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Merrill Lynch8th Annual Global Industries
Conference
May 9, 2006
Marshall LarsenChairman, President and CEO
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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 JSF 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 27, 2006 First Quarter 2006 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.
Forward Looking Statements
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Goodrich Value Proposition and Key Performance Drivers
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Company Overview - Goodrich
GR Portfolio AttributesGR Portfolio AttributesProprietary productsNon-discretionary repair / replacement cyclesLarge installed base drives aftermarket salesParticipation on every large commercial and regional jet platformSignificant defense & space presence
ResultsResultsMore predictable revenue and income growthSignificant margin potentialSustainable leadership positionsNo dependence on any single sub-market, product or customer
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Great market positions
Good top line growth
Substantial margin improvement opportunity
Significant cash flow improvement expected in 2007
Sustainable income growth beyond the OE cycle
The Value Proposition for Goodrich2006 – 2010 Expectations
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Goodrich – Key MarketLeadership Positions
$5.4B$10.5B$9.7B$16.5B2005 Aerospace Sales
Sensors
Cargo Systems
APUs
Wheel/BrakesEvacuation Systems
Lighting
Space Systems
Landing GearEnvironmental ControlsFlight Ctrl/ActuationElectronic ControlsAvionics
Power GenerationEnginesNacelles
GoodrichHONSAFRANUTC
Aerospace Focus Aerospace Focus -- Leadership Positions Leadership Positions -- Global Presence Global Presence -- Broad Systems Capability Broad Systems Capability -- Highly Engineered ProductsHighly Engineered Products
Goodrich has the broadest portfolio of system leadership positions;with approximately 85% of sales in markets with #1 or #2 positions world-wide
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First Quarter 2006 Sales by Market ChannelTotal Sales $1,424M
Large Commercial AircraftAftermarket
27%
Regional, Business & General Aviation Aftermarket
6%
Boeing Commercial OE
9%
Airbus Commercial OE
18%
Defense & Space, OE & Aftermarket
24%
Other 5%
Heavy A/CMaint.
3%
OE
AM
Balanced business mix
Regional, Business & Gen.
Av. OE8%
Total Commercial Aftermarket36%
Total Commercial OE35%
Total Defense and Space24%
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Top Line Growth -Large Commercial OE Market
2005 orders at record levels –many for deliveries beyond 2008
Both manufacturers continue to increase production rates and deliveries
Airbus fleet growing faster than Boeing fleet
Sustained, steady growth will benefit both suppliers and manufacturers
Overall active fleet continues to increase
0
200
400
600
800
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Est
2007
Est
Airbus Boeing
Air
craf
t D
eliv
erie
s
Source: GR Estimates
Active Passenger Fleet - 2005 Active Passenger Fleet – 2014 (Est.)
Boeing76%
Airbus24%
Boeing63%
Airbus37%
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Top Line Growth -Regional Jet Market
Expect decline in regional aircraft deliveries in 2006
2006 Goodrich sales expected to continue to grow – result of content positioning and model mix
Rapid growth since 1992 has driven rapid fleet size expansion
Expect continued growth in aftermarket from installed base
Good positions on all major regional jet models
0
50
100
150
200
250
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Est
2007
Est
Bombardier Embraer
Reg
iona
l Jet
Del
iver
ies
0
500
1000
1500
2000
2500
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05 E
st
Installed fleetC
um
ula
tive
Reg
iona
l Jet
Del
iver
ies Source: Jet Information Services, Inc; GR Estimates
Source: Jet Information Services, Inc; GR Estimates
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0
5000
10000
15000
20000
25000
30000
35000
1995
1997
1999
2001
2003
2005
Est
2007
Est
2009
Est
2011
Est
2013
Est
2015
Est
Installed fleet
Top Line Growth -Aftermarket Products and Services
Driven by ASMs, fleet size & GDP
Goodrich 2006 sales growth expected to continue to be above ASM growth rates
RPM and ASM growth expected to be about the same for 2006 - 2010
World fleet expected to continue to grow
Strong aftermarket trends will assist Goodrich margin expansion
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Est
2006
Est
2007
Est
2008
Est
2009
Est
2010
Est
ASMs RPMs
Above average growth rates possible over next several years
World ASM and RPM Percent Change, Year Over Year
Source: The Airline Monitor
Total Aircraft in World Fleet
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Top Line Growth -Defense & Space Market
Goodrich product focusSurveillance and reconnaissanceHigh usage platforms – helicopters, transport aircraft, fightersNew platforms
US in transition to “network-centric warfare”More focus on Surveillance and Reconnaissance to provide Intelligence
Fewer new platform starts create upgrade opportunitiesGoodrich developing several new products for Homeland Security markets
Market for Goodrich products is global and focused on growth areas; not dependent on any single program, platform or customer
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2006 Sales ExpectationsBy Market Channel
~5%Other6%
OE - Positions on funded platforms worldwide, new products provide stable growth Aftermarket - Platform utilization, upgrade opportunities support long-term growth
Flat to slightly down
Approx. Flat
Defense and Space OE and Aftermarket
28%
~6%
Flat to slightly down
>7%
~5%
10-15%(Due to delivery
lead times)
2006 Goodrich Growth
~7%
5%
~5%
0-5%
36%10%19%
2006Market Growth
Goodrich operating near capacity, sales fluctuate based on A/C age, timing and type of overhaul
Heavy Maintenance
4%
Total 100%
Airbus AM growing faster due to fleet aging, excellent product positions plus outsourcing trend support higher than market growth rate
Aftermarket (Commercial/Regional/Bus/GA)
32%
CF34-10 Engine Nacelles and tail cone support continued growth through the cycle
Regional/Bus/GA OE (Weighted)
6%
Market expectations - 2007 and beyondMarketGoodrich
2005Sales Mix
Strong growth in 737, 777, A320; A380, 787 and A350 introductions support deliveries past normal peak
Boeing OE Del.Airbus OE Del.
Total (GR Weight)
8%16%24%
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Sustainable Growth Beyond the Peak of the Cycle
Commercial AftermarketSignificantly larger fleet should fuel aftermarket strengthExcellent balance between Boeing and AirbusAirbus and regional jet fleet is getting older, more mature – increased aftermarket supportMore long-term agreementsMore opportunity for airline outsourcing
Defense and space marketBalance and focus on high growth areasWar on terror drives sustained spending
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$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sustainable Growth Sales from Key New Programs
New program sales are expected to provide significant incremental sales growth
(Dollars in Millions)(Dollars in Millions)
Annual Expected Future Sales for:• A380 Program• 787 Program• A350 Nacelles• CF34-10 Nacelle System• JSF Program• C-5 Re-engine Program• Small Engine Controls
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Sustainable Growth Beyond the Peak of the Cycle
Single Aisle Small TwinAisle
Large TwinAisle
Very LargeTwin Aisle
Current ModelsNew Models
Ave
rage
Con
ten
t pe
r A
ircr
aft
($
M)
B737,A320
B767,A330
B787,A350
B777,A340
B747
A380
Higher content per aircraft should dampen the effect from the next commercial down cycle
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Full-year 2006 Outlook
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2006 Outlook
Continued robust growth in major Commercial Aerospace original equipment and aftermarket channelsContinue to expect ~100 basis point segment OI margin expansion
Operational excellence and volume leverageOn track to achieve mid-teens segment OI margin by 2009-2010Expect growth in EPS from continuing operations to be greater than sales growth
EPS growth includes increased expenses for pension, FX and stock-based compensation of ~$0.29
Cash flow from operations minus capital expenditures of $100 -$150M, plus ~$90M of cash proceeds from the expected sale of Turbomachinery Products
New program investments (A380, Boeing 787, A350)Capital for cost reduction, capacity, landing gear OE rate increases
Balancing short-term earnings improvement & long-term value creation
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2006 Outlook
Not in cash flow from operations minus Cap. Ex.
+ $90M for TMPOther cash flow items
No change$240-260M$240-260M
Capital Expenditures
Includes expected 2nd half 2006 tax payment of approx. $90 million
$100-150M50 to 75% of NI from Cont. Ops.
Cash flow from operations minus capital expenditures
Continued strong aftermarket Rohr litigationRohr 1995-97 auditGain on sale less lost OI
$2.25-2.45
$0.93$0.12$0.08
$3.38-3.58
$2.20-2.40
EPS- Excl. Tax, TMP sale
- March 29 Tax Settlement- April Tax Settlement- TMP Sale
Net Income
No change (towards upper end of range)
$5.6-5.7B$5.6-5.7BSales
CommentsCurrentOutlook
PriorOutlook
The current sales, net income and cash flow from operations outlook for 2006 does not include resolution of the previously disclosed Coltec tax litigation and resolution of the remaining items in the IRS examination cycle for the company’s tax years through 1999, the impact of acquisitions or divestitures, other than the expected sale of Turbomachinery Products, resolution of potential remaining A380 contractual disputes with Northrop Grumman, or the impact of changes to the company’s pension plan. The sales projections include the expected full-year sales from the company’s Turbomachinery Products business. Goodrich expects Turbomachinery Products to be reported as a discontinued operation starting with the reporting of second quarter 2006 results in July 2006, and expects to remove the associated sales from its outlook at that time.
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Sales and Segment Operating Income Trends
$0
$100
$200
$300
$400
$500
$600
$700
$800
2003 2004 2005 2006Est.
$0
$1
$2
$3
$4
$5
$6
2003 2004 2005 2006Est.
Sales(Dollars in Billions)
Segment Operating Income(Dollars in Millions)
Strong sales and segment OI growth continues
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Long-term Margin Expansion Outlook
8%
10%
12%
14%
16%
18%
2004 2005 2006 2007 2008 20098%
10%
12%
14%
16%
18%OI/Sales Margins
Total Company
ObjectiveExpect Airframe Systems margin improvement to ~10%Sustained, high Engine Systems marginsMid-teens Electronics Systems margins
DriversVolume leverageR&D costs on new programs mitigatePension, FX and stock-based compensation headwinds mitigate or reverse
Substantial margin upside potential
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The Value Proposition for Goodrich2006 – 2010 Expectations
Great market positionsGood top line growth expected over the next several yearsSubstantial margin improvement opportunity
High margin aftermarket growth and OE volume leverageDevelopment program costs mitigateExpect ~ 15% segment operating income margins by 2009
Significant cash flow improvement expected in 2007Sustainable income growth beyond the OE cycle
Expect continued growth in higher margin aftermarket –faster than ASMsGoodrich should see “cycle on top of cycle” for OE production
• A380, Boeing 787, A350, EMB 190 all have high Goodrich content
Key for 2006: Entire organization focused on margin improvement – with a sense of urgency
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Supplemental Information
Additional information and presentations about Goodrich programs and products are available at www.goodrich.com. Presentations that are
available in the Investor Relations portion of the web site include the April 27, 2006 First Quarter
Results presentation and the December 12, 2005 Annual Investor Conference presentation.
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First Quarter 2006 Operational Highlights
Important tax settlements announced – $1.05 per diluted share included in first quarter 2006 resultsAnnounced definitive agreement to sell Turbomachinery Products
Consistent with overall strategy to divest non-core businessesAirframe Systems segment operational performance improvement continued
Reduction in force announced at Landing GearSegment margin improvement on track
Electronic Systems segment A380 full scale evacuation test successfully completed
Engine Systems SegmentContinued strong aftermarket growthDevelopment programs for the Boeing 787 and Airbus A350 continue on schedule
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Sales by Market Channel First Quarter 2006 Change Analysis
Actual Goodrich Change Comparisons
(12%)(3%)Defense and Space – OE and Aftermarket
12%
8%
(31%)
16%
25%
27%
1Q 2006 vs. 1Q 2005
(4%)Other
13%Regional, Business & General Aviation - OE
2%
(16%)
5%
14%
1Q 2006 vs. 4Q 2005
Heavy Airframe Maintenance
Goodrich Total Sales
Aftermarket – Large Commercial and Regional, Business and GA
Boeing and Airbus – OE Production
Market Channel
25
246%240%
253%250%
+0.1%
13%
12%
Change
$0.46$0.47
$1.59$1.60
Diluted EPS- Continuing Operations- Net Income
$57$58
$200$202
Income- Continuing Operations- Net Income
$151$170Segment operating income
11.8%11.9%- % of Sales
$1,276$1,424Sales
1st Qtr 2005
1st Qtr2006(Dollars in Millions, excluding EPS)
First Quarter 2006 – Financial SummaryYear-over-Year Performance