The increase reflects the necessary infrastructure for new commercial growth as well as supporting the R&T organization with new product development. Adjusted operating income in the third quarter was $42.8 million or 10.2% of sales, compared to $41.2 million or 11.3% of sales in the comparable prior year period. Due to our hedging program, foreign exchange rates had no impact on third quarter adjusted operating income when comparing to the prior year. Now turning to our two segments. The Composite Materials segment represented 81% of total sales and generated an operating margin of 12.3%. The operating margin in the comparable prior year period was 13.4%. The Engineered Products segment, which is comprised of our structures and engineered core businesses, represented 19% of total sales and generated a 7.8% operating income margin as compared to 8.3% in the comparable prior year period.
Net cash provided by operating activities was $98.1 million year-to-date compared to $56.4 million for the comparable period in 2022. Working capital was a cash use of $112.1 million year-to-date to support higher sales. For the comparable prior year period, working capital increased $115 million. Our strong focus on disciplined working capital management continues, as illustrated by the inventory reduction in the third quarter despite the lower revenue. Excellent performance on collections also supported third quarter working capital reduction. As just mentioned, our focus on inventory is becoming evident with raw materials decreasing approximately $20 million on a sequential basis as we purposefully reduced our buffer or safety stock. As previously discussed, our supply chain and input lead times have improved significantly from the first half of 2022.
We continue to target further inventory reductions. Capital expenditures on an accrual basis were $88.7 million year-to-date in 2023, which included the previously disclosed property purchase for our facility in Massachusetts. Without the property purchase in 2023, capital expenditure would be $50.7 million, which compares to $49.1 million in the prior year period. Free cash flow for the first 9 months of 2023 was $3.7 million, which includes the Massachusetts property acquisition, but does not include the proceeds from the Colorado facility sold in the third quarter. For the comparable prior year period, free cash flow was negative $1.9 million. The Board of Directors declared a $0.125 quarterly dividend yesterday, payable to stockholders of record as of November 3 with the payment of November 13.
We repurchased approximately $30 million of common stock in the third quarter. The remaining authorization under the share repurchase program on September 30, 2023, was $187 million. The company’s net debt-to-EBITDA leverage was approximately 1.8 times at the end of the third quarter. We are maintaining our 2023 guidance, except for adjusting the estimated annual tax rate due to some favorable law changes domestically and internationally. Our 2023 estimated annual effective tax rate is now 21% compared to 23% previously. As a reminder, our sales guidance is $1.765 billion to $1.835 billion. Our adjusted EPS guidance is $1.80 to $1.94. And free cash flow is guided to be greater than $110 million. With that, let me turn the call back to Nick.
Nick Stanage: Thanks, Patrick. Most of you know that we have a significant presence in Morocco. We are deeply saddened by the loss of life following the earthquake last month that tragically devastated parts of the country. Fortunately, all our employees in that region are safe and our engineered core operations in Casablanca remain fully operational. As a final note, I want to share that our leadership team and members of our Board of Directors spent time earlier this month with our R&T team reviewing new products and processes in development, and we couldn’t be more excited about the future of Hexcel’s technology offering and the tremendous potential impact those advanced lightweight composites will have in enabling the reduction of CO2 emissions in the environment through greater fuel efficiency and modern aircraft and other forms of transportation.
As you may remember from our comments in the past, we meet with our R&T leadership team every year, and this year, it was a pleasure to meet for the first time at our new Center of Research and Technology Excellence in Salt Lake City. While these meetings dig deep into data and the details of fiber tensile strength, modulus and the chemistry of precursors and resins, one simple fact always emerges from these technical discussions and that is our customer aligned approach to product development is a key differentiator for Hexcel. We innovate based on the collaboration and continuous dialogue we have with our customers. When we develop new products, we know the application and customer expectations, which make us highly efficient. Our engineers and researchers have daily conversations with customers as we work closely with them to develop the next generation of lightweight solutions.
These customer engagements are now deeper than ever, and we are fully aligned with their road maps as we design new lighter and stronger materials especially for improved fuel efficiency and life cycle costs. We are firmly convinced that the key to improve sustainability is light weighted, that composites are a prime enabler, and Hexcel is the world’s leader in providing lightweight sustainable materials for the aerospace, space and defense and select industrial markets. Paul, we’re now ready to take questions.
Operator: [Operator Instructions] We’ll go first this morning to Matt Akers at Wells Fargo.
Matt Akers: Thanks for the question. Maybe just to put a finer point on the margin discussion, I guess so margins down year-over-year even though sales were higher. Is most of that because of this kind of cost issue of you basically hired people ahead of the demand coming through? Or is there any sort of mix issue or anything else that sort of impacted margins for the quarter?
Patrick Winterlich: Yes. I think — good morning. It’s much more to do with the gradual infrastructure and cost base that we’ve been building and putting in place, quite honestly, over the last several quarters, really to be ready for the really strong growth that we see, and we’ve just called out over the next sort of couple of years. We’re running more lines, as Nick called out in his part of the comments, but perhaps they’re not all efficient, they’re not sort of at the utilization level individually that we would like. And we have more people, and we continue to train and upgrade that experience as we go. And so we’re carrying that higher level of overhead, if you like, infrastructure in the company for the future growth, and it’s going to take time to really get a top line that really pulls all that product, production and all those sales through to really drive the margins.
And certainly, when you have a quarter as we have forecasted as our third quarters are, reduced by the European seasonality impact, then you see the margin headwind that we saw. It was much more of that in the third quarter than anything to do with mix.
Matt Akers: Okay. Understood. And then I guess some of the, I guess the industry supply chain is you mentioned flat narrowbody year-over-year. Is any of that, I guess, driven by Hexcel supply chain you think so? Or is it more demand from your customers? And do you have any view on sort of how long that linger effect could go lasts in 2024?
Nick Stanage: Yes, Matt. So basically, the challenges that the OEs are dealing with are certainly not related to Hexcel. We’re in a great position with capacity and resources available to meet their growing demand and their projected growing demand. There are a few issues out there that really are limiting the ramp rate on the growth, where the OEs want to take the narrowbody and the widebodies. And it just slowed it down a little bit, caused some inspections and reworks within that supply chain. And my perspective is that these will be resolved. And given the demand and the pull for those new lightweight narrowbody and widebody aircraft, the rates are going to continue to go up, and that’s what we’re positioning for is strong ’24 and ’25 build rates and growth for Hexcel.
Matt Akers: Great. Thank you.
Operator: We will next go to Gavin Parsons at UBS. One moment gentlemen, it looks like we actually lost Mr. Parsons. We’ll go next now to Ken Herbert at RBC.
Ken Herbert : Yes, hi. Good morning, Nick and Patrick. Maybe just to put a finer point on the margin question. If you had sort of seen the increase in narrowbody volume that maybe been contemplated earlier in the year, would we have seen the same kind of margin impact year-over-year? Or how much of a factor was basically flat volume on the narrowbody side?
Nick Stanage: Well, let me start. Clearly, increased demand on the narrowbody would have helped, but it would not have changed our position and the fact that in the environment we’re in, after taking our assets down to the low point we did at the pandemic to preserve cash and to position for a strong viable future, we knowingly took out 35% of our resources in our heads. In today’s hiring environment, with the unemployment where it is, with the pull for talent globally, we had to get ahead of the hiring, and we do that intentionally so that we can train them, and as the growth comes, we can get the efficiency back to and above 2019 levels. And I have to tell you, the third quarter, we’re seeing our efficiencies come up. And as that demand and that growth continues to pull through for Q4 and into ’24 and ’25, we’re expecting to convert very strongly on that volume.
