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goodrich  1206csfb goodrich 1206csfb Presentation Transcript

  • Marshall Larsen Chairman, President and CEO CSFB/Aviation Week Aerospace & Defense Finance Conference December 6, 2006 1
  • Forward Looking Statements Certain statements made in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the Company's future plans, objectives and expected performance. The Company cautions readers that any such forward- looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks, and actual results may differ materially. Important factors that could cause actual results to differ include, but are not limited to: demand for and market acceptance of new and existing products, such as the Airbus A350 and A380, the Boeing 787 Dreamliner, the Embraer 190, the Dassault Falcon 7X, and the Lockheed Martin F-35 Lightning II and F-22 Raptor; the health of the commercial aerospace industry, including the impact of bankruptcies in the airline industry; global demand for aircraft spare parts and aftermarket services; and other factors discussed in the Company's filings with the Securities and Exchange Commission and in the Company's October 26, 2006 Third Quarter 2006 Results press release. The Company cautions you not to place undue reliance on the forward-looking statements contained in this presentation, which speak only as of the date on which such statements were made. The Company undertakes no obligation to release publicly any revisions to these forward- looking statements to reflect events or circumstances after the date on which such statements were made or to reflect the occurrence of unanticipated events. 2
  • Company Overview - Goodrich Results GR Portfolio Attributes Proprietary products More predictable revenue and income growth Non-discretionary repair/ replacement cycles Significant margin potential Large installed base drives Sustainable leadership aftermarket sales positions Participation on every large Diverse product portfolio and commercial and regional jet platform balanced customer base Significant defense & space presence 3
  • Aerospace and Defense Themes • Commercial Aircraft Original Equipment Production – New orders for commercial aircraft, including regional aircraft, remain very strong – Manufacturers continue to raise production rates – Deliveries expected to increase 7 – 8 percent in 2006 – Continued strong demand for larger regional jets • Commercial Aircraft Aftermarket Products and Services – Worldwide growth in available seat miles supports demand for replacement parts and repair and overhaul services – Aging aircraft fleet drives additional growth for many popular models of aircraft • Defense and Space Products and Services – Strong aftermarket demand for existing platforms – New opportunities for mission equipment and intelligence, surveillance and reconnaissance products 4
  • First Nine Months 2006 Sales by Market Channel Other 5% Commercial Defense and Space Original Equipment 25% 33% Commercial Aftermarket 37% Balanced business mix 5
  • Commercial Aircraft Production • 2006 orders for commercial aircraft significantly exceed expected deliveries • World GDP drives revenue passenger miles (RPMs) • Asia Pacific Airlines remain profitable – Record 2005 orders driven by Asia-Pacific Airlines – Increasing world-wide passenger traffic makes airplane production rates less sensitive to US Airline health • European Airlines have returned to profitability • US Airlines load factors and yields increasing – Third quarter results generally positive • European and US Airlines have aging fleets – Older aircraft are more expensive to operate – Current orders are insufficient to upgrade fleets with more efficient airplane Production rates expected to remain at historically high volumes 6
  • Commercial Delivery Forecasts Airbus and Boeing 1,400 Airline Monitor Forecast 1,200 Airbus & Boeing Aircraft 1,000 Annual Deliveries 800 600 400 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Increased production expected through 2010. 2011-2014 rates approximate 2006 rate 7
  • Regional Jet Market Forecast 250 Airline Monitor Forecast 200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Goodrich content on regional jets drives expected revenue growth 8
  • Commercial Aircraft Aftermarket • Aftermarket revenue driven by: – Fleet size – Aircraft utilization (available seat miles) – Aircraft age • RPM and ASM growth expected to be about the same for 2006 - 2010 • World fleet expected to continue to grow • Strong aftermarket trends expected to assist Goodrich margin expansion • Out-of-production spares prices and margins tend to be higher than for in-production aircraft 9
  • Large Commercial A/C Single and Twin Aisle Fleet Growth Y/E 2005 20,000 737NG A320 Family 18,000 747-400 767 777 A300-600 16,000 A330 A340 Out of Production A/C A380 14,000 787 A350 12,000 10,000 8,000 6,000 4,000 2,000 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 Total fleet size increasing 10 Source: Jet Information Services, Inc, YE 2005
  • Regional Jet A/C Fleet Growth Y/E 2005 6,000 Other Bombardier Embraer 5,000 Number of A/C 4,000 3,000 2,000 1,000 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 Strong growth in larger RJs should fuel aftermarket growth in out-years 11 Source: Jet Information Services, Inc, YE 2005
  • World ASMs and Load Factor ASMs Load Factor 9000 85 Recession Forecast by Airline Monitor 8000 80 History Forecast 7000 Billions of ASMS and RPMs 6000 75 % Load Factor 5000 4000 70 3000 2000 65 1000 0 60 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 High load factors drive increased aircraft utilization Source: The Airline Monitor 12
  • Aging Aircraft by Region 25 21 19 20 Average A/C Age 16 15 14 15 13 10 10 10 8 5 0 ast pe d ia ica sia A ca SA rl US As ri uro Afr Wo ala .U eE me c l str E ex dd A Mi Au n ti m A La N. • US Airlines must upgrade to compete internationally • Order flow may support longer production cycle 13 Source: Airclaims CASE
  • Sustainable Growth Beyond the Peak of the OE Cycle Commercial Aftermarket – Goodrich Attributes – Significantly larger fleet should fuel aftermarket strength – Excellent balance between Boeing and Airbus – Airbus and regional jet fleet is getting older, more mature – increased aftermarket support (especially A320) • Less than 30% of the A320 fleet has gone through its first nacelle and thrust reverser overhaul cycle – Greater content on newer, more efficient aircraft will provide long term aftermarket growth – More long-term agreements ensuring share retention – More opportunity for airline outsourcing – MRO growth • Enhanced global reach • Expanding market share • Greater infrastructure/capacity – Aging of key OE platforms with significant GR content 14
  • Defense and Space Market Summary • U.S. Defense Spending expected to continue at $400B+ levels over next 5 years – DOD top line spending is projected to grow at slightly better than inflation – Security spending by DOD, DHS and DOE continues to grow • Opportunities for new platforms are limited but DOD is investing in mission capabilities – Address evolving threats and accelerate the solution timeline – Leverage new technologies for more cost effective solutions • Mission and Payload renewal cycles are more frequent than Military Aircraft development programs • Homeland Security related spending continues to increase – Solutions have applicability across agencies (DOD, DHS, DOE) – Infrastructure protection and Chem - Bio detection are promising areas – Funding may change based on perceived or actual terrorist actions 15
  • Goodrich Defense and Space Content Platform Content Mission Equipment Content ~ 70% GR military sales ~ 30% GR military sales The systems which allow the The Aircraft, Ship or Ground Vehicle platform to perform a mission •Nacelles •Reconnaissance cameras •Landing gear •Precision optics •Aircraft and ship structures •Sensors •Wheels and Brakes •Missile actuators •Fuel systems •Precision weapon actuators •Air Data Sensors •Laser warning systems •Actuators •Perimeter warning systems •Ejection Seats •Infrared imaging devices •Lighting products •Classified Programs •High speed shafts and couplings Expect mission equipment to drive growth 16
  • Defense and Space Market • Defense remains an attractive long term Goodrich market – Forecasting above inflation growth in government spending – Strong alignment with Goodrich competencies – Provides additional portfolio diversification opportunities • Goodrich is well positioned in aircraft platform content – Robust aftermarket for the foreseeable future – Retrofit/upgrade opportunities • Mission Capability / Payloads offer the best opportunity for growth – Evolving DOD requirements create more frequent opportunities – DoD investment emphasis is on mission capability, not new platforms – Goodrich capabilities provide a solid growth foundation 17
  • Strategic Initiatives Key Drivers of Improving Margin Performance Goal is to achieve top quartile aerospace results through: • Balanced Growth – Use portfolio mass and breadth to grow all market channels – Win important new program positions – Pursue opportunities in defense and space markets – Grow aftermarket faster than market metrics • Leverage the enterprise – Emphasize and leverage multi-business unit participation – Balanced application of resources and capital allocation • Operational excellence – Continuous improvement – Supply chain management – Global capacity planning 18
  • Operational Excellence 2006 Accomplishments Driving To Benchmark Performance Levels • Continuous Improvement – Numerous events to aggressively reduce Cost of Poor Quality from industry average to world class – Focused efforts to achieve 100% on-time delivery and delivered quality • Supply Chain Management – Doubling low-cost country spend annually – Working supply chain to reduce materials and component costs and improve delivery and quality • Global Capacity Planning – Dubai MRO capability established – Expansion of Singapore and Scotland MRO facilities in progress – Dramatically increasing engineering/manufacturing in low-cost countries 19
  • Continuous Improvement On-Time Delivery History On Time Delivery 2004 2005 2006 2007 2008 Goodrich OTD Goal Lean enterprise practices reduce cycle time and enable better delivery performance even in a growth cycle 20
  • Continuous Improvement Cost of Poor Quality History COPQ % of Sales 2004 2005 2006 2007 2008 Goodrich COPQ Goal Reducing waste helps to offset cost increases in other areas 21
  • The Value Proposition for Goodrich 2006 – 2010 Expectations • Great market positions • Good top line growth – Expect commercial aftermarket growth greater than market growth (ASM’s) • Delivering on substantial margin improvement opportunity – Improved segment operating income margin from 11.5% in 2005 to 13.1% for the first nine months of 2006 – Expect to achieve at least 15% segment operating income margin by 2009 • Cash flow invested in businesses or returned to shareholders • Sustainable income growth beyond the OE cycle Entire organization focused on margin expansion – with a sense of urgency 22