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    goodrich  MasterJefferiesConfFinal goodrich MasterJefferiesConfFinal Presentation Transcript

    • Marshall Larsen Chairman, President and CEO Jefferies Quarterdeck Aerospace Defense and IT Services Conference December 3, 2003
    • Forward Looking Statements Certain statements made in the following presentations 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, the extent to which the Company is successful in integrating the Aeronautical Systems businesses and achieving operating synergies; the nature, and extent and timing of the Company’s proposed restructuring and consolidation actions and the extent to which the Company is able to achieve savings from these actions, as well as other factors discussed in the Company's filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. The Company cautions you not to place undue reliance on the forward-looking statements contained in these presentations, 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.
    • 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 with recent repositioning as focused aerospace supplier More than 20,000 employees in facilities throughout the world
    • Goodrich – A Global Franchise
    • Goodrich Today Aerospace Focus - Leadership Positions - Global Presence - Broad Systems Capability - Highly Engineered Products Goodrich Airframe Engine Electronics John Grisik Jack Carmola Cindy Egnotovich Landing Gear Aerostructures Sensors Wheels & Brakes Turbine Fuel Technologies Fuel and Utility Actuation Engine Controls Optical and Space Customer Services Turbo Machinery Products Lighting Airframe Technical Service Cargo Management Systems De-Icing EPP Power Interior Products Propulsion Products
    • Goodrich Today 1st Nine Months 2003 Sales - $3,253 M Aerospace Focus - Leadership Positions - Global Presence - Broad Systems Capability - Highly Engineered Products Heavy Airframe Boeing Maintenance Commercial OE IGT & 3% 9% Other 6% Airbus Commercial OE 15% Military & OE Space, OE & Aftermarket 30% AM OE Large Commercial Aircraft AM Aftermarket Regional, Business & 25% General Aviation OE & Aftermarket 12% Goodrich participates in all major aerospace market segments
    • Sales by Market Channel – 1999 – 2003E (Percentage of Total) 100% Other Airbus OE 80% Boeing OE 60% Regional, Business & G.A. 40% Large Cmcl. Aircraft Aftermarket 20% Military and Space 0% 1999 2000 2001 2002 2003E Significantly decreased dependence on Commercial OE
    • Goodrich Today Aerospace Focus - Leadership Positions - Global Presence - Broad Systems Capability - Highly Engineered Products UTC SNECMA HON Goodrich Aerospace Sales $13B $7B $10B $4B Nacelles #1 Engines Power Generation #2 Sensors #1 APUs Avionics Electronic Controls #1 Flight Ctrl/Actuation #1 Environmental Controls Landing Gear #1 Lighting #2 Wheel/Brakes #2 Evacuation Systems #1 Cargo Systems #1 Space Systems Goodrich has the broadest portfolio of system leadership positions
    • Agenda Market Summary Aerospace Strategy 2003 and 2004 Outlook
    • Commercial OE Airbus 700 Boeing 600 Balanced duopoly Airplane Deliveries 500 Airbus gaining on Boeing 400 300 Market flat near term 200 100 Recovery begins in 0 2005-2006 1992 1994 1996 1998 2000 2002 2004 Est. Active Commercial Fleet 2012 Active Commercial Fleet 2003 Airbus Airbus Boeing 3,296 Boeing 6,263 12,160 11,436 Source: Airline Monitor
    • Commercial OE - Airbus Fleet Aging 8,500 8,000 7,500 CAGR of 7,000 14.2% for 6,500 aged 5 yrs or Number of Planes 6,000 greater 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 aged less than 5 yrs aged 5 yrs or greater Source: GR Estimates Airbus fleet aging drives aftermarket growth for suppliers
    • Regional Jets Regional Jet Deliveries Bombardier Embraer Airlines eliminating 300 scope clauses 200 Encroaching on Large Commercial model 100 sizes 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Embraer and Large RJ’s Continue to Gain Share (19-100 Seat A/C) Bombardier primary (Deliveries in $ Billions) $8 suppliers $6 New Chinese and $4 Russian market entrants $2 $0 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Source: GR Estimates Props 30/50-seat Jets 60/100-seat Jets
    • Regional Jets Fleet Aging 6,000 CAGR of 28.2% for 5,000 Number of Planes aged 5 yrs or greater 4,000 3,000 2,000 1,000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201 201 2015 3 4 aged less than 5 yrs aged 5 yrs or greater RJ fleet aging drives aftermarket growth for suppliers Source: GR Estimates
    • Aftermarket ASM, RPM Forecast (yr/yr) - Airline Monitor, GR Est. Driven by ASMs, fleet size & RPM ASM 10% GDP 9% 8% 7% 6% 2004 expected to recover 5% slightly 4% 3% 2% 1% Airline inventory management 0% 2003 2004 2005 2006 2007 2008 2003 Global MRO Market ($B) Above average growth rates Airframe Engines Components Line Maintenenace possible over next several 23% 29% years 19% 29% Source: Back Aviation CAGR (’03-’08) = 4.2% Uncertainty remains in near-term aftermarket forecasts
    • Military & Space US Defense Spending ($B) Market is global Procurement & RDT&E Intelligence New fighters driving 200 growth 160 Intelligence, Transports 120 and Rotorcraft Markets growing 80 Transformational spending 40 underway 0 2002 2003 2004 2005 2006 2007 2008 Growth opportunity Source: DoD Military Transports The World Rotorcraft Market World Fighter Market (Units Delivered) (Market Value in '03$ Billions) (Units Delivered) (Market Value in '03$ Billions) 80 6 (Units Delivered) (Market Value in '03$ Bns) 500 1,000 5 8 60 15 400 800 4 6 40 3 600 300 10 4 2 400 200 20 5 1 2 200 100 0 0 Source: Teal Group '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 0 0 0 0 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Source: Teal Group Units Value Source: Teal Group Source: Teal Group Units Value Units Value
    • Market Summary Commercial aerospace OE market is at bottom but recovery projected in 2005-2006 Airbus gaining market parity with Boeing Low cost carriers winning market share Commercial aftermarket expected to recover slightly in 2004, higher growth in 2005 and beyond Stable regional jet deliveries; rapidly growing aftermarket Military market continues to present growth opportunities Significant opportunity for growth over the cycle
    • Agenda Market Summary Aerospace Strategy 2003 and 2004 Outlook
    • Building Goodrich Aerospace Build Platforms Achieve Critical Mass (Sales=$4 B) Innovator Grow • Differentiate (Sales $1-2 B) • Commercialize technology • Export technology • Exploit technology Sales Consolidator Niche Player • Opportunistic deals (Sales= $200 M) • Strategic bolt-ons • Acquirer / survivor • New platforms (space) • Assemble system platforms • Acquire technology Operational Excellence • Attractive niche positions • Innovation training • Alliances • Aerospace brand • Lean • Customer relationship management • Efficiency • Integration of acquisitions • E-commerce/SCM • Quality • Exploit synergies • Talent • Culture 1985 1990 1995 2000 Goodrich has grown from a niche player to an industry leader
    • Goodrich Strategic Imperatives Balanced Growth Faster than the overall market Win key positions on new aircraft (e.g. 7E7) Migrate commercial products/technologies to military applications Penetrate adjacent markets Leverage the Enterprise Resource allocation Technology/Innovation Enterprise-wide initiatives Customer alignment/focus Operational Excellence Integrate Aeronautical Systems Lean manufacturing/Six Sigma Make/Buy analysis Successful implementation will enable Goodrich to compete/win in all business environments
    • Enterprise-wide Initiatives Supply Chain Management Information Technology Human Resources Continuous Process Improvement Lean Manufacturing Six Sigma New Product Design/Build Processes Incentive Compensation Alignment Enterprise-wide initiatives significantly improve alignment across segments
    • Goodrich Strategic Initiatives Successful implementation is expected to result in: Continued cost competitiveness Organic Growth above market trends Significant improvement in segment operating margins Continued strong cash flow Sustainable value creation
    • New Programs Will Accelerate Future Growth Military Commercial Joint Strike CF34-10 Nacelle Fighter A380 Program System C-5 Re-Engine $1.4 Billion+* $6 Billion+* $5 Billion+* $0.8 Billion+* 2005** 2005** 2006** 2004** Cockpit Door Video Universal Control Program Surveillance System $0.1 Billion+* $0.5 Billion+* 2003** *Total estimated sales over life of program 2005** ** Year in which significant sales are expected to begin
    • Expected Future Sales from New Programs Dollars in Millions $500 Annual Expected Future Sales for: $450 • A380 Program • CF34-10 Nacelle System $400 • JSF Program • C-5 Re-engine Program $350 • Cockpit Door Video Surveillance System • Universal Control Program $300 $250 $200 $150 $100 $50 $0 2002 2003 2004 2005 2006 2007 2008 New program sales are incremental to sales growth from existing in-production platform positions
    • Agenda Market Summary Aerospace Strategy 2003 and 2004 Outlook
    • 2003 Financial Outlook Actual 2002 2003 Outlook Sales $3.8B $4.3 - $4.4B (around mid-point) Diluted earnings (loss) per share Continuing operations $1.55 $0.33 - $0.43 Discontinued operations ($0.07) $0.52 Cumulative effect of change in accounting ($0.34) -- Diluted E.P.S. – Net Income $1.14 $0.85 - $0.95 Cash flow from Operations $524M > $450M Including: Cash outflow for facility closures and headcount reductions ($52M) ($50 - $60M) Capital Expenditures ($106M) ($120 - $140M)
    • 2004 Outlook Assumptions Recovering Recovering Global Airline Economy Profitability GR No New Global ASM Macro Market Growth 3-5% Disruption Assumptions (Terrorism, SARS) Stable/Small Increase in 7E7 Launch Interest Rates Late 03/Early 04
    • 2004 Sales & Margin Expectations Margin Considerations Sales Growth Expectations Goodrich Restructuring benefits 2003 YTD Market 2004 Market Growth Improving AS results Sales Mix 24% Boeing/Airbus OE Slight Improving mix with decline Aftermarket growth 5% Regional, Flat Productivity initiatives Business & GA OE 32% Aftermarket 3-5% A380 development costs peak (Comm & Regnl) in 2003; 7E7 offset?? Continued pricing pressure 30% Military & Space ~ 10% (Total) (Similar to Pension costs flat vs. 2003 2003) 9% IGT/Other Flat Expect Margin Expansion Expect Low Single Digit Beyond Sales Growth Growth for GR
    • 2004 Summary Low single digit revenue growth Margin expansion $20-25 Million headwind in selected areas Capital expenditures increase over 2003 (new programs, productivity, cost reduction) Cash flow from operations less capital expenditures should exceed net income Several unknowns cloud outlook Expect to Issue Formal Guidance With Year End Earnings Release
    • Near Term Risks & Opportunities GR Positioning Risks Capacity downsizing near completion Slower Commercial Market Recovery Long term cost reduction focus Event risk Enterprise initiatives Portfolio balance Large cash balances Liquidity/Capital Markets New revolver No current debt maturities Positive net cash flow last 10 Qtrs Organizational transition complete AS Execution/Integration Major headcount reductions complete Most SBU’s profitable Strong purchase contract A380 peaks in 2003/limited technical risk New Program Investments 7E7 investment/timing uncertain Manageable Risks
    • Near Term Risks & Opportunities GR Positioning Opportunities Capacity in place Faster Commercial Recovery Substantial upside leverage Airline/OE outsourcing Working capital reductions Higher Cash Generation Further portfolio pruning Accelerate debt retirement Supply chain management Enterprise Initiative Savings ($2B annual spend) Shared services
    • Summary - Goodrich Attributes and Actions Top tier aerospace supplier Diversified, balanced business mix Proprietary, flight critical products Strong cash flow Taking aggressive actions to align cost structure with current demand Experience managing operations in challenging markets Focused on Aeronautical Systems integration and turnaround Committed to maintaining a conservative financial profile and investment grade ratings All future reporting and outlook to be only on a GAAP basis Focused on what we can control
    • What Investors Should Expect from Goodrich Continued commitment to integrity Transparency of financial results and disclosure No significant acquisitions Reduce leverage to target levels Focused on the business • “Blocking and Tackling” - Cash flow - Margin improvement - Aeronautical Systems integration - Working capital management • New product development - Continue investing in new products and systems Accountable to all stakeholders
    • Questions and Answers Jefferies Quarterdeck Aerospace Defense and IT Services Conference December 3, 2003