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Bear Stearns12th Annual Commercial Aerospace
and Defense Conference
May 2, 2005New York City
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 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.
Forward Looking Statements
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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
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
5
Goodrich – Key MarketLeadership Positions
$4.7B$9.7B$8.9B$14.7B2004 Aerospace Sales
Sensors
Cargo Systems
APUs
Wheel/BrakesEvacuation Systems
Lighting
Space Systems
Landing GearEnvironmental ControlsFlight Ctrl/ActuationElectronic ControlsAvionics
Power GenerationEnginesNacelles
GoodrichHONSNECMAUTC
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 2005 Sales by Market ChannelTotal Sales $1,282M
Large Commercial AircraftAftermarket
25%Regional, Business & General Aviation
Aftermarket7%
Boeing Commercial OE
8%
Airbus Commercial OE
16%Military &
Space, OE & Aftermarket
27%
Other 6%
Heavy A/CMaint.
4%
OE
AM
Balanced business mix – three major market channels, each with 1Q05 growth
Regional, Business & Gen.
Av. OE7%
Total Commercial Aftermarket36%
Total Commercial OE31%
Total Military and Space27%
7
Expectations for Goodrich 2005 Sales
Approx. 10%14%6%Other
>10%26%6%Regional, Business & General Aviation - OE
8% - 10%
>10%
Approx. 6%
>15%
5% - 6%
2005 Expected Change from
2004
10%
54%
11%
6%
5%
1st Quarter2005 vs. 1st
Quarter 2004
Average Growth
3%Heavy Airframe Maintenance
30%Military and Space –OE and Aftermarket
$4.7BGoodrich Total Sales
32%Aftermarket – Large Commercial and Regional, Business and GA
23%Boeing and Airbus –OE Production
2004 Sales MixSales by Market Channel
8
Current vs. Prior CycleMarket Differences
MarketGrowth 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
9
Large Aircraft Deliveries Prior Cycle vs. Current Expectations
0
100
200
300
400
500
600
700
800
900
1,000
1996 1997 1998 1999
Air
craf
t D
eliv
ered
Boeing Airbus
0
100
200
300
400
500
600
700
800
900
1,000
2003 2004 2005Est.*
2006Est.*
Air
craf
t D
eliv
ered
Boeing Airbus
32% CAGR
10% CAGR
Based on current estimates, this upcycle will have more measured OE growth
*Forecasts based on public information from manufacturers
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Current vs. Prior CycleCompany Specific Differences
Goodrich SpecificSignificantly 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 moreTop line growth potential from new programs is much greaterCurrently at 27% military and space, versus 18% in 1996 (without Rohr) and 9% in 1997 (including Rohr)Much better positioned from a cost structure standpointHigher proportion of “power-by-the-hour” contracts
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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
12
Airbus A380 & Boeing 787 Awards
Engine Fan Case/Other Specialty Aerostructures Products
Cargo Systems
PendingSpecialty Seating
Flight Control Actuation
Fuel & Proximity Systems
Engine Controls
Sensors
A380Passenger Version
787Passenger Version
Evacuation Systems
Power Generation/Distribution
Wheels and Brakes
Nacelles
Lighting
Landing Gear
Note: Shaded areas indicate Goodrich positions
Significant market penetration on new programs
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Key New Programs Will Add Balanced Future Growth
C-5 Re-Engine
Small Engine Controls
A380 Program Joint Strike Fighter
*Total estimated sales over life of program *** Total estimated sales through 2028** Year in which significant sales are expected to begin **** Total estimated sales over 20 years
$6 Billion+*2005**
$0.8 Billion+*2004**
$5 Billion+*2006**
$1.1 Billion+*2005**
CommercialCommercial MilitaryMilitary
CF34-10 Nacelle System
$1.4 Billion+*2005**
$7 Billion+***2008**
787 Dreamliner
$6 Billion****2010**
A350 Program
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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
Expected Future 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:Annual Expected Future Sales for:•• A380 ProgramA380 Program•• 787 Program787 Program•• A350 ProgramA350 Program•• CF34CF34--10 Nacelle System10 Nacelle System•• JSF ProgramJSF Program•• CC--5 Re5 Re--engine Programengine Program•• Small Engine ControlsSmall Engine Controls
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
16
Emerging Growth OpportunitiesHUMS: Health & Usage Management Systems
“Listens” for Subtle, Abnormal “Sounds”(Vibrations)Early Detection of “Unhealthy” ConditionsDirects Maintenance in Plain, Simple Language
No “Experts” RequiredSaves – TIME, Saves – MONEY, Saves –LIVESSafer Aircraft, Less Maintenance TimeRevenue Potential > $300M
Patented Software that can detect and identify subtle, abnormal vibrations and predict wear in rotating machinery
Pursue Civil Fleet and Military Upgrades
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“Turnkey” Reconnaissance System For Border Patrol And Homeland SecurityGoodrich Provides:
Airborne pods • DB-110 EO/IR camera• Data Link• Recorder
Ground stationsTrainingIntegrated logistics support
Current contracts with UK and PolandProven capability in a high risk environment
DB-110 used extensively in Operation Iraqi Freedom
Emerging Growth Opportunities Airborne Reconnaissance – DB110
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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: $29MRevenue Potential: $29M
$4M pendingDTRA (Defense Threat Reduction Agency)
$3M appropriatedARO (Army Research Organization)
$3M awardedRapid Automated Biological Identification System (RABIS)
$8M awardedAuto Rapid Facility Chemical Agent Monitor (ARFCAM)
HSARPA:
Contract ValueAgency and Program
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TERRORISMTERRORISM Homeland SecurityHomeland SecurityGlobal CooperationGlobal Cooperation
Protect High ValueProtect High ValueAssets and Assets and
InfrastructureInfrastructure
What needs Protection:Power GenerationMilitary BasesOil RefineriesDamsAirportsGov’t OfficesEmbassiesBordersShips / Ports
Emerging Growth Opportunities Laser Perimeter Awareness System
5 Year LPAS Revenue
Potential>$150M
*Morgan Keegan & Co.
Perimeter SecurityExplosive DetectionContainer Sensing
Market $1.5B
Nuclear Power and Weapons
PetrochemicalMilitary Bases
LPAS fills market need for autonomous perimeter security
Positioned to fill gap between guard/fence/camera solutions and more expensive radar/infra-red schemes
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
21
Conclusion
Top Quartile Aerospace Returns
Operational Excellence
Leverage the EnterpriseBalanced Growth
Push aggressive Supply Chain Management and Continuous ImprovementDrive breakthrough change in product and development costs using LPD and DFSSImprove Enterprise manufacturing and engineering efficiencies
Use portfolio mass and breadth to capture market shareWin new program positionsPursue Military Markets and Government funding opportunitiesAftermarket products and services expansion
Manage investments at the portfolio levelProvide Enterprise Shared ServicesLeverage SBU capabilities into integrated, higher level systemsSimplify customer interfaces –act as “One Company”
Goodrich – Strategic Imperatives
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• 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
Pre-Event – Monday Morning Post Event – Friday Morning
A380 Prismatic Titanium Machining CellLinkage and Flow EventEntire area moved during the week
3 Months Action in 1 Week
Operational ExcellenceLean Manufacturing - Actuation Systems
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Operational ExcellenceLean Product Development
Implement… Improve… Standardize
Continue to Evolve787 and A350 Nacelle Program Execution
Newest Training Ground for Lean PDRaises Performance Bar for Lean PD
Rigorous and Relentless Application of Lean PD onAll New Business Acquisition ProjectsAll New Product Development Programs
New Program Execution – Lean Product Development:
7-11
VOC ImpactMatrix
LWW Prog. Plan
CustomerDeliverables
Assy. Flow II
PartFamily
CellLayout
ValidateSW3P Pull
SystemsAssy. Flow I
MACROLearning
Std.Work
Macro Learning
make sparesbuild tools make parts
talk to customer
count costlook for work
Customer audit
plan work get materiel
• Pksx xnk dcm;s• knk sdcn• [nq sndc hdhdn • nq s msjkc mzm• jsjk qw nq• ncx nokk qwddm
• Pksx xnk dcm;s• knk sdcn• [nq sndc hdhdn • nq smsjkc mzm• jsjk qw nq• ncx nokk qwddm
• Pksx xnk dcm;s• knk sdcn• [nq sndc hdhdn • nq smsjkc mzm• jsjk qw nq• ncx nokk qwddm
• Pksx xnk dcm;s• knk sdcn• [nq sndc hdhdn • nq s msjkc mzm• jsjk qw nq• ncx nokk qwddm
• Pksx xnk dcm;s• knk sdcn• [nq sndc hdhdn • nq s msjkc mzm• jsjk qw nq
• Pksx xnk dcm;s• knk sdcn• [nq sndc hdhdn • nq smsjkc mzm• jsjk qw nq
• Pksx xnk dcm;s• knk sdcn• [nq sndc hd hdn • nq smsjkc mzm• jsjk qw nq
• Pksx xnk dcm;s• knk sdcn• [nq sndc hdhdn • nq smsjkc mzm
• Pksx xnk dcm;s• knk sdcn• [nq sndc hd hdn • nq smsjkc mzm 13
Standard Work SheetPROCESS NAME:SCOPE OF
OPERATIONSFROM:TO:
PREPARED BY:DATE:
QUALITY CHECK SAFETY CAUTION STANDARD WORK INPROCESS CYCLE TIMETAKT TI ME OPERATOR(S):
IncomingFinished Forming Center
J. Smith3/16/00
Incoming Rack
12
3
4 56
5 =
FinishedRack
6
1
Spray & Dry
2
Form
ing
Mac
hine
3
Finish
ing
Tabl e
4
Test Bench5
9
TimesMach WalkMan
Operation Operation Times
Date:______________Observer(s):____________________
Process /Cell:__________________Part:_________________
Dept.:_________Operator:___________
Takt Time:_____________Machine No:___________________
StepNo.
TotalWaiting:
Plan.Op.
12/6/98Marty & Jim
Face & Burr 059Group 1 Fred M.
590 secondsN/A
(seconds)
1Pick part formtote, indexto APLT and scribe.
2RemoveAPLT andfaceedges to scribeline.
3 Deburr holes.
4 Index part to APLT,clamp and final scribe.
6 Final deburr holes.
Place part and APLT in tote.7
100 200 300 400 500 600 700 800
77" 10"
163" 10"
84" 10"
102" 5"
50" 10"
53"
10"
TotalsMANAUTOWALKWAITING
529" 55"
584"
Remove APLT andfinal face edges.5
Standard Work Combination Sheet
ExecutionExecution Stable ProductionStable Production
LPD Model$$
TimeRecurring Unit Cost
Least Waste WayCumNon-
Recurring
PlanningPlanning
24
Goodrich One SourceTechnology
Global Sourcing OffsetTarget Cost
Pre-Lean Traditional Cost Model
LWW Cost Model
The Challenge: Significant Cost Reduction
Global Sourcing Offset
Make / Buy / OffsetCore Competency Model
Buy
Make
Gap Closure
Operational ExcellenceSignificant Cost Reduction
Deploy per Site Strategy
25
Goodrich Sourcing Efforts Growing in Low Cost Countries
Mexico SealsElectronic CompsMRO Transportation Service
Russia Titanium Forgingsand sheets
China Forgings/Machined PartsComp. Fan Cowls
Singapore Machined Parts/Engine Mounts
Indonesia Machined Parts JV
Taiwan Machined Panels
Korea Castings
India Engineering IT Services Components
Eastern Europe Misc. LG support
Malaysia Composite Panels
Operational ExcellenceSupply Chain Management
26
A380 Actuation SystemCurrent 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
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
28
81%21%
88%23%
+1.6%
28%
10%
Change
$0.26$0.39
$0.47$0.47
Diluted EPS- Continuing Operations- Net Income
$31$47
$58$58
Income- Continuing Operations- Net Income
$118$152Segment operating income
10.2%11.8%- % of Sales
$1,162$1,282Sales
1st Qtr 2004
1st Qtr2005
(Dollars in Millions, excluding EPS)
First Quarter 2005 – Financial Summary
29
2005 OutlookP&L Summary ($M)
+28 - 39%$220-239$172- Reported+32 - 44%$206-225$156- Continuing Operations
Net Income
~ 2%~ 122.5M120.3MShares Outstanding
+26 - 36%$1.80-1.95$1.43- Reported+30 - 42%$1.69-1.84$1.30- Continuing Operations
EPS (Diluted)
+1.1 - 1.4%11.5-11.8%10.4%Margin %+19 - 25%$585-615$493Segment Income+8 - 10%$5.1-5.2B$4.725BSales
B/(W)Estimate
2005Actual2004
Note: The current earnings and cash flow from operations outlook for 2005 does not include resolution of the previously disclosed Rohr and Coltec tax litigation or divestitures other than the JcAIR Test Systems business.
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
32
What Investors ShouldExpect from Goodrich in 2005
Key focus in 2005 – operational excellence and margin improvement
Complete redesign effort, and substantially complete the retrofit, for A380 actuatorsFocused 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 leverageTarget up to $200 million debt retirement
Transparency of financial results and disclosure