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goodrich BearStearns5_2_05


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goodrich BearStearns5_2_05

  1. 1. Marshall Larsen Chairman, President and CEO Bear Stearns 12th Annual Commercial Aerospace and Defense Conference May 2, 2005 New York City 1
  2. 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 April 28, 2005 First 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. 3. Agenda Company and market overview Organic growth Key programs Emerging opportunities in the Defense and Space markets 2005 focus – operational excellence 2004 Financial results and 2005 outlook 3
  4. 4. 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 21,800 employees in facilities throughout the world 4
  5. 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. 6. First Quarter 2005 Sales by Market Channel Total Sales $1,282M Total Military and Space Other Total Commercial OE 6% 27% 31% Boeing Commercial OE 8% Airbus Commercial OE 16% Military & OE Space, OE & Aftermarket 27% Regional, Business & Gen. AM Av. OE 7% Heavy A/C Maint. Large Commercial Aircraft 4% Aftermarket Regional, Business & 25% General Aviation Total Commercial Aftermarket Aftermarket 7% 36% 6 Balanced business mix – three major market channels, each with 1Q05 growth
  7. 7. Expectations for Goodrich 2005 Sales Average Growth 2004 Sales Sales by Market Channel Mix 1st Quarter 2005 Expected 2005 vs. 1st Change from Quarter 2004 2004 Military and Space – 30% 5% 5% - 6% OE and Aftermarket Boeing and Airbus – 23% 6% >15% OE Production Regional, Business & General 6% 26% >10% Aviation - OE Aftermarket – Large Commercial 32% 11% Approx. 6% and Regional, Business and GA Heavy Airframe Maintenance 3% 54% >10% Other 6% 14% Approx. 10% Goodrich Total Sales $4.7B 10% 8% - 10% 7
  8. 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. 9. Large Aircraft Deliveries Prior Cycle vs. Current Expectations 1,000 1,000 Boeing Airbus Boeing Airbus 900 900 GR 800 800 R A % CAG C 10 Aircraft Delivered 700 Aircraft Delivered 700 3 2% 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. 10. Current vs. Prior Cycle Company Specific Differences Goodrich Specific Significantly larger sales base • 1996 sales at $1.25B • 2005 estimated sales at $5.1 to $5.2B – 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 27% 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. 11. Agenda Company and market overview Organic growth Key programs Emerging opportunities in the Defense and Space markets 2005 focus – operational excellence 2004 Financial results and 2005 outlook 11
  12. 12. Airbus A380 & Boeing 787 Awards A380 787 Passenger Version Passenger Version Nacelles Engine Fan Case/Other Specialty Aerostructures Products Landing Gear Power Generation/Distribution Sensors Engine Controls Fuel & Proximity Systems Flight Control Actuation Lighting Wheels and Brakes Evacuation Systems Cargo Systems Specialty Seating Pending Significant market penetration on new programs 12 Note: Shaded areas indicate Goodrich positions
  13. 13. Key New Programs Will Add Balanced Future Growth Commercial Military CF34-10 Nacelle A380 Program System Joint Strike Fighter C-5 Re-Engine $6 Billion+* $1.4 Billion+* $5 Billion+* $0.8 Billion+* 2005** 2005** 2006** 2004** 787 Dreamliner A350 Program Small Engine Controls $7 Billion+*** $6 Billion**** $1.1 Billion+* 2008** 2010** 2005** *Total estimated sales over life of program *** Total estimated sales through 2028 13 ** Year in which significant sales are expected to begin **** Total estimated sales over 20 years
  14. 14. 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 14
  15. 15. Agenda Company and market overview Organic growth Key programs Emerging opportunities in the Defense and Space markets 2005 focus – operational excellence 2004 Financial results and 2005 outlook 15
  16. 16. Emerging Growth Opportunities HUMS: Health & Usage Management Systems Patented Software that can detect and identify subtle, abnormal vibrations and predict wear in rotating machinery “Listens” for Subtle, Abnormal “Sounds” (Vibrations) Early Detection of “Unhealthy” Conditions Directs Maintenance in Plain, Simple Language No “Experts” Required Saves – TIME, Saves – MONEY, Saves – LIVES Safer Aircraft, Less Maintenance Time Revenue Potential > $300M 16 Pursue Civil Fleet and Military Upgrades
  17. 17. Emerging Growth Opportunities Airborne Reconnaissance – DB110 “Turnkey” Reconnaissance System For Border Patrol And Homeland Security Goodrich Provides: Airborne pods • DB-110 EO/IR camera • Data Link • Recorder Ground stations Training Integrated logistics support Current contracts with UK and Poland Proven capability in a high risk environment DB-110 used extensively in Operation Iraqi Freedom 17
  18. 18. Emerging Growth Opportunities Chemical/Biological Detection Systems Market Needs: Develop a robust chemical and biological detection system for Defense and Homeland Security applications. Approach: Apply Goodrich’s Millimeter Wave technology to address detection of chemical and biological agents. Utilize expertise in the areas of threat warning, signal extraction, and systems design to solve difficult problems. Secure Funding for development and production from government agencies Revenue Potential: $29M Agency and Program Contract Value HSARPA: Auto Rapid Facility Chemical Agent Monitor (ARFCAM) $8M awarded Rapid Automated Biological Identification System (RABIS) $3M awarded ARO (Army Research Organization) $3M appropriated DTRA (Defense Threat Reduction Agency) $4M pending 18
  19. 19. Emerging Growth Opportunities Laser Perimeter Awareness System Homeland Security Protect High Value TERRORISM Assets and Global Cooperation Infrastructure What needs Protection: Nuclear Power Generation Power and Perimeter Security Military Bases Weapons Explosive Detection Container Sensing Oil Refineries Market $1.5B Dams Airports 5 Year Gov’t Offices Petrochemical LPAS Revenue Potential Embassies Military Bases >$150M Borders *Morgan Keegan & Co. Ships / Ports LPAS fills market need for autonomous perimeter security Positioned to fill gap between guard/fence/camera solutions and more expensive radar/infra-red schemes 19
  20. 20. Agenda Company and market overview Organic growth Key programs Emerging opportunities in the Defense and Space markets 2005 focus – operational excellence 2004 Financial results and 2005 outlook 20
  21. 21. 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 Provide Enterprise Shared Continuous Improvement Win new program positions Services Drive breakthrough change Pursue Military Markets and Leverage SBU capabilities into in product and development Government funding integrated, higher level costs using LPD and DFSS opportunities systems Improve Enterprise Aftermarket products and Simplify customer interfaces – manufacturing and services expansion act as “One Company” engineering efficiencies 21
  22. 22. 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 22 3 Months Action in 1 Week
  23. 23. Operational Excellence Lean Product Development Planning Execution Stable Production Macro Learning Standard Work Sheet Standard Work Combination Sheet SCOPE OF FR OM: Incoming PROCES S NAME: PR EPARED BY: J. Smith talk to customer OPERATIONS TO: Finished Forming Center DATE: 3/16/00 590 seconds Date:______________ 12/6/98 Process /Cell:__________________ Dept.:_________ Face & Burr 059 Takt Time:_____________ look for work 7- Marty & Jim Observer(s):____________________ Group 1 Part:_________________ Fred M. Operator:___________ N/A Machine No:___________________ count cost Spray & Dry Times Step Operation Plan. Op. Operation Times (seconds) 2 No. Man Mach Walk 100 200 300 400 500 600 700 800 Pick part form tote, index 1 77quot; 10quot; • Pksx xnk dcm; s 1 to APLT and scribe. • Pksx xnk dcm; s • Pksx xnk dcm; s • knk sdcn Incoming Rack • knk sdcn • knk sdcn • [nq sndc hdhdn Remove APLT and face • [nq sndc hdhdn • [nq sndc hd hdn 2 edges to scribe line. 163quot; 10quot; 3 • nq s msjkc mzm • nq smsjkc mzm • nq smsjkc mzm • jsjk qw nq 2 1 Mach ng • j sj k qw nq • jsjk qw nq ine make spares • ncx nokk qwddm Deburr holes. Formi build tools • ncx nokk qwddm 3 84quot; 10quot; make parts 3 4 Index part to APLT, 5quot; 102quot; clamp and final scribe. 6 5 Rem APLT and ove 10quot; 6 50quot; final face edges. • Pksx xnk dcm; s • knk sdcn 4 5 6 4 • Pksx xnk dcm;s Finished Final deburr holes. 53quot; • [nq sndc hdhdn • knk sdcn Rack Tab hing • [nq sndc hdhdn • Pksx xnk dcm; s • nq smsjkc mzm 5 • knk sdcn • j sjk qw nq Test Bench le Finis • nq s msjkc mzm • jsjk qw nq • [nq sndc hdhdn 7 Place part and APLT in tote. 10quot; • nq s msjkc mzm Customer audit 11 • ncx nokk qwddm • jsjk qw nq get materiel plan work • Pksx xnk dcm; s • knk sdcn QUALITY CHECK SAFETY CAUTION STANDARD WORK INPROCESS TAKT TI ME CYCLE TIME OPE RATOR(S): • [nq sndc hdhdn • nq smsjkc mzm 5= • j sjk qw nq Tot al MAN • Pksx xnk dcm;s • Pksx xnk dcm; s • ncx nokk qwddm Totals 529quot; 55quot; Waiting: AUTO • knk sdcn • knk sdcn WAL K • [nq sndc hdhdn • [nq sndc hd hdn 584quot; WAITI G N • nq smsj kc mzm • nq smsjkc mzm 13 9 MACRO Impact Customer LWW Part Assy. Assy. Cell Std. Pull Validate Learning VOC Matrix Deliverables 3P 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 23
  24. 24. Operational Excellence Significant Cost Reduction The Challenge: Significant Cost Reduction Pre-Lean Traditional Cost Model Make / Buy / Offset LWW Cost Model Core Competency Model Goodrich One Source Technology Make Global Sourcing Offset Target Cost Buy Gap Closure Global Sourcing Offset Deploy per Site Strategy 24
  25. 25. 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 25
  26. 26. A380 Actuation System Current Status Most complex and largest commercial flight control system Joint development and production by multiple Goodrich business units (Actuation Systems, Engine Control Systems, Fuel and Utility Systems, and Power Systems) Combines conventional and electro-hydraulic actuation Lighter weight, improved reliability, and lower total cost Redesign/retrofit program on schedule Redesigned motor drive electronics currently in test phase Expect approved product mid-year Expect retrofit effort to be substantially completed in 2005 Evaluating potential claim against Northrop Grumman 26
  27. 27. Agenda Company and market overview Organic growth Key programs Emerging opportunities in the Defense and Space markets 2005 focus – operational excellence First Quarter 2005 Financial results and Full year 2005 outlook 27
  28. 28. First Quarter 2005 – Financial Summary (Dollars in Millions, excluding 1st Qtr 1st Qtr EPS) 2005 2004 Change Sales $1,282 $1,162 10% Segment operating income $152 $118 28% - % of Sales 11.8% 10.2% +1.6% Income - Continuing Operations $58 $31 88% - Net Income $58 $47 23% Diluted EPS - Continuing Operations $0.47 $0.26 81% - Net Income $0.47 $0.39 21% 28
  29. 29. 2005 Outlook P&L Summary ($M) Actual Estimate 2004 2005 B/(W) Sales $4.725B $5.1-5.2B +8 - 10% Segment Income $493 $585-615 +19 - 25% Margin % 10.4% 11.5-11.8% +1.1 - 1.4% Net Income - Continuing Operations $156 $206-225 +32 - 44% - Reported $172 $220-239 +28 - 39% EPS (Diluted) - Continuing Operations $1.30 $1.69-1.84 +30 - 42% - Reported $1.43 $1.80-1.95 +26 - 36% Shares Outstanding 120.3M ~ 122.5M ~ 2% Note: The current earnings and cash flow from operations outlook for 2005 does not include resolution of the 29 previously disclosed Rohr and Coltec tax litigation or divestitures other than the JcAIR Test Systems business.
  30. 30. Summary 30
  31. 31. 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 31
  32. 32. What Investors Should Expect from Goodrich in 2005 Key focus in 2005 – operational excellence and margin improvement Complete redesign effort, and substantially complete the retrofit, for A380 actuators 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 Continue to reduce leverage Target up to $200 million debt retirement Transparency of financial results and disclosure 32