Hexcel
HXL
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Hexcel - 10-Q quarterly report FY


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================================================================================
THIS DOCUMENT IS A COPY OF THE QUARTERLY REPORT ON FORM 10-Q FILED ON MAY 15,

1996 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549
-----------------------


FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 1996

or

[ ] 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)

Delaware 94-1109521
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

5794 W. Las Positas Boulevard
Pleasanton, California 94588-8781

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

Registrant's telephone number, including area code: (510) 847-9500

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 X No
--- ---

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
of reorganization confirmed by a U.S. Bankruptcy Court.

Yes X No
--- ---

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

Class Outstanding at May 3, 1996
----- --------------------------
COMMON STOCK 36,221,580


================================================================================
HEXCEL CORPORATION AND SUBSIDIARIES


INDEX

PAGE
PART I. FINANCIAL INFORMATION

o Condensed Consolidated Statements of
Operations -- The Quarters Ended
March 31, 1996 and April 2, 1995 2

o Condensed Consolidated Balance Sheets --
March 31, 1996 and December 31, 1995 3

o Condensed Consolidated Statements of
Cash Flows -- The Quarters Ended
March 31, 1996 and April 2, 1995 4

o Notes to Condensed Consolidated
Financial Statements 5

o Management Discussion and Analysis
of Financial Condition and Results of
Operations 13


PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of
Security Holders 18

Item 6. Exhibits and Reports on Form 8-K 20


SIGNATURES 24
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------
Unaudited
-------------------------
March 31, April 2,
The Quarters Ended (In thousands, except per share data) 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 126,418 $ 85,155

Cost of sales (99,635) (70,360)
- --------------------------------------------------------------------------------------------

Gross margin 26,783 14,795

Selling, general and administrative expenses (17,482) (12,166)
Business acquisition and consolidation expenses (5,211) -
Other income, net 2,697 -
- --------------------------------------------------------------------------------------------

Operating income 6,787 2,629
Interest expense (3,633) (2,363)
Bankruptcy reorganization expenses - (2,125)
- --------------------------------------------------------------------------------------------

Income (loss) from continuing operations before income taxes 3,154 (1,859)
Provision for income taxes (1,306) (510)
- --------------------------------------------------------------------------------------------

Income (loss) from continuing operations 1,848 (2,369)

Discontinued operations: Loss during phase-out period - (112)
- --------------------------------------------------------------------------------------------

Net income (loss) $ 1,848 $ (2,481)
============================================================================================

Net income (loss) per share and equivalent share:
Primary and fully diluted:
Continuing operations $ 0.07 $ (0.27)
Discontinued operations - (0.01)
- --------------------------------------------------------------------------------------------

Net income (loss) $ 0.07 $ (0.28)
============================================================================================
Weighted average shares and equivalent shares 24,685 8,773
============================================================================================
</TABLE>

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

2
Hexcel Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------------
Unaudited
----------------------------------
March 31, December 31,
(In thousands, except per share data) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 4,675 $ 3,829
Accounts receivable 132,076 65,888
Inventories 111,123 55,475
Prepaid expenses 1,656 2,863

- ------------------------------------------------------------------------------------------------------------

Total current assets 249,530 128,055
- ------------------------------------------------------------------------------------------------------------

Property, plant and equipment 311,904 203,580
Less accumulated depreciation (119,675) (117,625)

- ------------------------------------------------------------------------------------------------------------

Net property, plant and equipment 192,229 85,955

- ------------------------------------------------------------------------------------------------------------

Intangible assets 29,230 1,832
Investments and other assets 14,736 14,760

- ------------------------------------------------------------------------------------------------------------

Total assets $ 485,725 $ 230,602

============================================================================================================

Liabilities and Shareholders' Equity

Current liabilities:
Notes payable and current maturities of long-term liabilities $ 6,809 $ 1,802
Accounts payable 50,385 22,904
Accrued liabilities 54,737 41,779

- ------------------------------------------------------------------------------------------------------------

Total current liabilities 111,931 66,485

- ------------------------------------------------------------------------------------------------------------

Notes payable and capital lease obligations, less current maturities 112,111 88,342
Indebtedness to related parties, less current maturities 26,170 -
Deferred liabilities 40,097 27,401

- ------------------------------------------------------------------------------------------------------------

Shareholders' equity
Common stock, $0.01 par value, 100,000 shares authorized, shares
issued and outstanding of 36,119 in 1996 and 18,091 in 1995 361 181
Additional paid-in capital 257,202 111,259
Accumulated deficit (68,133) (69,981)
Minimum pension obligation adjustment (535) (535)
Cumulative currency translation adjustment 6,521 7,450

- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 195,416 48,374

- ------------------------------------------------------------------------------------------------------------

Total liabilities and shareholders' equity $ 485,725 $ 230,602
============================================================================================================
</TABLE>

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

3
Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
<TABLE><CAPTION>

- -------------------------------------------------------------------------------------------------------------
Unaudited
-----------------------------------
March 31, April 2,
The Quarters Ended (In thousands) 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income (loss) from continuing operations $ 1,848 $ (2,369)
Reconciliation to net cash provided (used) by continuing operations:
Depreciation and amortization 4,454 2,808
Working capital changes and other (6,213) (9,299)

- -------------------------------------------------------------------------------------------------------------

Net cash provided (used) by continuing operations 89 (8,860)
Net cash provided by discontinued operations - 436

- -------------------------------------------------------------------------------------------------------------

Net cash provided (used) by operating activities 89 (8,424)

- -------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
Capital expenditures (2,285) (2,090)
Proceeds from equipment sold - 14
Cash paid for the Acquired Business (a) (25,000) -
Proceeds from sale of Chandler, Arizona manufacturing facility and
certain related assets and technology 1,560 26,694
Proceeds from sale of discontinued European resins business - 2,602

- -------------------------------------------------------------------------------------------------------------

Net cash provided (used) by investing activities (25,725) 27,220

- -------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
Proceeds from issuance of long-term debt 26,544 3,891
Payments of long-term debt (1,092) (3,993)
Proceeds of short-term debt, net 237 18,039
Proceeds from issuance of common stock 765 41,155
Payments of allowed claims pursuant to the Reorganization Plan - (78,144)

- -------------------------------------------------------------------------------------------------------------

Net cash provided (used) by financing activities 26,454 (19,052)

- -------------------------------------------------------------------------------------------------------------

Effect of exchange rate changes on cash and equivalents 28 (675)

- -------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and equivalents 846 (931)
Cash and equivalents at beginning of year 3,829 931

- -------------------------------------------------------------------------------------------------------------

Cash and equivalents at end of period $ 4,675 $ -

=============================================================================================================

(a) Cash paid for the Acquired Business:
Purchase of working capital, other than cash $ (71,201)
Purchase of property, plant and equipment (109,149)
Purchase of other assets (1,590)
Excess of purchase price over net assets acquired (25,913)
Assumption of long-term debt and deferred liabilities 14,959
Obligation to issue Senior Subordinated Notes to seller 26,170
Issuance of 18,022 shares of common stock, net 141,724

- -------------------------------------------------------------------------------------------

Cash paid for the Acquired Business $ (25,000)

===========================================================================================
</TABLE>

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

4
HEXCEL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1 -- BASIS OF ACCOUNTING

The accompanying condensed consolidated financial statements have been
prepared from the unaudited records of Hexcel Corporation and subsidiaries
("Hexcel" or the "Company") in accordance with generally accepted accounting
principles, and, in the opinion of management, include all adjustments necessary
to present fairly the balance sheet of the Company as of March 31, 1996, and the
results of operations and cash flows for the quarters ended March 31, 1996 and
April 2, 1995. The condensed consolidated balance sheet of the Company as of
December 31, 1995 was derived from the audited 1995 consolidated balance sheet.
Certain information and footnote disclosures normally included in financial
statements have been omitted pursuant to rules and regulations of the Securities
and Exchange Commission. Certain prior quarter amounts in the condensed
consolidated financial statements and notes have been reclassified to conform to
the 1996 presentation. These condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's 1995 Annual Report on Form 10-K.

As discussed in Note 2, Hexcel acquired the worldwide composites division
of Ciba-Geigy Limited, a Swiss corporation ("Ciba"), and Ciba-Geigy Corporation,
a New York corporation ("CGC"), including Ciba's and CGC's composite materials,
parts and structures businesses (the "Acquired Business"), on February 29, 1996.
Accordingly, the condensed consolidated balance sheet as of March 31, 1996
includes the financial position of the Acquired Business as of that date, and
the condensed consolidated statements of operations and cash flows for the
quarter ended March 31, 1996 include the results of operations and cash flows,
respectively, of the Acquired Business for the period from March 1, 1996 through
March 31, 1996.


NOTE 2 -- BUSINESS ACQUISITION AND CONSOLIDATION

BUSINESS ACQUISITION

Hexcel acquired the worldwide composites division of Ciba and CGC on
February 29, 1996. The Acquired Business is engaged in the manufacture and
marketing of composite materials, parts and structures for aerospace, recreation
and general industrial markets. Product lines include fabrics, prepregs,
adhesives, honeycomb core, sandwich panels and fabricated components, as well as
structures and interiors primarily for the commercial and military aerospace
markets.

The acquisition of the Acquired Business was consummated pursuant to a
Strategic Alliance Agreement dated as of September 29, 1995 among Ciba, CGC, and
Hexcel, as amended (the "Strategic Alliance Agreement"). Under the Strategic
Alliance Agreement, the Company acquired the assets (including the capital stock
of certain non-U.S. subsidiaries) and assumed the liabilities of the Acquired
Business other than certain excluded assets and liabilities in exchange for: (a)
approximately 18,022 newly issued shares of Hexcel common stock; (b) $25,000 in
cash;


5
and (c) undertakings to deliver to Ciba and/or one or more of its subsidiaries,
following completion of certain post-closing adjustment procedures contemplated
by the Strategic Alliance Agreement, senior subordinated notes in an aggregate
principal amount of approximately $43,000, subject to certain adjustments (the
"Senior Subordinated Notes"), and senior demand notes in a principal amount
equal to the cash on hand at certain of the non-U.S. subsidiaries included in
the Acquired Business (the "Senior Demand Notes").

As of March 31, 1996, the aggregate principal amount of Senior Subordinated
Notes to be issued to Ciba, determined in accordance with the formula included
in the Strategic Alliance Agreement, was estimated at approximately $28,300.
However, the actual aggregate principal amount of the Senior Subordinated Notes
is expected to exceed $28,300, as a result of the pending acquisition from Ciba
of certain assets of the Acquired Business, including an Austrian subsidiary,
that have not yet been transferred to Hexcel. Pursuant to the terms of the
Strategic Alliance Agreement, the aggregate principal amount of the Senior
Subordinated Notes will be adjusted to reflect the acquisition of this Austrian
subsidiary and certain other assets at such time as those acquisitions are
completed. The acquisition of the Austrian subsidiary is expected to be
completed in the second quarter of 1996, and would increase the aggregate
principal amount of the Senior Subordinated Notes by $9,000, subject to certain
working capital and other adjustments. The acquisition of the remaining assets
is expected to be completed from time to time prior to February 28, 1997.

In connection with the acquisition of the Acquired Business, Hexcel
obtained a three-year revolving credit facility of up to $175,000 (the "Senior
Secured Credit Facility") to: (a) fund the cash component of the purchase price;
(b) refinance outstanding indebtedness under certain U.S. and European credit
facilities; and (c) provide for the ongoing working capital and other financing
requirements of the Company, including business consolidation activities, on a
worldwide basis.

The pro forma net sales, net income and net income per share of Hexcel for
the quarter ended March 31, 1996, giving effect to the acquisition of the
Acquired Business as if it had occurred on January 1, 1996, were:

- ---------------------------------------------------------
3/31/96
- ---------------------------------------------------------
Pro forma net sales $ 178,011
Pro forma net income 1,889
Pro forma net income per share 0.05
- ---------------------------------------------------------

Comparable pro forma financial information for the quarter ended April 2,
1995 has not been presented, because information as to the Acquired Business for
this period is not available.

BUSINESS CONSOLIDATION

On May 9, 1996, Hexcel announced that its Board of Directors has approved a
plan for consolidating the Company's operations following the acquisition of the
Acquired Business. This business consolidation program, which is expected to
take up to three years to complete, will result in a 1996 second quarter charge
against earnings of approximately $32,000. The total expense of the business
consolidation program is estimated to be approximately $49,000, including $5,211
of expenses incurred in the first quarter of 1996 and additional expenses




6
totaling as much as $12,000 that will be recognized after the second quarter of
1996. Cash expenditures necessary to complete the business consolidation program
are expected to total approximately $44,000, net of expected proceeds from asset
sales.

The objective of the business consolidation program is to integrate
acquired assets and operations into Hexcel, and to reorganize the Company's
research and manufacturing activities around strategic centers dedicated to
select product technologies. The consolidation program is also intended to
eliminate excess manufacturing capacity and redundant administrative functions.
Specific actions contemplated by the consolidation program include the
previously announced closure of the Anaheim, California facility acquired from
Ciba, the closure of a portion of the Welkenraedt, Belgium facility, the
reorganization of the Company's manufacturing operations in France, the
consolidation of the Company's U.S. special process manufacturing activities,
and the integration of sales and marketing resources.

Management estimates that the business consolidation program will take up
to three years to complete, in part because of aerospace industry requirements
to "qualify" specific equipment and manufacturing facilities for the manufacture
of certain products. Based on Hexcel's experience with previous plant
consolidations, these qualification requirements necessitate an approach to the
consolidation of manufacturing facilities that will require two to three years
to complete. The consolidation program is expected to reduce the Company's
workforce by approximately 8% worldwide.

The $5,211 of business acquisition and consolidation expenses incurred in
the first quarter of 1996 includes $3,635 of compensation expense resulting from
stock options that were granted in 1995 subject to stockholder approval and
stock options which vested in connection with the acquisition of the Acquired
Business. This compensation expense is based on the difference between the
exercise price of the stock options granted and the market price of Hexcel's
common stock on February 21, 1996, the date that the Company's stockholders
approved the incentive stock plan under which the options were granted. The
recognition of compensation expense in connection with these stock options
resulted in a corresponding $3,635 increase in the additional paid-in capital of
the Company.


NOTE 3 -- PROPOSED BUSINESS ACQUISITION

On April 16, 1996, Hexcel announced that it has executed a definitive
agreement to acquire the Composite Products Division ("CPD") of Hercules
Incorporated ("Hercules"). CPD is engaged in the manufacture and marketing of
prepregs and carbon fiber for aerospace and other markets. According to the
provisions of the definitive agreement, the Company will pay Hercules
approximately $135,000 in cash, subject to certain adjustments, in exchange for
CPD. The proposed transaction is expected to be completed by the end of the
second quarter of 1996, subject to certain conditions, including antitrust and
other regulatory clearances.

In connection with the proposed acquisition of CPD, Hexcel has entered into
a commitment letter for a new bank credit facility of up to $300,000. Borrowings
under this new credit facility are expected to be used to fund the purchase of
CPD, to refinance certain existing indebtedness,





7
including the Senior Secured Credit Facility, and to provide for the ongoing
working capital and other financing requirements of the Company, including
business consolidation activities.


NOTE 4 -- INVENTORIES

Inventories as of March 31, 1996 and December 31, 1995 were:

- ------------------------------------------------------------------
3/31/96 12/31/95
- ------------------------------------------------------------------
Raw materials $ 47,850 $ 22,257
Work in progress 36,098 13,688
Finished goods 25,682 17,778
Supplies 1,493 1,752
- ------------------------------------------------------------------
Total inventories $ 111,123 $ 55,475
- ------------------------------------------------------------------

Inventories as of March 31, 1996 included inventories of the Acquired
Business totaling approximately $54,000.


NOTE 5 -- INTANGIBLE ASSETS

Intangible assets as of March 31, 1996 are comprised primarily of goodwill
and other intangible assets attributable to the acquisition of the Acquired
Business on February 29, 1996. Substantially all such assets are subject to
amortization over a period of 20 years. The gross value of intangible assets
attributable to the acquisition of the Acquired Business is expected to increase
subsequent to March 31, 1996, primarily as a result of the pending acquisition
from Ciba of certain assets of the Acquired Business that have not yet been
transferred to Hexcel and the recognition of certain costs of the business
consolidation program.



8
NOTE 6 -- NOTES PAYABLE, CAPITAL LEASE OBLIGATIONS AND INDEBTEDNESS TO RELATED
PARTIES

Notes payable, capital lease obligations and indebtedness to related
parties as of March 31, 1996 and December 31, 1995 were:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------- -----------------
3/31/96 12/31/95
- ------------------------------------------------------------------------------------- -----------------
<S> <C> <C>
Senior Secured Credit Facility $ 69,836 --
U.S. revolving credit facility -- $ 30,091
European credit facilities and notes payable 4,851 18,064
Obligation to issue Senior Subordinated Notes
payable to Ciba, net of discount 26,170 --
Obligation to issue Senior Demand Notes payable to Ciba 2,099 --
7% convertible subordinated debentures, due 2011 25,625 25,625
Obligations under IDRB variable rate demand notes,
due through 2024, net 11,990 11,990
Capital lease obligations 3,215 3,217
Various U.S. notes payable, due through 2007 1,304 1,157
- ------------------------------------------------------------------------------------- -----------------
Total notes payable, capital lease obligations and
indebtedness to related parties $ 145,090 $ 90,144
- ------------------------------------------------------------------------------------- -----------------

- ------------------------------------------------------------------------------------- -----------------
Notes payable and current maturities of long-term liabilities $ 6,809 $ 1,802
Notes payable and capital lease obligations, less current maturities 112,111 88,342
Indebtedness to related parties, less current maturities 26,170 --
- ------------------------------------------------------------------------------------- -----------------
Total notes payable, capital lease obligations and
indebtedness to related parties $ 145,090 $ 90,144
- ------------------------------------------------------------------------------------- -----------------
</TABLE>

SENIOR SECURED CREDIT FACILITY

In connection with the acquisition of the Acquired Business, Hexcel
obtained the Senior Secured Credit Facility on February 29, 1996. The Senior
Secured Credit Facility is a three-year revolving credit facility of up to
$175,000 which is available to: (a) fund the $25,000 cash component of the
purchase price paid for the Acquired Business; (b) refinance outstanding
indebtedness under certain U.S. and European credit facilities; and (c) provide
for the ongoing working capital and other financing requirements of the Company,
including business consolidation activities, on a worldwide basis. The Senior
Secured Credit Facility has replaced certain U.S. and European credit facilities
that were available to the Company and in use as of December 31, 1995.

Interest on outstanding borrowings under the Senior Secured Credit Facility
is computed at an annual rate of 0.4% in excess of the applicable London
interbank rate or, at the option of Hexcel, at the base rate of the
administrative agent for the lenders. In addition, the Senior Secured Credit
Facility is subject to a commitment fee of approximately 0.2% per annum on the
unused portion of the facility and a letter of credit fee of up to 0.5% per
annum on the outstanding face amount of letters of credit.

The Senior Secured Credit Facility is secured by a pledge of stock of
certain of Hexcel's subsidiaries. In addition, the Company is subject to various
financial covenants and restrictions





9
under the Senior Secured Credit Facility, as more fully described in the
Company's 1995 Annual Report on Form 10-K.

OBLIGATION TO ISSUE SENIOR SUBORDINATED NOTES PAYABLE TO CIBA-GEIGY

In connection with the acquisition of the Acquired Business, Hexcel has
undertaken to deliver to Ciba and/or one or more of its subsidiaries the Senior
Subordinated Notes. The Senior Subordinated Notes, which will be issued
following the completion of certain post-closing adjustment procedures
contemplated by the Strategic Alliance Agreement, will be general unsecured
obligations of the Company. As discussed in Note 2, the aggregate principal
amount of Senior Subordinated Notes to be issued to Ciba, determined in
accordance with the Strategic Alliance Agreement, was approximately $28,300 as
of March 31, 1996. However, the actual aggregate principal amount of the Senior
Subordinated Notes is expected to exceed this amount as a result of the pending
acquisition of certain assets of the Acquired Business that have not yet been
transferred to the Company.

As of March 31, 1996, the fair value of the obligation to issue the Senior
Subordinated Notes was $26,170, which is $2,130 lower than the aggregate
principal amount as of that date. The $2,130 discount reflects the absence of
certain call protection provisions from the terms of the Senior Subordinated
Notes and the difference between the stated interest rate on the Senior
Subordinated Notes and the estimated market rate for debt obligations of
comparable quality and maturity. The Senior Subordinated Notes are expected to
bear interest for three years at a rate of 7.5% per annum, payable semiannually
from February 29, 1996. The interest rate is expected to increase to 10.5% per
annum on the third anniversary of the acquisition of the Acquired Business, and
by an additional 0.5% per year thereafter until the Senior Subordinated Notes
mature in the year 2003. The payment of principal and interest on the Senior
Subordinated Notes will be subordinate to the Senior Secured Credit Facility.

As of March 31, 1996, Ciba owned approximately 49.9% of Hexcel's issued and
outstanding common stock, and four of the Company's ten directors were members
of Ciba management. Accordingly, the Company's obligation to issue the Senior
Subordinated Notes has been classified as "Indebtedness to related parties" in
the accompanying condensed consolidated balance sheet as of March 31, 1996.

OBLIGATION TO ISSUE SENIOR DEMAND NOTES PAYABLE TO CIBA-GEIGY

Under the terms of the Strategic Alliance Agreement, the cash on hand at
certain of the non-U.S. subsidiaries included in the Acquired Business was
acquired by Hexcel in exchange for an undertaking to deliver to Ciba and/or one
or more of its subsidiaries the Senior Demand Notes. The Senior Demand Notes,
totaling $2,099, are expected to be presented for payment shortly after
issuance.


NOTE 7 -- DEFERRED LIABILITIES

Deferred liabilities as of March 31, 1996 and December 31, 1995 were
comprised primarily of various pension, retirement and post-retirement benefit
liabilities, as well as deferred tax liabilities and certain other long-term
obligations.


10
NOTE 8 -- NON-CASH FINANCING ACTIVITIES

In addition to a cash payment of $25,000 and the obligations to issue the
Senior Subordinated Notes and the Senior Demand Notes, the consideration paid
for the Acquired Business included approximately 18,022 shares of newly issued
Hexcel common stock. The aggregate value of these shares has been estimated at
approximately $144,200, based on a discounted market price of $8 per share
multiplied by the number of shares issued. The discounted market price of $8 per
share was based on a market price of $10 per share during a reasonable period
before and after December 12, 1995, the date that the terms for determining the
total consideration to be paid by the Company were finalized, and a discount
rate of 20%. The 20% discount reflects the illiquidity of the Hexcel common
stock issued to Ciba caused by the size of Ciba's holding, the contractual
restrictions on transferring such shares and, accordingly, limitations on the
price Ciba could realize, the contractual limitation on the per share price Ciba
could realize in certain types of transactions, the fact that such shares are
"restricted securities" within the meaning of the Securities Act of 1933, and
various other factors.


NOTE 9 -- OTHER INCOME, NET

Other income of $2,697 in the quarter ended March 31, 1996 was largely
attributable to the receipt of an additional $1,560 of cash in connection with
the disposition of the Chandler, Arizona manufacturing facility and certain
related assets and technology in 1994, and to the partial settlement for $1,054
of a claim arising from the sale of certain assets in 1991.


NOTE 10 -- BANKRUPTCY REORGANIZATION

On January 12, 1995, the United States Bankruptcy Court for the Northern
District of California entered an order dated January 10, 1995 confirming the
First Amended Plan of Reorganization (the "Reorganization Plan") proposed by
Hexcel and the Official Committee of Equity Security Holders (the "Equity
Committee"). On February 9, 1995, the Reorganization Plan became effective and
Hexcel emerged from the bankruptcy reorganization proceedings which had begun on
December 6, 1993, when Hexcel filed a voluntary petition for relief under the
provisions of Chapter 11 of the federal bankruptcy laws.

The Reorganization Plan which became effective on February 9, 1995
provided, among other things, for the reinstatement or payment in full, with
interest, of all allowed claims, including prepetition accounts payable and
notes payable. On February 9, 1995, Hexcel paid $78,144 in prepetition claims
and interest, and reinstated another $60,575 in prepetition liabilities. The
payment of claims and interest was financed with: (a) cash proceeds of $26,694
received in the first quarter of 1995 from the sale of the Company's Chandler,
Arizona manufacturing facility and related assets and technology; (b) cash
proceeds of $2,602 received in the first quarter of 1995 from the sale of the
Company's European resins business; (c) the $50,000 in cash received from Mutual
Series Fund Inc. in connection with a standby purchase agreement with respect to
a subscription rights offering for additional shares of new common stock; and
(d) borrowings under a U.S. revolving credit facility. The subscription rights
offering for additional shares of new common stock was subsequently concluded on
April 6, 1995, with a total of 10,800 shares




11
of new common stock having been issued between February 9, 1995 and April 6,
1995. The U.S. revolving credit facility was subsequently replaced by the Senior
Secured Credit Facility on February 29, 1996.

Professional fees and other costs directly related to bankruptcy
proceedings were expensed as incurred, and have been reflected in the condensed
consolidated statement of operations for the quarter ended April 2, 1995 as
"bankruptcy reorganization expenses." Bankruptcy reorganization expenses
consisted primarily of professional fees paid to legal and financial advisors of
Hexcel, the Equity Committee and the Official Committee of Unsecured Creditors.
In addition, these expenses included incentives for employees to remain with the
Company for the duration of bankruptcy proceedings and the write-off of
previously capitalized costs related to the issuance of prepetition debt, as
required by generally accepted accounting principles. The resolution of certain
bankruptcy-related issues, including the final settlement of disputed claims and
professional fees, resulted in bankruptcy reorganization expenses being incurred
after the effective date of the Reorganization Plan.


12
ITEM 2.  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
---------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------


BUSINESS ACQUISITION AND CONSOLIDATION

Hexcel Corporation and subsidiaries ("Hexcel" or the "Company") acquired
the worldwide composites division of Ciba-Geigy Limited, a Swiss corporation
("Ciba"), and Ciba-Geigy Corporation, a New York corporation ("CGC"), including
Ciba's and CGC's composite materials, parts and structures businesses (the
"Acquired Business"), on February 29, 1996. The Acquired Business is engaged in
the manufacture and marketing of composite materials, parts and structures for
aerospace, recreation and general industrial markets. Product lines include
fabrics, prepregs, adhesives, honeycomb core, sandwich panels and fabricated
components, as well as structures and interiors primarily for the commercial and
military aerospace markets.

The acquisition of the Acquired Business was consummated pursuant to a
Strategic Alliance Agreement dated as of September 29, 1995 among Ciba, CGC, and
Hexcel, as amended (the "Strategic Alliance Agreement"). Under the Strategic
Alliance Agreement, the Company acquired the assets (including the capital stock
of certain non-U.S. subsidiaries) and assumed the liabilities of the Acquired
Business other than certain excluded assets and liabilities in exchange for: (a)
approximately 18 million newly issued shares of Hexcel common stock; (b) $25
million in cash; and (c) undertakings to deliver to Ciba and/or one or more of
its subsidiaries, following completion of certain post-closing adjustment
procedures contemplated by the Strategic Alliance Agreement, senior subordinated
notes in an aggregate principal amount of approximately $43 million, subject to
certain adjustments (the "Senior Subordinated Notes"), and senior demand notes
in a principal amount equal to the cash on hand at certain of the non-U.S.
subsidiaries included in the Acquired Business (the "Senior Demand Notes"). As
of March 31, 1996, the aggregate principal amount of the Senior Subordinated
Notes to be issued to Ciba, determined in accordance with the formula included
in the Strategic Alliance Agreement, was estimated at approximately $28.3
million. However, the actual aggregate principal amount of the Senior
Subordinated Notes is expected to exceed $28.3 million, as a result of the
pending acquisition from Ciba of certain assets of the Acquired Business,
including an Austrian subsidiary, that have not yet been transferred to the
Company.

On May 9, 1996, Hexcel announced that its Board of Directors has approved a
plan for consolidating the Company's operations following the acquisition of the
Acquired Business. This business consolidation program, which is expected to
take up to three years to complete, will result in a 1996 second quarter charge
against earnings of approximately $32 million. The total expense of the business
consolidation program is estimated to be approximately $49 million, including
$5.2 million of expenses incurred in the first quarter of 1996 and additional
expenses totaling as much as $12 million that will be recognized after the
second quarter of 1996. Cash expenditures necessary to complete the business
consolidation program are expected to total approximately $44 million, net of
expected proceeds from asset sales.

The objective of the business consolidation program is to integrate
acquired assets and operations into Hexcel, and to reorganize the Company's
research and manufacturing activities around strategic centers dedicated to
select product technologies. The consolidation program is




13
also intended to eliminate excess manufacturing capacity and redundant
administrative functions. Specific actions contemplated by the consolidation
program include the previously announced closure of the Anaheim, California
facility acquired from Ciba, the closure of a portion of the Welkenraedt,
Belgium facility, the reorganization of the Company's manufacturing operations
in France, the consolidation of the Company's U.S. special process manufacturing
activities, and the integration of sales and marketing resources.

Management estimates that the business consolidation program will take up
to three years to complete, in part because of aerospace industry requirements
to "qualify" specific equipment and manufacturing facilities for the manufacture
of certain products. Based on Hexcel's experience with previous plant
consolidations, these qualification requirements necessitate an approach to the
consolidation of manufacturing facilities that will require two to three years
to complete. The consolidation program is expected to reduce the Company's
workforce by approximately 8% worldwide.


PROPOSED BUSINESS ACQUISITION

On April 16, 1996, Hexcel announced that it has executed a definitive
agreement to acquire the Composite Products Division ("CPD") of Hercules
Incorporated ("Hercules"). CPD is engaged in the manufacture and marketing of
prepregs and carbon fiber for aerospace and other markets. According to the
provisions of the definitive agreement, the Company will pay Hercules
approximately $135 million in cash, subject to certain adjustments, in exchange
for CPD. The proposed transaction is expected to be completed by the end of the
second quarter of 1996, subject to certain conditions, including antitrust and
other regulatory clearances.


RESULTS OF OPERATIONS

Net income for the first quarter of 1996 was $1.8 million or $0.07 per
share, compared with a net loss for the first quarter of 1995 of $2.5 million or
$0.28 per share. The results for the 1996 quarter include the results of the
Acquired Business for the period from March 1, 1996 through March 31, 1996.
There were approximately 24.7 million weighted average shares and equivalent
shares outstanding during the first quarter of 1996, versus 8.8 million during
the first quarter of 1995. The difference in the number of weighted average
shares and equivalent shares reflects the issuance of 10.8 million shares of new
common stock between February 9, 1995 and April 6, 1995 in connection with a
subscription rights offering and standby purchase agreement, as well as the
issuance of approximately 18.0 million shares of new common stock to Ciba on
February 29, 1996 in connection with the acquisition of the Acquired Business.

The results for the 1996 quarter include business acquisition and
consolidation expenses of $5.2 million, partially offset by other income of $2.7
million. Business acquisition and consolidation expenses were comprised of $3.6
million in compensation expense resulting from stock options that were granted
in 1995 subject to stockholder approval and stock options which vested in
connection with the acquisition of the Acquired Business, as well as $1.6
million of other acquisition-related costs. Other income was attributable to the
receipt of an additional $1.6 million of cash in connection with the disposition
of the Chandler, Arizona manufacturing



14
facility and certain related assets and technology in 1994, and to the partial
settlement for $1.1 million of a claim arising from the sale of certain assets
in 1991. The results for the 1996 quarter also include $1.6 million of interest
expense attributable to the write-off of capitalized debt financing costs as a
result of the refinancing of certain credit facilities in connection with the
acquisition of the Acquired Business.

The results for the first quarter of 1995 include bankruptcy reorganization
expenses of $2.1 million.

SALES AND GROSS MARGIN

Net sales were $126.4 million for the first quarter of 1996, including
approximately $27.6 million of sales attributable to the Acquired Business for
the period from March 1, 1996 through March 31, 1996. This compares with net
sales of $85.2 million for the first quarter of 1995. Gross margin was $26.8
million for the 1996 quarter, or 21.2% of sales, compared with $14.8 million for
the 1995 quarter, or 17.4% of sales. Aside from the impact of the Acquired
Business, the increase in net sales and gross margin primarily reflects improved
sales to the commercial aerospace market and the beneficial impact of the
restructuring program that was begun in 1993 and completed in 1995. Sales were
higher in both the U.S. and Europe, and gross margins improved in Hexcel's
reinforcement fabrics, composite materials and special process businesses. The
combination of increased sales volumes and more efficient manufacturing resulted
in the highest level of gross margin as a percentage of sales since the third
quarter of 1992.

OPERATING INCOME

Operating income was $6.8 million for the first quarter of 1996, a $4.2
million increase over the same period of 1995. This increase reflects the $12.0
million improvement in gross margin and the $2.7 million of other income noted
above, partially offset by an additional $5.3 million of selling, general and
administrative expenses, and $5.2 million of business acquisition and
consolidation expenses. The increase in selling, general and administrative
expenses was largely attributable to the Acquired Business.


CAPITAL RESOURCES AND LIQUIDITY

FINANCIAL RESOURCES

In connection with the acquisition of the Acquired Business, Hexcel
obtained a three-year revolving credit facility of up to $175 million (the
"Senior Secured Credit Facility") to: (a) fund the cash component of the
purchase price; (b) refinance outstanding indebtedness under certain U.S. and
European credit facilities; and (c) provide for the ongoing working capital and
other financing requirements of the Company, including business consolidation
activities, on a worldwide basis. As of March 31, 1996, outstanding borrowings
under the Senior Secured Credit Facility totaled $69.8 million.

In connection with the proposed acquisition of CPD, Hexcel has entered into
a commitment letter for a new bank credit facility of up to $300 million.
Borrowings under this new credit facility are expected to be used to fund the
purchase of CPD, to refinance certain existing indebtedness, including the
Senior Secured Credit Facility, and to provide for the ongoing




15
working capital and other financing requirements of the Company, including
business consolidation activities.

Management expects that the financial resources of Hexcel will be
sufficient to fund the Company's worldwide operations.

CASH FLOWS

Net cash provided by operating activities was $0.1 million in the first
quarter of 1996, primarily reflecting income before business acquisition and
consolidation expenses, interest expense, income taxes, and depreciation and
amortization ("EBITDA") of $16.5 million and a comparable offsetting increase in
accounts receivable. The increase in accounts receivable resulted primarily from
strong first quarter sales. Other components of operating cash flow included the
payment of interest and a net increase in accounts payable. Changes in working
capital attributable to the acquisition of the Acquired Business are not an
element of operating cash flow.

Cash flows from investing and financing activities for the first quarter of
1996 included the cash components of the Acquired Business acquisition. As noted
in the statement of cash flows for the quarter ended March 31, 1996, and the
accompanying footnotes, a substantial portion of the consideration paid for the
Acquired Business was comprised of Hexcel common stock and Senior Subordinated
Notes.

Net cash used by operating activities was $8.4 million in the first quarter
of 1995, on EBITDA of $3.2 million. The difference between EBITDA and net
operating cash flow was primarily attributable to the payment of interest,
expenditures for restructuring activities, and a net increase in working capital
as a result of higher sales levels.

Cash flows from investing and financing activities for the first quarter of
1995 included the proceeds from the sale of certain assets, the proceeds from
the sale of Hexcel common stock pursuant to a subscription rights offering and
standby purchase agreement, and the payment of allowed claims pursuant to the
Reorganization Plan.

EBITDA is presented for purposes of describing the significant components
of Hexcel's operating cash flows, and is not presented as an alternative measure
of those cash flows or of the Company's operating results as determined in
accordance with generally accepted accounting principles.

CAPITAL EXPENDITURES

Capital expenditures were $2.3 million in the first quarter of 1996,
compared with $2.1 million in the first quarter of 1995, and were limited to
essential maintenance and process improvement projects. As a result of the
reduced spending levels in recent years, the acquisition of the Acquired
Business and the commencement of the business consolidation program, management
expects that capital expenditures will increase significantly above first
quarter levels in the remaining three quarters of 1996. Such expenditures will
be financed with cash generated from operations and borrowings under available
credit facilities.



16
RISKS, UNCERTAINTIES AND OTHER FACTORS WITH RESPECT TO "FORWARD-LOOKING
STATEMENTS"

Certain statements in this Quarterly Report on Form 10-Q under the captions
"Management Discussion and Analysis of Financial Condition and Results of
Operations," "Notes to Condensed Consolidated Financial Statements" and
elsewhere constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, but are not limited to, statements related to Hexcel's business
consolidation program, anticipated capital expenditure levels, the aggregate
principal amount of the Senior Subordinated Notes, the acquisition of the
remaining assets of the Acquired Business, the proposed acquisition of CPD and
the commitment for a new bank credit facility. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; industry capacity; changes in customer preferences; demographic
changes; competition; changes in methods of distribution and technology; changes
in political, social and economic conditions, particularly in Europe and Asia;
the assimilation of the Acquired Business; the acquisition and assimilation of
CPD; the availability of the new bank credit facility; the loss of any
significant customers; changes in business strategy or development plans;
indebtedness of the Company; quality of management; availability, terms and
deployment of capital; business abilities and judgment of personnel; changes in,
or the failure to comply with, the laws and regulations of federal and local
governments, agencies and similar organizations; and other factors referenced in
this Quarterly Report on Form 10-Q. The Company assumes no obligation to update
the forward-looking information to reflect actual results or changes in the
factors affecting such forward-looking information.

17
PART II. OTHER INFORMATION

HEXCEL CORPORATION AND SUBSIDIARIES


Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------

An Annual Meeting of Stockholders of the Company was held on
February 21, 1996. Stockholders holding 16,019,338 shares of
Hexcel common stock were present, either in person or by proxy.
The following matters were submitted to the Company's stockholders
for a vote at that meeting, with the results of the vote
indicated:

1. The approval of the issuance of a number of new shares (the
"Hexcel Shares") of Hexcel common stock, representing 49.9% of
the issued and outstanding shares of Hexcel common stock after
giving effect to the issuance of the Hexcel Shares, to be
issued in connection with the proposed acquisition by Hexcel
of the Acquired Business;

Votes Cast
<TABLE>
<CAPTION>

------------------ ---------------- ----------------- ---------------- ------------------
Broker
For Against Withheld Abstentions Non-votes
------------------ ---------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
12,171,640 154,871 0 30,030 3,656,797
------------------ ---------------- ----------------- ---------------- ------------------

<CAPTION>

2. The approval of an amendment to Hexcel's certificate of incorporation increasing the number of
authorized shares of Hexcel common stock from 40,000,000 to 100,000,000;

Votes Cast

------------------ ---------------- ----------------- ---------------- ------------------
Broker
For Against Withheld Abstentions Non-votes
------------------ ---------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
12,619,146 601,043 0 56,709 2,742,440
------------------ ---------------- ----------------- ---------------- ------------------
</TABLE>


18
3.  The election of nine directors to Hexcel's Board of Directors;

Votes Cast
<TABLE>
<CAPTION>

-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
Broker
Director For Against Withheld Abstentions Non-Votes
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Marshall S. Geller 15,859,941 0 159,397 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
Joseph L. Harrosh 15,770,430 0 248,908 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
Peter A. Langerman 15,869,043 0 150,295 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
John J. Lee 15,756,826 0 262,512 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
George S. Springer 15,872,526 0 146,812 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
Frederick W. Stanske 15,868,461 0 150,877 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
Franklin S. Wimer 15,866,561 0 152,777 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
Robert L. Witt 15,843,250 0 176,088 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------
Peter D. Wolfson 15,866,561 0 152,777 0 0
-------------------------- ----------------- ------------- ---------------- ---------------- ------------------

<CAPTION>
4. The approval of the Hexcel Corporation Incentive Stock Plan; and

Votes Cast

------------------- --------------- ----------------- ---------------- ------------------
Broker
For Against Withheld Abstentions Non-votes
------------------- --------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
10,495,719 2,681,046 0 100,233 2,742,340
------------------- --------------- ----------------- ---------------- ------------------
<CAPTION>

5. The ratification of the appointment of Deloitte & Touche LLP as Hexcel's independent auditors
for the fiscal year ended December 31, 1995;

Votes Cast

------------------- --------------- ----------------- ---------------- ------------------
Broker
For Against Withheld Abstentions Non-votes
------------------- --------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
15,841,530 51,999 0 125,809 0
------------------- --------------- ----------------- ---------------- ------------------
</TABLE>

19
Item 6.       Exhibits and Reports on Form 8-K
- ------- --------------------------------

(a) Exhibits:


2.1 Strategic Alliance Agreement dated as of
September 29, 1995 among Hexcel, Ciba-Geigy
Limited and Ciba-Geigy Corporation (filed as
Exhibit 10.1 to the Company's Current Report on
Form 8-K dated as of October 13, 1995 and
incorporated herein by reference).

2.1(a) Amendment dated as of December 12, 1995 to the
Strategic Alliance Agreement among Hexcel,
Ciba-Geigy Limited and Ciba-Geigy Corporation
(filed as Exhibit 2.1(a) to the Company's
Current Report on Form 8-K dated as of March
15, 1996 and incorporated herein by reference).

2.1(b) Letter Agreement dated as of February 28, 1996
among Hexcel, Ciba-Geigy Limited and Ciba-Geigy
Corporation (filed as Exhibit 2.1(b) to the
Company's Current Report on Form 8-K dated as
of March 15, 1996 and incorporated herein by
reference).

2.1(c) Distribution Agreement dated as of February 29,
1996 among Hexcel, Brochier S.A., Composite
Materials Limited, Salver S.r.l. and Ciba-Geigy
Limited (filed as Exhibit 2.1(c) to the
Company's Current Report on Form 8-K dated as
of March 15, 1996 and incorporated herein by
reference).

2.2 Sale and Purchase Agreement dated as of April 15, 1996
between Hercules Incorporated, Hercules Nederland BV
and HISPAN Corporation, each and all as sellers, and
Hexcel, as buyer.

3.1 Certificate of Incorporation of Hexcel dated as of February 9,
1995 (filed as Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 and
incorporated herein by reference).

3.1(a) Amendment dated as of February 21, 1996 to the
Certificate of Incorporation of Hexcel (filed
as Exhibit 3.1(a) to the Company's Registration
Statement on Form S-8, Registration No.
333-1225, and incorporated herein by
reference).

3.2 Bylaws of Hexcel dated as of February 9, 1995 (filed as Exhibit
3.2 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 and incorporated herein by
reference).

20
3.2(a)       Amendment dated as of February 29, 1996 to the
Bylaws of Hexcel (filed as Exhibit 3.2(b) to
the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 and
incorporated herein by reference).

4.1 Certificate of Incorporation of Hexcel dated as of February 9,
1995 (see Exhibit 3.1 above).

4.1(a) Amendment dated as of February 29, 1996 to the Certificate of
Incorporation of Hexcel (see Exhibit 3.1(a) above).

4.2 Bylaws of Hexcel dated as of February 9, 1995 (see Exhibit 3.2
above).

4.2(a) Amendment dated as of February 29, 1996 to the Bylaws of Hexcel
(see Exhibit 3.2(a) above).

4.3 Indenture dated as of February 29, 1996 between Hexcel and First
Trust of California, National Association, as trustee (filed as
Exhibit 4.1 to the Company's Current Report on Form 8-K dated as
of March 15, 1996 and incorporated herein by reference).

10.1 Credit Agreement dated as of February 29, 1996 among Hexcel and
certain subsidiaries of the Company, as borrowers, the lenders
and issuing banks party thereto, Citibank, N.A., as U.S.
administrative agent, Citibank International plc, as European
administrative agent and Credit Suisse, as syndication agent
(filed as Exhibit 99.1 to the Company's Current Report on
Form 8-K dated as of March 15, 1996 and incorporated herein by
reference).

10.2 Second Restated and Amended Reimbursement Agreement dated as of
February 29, 1996 between Hexcel and Banque Nationale de Paris
(filed as Exhibit 10.3(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995 and
incorporated herein by reference).

10.3 Hexcel Corporation Incentive Stock Plan (filed as Exhibit 4.3 to
the Company's Registration Statement on Form S-8, Registration
No. 333-1225, and incorporated herein by reference).

10.4 Hexcel Corporation Management Incentive Compensation Plan.

10.5 Form of Employee Option Agreement (1996).
10.6         Form of Employee Option Agreement (1995).

10.7 Form of Option Agreement (Directors) (filed as
Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 1995 and incorporated herein by reference).

10.8 Form of Short-Term Option Agreement.

10.9 Form of Performance Accelerated Restricted Stock Unit Agreement.

10.10 Form of Reload Option Agreement.

10.11 Employment Agreement dated as of February 29,
1996 between Hexcel and John J. Lee (filed as
Exhibit 10.14 to the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 1995 and incorporated herein by reference).

10.11(a) Employee Option Agreement dated as of February
29, 1996 between Hexcel and John J. Lee (filed
as Exhibit 10.14(a) to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by
reference).

10.11(b) Bankruptcy Court Option Agreement dated as of
February 29, 1996 between Hexcel and John J.
Lee (filed as Exhibit 10.14(b) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and incorporated herein
by reference).

10.11(c) Performance Accelerated Restricted Stock Unit
Agreement dated as of February 29, 1996 between
Hexcel and John J. Lee (filed as Exhibit
10.14(c) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31,
1995 and incorporated herein by reference).

10.11(d) Short-Term Option Agreement dated as of
February 29, 1996 between Hexcel and John J.
Lee (filed as Exhibit 10.14(d) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and incorporated herein
by reference).

10.11(e) Form of Reload Option Agreement dated as of
February 29, 1996 between Hexcel and John J.
Lee (filed as Exhibit 10.14(e) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and incorporated herein
by reference).

10.12 Memorandum Agreement dated as of January 31, 1996 and between
Hexcel and Rodney P. Jenks, Jr. (filed as Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by reference).
10.13        Governance Agreement dated as of February 29,
1996 between Hexcel and Ciba-Geigy Limited
(filed as Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by
reference).

10.14 Registration Rights Agreement dated as of
February 29, 1996 between Hexcel and Ciba-Geigy
Limited (filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 and
incorporated herein by reference).

10.15 Agreement Governing United States Employment
Matters dated as of September 29, 1995 between
Hexcel and Ciba-Geigy Corporation (filed as
Exhibit D to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated as of October
13, 1995 and incorporated herein by reference).

10.15(a) Amendment dated as of November 22, 1995 to the
Agreement Governing United States Employment
Matters between Hexcel and Ciba-Geigy
Corporation (filed as Exhibit 10.23(a) to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 and
incorporated herein by reference).

10.16 Employment Matters Agreement dated as of
February 29, 1996 among Ciba-Geigy plc,
Composite Materials Limited and Hexcel (filed
as Exhibit 10.24 to the Company's Annual Report
on Form 10-K for the fiscal year ended December
31, 1995 and incorporated herein by reference).

11. Statement Regarding Computation of Per Share Earnings.

27. Financial Data Schedule (electronic filing only).

(b) Reports on Form 8-K:

Current Report on Form 8-K dated as of March 15, 1996,
relating to the consummation of the acquisition of the
worldwide composites division of Ciba-Geigy Limited and
Ciba-Geigy Corporation.

Current Report on Form 8-K/A dated as of April 1, 1996,
relating to the consummation of the acquisition of the
worldwide composites division of Ciba-Geigy Limited and
Ciba-Geigy Corporation.


23
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, and in the capacity indicated.


HEXCEL CORPORATION
(Registrant)


May 15, 1996 /s/ Wayne C. Pensky
------------ -------------------
(Date) Wayne C. Pensky,
Corporate Controller and
Chief Accounting Officer
EXHIBIT INDEX
-------------

EXHIBIT NO. DESCRIPTION
----------- -----------

2.1 Strategic Alliance Agreement dated as of September 29,
1995 among Hexcel, Ciba-Geigy Limited and Ciba-Geigy
Corporation (filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K dated as of October 13, 1995 and
incorporated herein by reference).

2.1 (a) Amendment dated as of December 12, 1995 to the Strategic
Alliance Agreement among Hexcel, Ciba-Geigy Limited and
Ciba-Geigy Corporation (filed as Exhibit 2.1(a) to the
Company's Current Report on Form 8-K dated as of March 15,
1996 and incorporated herein by reference).

2.1 (b) Letter Agreement dated as of February 28, 1996 among Hexcel,
Ciba-Geigy Limited and Ciba-Geigy Corporation (filed as
Exhibit 2.1(b) to the Company's Current Report on Form 8-K
dated as of March 15, 1996 and incorporated herein by
reference).

2.1 (c) Distribution Agreement dated as of February 29, 1996 among
Hexcel, Brochier S.A., Composite Materials Limited, Salver
S.r. 1. and Ciba-Geigy Limited (filed as Exhibit 2.1(c) to
the Company's Current Report on Form 8-K dated as of March
15, 1996 and incorporated herein by reference).

2.2 Sale and Purchase Agreement dated as of April 15, 1996
between Hercules Incorporated, Hercules Nederland BV and
HISPAN Corporation, each and all as sellers, and Hexcel, as
buyer.

3.1 Certificate of Incorporation of Hexcel dated as of February
9, 1995 (filed as Exhibit 3.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994 and
incorporated herein by reference).

3.1 (a) Amendment dated as of February 21, 1996 to the Certificate
of Incorporation of Hexcel (filed as Exhibit 3.1(a) to the
Company's Registration Statement on Form S-8,
Registration No. 333-1225, and incorporated herein by
reference).

3.2 Bylaws of Hexcel dated as of February 9, 1995 (filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 and incorporated
herein by reference).
EXHIBIT INDEX
-------------

EHXIBIT NO. DESCRIPTION
----------- -----------


3.2(a) Amendment dated as of February 29, 1996 to the Bylaws of
Hexcel (filed as Exhibit 3.2(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 and incorporated herera by reference).


4.1 Certificate of Incorporation of Hexcel dated as of February
9, 1995 (see Exhibit 3.1 above).



4.1(a) Amendment dated as of February 29, 1996 to the Certificate
of Incorporation of Hexcel (see Exhibit 3.1(a) above).



4.2 Bylaws of Hexcel dated as of February 9, 1995 (see Exhibit
3.2 above).



4.2(a) Amendment dated as of February 29, 1996 to the Bylaws of
Hexcel (see Exhibit 3.2(a) above).



4.3 Indenture dated as of February 29, 1996 between Hexcel and
First Trust of California, National Association, as trustee
(filed as Exhibit 4.1 to the Company's Current Report on
Form 8-K dated as of March 15, 1996 and incorporated herein
by reference).



10.1 Credit Agreement dated as of February 29, 1996 among Hexcel
and certain subsidiaries of the Company, as borrowers, the
lenders and issuing banks party thereto, Citibank, N.A., as
U.S. administrative agent, Citibank International plc, as
European administrative agent and Credit Suisse, as
syndication agent (filed as Exhibit 99.1 to the Company's
Current Report on Form 8-K dated as of March 15, 1996 and
incorporated herein by reference).

10.2 Second Restated and Amended Reimbursement Agreement dated
as of February 29, 1996 between Hexcel and Banque Nationale
de Paris (filed as Exhibit 10.3(a) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 and incorporated herein by reference).

10.3 Hexcel Corporation Incentive Stock Plan (filed as Exhibit
4.3 to the Company's Registration Statement on Form S-8,
Registration No. 333-1225, and incorporated herein by
reference).

10.4 Hexcel Corporation Managment Incentive Compensation Plan.


10.5 Form of Employee Option Agreement (1996).
EXHIBIT INDEX
-------------

EHXIBIT NO. DESCRIPTION
----------- -----------


10.6 Form of Employee Option Agreement (1995).

10.7 Form of Option Agreement (Directors) (filed as Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by reference).

10.8 Form of Short-Term Option Agreement.

10.9 Form of Performance Accelerated Restricted Stock Unit Agreement.

10.10 Form of Reload Option Agreement.

10.11 Employment Agreement dated as of February 29, 1996 between Hexcel
and John J. Lee (filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 and
incorporated herein by reference).

10.11(a) Employee Option Agreement dated as of February 29, 1996 between
Hexcel and John J. Lee (filed as Exhibit 10.14(a) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995 and incorporated herein by reference).

10.11(b) Bankruptcy Court Option Agreement dated as of February 29,
1996 between Hexcel and John J. Lee (filed as Exhibit 10.14(b) to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by reference).

10.11(c) Performance Accelerated Restricted Stock Unit Agreement dated as
of February 29, 1996 between Hexcel and John J. Lee (filed as
Exhibit 10.14(c) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 and incorporated herein by
reference).

10.11(d) Short-Term Option Agreement dated as of February 29, 1996
between Hexcel and John J. Lee (filed as Exhibit 10.14(d) to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by reference).

10.11(e) Form of Reload Option Agreement dated as of February 29, 1996
between Hexcel and John J. Lee (filed as Exhibit 10.14(e) to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by reference).

10.12 Memorandum Agreement dated as of January 31, 1996 and between
Hexcel and Rodney P. Jenks, Jr. (filed as Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by reference).
EXHIBIT INDEX
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EHXIBIT NO. DESCRIPTION
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10.13 Governance Agreement dated as of February 29, 1996 between
Hexcel and Ciba-Geigy Limited (filed as Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by reference).

10.14 Registration Rights Agreement dated as of February 29, 1996
between Hexcel and Ciba-Geigy Limited (filed as Exhibit 10.22 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and incorporated herein by reference).

10.15 Agreement Governing United States Employment Matters dated as of
September 29, 1995 between Hexcel and Ciba-Geigy Corporation
(filed as Exhibit D to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated as of October 13, 1995 and incorporated
herein by reference).

10.15(a) Amendment dated as of November 22, 1995 to the Agreement Governing
United States Employment Matters between Hexcel and Ciba-Geigy
Corporation (filed as Exhibit 10.23(a) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995
and incorporated herein by reference).

10.16 Employment Matters Agreement dated as of February 29, 1996
among Ciba-Geigy plc, Composite Materials Limited and Hexcel
(filed as Exhibit 10.24 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 and incorporated
herein by reference).

11. Statement Regarding Computation of Per Share Earnings.

27. Financial Data Schedule (electronic filing only).