1969 Even before Neil Armstrong, Hexcel materials make first footprints on moon. The footpads on the Apollo 11 Lunar Landing Module are made of crushable honeycomb foil by Hexcel.

1970 When Concorde, the world’s first commercial supersonic aircraft, enters service it contains materials from a variety of Hexcel locations.

Market Leaders Must Continually Invent

>> Looking back Early attempts at making honeycomb used a corrugation process which was slow, inefficient and had size constraints. Roger Steele patented a novel method to apply lines of adhesive to aramid paper and expand honeycomb that is still the standard today. When Douglas Aircraft said they needed a fiberglass core, he developed woven glass prepreg to replace his original paper design. Year after year, Hexcel has advanced the state -of-the-art, accumulating over 400 patents along the way.

Lesson? Pioneers can’t look for trails, they need to forge them.

>> Looking forward: In 2007, Hexcel won the prestigious JEC innovation award for applying its patented HexWeb® Acousti-Cap™ to a jet engine nacelle. This unique honeycomb core with cell inserts has, after years of study by NASA, been deemed a significant improvement over the current state-of-the-art methods of dampening jet engine inlet noise. It is now being incorporated in a number of new and existing aircraft, such as the Boeing 777, 787 and 747-8.

Traditional carbon composite parts, such as the intake fan blade on the new GE turbofan, require precisely placed sheets of prepreg to be stacked on a mold and cured in a high pressure/temperature autoclave for hours. High speed tape-laying machines are employed in

making large structures such as aircraft wings and fuselages. However, neither method is gener-ally applicable to making smaller, odd-shaped parts like window frames and internal brackets. In 2007, FAA approval was received for the first aircraft part made with our patented HexMC® system. HexMC® is carbon fiber prepreg, cut into flakes and layered in a blanket-like form. Loaded into a molding press, it allows for high-volume shaping and curing of lightweight structural parts that would otherwise need to be made from more expensive and heavier titanium for similar perfor-mance. Using the HexMC® process, Hexcel now offers turnkey finished composite parts that meet FAA certification requirements starting with only the customer’s desired load, envelope and mounting profile. Hundreds of parts made this way have been incorporated into the Boeing 787, and thousands of addi-tional parts are likely on future aircraft designs.

Also in 2007, HexTool® was introduced to the tooling market. Most large composite aircraft struc-tures have traditionally required tools made of a very expensive and extremely heavy Invar® alloy because its low coefficient of thermal expansion is close to that of carbon

1958 Atlas Missile & U.S. Airforce moon probe used Hexcel Honeycomb. Our materials were also used in the U.S. Mercury space program.

1959 Hexcel goes public – I.P.O. of 50,000 shares for over-the-counter trading.

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1981Hexcel plays a vital part in the construction of the Columbia space shuttle, supplying materials for the nose cap, payload doors and wings.

1986Hexcel plays a major role in the historic non-stop, round-the-world flight of the Voyager aircraft.

1971Hexcel begins manufacturing skis, bringing together a number of the company’s materials and technologies into a single finished product.

1974Hexcel convinces design engineers at Cincinnati Milacron to build the five-axis, numerically-controlled (“NC”) honeycomb carving machine, which allows Hexcel to begin supplying complex, contoured parts such as the speed brakes on the F-15 fighter.

A350XWB 52%

787 50%

A380 23%

A340-500 17%

A330 12%

777 11%

A320 10%

767 6%

757 5%

737 5%

747 2%

DC-10 2%

A-310 2%

707 1%

CompositeUsageRatio(basedonestimatedweight)

2007AnnualReport3

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>> Looking back:

1996-98 The combination of Hexcel, Ciba Composites, Hercules Composites, along with select Fiberite product lines gives Hexcel the most comprehensive array of technologies, qualifications, geographic mix and vertically integrated capabilities in the industry. This leaves the company well positioned for growth and diversification.

abankruptcythatcouldhavebeenavoided.AfterSeptember11,2001,wedidnotwait.Wereducedourworkforcebyover30%,raisednewcapitalandrefinancedourentiredebtstructure.Lesson?Greatwindsdon’t

guaranteesmoothsailing;thebeststrategiesmustalsoincludeexecution,agility,adaptationandawillingnesstorethink/reinvent.

>> Looking forward: Theunexpectedtwo-yeardelayofthecomposite-intensivesuperjumboAirbusA380aircraftcombinedwitha35%dropinourballisticsalescreatedtheequivalentofarecessionintwoofourkeymarkets.Tomaintainourtrackrecordofmarginandearningsexpansion,wechosetorespondaggressivelyratherthanwaitforarebound.Wesoldourballistics,

electronicsandarchitecturalweavingbusinesses,becausetheirlong-termprospectswerelesscompellingthanthoseofcompositematerialsforaerospaceandwindenergy.Weclosedtwoplantsandtookoutsignificantoverheadcoststooffsettheincomelostfromthesebusinesses.Andwerestructuredourorganizationfromthreeglobalbusinessunitstoonetobecomeapurelyfocusedcompositescompany.

2007AnnualReport5

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>> Looking back:

>> Looking forward:

Chairman and CEO

Hexcel’s Board of Directors (Left to Right standing: Front Row – D. Hurley, J. Graves, J. Campbell,

S. Derickson, J. Beckman, L. Brubaker; Back row – A. Bellows, D. Berges, K. Foster, D. Pugh

Composite Materials

Carbon Fibers:

Industrial Fabrics and Specialty Reinforcements:

Prepregs:

Other Fiber-Reinforced Matrix Materials

Resins

Structural Adhesives:

Honeycomb:

Engineered Products

Investments in Affiliated Companies

Commercial Aerospace

Space & Defense

Industrial Markets

2007 Compared to 2006

Gross Margin:

Selling, General and Administrative (“SG&A”) Expenses:

Research and Technology Expenses:

Business Consolidation and Restructuring Expenses:

Other Expense, Net:

Operating Income:

Interest Expense:

Non-Operating Expense, Net:

Provision (Benefit) for Income Taxes:

Equity in Earnings from and Gain on Sale of Investments in

Affiliated Companies:

Income from Continuing Operations:

Income (Loss) from Discontinued Operations, Net

2006 Compared to 2005Net Sales:

2006 Net Sales

2005 Net Sales

December 2006 Program

Livermore 2004 Program November 2001 Program

Employers’

Accounting for Pensions (“FAS 87”), Employers’ Accounting

for Settlements and Curtailments of Defined Benefit Pension Plans

and for Termination Benefits (“FAS 88”), Employers’

Accounting for Postretirement Benefits Other Than Pensions (“FAS

106”) Employers’ Accounting for Defined Benefit

Pension and Other Postretirement Plans — an amendment of FASB

Statements No. 87, 88, 106, and 132(R)

Liquidity:

Credit Facilities:

Financing Activities:

Financial Obligations and Commitments:

Operating Activities

Investing Activities:

Accounts Receivable Inventories

Product Warranties

Deferred Tax Assets

Accounting

for Income Taxes (“FAS 109”),

Considering the Effects

of Prior Year Misstatements when Quantifying Misstatements in

Current Year Financial Statements

Uncertain Tax Positions

Accounting for Uncertainty in Income

Long-Lived Assets and Goodwill

Share-Based Compensation

Accounting for Stock-

Based Compensation

Accounting for

Stock Issued to Employees

Commitments and Contingencies

Interest Rate Risks

Interest Rate Swap Agreements

Cross-Currency Interest Rate Swap Agreement

Foreign Currency Exchange Risks

Foreign Currency Forward Exchange Contracts

Utility Price Risks

Fair Value

Measurements (“SFAS 157”)

The Fair

Value Option for Financial Assets and Financial Liabilities –

Including an amendment of FASB Statement No. 115

Business Combinations (“SFAS 141(R)”)

Business Combinations

Noncontrolling Interests in Consolidated

Financial Statements—an amendment of ARB No. 51

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

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

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

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

Inventories

Property, Plant and Equipment

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

(“FAS 142”)

Software Development Costs

“Accounting for

the Costs of Computer Software Developed or Obtained for Internal

Use.”

Nature of Operations

Principles of Consolidation

Reclassifications

Use of Estimates

Cash and Cash Equivalents

Investments

Consolidation of Variable Interest

Entities (“FIN 46R”)

Debt Financing Costs

Share-Based CompensationShare-

Based Payments

Accounting for Stock

Issued to Employees

Currency Translation

Revenue Recognition

Accounting for Performance of Construction-Type and

Certain Production Type Contracts

Product Warranty

Research and Technology

Income Taxes

Accounting for Income Taxes.

Accounting for Uncertainty in Income Taxes – an

interpretation of FASB No. 109,

Concentration of Credit Risk

Derivative Financial Instruments

Accounting for Derivative Instruments and

Hedging Activities (“FAS 133”)

Accounting for

Certain Derivative Instruments and Certain Hedging Activities

Self-insurance

Recently Issued Accounting StandardsFair Value

Measurements (“SFAS 157”)

The Fair

Value Option for Financial Assets and Financial Liabilities –

Including an amendment of FASB Statement No. 115

Business Combinations (“SFAS 141(R)”)

Business Combinations

Noncontrolling Interests in Consolidated

Financial Statements—an amendment of ARB No. 51

EBGI

European Architectural Business

,

BHA Aero Composite Parts Co., Ltd.

Guarantor’s Accounting and Disclosure Requirements for

Guarantees, Including Indirect Guarantees of Indebtedness of Others,

Asian Composites Manufacturing Sdn. Bhd.

TechFab LLC

DIC-Hexcel Limited

Senior Secured Credit Facility

6.75% Senior Subordinated Notes, due 2015

European Credit and Overdraft Facilities

Aggregate Maturities of Notes Payable

Estimated Fair Values of Notes Payable

“Accounting for Leases.”

Employers’

Accounting for Pensions (“FAS 87”), Employers’ Accounting

for Settlements and Curtailments of Defined Benefit Pension Plans

and for Termination Benefits (“FAS 88”), Employers’

Accounting for Postretirement Benefits Other Than Pensions (“FAS

106”) Employers’ Accounting for Defined Benefit

Pension and Other Postretirement Plans — an amendment of FASB

Statements No. 87, 88, 106, and 132(R)

U.S. Defined Benefit Retirement Plans

U.S. Postretirement Plans

European Defined Benefit Retirement Plans

Retirement and Other Postretirement Plans - France

Net Periodic Pension Expense

Defined Benefit Retirement and Postretirement Plans

Deferred Income Taxes

Net Operating Loss Carryforwards

Uncertain Tax Positions

Accounting for Uncertainty in Income

Common Stock Outstanding

Secondary Offerings of Common Stock and Conversions of

Mandatorily Redeemable Convertible Preferred Stock

Prior to adoption of SFAS 123(R)

Accounting for Stock-Based Compensation

, Accounting for Stock-Based

Compensation — Transition and Disclosure

Adoption of SFAS 123(R)

Non-Qualified Stock Options

Valuation Assumptions in Estimating Fair Value

Restricted Stock Units – Service Based

Restricted Stock Units – Performance Based

Stock-Based Compensation Cash Activity

Shares Authorized for Grant

Employee Stock Purchase Plan (“ESPP”)

Plus incremental shares from assumed conversions:

Cross-Currency Interest Rate Swap Agreement

Interest Rate Swap Agreements

Foreign Currency Forward Exchange Contracts

Foreign Currency Options

Environmental Matters

Lodi, New Jersey Site

Lower Passaic River Study Area

Kent, Washington Site

Omega Chemical Corporation Superfund Site, Whittier, CA

Litigation

Austrian Exotherm Claim

Hercules Claim

Product Warranty

Disclosures

about Segments of an Enterprise and Related Information,

Geographic Data

Note:

Significant Customers

December 2006 Program

Livermore 2004 Program

November 2001 Program

2007

2006

Internal Control-Integrated

Framework

Internal Control - Integrated Framework