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goodrich BofA_9.21.05

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  • 1. Marshall Larsen Chairman, President and CEO Bank of America 35th Annual Investment Conference San Francisco September 21, 2005 1
  • 2. 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, and the Lockheed Martin F-35 Joint Strike Fighter 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 July 28, 2005 Second Quarter 2005 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
  • 3. Company Overview - Goodrich One of the largest worldwide aerospace suppliers Broadest portfolio of products in industry Proprietary, flight critical products Operating history of over 130 years More than 22,100 employees in facilities throughout the world 3
  • 4. Goodrich – Key Market Leadership Positions 4
  • 5. Goodrich – Key Market Leadership Positions Aerospace Focus - Leadership Positions - Global Presence - Broad Systems Capability - Highly Engineered Products UTC SNECMA HON Goodrich 2004 Aerospace Sales $14.7B $8.9B $9.7B $4.7B Nacelles Engines Power Generation Sensors APUs Avionics Electronic Controls Flight Ctrl/Actuation Environmental Controls Landing Gear Lighting Wheel/Brakes Evacuation Systems Cargo Systems Space Systems Goodrich has the broadest portfolio of system leadership positions; with approximately 85% of sales in markets with #1 or #2 positions world-wide 5
  • 6. First Half 2005 Sales by Market Channel Total Sales $2,628M Total Military and Space Total Commercial OE Other 6% 28% 31% Boeing Commercial OE 8% Airbus Commercial OE 16% OE Military & Space, OE & Aftermarket 28% Regional, Business & Gen. AM Av. OE 7% Heavy A/C Large Commercial Aircraft Maint. Aftermarket 4% 24% Regional, Business & General Aviation Total Commercial Aftermarket Aftermarket 35% 7% 6 Balanced business mix – three major market channels, each with strong growth
  • 7. 2005 Market Channel Growth Expectations Average Growth 2004 Sales Mix Sales by Market Channel 1st 6 Mos. 2005 Expected 2005 vs. 1st Change from 6 Mos. 2004 2004 Military and Space – 30% 11% 5% - 6% OE and Aftermarket Boeing and Airbus – 23% 18% Approx. 20% OE Production Regional, Business & General 6% 22% >10% Aviation - OE Aftermarket – Large Commercial 32% 13% Approx. 10% and Regional, Business and GA Heavy Airframe Maintenance 3% 38% >25% Other 6% 15% Approx. 15% Goodrich Total Sales $4.7B 15% 10% - 12% 7
  • 8. Current vs. Prior Cycle Market Differences Market Growth rate for OE production smoother Better balance between Boeing and Airbus Significantly larger fleet to fuel aftermarket strength Airbus and regional jet fleet is older, more mature – increased aftermarket support 8
  • 9. Large Aircraft Deliveries Prior Cycle vs. Current Expectations 1,000 1,000 Boeing Airbus Boeing Airbus 900 900 800 GR R 800 CAG A % C 11 Aircraft Delivered 700 Aircraft Delivered 700 2% 3 600 600 500 500 400 400 300 300 200 200 100 100 0 0 2003 2004 2005 2006 1996 1997 1998 1999 Est.* Est.* Based on current estimates, this upcycle will have more measured OE growth 9 *Forecasts based on public information from manufacturers
  • 10. Current vs. Prior Cycle Company Specific Differences Goodrich Specific Significantly larger sales base • 1996 sales at $1.25B • 2005 estimated sales at $5.2 to $5.3B – more than a four-fold increase Significantly more diverse products • 1996 – focused on wheels and brakes, landing gear, sensors and evacuation systems • 2005 – all of the above plus aerostructures, engine controls, actuation and more Top line growth potential from new programs is much greater Currently at 28% military and space, versus 18% in 1996 (without Rohr) and 9% in 1997 (including Rohr) Much better positioned from a cost structure standpoint Higher proportion of “power-by-the-hour” contracts 10
  • 11. Airbus A380, A350 & Boeing 787 Awards A380 A350 787 Passenger Passenger Passenger Version Version Version Nacelles Engine Fan Case/Other Specialty Pending Aerostructures Products Landing Gear Pending Power Generation/Distribution Pending Sensors Pending Engine Controls Pending Fuel & Proximity Systems Pending Flight Control Actuation Pending Lighting Pending Wheels and Brakes Pending Evacuation Systems Pending Cargo Systems Pending Specialty Seating Pending Pending Significant market penetration on new programs 11 Note: Shaded areas indicate Goodrich positions
  • 12. Key New Programs Will Add Balanced Future Growth Military Commercial CF34-10 Nacelle A380 Program Joint Strike Fighter System C-5 Re-Engine $1.4 Billion+* $6 Billion+* $5 Billion+* $0.8 Billion+* 2005** 2005** 2006** 2004** 787 Dreamliner A350 Program Small Engine Controls $1.1 Billion+* $7 Billion+*** $6 Billion**** 2005** 2008** 2010** *Total estimated sales over life of program *** Total estimated sales through 2028 12 ** Year in which significant sales are expected to begin **** Total estimated sales over 20 years
  • 13. Expected Future Sales from Key New Programs (Dollars in Millions) $1,400 Annual Expected Future Sales for: • A380 Program $1,200 • 787 Program • A350 Program • CF34-10 Nacelle System CF34- $1,000 • JSF Program • C-5 Re-engine Program Re- • Small Engine Controls $800 $600 $400 $200 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 New program sales are expected to provide significant incremental sales growth 13
  • 14. Emerging Growth Opportunities HUMS: Health & Usage Management Systems Patented Software that can detect and identify subtle, abnormal vibrations and predict wear in rotating machinery Airborne Reconnaissance – DB110 “Turnkey” reconnaissance system for Border Patrol and Homeland Security Chemical/Biological Detection Systems Robust chemical and biological detection Nuclear system for Defense and Homeland Security Power applications and Weapon Laser Perimeter Awareness System s Petrochemical Military Bases Autonomous perimeter security 14
  • 15. Goodrich – Strategic Imperatives Top Quartile Aerospace Returns Conclusion Leverage the Operational Balanced Growth Enterprise Excellence Use portfolio mass and Manage investments at the Push aggressive Supply breadth to capture market portfolio level Chain Management and share Continuous Improvement Provide Enterprise Shared Win new program positions Services Drive breakthrough change in product and development Pursue Military Markets and Leverage SBU capabilities into costs using LPD and DFSS Government funding integrated, higher level opportunities systems Improve Enterprise manufacturing and Aftermarket products and Simplify customer interfaces – engineering efficiencies services expansion act as “One Company” 15
  • 16. Operational Excellence Lean Manufacturing - Actuation Systems A380 Prismatic Titanium Machining Cell Linkage and Flow Event Entire area moved during the week Pre-Event – Monday Morning Post Event – Friday Morning • Part travel reduced by 78% from 1,677m to 372m • Operator travel reduced by 85% from 2,442m to 372m • Lead time for Titanium Valve Block reduced by 86% from 72 days to 10 days • Work in progress reduced by 64% from 39 blocks to 14 blocks 3 Months Action in 1 Week 16
  • 17. Operational Excellence Lean Product Development Planning Execution Stable Production Macro Learning Standard Work Combination Sheet Standard Work Sheet FROM: Incoming PREPA RED BY: J. Smith PROCESS N AME: SC OPE OF Forming Center DATE: 3/16/00 talk to customer OPER ATION S TO: Finished 590 seconds Date:______________ Face & Burr 059 Process /Cell:__________________ Dept.:_________ Takt Time:_____________ 12/6/98 look for work 7- N/A Marty & Jim Group 1 Observer(s):____________________ Part:_________________ Machine No:___________________ Operator:___________ Fred M. count cost S pray & Dry Times Operation Times (seconds) Step Plan. Operation Op. 2 M an No. Mach Walk 100 200 300 400 500 600 700 800 Pic k part form tote, index 1 77quot; 10quot; to APLT and scribe. 1 • Pksx xnk dcm; s • Pksx xnk dcm;s • Pksx xnk dcm; s • knk sdcn Incoming Rack Remove APLT and face • knk sdcn • knk sdcn • [nq sndc hd hdn 2 163quot; 10quot; edges to scribe line. • [nq sndc hdhdn • [nq sndc hdhdn 2 3 • nq s msjkc mzm 1 • nq smsjkc mzm • nq smsjkc mzm • jsjk qw nq Mach ing ine Deburr holes. • j sjk qw nq • jsjk qw nq • ncx nokk qwddm make spares Form 3 84quot; 10quot; • ncx nokk qwddm build tools make parts Index part to APLT, 3 4 5quot; 102quot; clamp and final scribe. Remove APLT and 6 5 10quot; 50quot; final face edges. 6 4 • Pksx xnk dcm;s 5 • knk sdcn 6 4 Finished Final deburr holes. • Pksx xnk dcm;s 53quot; • [nq sndc hdhdn • knk sdcn Rack le g 5 • nq smsjkc mzm • Pksx xnk dcm;s Tab hin • [nq sndc hdhdn • j sjk qw nq Test Bench • knk sdcn Finis • nq smsjkc mzm 7 Place part and APLT in tote. • [nq sndc hdhdn 10quot; • jsjk qw nq Customer audit • nq smsjkc mzm 11 • ncx nokk qwddm • jsjk qw nq get materiel plan work • Pksx xnk dcm;s TAKT T IME SAFETY CAUTION ST ANDARD WORK I NPROCESS CYCLE TIME OPERATOR(S): • knk sdcn QUALI TY CHECK • [nq sndc hdhdn 5= • nq smsjkc mzm • j sjk qw nq MAN Total • Pksx xnk dcm;s • Pksx xnk dcm; s Totals 529quot; • ncx nokk qwddm 55quot; Wa iting: AUT O • knk sdcn • knk sdcn WALK • [nq sndc hdhdn • [nq sndc hdhdn WAITI G N 584quot; • nq smsjkc mzm • nq smsjkc mzm 13 9 MACRO Impact Customer LWW Part Assy. Assy. Cell Std. Pull Validate 3P VOC Learning Matrix Deliverables Prog. Plan Family Flow I Flow II Layout Work Systems SW New Program Execution – Lean LPD Model $ Product Development: $ Continue to Evolve Least Waste Way 787 and A350 Nacelle Program Execution Cum Non- Recurring Recurring Unit Cost Newest Training Ground for Lean PD Time Raises Performance Bar for Lean PD Rigorous and Relentless Application of Lean PD on All New Business Acquisition Projects All New Product Development Programs Implement… Improve… Standardize 17
  • 18. Operational Excellence Significant Cost Reduction The Challenge: Significant Cost Reduction Make / Buy / Offset Pre-Lean Traditional Cost Model Core Competency Model LWW Cost Model Goodrich One Source Make Technology Global Sourcing Offset Target Cost Buy Gap Closure Global Sourcing Offset Deploy per Site Strategy 18
  • 19. Operational Excellence Supply Chain Management Eastern Europe Russia Misc. LG support Titanium Forgings China and sheets Forgings/Machined Parts Comp. Fan Cowls Korea Castings Taiwan Machined Panels Singapore Machined Parts/Engine Mounts Indonesia Machined Parts JV Mexico Seals Malaysia Electronic Comps India Composite Panels MRO Engineering Transportation Service IT Services Components Goodrich Sourcing Efforts Growing in Low Cost Countries 19
  • 20. Goodrich – Culture Highest levels of integrity Entrepreneurial, fast moving and empowered Key functions recently aligned at enterprise level to leverage size, capabilities Experienced, stable management team Accountability Customer focus Technology leadership 20
  • 21. What Investors Should Expect from Goodrich in 2005 Key focus in 2005 – operational excellence and margin improvement Focused on the business “Blocking and Tackling” Cash flow Margin improvement Working capital management Cost reduction New product development Continue investing in new products and systems Transparency of financial results and disclosure 21