goodrich CSFBMasterBW5172004

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goodrich CSFBMasterBW5172004

  1. 1. Marshall Larsen Chairman, President and CEO CSFB/Aviation Week Aerospace & Defense Finance Conference May 17, 2004 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: the extent to which the Company is successful in integrating Aeronautical Systems in a manner and a timeframe that achieves expected cost synergies and operating synergies; demand for and market acceptance of new and existing products, such as the Airbus A380, the Joint Strike Fighter, the Boeing 7E7, the Embraer 190 and the Boeing 717; and 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, 2003. 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. 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 3
  4. 4. Goodrich – A Global Franchise 4
  5. 5. 1st Quarter 2004 Sales by Market Channel Total Sales $1,162M Total Military and Space Total Commercial OE Boeing 29% 31% Other Commercial OE 5% 9% Airbus Commercial OE 16% OE Military & Space, OE & Aftermarket 29% Regional, Business & Gen. AM Av. OE 6% Large Commercial Aircraft Aftermarket Heavy A/C 26% Maint. 3% Regional, Business & Total Commercial Aftermarket General Aviation 35% Aftermarket 6% Balanced business mix – three major market areas each represent approximately one-third of sales 5
  6. 6. Sales by Market Channel – 1999 – 2004E (Percentage of Total) 100% Other 90% 80% Airbus OE 70% Boeing OE Regional, Business 60% & G.A. 50% Large Commercial 40% Aircraft 30% Aftermarket 20% Military and 10% Space 0% 1999 2000 2001 2002 2003 2004E Significantly decreased dependence on Commercial OE 6
  7. 7. Goodrich Today Aerospace Focus - Leadership Positions - Global Presence - Broad Systems Capability - Highly Engineered Products UTC SNECMA HON Goodrich 2003 Aerospace Sales $13.2B $7B $8.8B $4.4B 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 7
  8. 8. Agenda Market Summary 1st Quarter 2004 Results and 2004 Outlook Goodrich Key Initiatives 8
  9. 9. 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 9
  10. 10. 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 10
  11. 11. Regional Jets Regional Jet Deliveries Bombardier RJ Embraer RJ 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 $0 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Source: GR Estimates Props 30/50-seat Jets 60/100-seat Jets 11
  12. 12. Regional Jets Fleet Aging 6,000 CAGR of 28.2% for 5,000 Number of Planes aged 5 yrs or greater 4,000 3,000 2,000 1,000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201 201 2015 3 4 aged less than 5 yrs aged 5 yrs or greater RJ fleet aging drives aftermarket growth for suppliers Source: GR Estimates 12
  13. 13. Aftermarket World ASM and RPM Forecast (yr/yr) - Airline Monitor, GR Estimates Driven by ASMs, fleet size & GDP RPM ASM 10% 8% 2004 expected to recover 6% 3 – 5 percent – towards upper 4% end of range 2% 0% Airline inventory management -2% 2003P 2004 2005 2006 2007 2008 2009 2003 Global MRO Market ($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% Recent aftermarket trends are very encouraging 13
  14. 14. Military & Space US Defense Spending ($B) Market is global Procurement & RDT&E Intelligence New fighters driving 200 growth 160 Intelligence, Transports 120 and Rotorcraft Markets growing 80 FY05 Defense budget 40 supports expectations 0 2002 2003 2004 2005 2006 2007 2008 Growth opportunity Source: DoD Military Transports The World Rotorcraft Market World Fighter Market (Units Delivered) (Market Value in '03$ 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 14
  15. 15. 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** 7E7 Dreamliner Universal Control Program $4+ Billion+*** $0.5 Billion+* 2007** 2005** *Total estimated sales over life of program ** Year in which significant sales are expected to begin *** Total estimated sales over initial contract period 15
  16. 16. Expected Future Sales from New Programs (Dollars in Millions) $600 $500 $400 $300 $200 $100 $0 2002 2003 2004 2005 2006 2007 2008 New program sales are incremental to sales growth from existing in-production platform positions 16
  17. 17. Additional New Awards Add Long-term Stability and Potential Growth Commercial Military, Homeland Defense Airborne Lighting System: Reconnaissance System: Chinese Regional Jet Electric Braking System: Littoral Combat Ship: Poland Ministry of Global Hawk Composite Structures National Defense Wheel and Brake Systems: Russian Regional Jet, Laser Altimeter – Boeing Rescue Hoist – Eurocopter, Cessna Citation Mustang X-45 Unmanned Vehicle V-22, Sikorsky S-92 Cargo Systems: Laser Perimeter Awareness Nacelle System – Japan Defense New and Retrofit Applications System - Homeland Defense Agency C-X Cargo Aircraft 17
  18. 18. 7E7 Dreamliner – Participation Update Two significant wins Worth slightly more than $4B over initial contract period Fuel Quantity Indicating System/Fuel Management Software Nacelles and thrust reversers – all engine options Fan Cowl Reverser Exhaust Inlet Cowl Goodrich bidding multiple other products and systems yet to be awarded Current 7E7 OE content could increase significantly 18
  19. 19. Market Summary Commercial aerospace OE market is at bottom but recovery projected in 2005-2006 Airbus has achieved market parity with Boeing Low cost carriers winning market share Commercial aftermarket expected to recover close to 5 percent in 2004, higher growth in 2005 and beyond Increasing regional jet deliveries; growing aftermarket Military market continues to present growth opportunities Significant opportunity for growth over the cycle 19
  20. 20. Agenda Market Summary 1st Quarter 2004 Results and 2004 Outlook Goodrich Key Initiatives 20
  21. 21. Recent Significant Developments Solid first quarter results from operations Significant new program wins expected to fuel balanced growth 7E7 Dreamliner – nacelles and thrust reversers; Fuel Quantity Indicating System and Fuel Management Software A380 – first body and wing landing gears delivered Airline component maintenance contract with Continental Japanese C-X military cargo aircraft – selected to supply nacelle system Homeland Security – Laser Perimeter Awareness System Commercial aftermarket and military and space sales continue to improve 2004 Outlook – Diluted EPS at upper end of $1.20 - $1.35 range, sales expectations increased Great start to 2004 21
  22. 22. Sales Trends Sales ($ in Millions) $1,200 $1,000 $800 $600 $1,162 $1,157 $1,130 $1,094 $1,095 $1,064 $400 $200 $0 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Recent sequential quarterly sales increases Note: All sales restated to reflect discontinued operations 22
  23. 23. First Quarter 2004 – Financial Summary 1st Qtr 1st Qtr (Dollars in Millions, excluding EPS) 2004 2003 Change Sales $1,162 $1,094 $68 Segment operating income $118 $19 $99 - % of Sales 10.2% 1.7% 8.5% Income (Loss) - Continuing operations $30 ($33) $63 - Net income $46 $29 $17 Diluted EPS - Continuing operations $0.25 ($0.28) $0.53 - Net income $0.38 $0.25 $0.13 23
  24. 24. First Quarter 2004 Financial Change Analysis (Dollars in Millions) After-tax Income from Diluted Item Sales Continuing EPS Operations First Quarter 2003 – Income from Continuing $1,094 ($33) ($0.28) Operations Increased overall volume, change in share $40 $14 $0.10 count, other Foreign Exchange Sales and Income Impacts $28 ($6) ($0.05) Stock-based compensation expensing ($3) ($0.02) P & L Headwind (Incentive Comp, Liability ($6) ($0.05) Insurance, Tax Litigation, Retiree Medical) Lower facility closure and headcount reduction and asset impairment charges, $63 $0.54 2003 gain on sale of Noveon PIK notes Lower pension expense $1 $0.01 First Quarter 2004 – Income from Continuing $1,162 $30 $0.25 Operations Operating performance clouded by FX, Other Income, G&A 24
  25. 25. Debt Retirement Progress Since Acquisition of Aeronautical Systems Total $ in Millions Debt $3,500 + Total QUIPS Debt $3,039 + Total Total Total $3,000 Total QUIPS Debt Debt Cash $146 Debt Debt $2,638 + + + (includes Total QUIPS QUIPS QUIPS QUIPS) $2,500 Cash $150 Debt $2,261 $2,262 $2,275 $2,215 $2,153 Net Debt Cash $186 Cash $326 Cash $268 $2,000 + QUIPS Cash $378 Cash $330 $2,893 Net Debt + QUIPS $1,500 Net Debt $2,488 Net Debt Net Debt + QUIPS Net Debt + QUIPS Net Debt + QUIPS $2,075 (includes $1,994 $1,824 $1,949 $1,000 QUIPS) $1,837 $500 $0 10/1/02 12/31/02 3/31/2003 6/30/2003 9/30/2003 12/31/2003 3/31/2004 Proforma Total debt + QUIPS reduced $886M or 29%; Net debt + QUIPS reduced $1,069M or 37% Note: See page 32 for definitions of Total Debt and Net Debt and a detailed calculation of these measures as of the dates indicated. 25
  26. 26. 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 7E7 Launch, Increase in Goodrich awards Interest Rates and timing Positive trends emerging 26
  27. 27. Expectations for Goodrich 2004 Sales Average Expected Growth 2003 Sales Sales by Market Channel 2003 Actual 2004 Expected Mix Change* Change Military and Space – 30% 10% 10% - 12% OE and Aftermarket Boeing and Airbus – 24% (10%) Flat OE Production Regional, Business & General 5% (18%) 8% - 10% Aviation - OE Aftermarket – Large Commercial 3% - 5% 32% (3%) and Regional, Business and GA (Upper end of range) Heavy Airframe Maintenance 3% (27%) Approx. Flat Other 6% (13%) Approx. Flat Goodrich Total Sales $4.4B (4%) $4.65 – 4.70B * Compared to 2002 pro-forma sales, including full year contribution of Aeronautical Systems, excluding discontinued operations. $3,809M as reported, plus $756M for Aeronautical Systems during first 9 months of 2002. 27
  28. 28. Agenda Market Summary 1st Quarter 2004 Results and 2004 Outlook Goodrich Key Initiatives 28
  29. 29. 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 29
  30. 30. What Investors Should Expect from Goodrich Continued commitment to integrity No significant acquisitions 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 Reduce leverage to target levels Transparency of financial results and disclosure Accountable to all stakeholders 30
  31. 31. Questions and Answers 31
  32. 32. Supplemental Information Goodrich Corporation Reconciliation of Total Debt and Net Debt to GAAP Financial Measures Adjustments Pro-forma 9/30/2002 to get to Pro-forma* 10/1/2002 12/31/2002 3/31/2003 6/30/2003 9/30/2003 12/31/2003 3/31/2004 Pre-positioned Elements of Total Debt Cash Bridge Loan Short-term bank debt $ 284.0 $ (200.0) $ 1,500.0 $ 1,584.0 $ 379.2 $ - $ - $ - $ 2.7 $ 2.7 Current maturities of long-term debt and capital lease obligations $ 3.5 $ - $ - $ 3.5 $ 3.9 $ 3.6 $ 3.5 $ 4.3 $ 75.6 *** $ 9.6 Long-term debt and capital lease obligations $ 1,326.5 $ - $ - $ 1,326.5 $ 2,129.0 $ 2,132.1 $ 2,133.2 $ 2,144.1 $ 2,136.6 $ 2,140.7 Total Debt $ 1,614.0 $ (200.0) $ 1,500.0 $ 2,914.0 $ 2,512.1 $ 2,135.7 $ 2,136.7 $ 2,148.4 $ 2,214.9 $ 2,153.0 Adjustments: Manditory redeemable preferred securities of trust (QUIPS) - current $ - $ - $ - $ - $ - $ - $ - $ 63.0 $ - $ - Manditory redeemable preferred securities of trust (QUIPS) $ 125.3 $ - $ - $ 125.3 $ 125.4 $ 125.5 $ 125.6 $ 63.5 $ - *** $ - Total debt + QUIPS $ 1,739.3 $ (200.0) $ 1,500.0 $ 3,039.3 $ 2,637.5 $ 2,261.2 $ 2,262.3 $ 2,274.9 $ 2,214.9 $ 2,153.0 Cash and cash equivalents $ 346.3 $ (200.0) $ - $ 146.3 $ 149.9 $ 185.8 $ 267.8 $ 325.9 $ 378.4 $ 329.5 Net Debt + QUIPS** $ 1,393.0 $ - $ 1,500.0 $ 2,893.0 $ 2,487.6 $ 2,075.4 $ 1,994.5 $ 1,949.0 $ 1,836.5 $ 1,823.5 * In late September 2002, the company utilized short-term debt of $200 million to preposition certain funds necessary for the acquisition of TRW Aeronautical Systems. This short-term debt was repaid on October 1, 2002 with a portion of the proceeds from the $1.5 billion bridge loan secured to finance the entire purchase. Accordingly, on October 1, 2002, cash was reduced by $200 million. **Total Debt (defined as short-term debt plus current maturities of long-term debt and capital lease obligations plus long-term debt and capital lease obligations) and Net Debt (defined as Total Debt minus cash and cash equivalents) are non-GAAP financial measures that the Company believes are useful to rating agencies and investors in understanding the Company’s capital structure and leverage. Because all companies do not calculate these measures in the same manner, the Company's presentation may not be comparable to other similarly titled measures reported by other companies. *** QUIPS included in Current maturities of long-term debt and capital lease obligations as of December 31, 2003. 32

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