HEXCEL CORP /DE/

Note 7 — Leases

At December 31, 2025, we had approximately $25.7 million of right of use assets recorded in non-current other assets, and $25.7 million of related liabilities, $18.7 million of which was included in other non-current liabilities with the current portion of $7.0 million included in accrued liabilities. The weighted average of the remaining lease terms was approximately 5 years. We discount the future lease payments of our leases using the prevailing rates extended to us by our lenders relevant to the period of inception. These rates are comprised of SOFR plus a stated spread less a component related to collateralization. The rates are relative to the duration of the lease at inception and the country of origin. The weighted average interest rate used in calculating the fair values listed above was 4.2%.

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

Operating lease expense recognized during the years ended December 31, 2025, 2024 and 2023, was $16.1 million, $15.3 million and $16.1 million, respectively. Expense related to operating leases which have a duration of a year or less were not material. Expenses for finance leases for the years ended December 31, 2025, 2024 and 2023 were not material.

Note 8 — 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 three years ended December 31, 2025 was $1.9 million, $1.6 million, and $5.7 million, respectively. The amounts for the year ended December 31, 2023 do not include a non-cash charge of $70.5 million related to the completion of the buy-out of the UK pension plan and a gain of $1.9 million related to excess assets from the UK pension plan that reverted back to the Company.

Multi-Employer Plan

The Company is party to a multi-employer pension plan covering certain U.S. employees with union affiliations. The plan is the Western Metal Industry Pension Fund, (“the Plan”). The Plan’s employer identification number is 91-6033499; the Plan number is 001. In 2025, 2024 and 2023 the Plan reported Hexcel Corporation as being an employer that contributed greater than 5% of the Plan’s total contributions. The collective bargaining agreement was renewed on October 1, 2025 for a five-year term. The Plan has been listed in “critical status” and has been operating in accordance with a Rehabilitation Plan since 2010. The Plan, as amended under the Rehabilitation Plan, reduced the adjustable benefits of the participants, and levied a surcharge on employer contributions. Expense related to the multi-employer plan for the three years ended December 31, 2025 was $1.7 million, $1.7 million, and $1.5 million, respectively.

Retirement Savings Plan

Under the defined contribution retirement savings plans, eligible employees can make contributions up to certain thresholds of their annual compensation. The Company also makes matching contributions each year. Expense related to the matching contributions for the defined contribution plans for the three years ended December 31, 2025 was $20.4 million, $22.7 million, and $20.1 million, respectively.

Postretirement Plans

In addition to defined benefit and retirement savings plan benefits, we also 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.

Non-Qualified Deferred Compensation Plan

Under the deferred compensation plan, eligible U.S. employees may make tax-deferred contributions that cannot be made under the 401(k) Plan because of Internal Revenue Service limitations. We match 50% of a participant’s contributions up to 6% of the participant's excess compensation pay as well as provide the same fixed and profit-sharing contributions as provided under the 401(k) plan.

We have elected to fund our deferred compensation obligation through a rabbi trust. The rabbi trust is subject to creditor claims in the event of insolvency, but the assets held in the rabbi trust are not available for general corporate purposes. Amounts in the rabbi trust are invested in a number of funds based on the funds available under our 401(k) plan, other than the Hexcel stock fund. The securities are carried at fair value and are included in other assets on the Consolidated Balance Sheets. We record trading gains and losses in general and administrative expenses on the Consolidated Statements of Operations, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect our exposure to liabilities for payment under the deferred compensation plan.

Net Periodic Pension Expense

The measurement date used to determine the benefit obligations and plan assets of the defined benefit retirement and postretirement plans was December 31, 2025. All costs related to our pensions are included as a component of operating income in our Consolidated Statements of Operations.

During 2025, the Company paid $16.5 million to settle certain plans. As of December 31, 2025, the total benefit obligation was $21.0 million, and the fair value of plan assets was $4.0 million, resulting in a net projected benefit obligation ("PBO") of $17.0 million ($2.4 million recorded in current liabilities and $14.6 million in other non-current liabilities). As of December 31, 2024 the total benefit obligation was $37.8 million, and the fair value of plan assets was $4.0 million, resulting in a net PBO of $33.8 million ($17.4 million recorded in current liabilities and $16.4 million in other non-current liabilities).

Note 9 — Income Taxes

During the fourth quarter of 2025, the Company adopted ASU No. 2023-09, Income Taxes (Topic 240): Improvements to Income Tax Disclosures, which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign and (3) income tax expense or benefit from continuing operations disaggregated by Federal, state, and foreign. The update also requires entities to disclose their income tax payments (net of refunds) disaggregated by Federal, state, and foreign.

Income before income taxes and the provision for income taxes, for the three years ended December 31,2025, were as follows:

A reconciliation of the provision for income taxes at the U.S. federal statutory income tax rate of 21.0% to the effective income tax rate, for the years ended December 31, 2025, 2024 and 2023 is as follows:

(1)State taxes in Connecticut and Utah contributed to the majority of the tax effect in this category for the year ended December 31, 2025. State taxes in California and Utah contributed to the majority of the tax effect in this category for the year ended December 31, 2024. State taxes in Massachusetts and Utah contributed to the majority of the tax effect in this category for the year ended December 31, 2023.

We donot provide for additional income or withholding taxes for any undistributed foreign earnings as we do not currently have any specific plans to repatriate funds from our international subsidiaries; however, we may do so in the future if a dividend can be remitted with no material tax impact. As of December 31, 2025, we have approximately $204.0 million of unremitted foreign earnings that we intend to keep indefinitely reinvested. Addi tionally, due to withholding tax, basis computations and other tax related considerations, it is not practicable to estimate any taxes to be provided on outside basis differences at this time.

The table below provides income taxes paid (net of refunds received) for the years ended December 31, 2025, 2024 and 2023:

The Organization for Economic Cooperation and Development (“OECD”) Pillar Two global minimum tax rules, requiring a minimum effective tax rate of 15%, are effective for tax years beginning on or after January 1, 2024. Under Pillar Two, a top-up tax will be required for certain jurisdictions whose effective tax rate falls below the 15% minimum rate. Although the U.S. has not yet enacted legislation to adopt Pillar Two, nearly all European Union member states have enacted the Pillar Two legislation. After considering the applicable tax law changes associated with Pillar Two legislation, we determined there wasno material impact to our provision for income taxes for the 12 months ended December 31, 2025. The Company will continue to monitor for additional guidance and legislative changes related to Pillar Two in the jurisdictions where we operate.

Deferred Income Taxes

Deferred income taxes result from tax attributes including foreign tax credits, net operating loss carryforwards and temporary differences between the recognition of items for income tax purposes and financial reporting purposes. Principal components of deferred income taxes as of December 31, 2025 and 2024 are:

Deferred tax assets and deferred tax liabilities as presented in the Consolidated Balance Sheets as of December 31, 2025 and 2024 are as follows and are recorded in other assets and deferred income taxes in the Consolidated Balance Sheets:

The deferred tax assets for the respective periods were assessed for recoverability and, where applicable, a valuation allowance was recorded to reduce the total deferred tax asset to an amount that will, more likely than not, be realized in the future. The valuation allowance as of December 31, 2025 relates to certain U.S. and foreign tax attributes for which we have determined, based upon historical results and projected future book and taxable income levels, that a valuation allowance should continue to be maintained. The valuation allowance decreased by $3.0 million in 2025 primarily as a result of changes in the realization of deferred tax assets in a foreign jurisdiction. The net change in the total valuation allowance for the years ended December 31, 2025 and 2024, was a decrease of $3.0 million and an increase of $6.2 million, respectively.

Although realization is not assured, we have concluded that it is more likely than not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The amount of the net deferred tax assets considered realizable, however, could be reduced in the near term if actual future income or income tax rates are lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.

Net Operating Loss & Tax Credit Carryforwards

At December 31, 2025, we had tax credit carryforwards for U.S. state tax purposes of $11.4 million available to offset future income taxes. These credits will begin to expire if not utilized in 2026. We also had net operating loss carryforwards for U.S. state and foreign income tax purposes of $2.8 million and $333.2 million, respectively, for which there were foreign valuation allowances of $11.7 million as of December 31, 2025. Our foreign net operating losses can be carried forward without limitation in Belgium, Germany, France, Luxembourg, Morocco, and the U.K. We have a valuation allowance against certain foreign net operating losses for which the Company believes it is not more likely than not that the net operating losses will be utilized.

Uncertain Tax Positions

Our unrecognized tax benefits at December 31, 2025 relate to U.S. federal and various state jurisdictions.

The following table summarizes the activity related to our unrecognized tax benefits.

We had unrecognized tax benefits of $1.4 million at December 31, 2025, of which $1.4 million, if recognized, would impact our annual effective tax rate. In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the Consolidated Statements of Operations. The Company did not recognize any interest expense or penalties related to the above unrecognized tax benefits in 2025 and 2024. The Company had no accrued interest as of December 31, 2025 and 2024.

We are subject to taxation in the U.S. and various states and foreign jurisdictions. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years. Years in major jurisdictions that remain open to examination are the U.S. (2022 onward for Federal purposes and 2021 onward for state purposes), Austria (2020 onward), Belgium (2016 onward), France (2022 onward), Spain (2021 onward), Germany (2022 onward), Luxembourg (2020 onward), and the U.K. (2021 onward). We are currently under examination in certain state and foreign tax jurisdictions.

Note 10 — Capital Stock

Common Stock Outstanding

Common stock outstanding as of December 31, 2025, 2024 and 2023 was as follows:

On February 19, 2024, the Board approved a $300 million share repurchase plan (the “2024 Share Repurchase Plan”). As of December 31, 2025, the 2024 Share Repurchase Plan was fully utilized. The repurchases of the Company’s common stock under the 2024 Share Repurchase Plan were made in open market transactions, block transactions, privately negotiated purchase transactions or other purchase techniques at the discretion of management based upon consideration of market, business, legal, accounting, and other factors.

On October 22, 2025, the Board approved an additional $600 million share repurchase plan (the "2025 Share Repurchase Plan"), and, as part of the 2025 Share Repurchase Plan, the Company entered into accelerated share repurchase agreements (the "ASR") to purchase an aggregate of $350 million of the Company's common stock. On October 24, 2025, the Company paid Bank of America, N.A. (“Bank of America”) and Goldman Sachs & Co. LLC (together with Bank of America, the “Counterparties”) an aggregate amount of $350 million and received an initial delivery of approximately 3.95 million shares of the Company's common stock, representing 80% of the shares expected to be repurchased under the ASR agreement, at a price of $70.95 per share. The final number of shares to be repurchased will be based on the average of the daily volume-weighted average prices of the Company’s common stock during the term of the ASR Agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreements. Upon final settlement of the ASR, under certain circumstances, each of the Counterparties may be required to deliver additional shares of common stock, or the Company may be required to deliver shares of common stock or to make a cash payment, at its election, to the Counterparties. The final settlement of each transaction under the ASR Agreements is scheduled to occur in the first quarter of 2026 and in each case may be accelerated at the option of the applicable Counterparty.

In connection with the ASR, on October 21, 2025, the Company provided notice to the lenders pursuant to the Credit Agreement to borrow $350.0 million under the Facility to fund the initial settlement of the ASR.

During the year ended December 31, 2025, we repurchased 5,720,616 shares of common stock, including the shares purchased pursuant to the ASR, under both repurchase plans at a cost of $454.3 million, including sales commissions and excise taxes, leaving approximately $380.6 million available for additional repurchases under the 2025 Share Repurchase Plan. The acquisition of these shares was accounted for under the treasury stock method.

Dividends per share of common stock for 2025 and 2024 were$0.68 and $0.60, respectively. For the years ended December 31, 2025 and 2024, we paid $53.9 million and $49.3 million in dividends for each year, respectively.

Note 11 — Revenue

Our revenue is primarily derived from the sale of inventory under long-term contracts with our customers. The majority of our revenue is recognized at a point in time. In instances where our customers acquire our goods related to government contracts, the contracts are typically subject to terms similar, or equal to, the Federal Acquisition Regulation Part 52.249-2, which contains a termination for convenience clause ("T for C") that requires the customer to 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 contracts that have a T for C clause and where the products being produced have no alternative use. As our production cycle is typically nine months or less, it is expected that goods related to the revenue recognized over time will be shipped and billed within the next twelve months.

We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the years ended December 31, 2025, 2024 and 2023:

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

Contract assets as of December 31, 2025, will be billed and reclassified to accounts receivable during 2026. Accounts receivable, net, includes amounts billed to customers where the right to payment is unconditional.

Note 12 — Restructuring

We recognized restructuring charges of $28.4 million for the year ended December 31, 2025 primarily related to severance and impairments. Anticipated future cash payments as of December 31, 2025 were $5.5 million.

We recognized restructuring charges of $2.3 million and $0.8 million for the years ended December 31, 2024 and December 31, 2023, respectively, primarily related to severance and asset impairments. Restructuring charges are recorded in Other Operating Expense on the Consolidated Statements of Operations.

Note 13 — Stock-Based Compensation

The following table details the stock-based compensation expense by type of award for the years ended December 31, 2025, 2024 and 2023:

Non-Qualified Stock Options

Non-qualified stock options (“NQOs”) have been granted to our employees and directors under our stock compensation plan. Options granted generally vest over three years and expireten years from the date of grant.

A summary of option activity under the plan for the three years ended December 31, 2025 is as follows:

(a)

Unrecognized compensation cost relates to non-vested stock options and is expected to be recognized over the remaining vesting period ranging fromone year to three years.

Valuation Assumptions in Estimating Fair Value

We estimated the fair value of stock options at the grant date using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2025, 2024 and 2023:

The weighted-average expected life is derived from the average midpoint between the vesting and the contractual term and considers the effect of both the inclusion and exclusion of post-vesting cancellations during theten-year period. Expected volatility is calculated based on a blend of both historic volatility of our common stock and implied volatility of our traded options. We weigh both volatility inputs equally and utilize the average as the volatility input for the Black-Scholes calculation. The risk-free interest rate for the expected term is based on the U.S. Treasury yield curve in effect at the time of grant and corresponding to the expected term.

Restricted Stock Units — Service Based

As of December 31, 2025, a total of 387,418 shares of service based restricted stock units were outstanding, which vest based on years of service under the 2003 and 2013 incentive stock plan. RSUs are granted to key employees, executives, and directors of the Company. The fair value of the RSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized on a straight-line basis over the requisite service period. The stock-based compensation expense recognized is based on an estimate of shares ultimately expected to vest, and therefore it has been reduced for estimated forfeitures. The total compensation expense related to awards granted to retirement-eligible employees is recognized on the grant date.

The table presented below provides a summary of the Company’s RSU activity for the years ended December 31, 2025, 2024 and 2023:

As of December 31, 2025, there was total unrecognized compensation cost related to non-vested RSUs of $7.2 million, which is to be recognized over the remaining vesting period ranging fromone year tothree years.

Restricted Stock Units — Performance Based

As of December 31, 2025, a total of 418,475 shares of performance based restricted stock units were outstanding under the 2003 and 2013 incentive stock plan. The total amount of PRSUs that will ultimately vest is based on the achievement of various financial performance targets set forth by the Company’s Compensation Committee on the date of grant. PRSUs are based on athree-year performance period. The stock-based compensation expense related to awards granted to retirement-eligible employees is expensed on the grant date and is trued up as projections change. The fair value of the PRSU is based on the closing market price of the Company’s common stock on the date of grant and is amortized straight-line over the total three-year period. A change in the performance measure expected to be achieved is recorded as an adjustment in the period in which the change occurs.

The table presented below provides a summary, of the Company’s PRSU activity, at original grant amounts, for the years ended December 31, 2025, 2024, and 2023:

As of December 31, 2025, there was total unrecognized compensation cost related to non-vested PRSUs of $5.6 million, which is to be recognized over the remaining vesting period ranging fromone year tothree years. The final amount of compensation cost to be recognized is dependent upon our financial performance.

Stock-Based Compensation Cash Activity

During 2025, 2024, and 2023 cash received from stock option exercises was $5.8 million, $7.1 million and $7.8 million, respectively. We used $5.0 million, $11.3 million and $3.2 million in cash related to the shares withheld to satisfy employee tax obligations for RSUs and PRSUs converted during the years ended December 31, 2025, 2024 and 2023, respectively.

We classify the cash flows resulting from these tax benefits as financing cash flows. We either issue new shares of our common stock or utilize treasury shares upon the exercise of stock options or the conversion of stock units.

Shares Authorized for Grant

In 2019, an amendment tothe Hexcel Corporation 2013 Incentive Stock Plan (the “Plan”) was adopted that increased the number of shares of the Company’s common stock authorized for issuance under the Plan by 3,300,000 shares. As of December 31, 2025, an aggregateof 1.9 million shares were authorized for future grant under our stock plan, which covers stock options, RSUs, PRSUs and at the discretion of Hexcel, could result in the issuance of other types of stock-based awards.

Employee Stock Purchase Plan (“ESPP”)

The Company offers an ESPP, which allowed for eligible employees to contribute up to 10% of their base earnings, to a maximum of $25,000 in a calendar year, toward the quarterly purchase of our common stock at a purchase price equal to 85% of the fair market value of the common stock. There were 101,387,80,589, and 73,809 ESPP shares purchased in 2025, 2024 and 2023, respectively.

Note 14 — Net Income Per Common Share

Computations of basic and diluted net income per common share for the years ended December 31, 2025, 2024 and 2023, are as follows:

Note 15 — 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 5.875% Senior Unsecured Notes. These hedges were designated as cash flow hedges, thus any change in fair value was recorded as a component of other comprehensive income. As part of the issuance of our 5.875% Senior Unsecured Notes, we net settled these derivatives for $3.6 million in cash and the deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The remaining balance of deferred gains as of December 31, 2025 was approximately $3.3 million. The effect of the settled treasury locks reduces the effective interest rate of the senior notes by approximately 0.10%.

Cross Currency and Interest Rate Swap Agreements

In November 2020, we entered into a cross currency and interest rate swap which was designated as a cash flow hedge of a €270 million,5-year amortizing, intercompany loan between one of our European subsidiaries and the U.S. parent company. Changes in the spot exchange rate were recorded to the general ledger and offset the fair value re-measurement of the hedged item. The net difference in the interest rates coupons was recorded as a credit to interest expense. The derivative swapped €270 million bearing interest at a fixed rate of 0.30% for $319.9 million at a fixed rate interest of 1.115%. The interest coupons settled semi-annually. The principal amortized each year on November 15, as follows: for years 1 through 4, beginning November 15, 2021, €50 million versus $59.2 million, and the final settlement on November 15, 2025 of €70 million versus $82.9 million.

Foreign Currency Forward Exchange Contracts

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 June 2028. The aggregate notional amount of these contracts was $403.4 million at December 31, 2025 and $386.4 million at December 31, 2024. The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. The effective portion of the hedges was gains of $33.6 million, losses of $19.3 million, and gains of $10.5 million, for the years ended December 31, 2025, 2024 and 2023, respectively, and are recorded in other comprehensive (loss) income.

The fair values of outstanding derivative financial instruments as of December 31, 2025 and December 31, 2024 were as follows:

During the years ended December 31, 2025 and 2024, the net impact for the hedges recognized in sales was a gain of $8.9 million and a loss of $1.5 million, respectively. For the two years ended December 31, 2025 and 2024, hedge ineffectiveness was immaterial.

In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the 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 areno credit contingency features in these derivatives. During the years ended December 31, 2025, 2024 and 2023, we recognized net foreign exchange losses of $1.8 million, gains of $4.0 million, and gains of $1.4 million, respectively, in the Consolidated Statements of Operations. The carrying amount of the contracts for asset and liability derivatives not designated as hedging instruments was $0.1 million of current liabilities on our Consolidated Balance Sheets at December 31, 2025.

The activity, net of tax, in accumulated other comprehensive loss related to foreign currency forward exchange contracts for the years ended December 31,2025, 2024 and 2023 was as follows:

Unrealized gains of $10.6 million recorded in accumulated other comprehensive loss, net of tax of $2.8 million, as of December 31, 2025 are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded. The impact of credit risk adjustments was immaterial for the three years.

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 December 31, 2025, the Company had commodity swap agreements with a notional value of $11.4 million. The swaps mature monthly through October 2027. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items. The fair value of the commodity swap agreements was a liability of $4.2 million (of which $0.5 million was recorded in long term liabilities) at December 31, 2025 and a liability of $1.3 million (of which $0.3 million was recorded in long term liabilities) at December 31, 2024.

Note 16 — Commitments and Contingencies

Weare 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 are neither probable and/or reasonably estimable of having a material 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 48 other PRPs that comprise the Lower Passaic Cooperating Parties Group (the “CPG”), are subject to a May 2007 Administrative Order on Consent (“AOC”) with the EPA requiring the CPG to perform a Remedial Investigation/Feasibility Study of environmental conditions of a 17-mile stretch of the Passaic River in New Jersey (the “Lower Passaic River”). We were included in the CPG based on our operations at our former manufacturing site in Lodi, New Jersey.

In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower eight miles of the Lower Passaic River at an expected cost ranging from $0.97 billion to $2.07 billion. In August 2017, the EPA appointed an independent third-party allocation expert to make recommendations on the relative liability of approximately 120 identified non-government PRPs for the lower eight miles of the Lower Passaic River. In December 2020, the allocator issued its non-binding report on PRP liability (including Hexcel’s) to the EPA. In October 2021, the EPA released a ROD selecting an interim remedy for the upper nine miles of the Lower Passaic River at an expected additional cost ranging from $308.7 million to $661.5 million.

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 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 38 other parties claiming cost recovery under CERCLA for future costs related to its compliance with the UAO. On January 5, 2024, the U.S. District Court stayed the foregoing claim initiated by OCC until the completion of the Passaic-related Consent Decree process.

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 $150 million settlement of the EPA’s CERCLA claims against Hexcel and 83 other PRPs for costs related to alleged contamination of the upper and lower portions of the Lower Passaic River. The 84 PRPs have collectively placed $150 million in escrow, pending District Court approval of the Consent Decree. In December 2024, the District Court granted the issuance of the Consent Decree, however, this decision has been appealed. Briefing on the appeal was completed in January 2026.

Environmental remediation reserve activity for the three years ended December 31, 2025, 2024 and 2023 was as follows:

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 December 31, 2025 and December 31, 2024, our aggregate environmental related accruals were $0.1 million and $0.3 million, respectively. These amounts were included in non-current liabilities.

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

Warranty expense for the years ended December 31, 2025, 2024 and 2023 and accrued warranty cost, included in “other accrued liabilities” in the Consolidated Balance Sheets were as follows:

Purchase Obligations

At December 31, 2025, purchase commitments were $18.4 million for 2026, $14.2 million for 2027, $6.3 million for 2028, $5.7 million for 2029, $5.6 million for 2030, and $38.1 million thereafter.

Note 17 — Accumulated Other Comprehensive Loss

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the Consolidated Statements of Operations.

The components of accumulated other comprehensive loss as of December 31, 2025 and 2024 were as follows:

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 lossfor the years ended December 31, 2025, 2024 and 2023 were as follows:

Note 18— Segment Information

We reporttwo segments, Composite Materials and Engineered Products. Corporate and certain other expenses are not allocated to the segments, except to the extent that the expense can be directly attributable to the segment. Corporate & Other is shown to reconcile to Hexcel’s consolidated results. Hexcel’s Chief Executive Officer and President, Thomas C. Gentile III, is the Company’s Chief Operating Decision-Maker ("CODM"). He assesses the performance of the Company’s entire business, as well as the individual segments, and is the ultimate decision maker in allocating resources within the Company. The CODM has leadership teams, organized along the various functions/lines of our business, with whom he regularly reviews and assesses segment operations and performance.

The financial results for our 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 segments based on operating income, and generally account for intersegment sales based on arm’s length prices. Specifically, the CODM uses operating income to evaluate income generated from segment assets (return on assets) and to make decisions such as whether and where to reinvest profits back into the business.

In addition to the product line-based segmentation of our business, we also monitor sales into our principal end markets as a means to understanding demand for our products.

The following tables present financial information on our segments as of December 31, 2025, 2024 and 2023 and for the years then ended.

Geographic Data

Net sales and long-lived assets, by geographic area, consisted of the following for the three years ended December 31, 2025, 2024 and 2023:

(a)

Net sales by geography based on the location in which the product sold was manufactured.

(b)

Net sales to external customers based on the location to which the product sold was delivered.

(c)

Long-lived assets primarily consist of property, plant and equipment, net and goodwill at December 31, 2025, 2024 and 2023. Also included are right of use assets related to operating leases.

Significant Customers

Approximately 39%,40% and 39% of our 2025, 2024 and 2023 net sales, respectively, were to Airbus and its subcontractors and approximately 13%,15% and 15% of our 2025, 2024 and 2023 net sales, respectively, were to Boeing and its subcontractors.

Note 19— Fair Value Measurements

The fair values of our financial instruments are classified into one of the following categories:

•

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

•

Level 2: Observable inputs other than quoted prices in active markets but corroborated by market data.

•

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

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.

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). In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the Consolidated Balance Sheet.

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

•

Cross Currency and Interest Rate Swap Agreements — valued using the USD Secured Overnight Financing Rate (“SOFR”) curves and quoted forward foreign exchange prices at the reporting date.

•

Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices at the reporting date.

•

Commodity swap agreements — valued using quoted forward commodity prices at the reporting date.

For more information regarding fair values for our financial assets and liabilities, see Note 15, Derivative Financial Instruments, to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in 2025 that would reduce the receivable amount owed, if any, to the Company.