goodrich 20080905GabelliSlides

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Gabelli and Company’s 14th Annual Aircraft Supplier Conference Paul Gifford Vice President – Investor Relations September 5, 2008

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Transcript of goodrich 20080905GabelliSlides

  • 1. Gabelli and Companys 14th Annual Aircraft Supplier ConferencePaul Gifford Vice President Investor Relations September 5, 2008

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 XWB 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 and/or mergers 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 24, 2008 Second Quarter 2008 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 - GoodrichResults GR Portfolio Attributes More predictable revenue Proprietary products and income growth Non-discretionary repair/ Sustainable leadership replacement cycles positions Large installed base drives Diverse product portfolio and aftermarket sales balanced customer base Participation on every large Sustainable EPS and cash commercial and regional jet platform flow growth Significant defense & space presence 3 4. Goodrich Strategic Imperatives Top QuartileFinancial ReturnsConclusion Leverage theOperational Balanced GrowthEnterprise Excellence Our strategy has delivered consistent, positive results 4 5. Recent HighlightsAnnounced a Letter of Intent with Rolls-Royce proposing the formation of a joint venture company, which would develop and supply engine controls for Rolls-Royce aero engines; Goodrich will retain aftermarket products and servicesAwarded nacelle system for Pratt & Whitney Geared Turbofan EngineEngine to be used on Mitsubishi Regional Jet and Bombardier CSeriesairplanesExpected to generate more than $5 billion in original equipment and aftermarketrevenue for Goodrich over the 25-year period following entry into serviceStandard and Poors raised its corporate credit rating on Goodrich to BBB+ from BBBReceived production contracts from Lockheed Martin and General Electric Aircraft Engines to supply pylons and nacelles for the USAF C-5 Galaxy Reliability Enhancement and Re-engining ProgramSecond quarter 2008 results, compared with second quarter 2007Sales grew 17% - double-digit growth rates in all major market channelsSegment OI margin increased from 16.3% to 17.1%Net income per diluted share of $1.46 a 49% increase over second quarter2007 5 6. YTD 2008 Sales by Market Channel Total Sales $3.594 Billion Total Commercial OE Other Total Defense and6% 36% SpaceBoeing24%Commercial OE 10% Defense & Airbus Space, OE &Commercial OE Aftermarket17% 24%OE AM Regional,Business & Gen.Av. OE9%Large Commercial AircraftAftermarket28%Regional, Business & General Aviation Aftermarket 6% Total Commercial Aftermarket 34% Balanced business mix; aftermarket represents 45% of total sales 6 7. Sales by Market ChannelSecond Quarter 2008 Change Analysis Actual Goodrich Change ComparisonsFirst Half 2008 2Q 2008 vs. 2Q 2008 vs.vs. First Half2Q 2007 1Q 2007 2007 Boeing and Airbus Aircraft Deliveries28%8% 20% OE ProductionRegional, Business & Aircraft Deliveries26% 17% 25% General Aviation - OEAftermarket Large ASMs, Age, Cycles, Commercial, Regional,12%3% 11%Fleet size Business and GADefense and Space US, UK Defense11%6% 12% OE and AftermarketBudgets Other IGT, Other 24%4% 24%Goodrich Total Sales 17%6% 15%7 8. Notional Cycle Dynamics and Potential Impact on Goodrich 1,100+ Deliveries Annual Airplane DeliveriesTotalActiveEquilibrium Period OE Production Declines OE sales growthFleet OE sales declineflattens AM growth continues AM growth continues Fleet additions reach Stable Defense &major repair period 15,000+Space marketsin fleet Stable Defense &Investment period Cash flow improvesSpace markets High OE sales growth Cash flow improves Aftermarket growth accelerates EPS grows > sales Stable Defense & Space markets Higher cash needs Working Capital Capex Program InvestmentsOE Production Rate Increases; Production Peaks Production DeclinesCycleNew Development Programs Begin New Airplanes In Service Active Fleet Much Larger than Trough Fleet Increases Rapidly Fleet Growth Slows at Beginning of Cycle 8 9. Large Commercial Airplane Delivery Forecast 1,200 1,000800 Units600400200 020052006 2007 20082009 20102011 2012 2013 ActualsAirline Monitor Outlook 9Source: Airline Monitor, July 2008 10. Airbus and Boeing Backlog as of July 1, 2008 Asia North Am.Europe Leasing Middle East Latin Am. UnidentifiedAfrica800070006000 Number of A/C 50004000The order backlog alone is equivalent 3000 to the next 7 years of expected 2000 production 10000OrderOptionLoILoI Option OrderOptionLoI LoI Option400035003000 Number of A/C 25002000150010005000 Africa Unidentified Latin Am. Middle East Leasing Europe North A m. A sia % of firm orders 27 69121913 32 10 Source: Ascend Online 11. Increasing Content per AircraftOriginal Equipment Production High Airbus content on high growth platforms Aircraft introductions between now and 2013 will help support higher production/delivery levels later A380, 787, 747-8, A350 A380 Current ModelAverage Content perB747 New Models Aircraft ($M)B787,A350 B777,B767,A340 B737,A330 A320Single Aisle Medium TwinLarge TwinVery LargeAisleAisleTwin Aisle Higher Goodrich content on new aircraft than on aircraft being replaced 11 12. Large Commercial Aircraft Fleet Demographics vs.Goodrich Aftermarket SalesIn Service Fleet Demographics Goodrich Aftermarket Sales(1/1/08)Distribution (Est. 2008) In InProduction Production 80% Long Out-of-Long O60% ut-of-PProduction ro707 727 7 duction 4A310DC8 D 7C 737C 31%C9 DCMD80 Long Out-of-L1011 10Production 8%4% Long Out-of-Production (Less Vulnerable) 2%MD11 MD90Recently Recently Out- Out-of- of-Production Production 8%7% - Expect ~90% of retirements in 2008-2011 to come from the 4,800 less fuel efficient A/C in fleet.- Only ~ 8% of GRs large commercial aftermarket sales come from those platforms. 12 13. A320 Deliveries and Installed Base Delivered Units Installed Base500 7000Actual Estimated4506000Installed base/deliveries400 subject to majoroverhaul in 20085000350 3004000 Installed250base/deliveries3000 subject to major200overhaul in 2001150 2000 1001000 50 0 01995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 A320 Family DeliveriesA320 Family Installed Base 2002 2003 aftermarket sales based on installed base as of 1995, 2008 and on sales based on deliveries and installed base in 2001 and beyond 13 Source: Airline Monitor, July 2008 14. Aftermarket Summary Goodrich-installed base of aftermarket products providesexcellent growth opportunityA320 fleet will exist for another 30 to 35 yearsNew program wins position Goodrich for future aftermarketgrowthMRO capacity in place to support growthDriving operational excellence speed & ease Building a best-in-class, integrated system to leverageand grow aftermarket business14 15. Defense & Space Market Focused pursuit of Military Market is key to ourBalanced Growth StrategyWe have significant opportunities for growthwithin a flat Military spending environmentSpending in Goodrich related accounts is robust ISR Investment Helicopters Aftermarket 15 16. Goodrich Defense & Space Sales 2007 SALESPlatforms Payloads $1.6B Tactical Jets$0.4$1.2B ISR, Classified and other27% 73%Transport & Special Mission A/CSecurity Systems Space Systems Ground Vehicle SystemsMissiles and Precision Weapons UAVsMarine Rotary Wing Space Vehicles Strong position in platformsPayload area offers strong growth 16 17. F-35 (Joint Strike Fighter) Modulated Exhaust Cooling Duct Fuel Management SystemEngine SensorsPower Take Off Shafts Weapons Bay Door Actuator Engine Ice Detection & Protection Landing Gear Systems Air Data System $3M Goodrich Content 17 18. CH-53KGoodrich Potential ContentActuation Systems IncludingMain & Tail Actuators andHydraulic SystemsMechanical DiagnosticsEngine Control Systems Exterior LightingDriveshafts & Flexible Couplings Engine Sensors Laser Warning & ComponentsEngine & Rotor Ice ReceiversProtection SystemsRescue HoistsIce Rate Sensing Fuel Injection Systems Systems Cockpit & Interior Lighting Wheels & BrakesWindshield Wiper Systems Life RaftsFuel & Utility Systems Intelligent Power Distribution SystemsVehicle Health Management Canopy Severance System Cabin Heating SystemsLanding GearAir Data Sensors &SmartProbe SystemsCrew seats Goodrich potential content: $1.5 - $2.0M per shipset 18 19. Military Helicopter Market FightersU.S. Military Aircraft Production 27%500 Helicopters 40%400 300 200 2007 20082009 2010 2011 2012 Transports & Helicopters Fixed WingTankers 15% Recon & SurvTrainers World Military Helicopter Production 5%13%800700 Major Programs600 PlatformQTYPrime500 UH-60M1200 Sikorsky400300CH-53K 227 Sikorsky200 CH-47F 513 Boeing100 AH-64 Block III639 Boeing 0 ARH512 Bell2007 20082009 2010 20112012 LUH322 EADSBellBoeingSikorskyAgustaWestlandEurocopter Other1 Data from Forecast International, Teal Group, DoD Budgets Helicopters are 55% of future production and 40% of current inventory 19 20. Intelligence Surveillance Reconnaissance Market ISR is a priority for military budgets worldwide Global War On Terrorism (GWOT) Transition to Unmanned Aerial Vehicles (UAV) platforms Upgrade tactical reconnaissance cameras from film to digital Operationally Responsive Space (ORS) Goodrich products, competencies and investments well positionedFilm to Digital GWOT DB-110 has capturedU2 product 90% of internationalutilization at allORSUAV awardstime highUnder contract to Growing Operationalmodify U2 camera Need within US and for SpaceUK for DB110 20 21. Defense & Space Market SummaryFocused pursuits and advanced technology are keys to growth Space Airborne Ground Goodrich well positioned in aircraft platform content New Programs, Upgrades, Aftermarket Payload area offers significant growth potential ISR Systems GWOT, UAV, ORS 21 22. Delivering Sustained Sales Growth and Margin Expansion Sales$M Segment Operating Income Margins (Trailing Four Qtrs.) (Trailing Four Qtrs.) 7,000 18.0%6,500 16.0% 14.0% 6,00012.0% 5,50010.0% 5,000 8.0% 4,500 6.0%4,000 4.0%3,500 2.0% 0.0% 3,000Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2Q 2004 2005 2005 2006 2006 2007 2007 2008 2004 2005 2005 2006 2006 2007 2007 200822 23. 2008 Sales ExpectationsBy Market Channel Full Year2007 20082007 Goodrich GoodrichMarketMarket expectations - 2009 and beyondActualExpectedSales MixGrowth Growth10% Boeing OE Del.Growth continues for Commercial OE deliveries;15% Airbus OE Del.A380, 787 and A350 introductions supportdeliveries past normal peak25%Total (GR Weight) 8%~20%8%Regional/Bus/GA20% >20% CF34-10 Engine Nacelles and tail cone onOE (Weighted) EMBRAER 190 support continued growth throughthe cycle 36% Aftermarket16%~8 - 11%Airbus AM growing faster due to fleet aging,(Commercial/excellent product positions plus outsourcing trendRegional/Bus/GA)support higher than market growth rate25% Defense and Space7%~13% OE - Positions on funded platforms worldwide, newOE and Aftermarketproducts provide stable growthAftermarket - Platform utilization, upgradeopportunities support long-term growth 6%Other14% >20% 100%Total12%~13 - 14% 23 24. The Value Proposition for GoodrichLeadership positions and growing market share Leads to sustainable growth in high margin aftermarketAbove market organic growth in sales Original equipment - increased share on new programs Aftermarket growing content, worldwide MRO footprint Military F-35 (JSF), ISR and helicopter platformsAftermarket sales expected to continue to grow faster thanmarket metric due to favorable platform positionsCash flow improving and robust over the cycleDemonstrated ability to executeGoodrich is uniquely positioned for sales, earnings and cash flowgrowth 24