director		March 12, 2004
(Sanjeev K. Mehra)
/s/ PETER M. SACERDOTE		Director		March 12, 2004
(Peter M. Sacerdote)
/s/ ROBERT J. SMALL		Director		March 12, 2004
(Robert J. Small)
/s/ MARTIN L. SOLOMON		Director		March 12, 2004
(Martin L. Solomon)

 

30

 

Selected Financial Data

(In millions, except per share data)

 

The following table summarizes selected financial data as of and for the five years ended December 31:

 

		2003			2002			2001			2000			1999
Results of Operations (a) (b):
Net sales		$	896.9		$	850.8		$	1,009.4		$	1,055.7		$	1,151.5
Cost of sales		722.4			689.5			818.6			824.3			909.0
Gross margin		174.5			161.3			190.8			231.4			242.5
Selling, general and administrative expenses		95.0			85.9			120.9			123.9			128.7
Research and technology expenses		17.7			14.7			18.6			21.2			24.8
Business consolidation and restructuring expenses		4.0			0.5			58.4			10.9			20.1
Impairment of goodwill and other purchased intangibles		—			—			309.1			—			—
Operating income (loss)		57.8			60.2			(316.2		)	75.4			68.9
Interest expense		(53.6		)	(62.8		)	(64.8		)	(68.7		)	(73.9		)
Other income (expense), net		(0.4		)	10.3			(2.7		)	—			—
Gain on sale of Bellingham aircraft interiors business		—			—			—			68.3			—
Income (loss) before income taxes		3.8			7.7			(383.7		)	75.0			(5.0		)
Provision for (benefit from) income taxes		13.5			11.3			40.5			26.3			(1.7		)
Income (loss) before equity in earnings (losses)		(9.7		)	(3.6		)	(424.2		)	48.7			(3.3		)
Equity in earnings (losses) of and write-downs of an investment in affiliated companies		(1.4		)	(10.0		)	(9.5		)	5.5			(20.0		)
Net income (loss)		(11.1		)	(13.6		)	(433.7		)	54.2			(23.3		)
Deemed preferred dividends and accretion		(9.6		)	—			—			—			—
Net income (loss) available to common shareholders		$	(20.7	)	$