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1 Smith Barney 17 th Annual Global Industrial Manufacturing Conference March 10, 2004 Marshall Larsen Chairman, President and CEO
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Page 1: goodrich  SmithBarneyPresentationBW

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Smith Barney

17th Annual Global Industrial Manufacturing Conference

March 10, 2004

Marshall Larsen

Chairman, President and CEO

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Certain statements made in the following presentations 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 the Aeronautical Systems businesses and achieving operating synergies; the nature, and extent and timing of the Company’s proposed restructuring and consolidation actions and the extent to which the Company is able to achieve savings from these actions, as well as 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, 2002.

The Company cautions you not to place undue reliance on the forward-looking statements contained in these presentations, 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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Company Overview - Goodrich

One of the largest worldwide aerospace suppliersBroadest portfolio of products in industryProprietary, flight critical productsOperating history of over 130 years with recent repositioning as focused aerospace supplierMore than 20,000 employees in facilities throughout the world

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Goodrich – A Global Franchise

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2003 Sales by Market Channel – Total Sales $4,383M

Large Commercial AircraftAftermarket

25%Regional, Business &

General AviationAftermarket

7%

Boeing Commercial OE

9%

Airbus Commercial OE

15%Military &

Space, OE & Aftermarket

30%

Other 6%

Heavy A/CMaint.

3%

OE

AM

Balanced business mix – three major market areas each represent approximately one-third of sales

Regional, Business & Gen.

Av. OE5%

Total Commercial Aftermarket35%

Total Commercial OE29%

Total Military and Space30%

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Sales by Market Channel – 1999 – 2004E

0%10%20%30%40%50%60%70%80%90%

100%

1999 2000 2001 2002 2003 2004E

Significantly decreased dependence on Commercial OE

(Percentage of Total)

Military and Space

Large CommercialAircraft

Aftermarket

Regional, Business& G.A.

Boeing OE

Airbus OE

Other

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Goodrich Today

$4.4B$8.8B$7B$13.2BAerospace Sales

#1Sensors

#1Cargo Systems

APUs

#2Wheel/Brakes#1Evacuation Systems

#2Lighting

Space Systems

#1Landing Gear

Environmental Controls#1Flight Ctrl/Actuation#1Electronic Controls

Avionics

#2Power GenerationEngines

#1Nacelles

GoodrichHONSNECMAUTC

Aerospace Focus - Leadership Positions - Global Presence - Broad Systems Capability - Highly Engineered Products

Goodrich has the broadest portfolio of system leadership positions

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Agenda

Market Summary

2003 Results and 2004 Outlook

Goodrich Key Initiatives

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Commercial OE

Balanced duopoly

Airbus gaining on Boeing

Market flat near term

Recovery begins in 2005-2006

Active Commercial Fleet 2003

3,29611,436

Active Commercial Fleet 2012

6,26312,160

Source: Airline Monitor

BoeingAirbus

Boeing Airbus

0

100

200

300

400

500

600

700

1992

1994

1996

1998

2000

2002

2004

Est

.

AirbusBoeing

Air

plan

e D

eliv

erie

s

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Commercial OE - Airbus

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

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

CAGR of 14.2% for

aged 5 yrs or greater

Nu

mbe

r of

Pla

nes

Airbus fleet aging drives aftermarket growth for suppliers

Fleet Aging

Source: GR Estimates

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Regional Jets

Airlines eliminating scope clauses

Encroaching on Large Commercial model sizes

Embraer and Bombardier primary suppliers

New Chinese and Russian market entrants

Large RJ’s Continue to Gain Share (19-100 Seat A/C)

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12$0

$2

$4

$6

$8(Deliveries in $ Billions)

Props 30/50-seat Jets 60/100-seat JetsSource: GR Estimates

0

100

200

300

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Regional Jet DeliveriesBombardier RJ Embraer RJ

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Regional Jets

0

1,000

2,000

3,000

4,000

5,000

6,000

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

Num

ber

of P

lane

s

CAGR of 28.2% for

aged 5 yrs or greater

RJ fleet aging drives aftermarket growth for suppliers

Fleet Aging

Source: GR Estimates

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Aftermarket

Driven by ASMs, fleet size & GDP

2004 expected to recover 3 – 5 percent

Airline inventory management

Above average growth rates possible over next several years

2003 Global MRO Market ($B)

19%

23%

29%

29%

Airframe Engines Components Line Maintenenace

CAGR (’03-’08) = 4.2%

Source: Back Aviation

Uncertainty remains in near-term aftermarket forecasts

-2%

0%

2%

4%

6%

8%

10%

2003P 2004 2005 2006 2007 2008 2009

World ASM and RPM Forecast (yr/yr) - Airline Monitor, GR Estimates

RPM ASM

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Military & Space

Market is global New fighters driving growthIntelligence, Transports and Rotorcraft Markets growingFY05 Defense budget supports expectations Growth opportunity

0

40

80

120

160

200

2002 2003 2004 2005 2006 2007 2008

US Defense Spending ($B)

Procurement & RDT&E Intelligence

Military Transports

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '120

20

40

60

80(Units Delivered)

0

1

2

3

4

5

6(Market Value in '03$ Billions)

Units ValueSource: Teal Group

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '120

20

40

60

80(Units Delivered)

0

1

2

3

4

5

6(Market Value in '03$ Billions)

Units ValueSource: Teal Group

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '120

200

400

600

800

1,000

0

2

4

6

8

Source: Teal GroupUnits Value

The World Rotorcraft Market

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '120

200

400

600

800

1,000

0

2

4

6

8

Source: Teal GroupUnits Value

World Fighter Market

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '120

100

200

300

400

500(Units Delivered)

0

5

10

15

(Market Value in '03$Bns)

Source: Teal Group

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '120

100

200

300

400

500(Units Delivered)

0

5

10

15

(Market Value in '03$Bns)

Source: Teal Group

(Units Delivered) (Market Value in '03$ Billions)(Units Delivered) (Market Value in '03$ Billions)

Source: Teal GroupUnits Value Source: Teal GroupUnits Value

Source: DoD

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Market Summary

Commercial aerospace OE market is at bottom but recovery projected in 2005-2006

Airbus gaining market parity with Boeing

Low cost carriers winning market share

Commercial aftermarket expected to recover 3 – 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

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Agenda

Market Summary

2003 Results and 2004 Outlook

Goodrich Key Initiatives

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Recent Significant Developments

Full-year 2003 cash flow from operations of $553 million –6% greater than 2002

2003 full-year sales of $4.4 billion, EPS of $0.85 per diluted share

Announced plans to redeem the remaining $63.5 million of QUIPS – to be completed on March 2, 2004

Several new commercial and military contracts announced

Expect low single-digit sales growth in 2004, EPS expected to be between $1.20 – $1.35 per diluted share

Includes impact of contract accounting change and expensing of stock options

Strong finish to 2003

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($1.23)($0.29)

($125)($18)

(3.8%)

($103)

$574

Change

$1.56$1.14

$0.33$0.85

Diluted EPS- Continuing operations- Net income

$164$118

$39$100

Income - Continuing operations- Net income

$419$316Segment operating income

11.0%7.2%- % of Sales

$3,809$4,383Sales

20022003(Dollars in Millions, excluding EPS)

Full-year 2003 – Financial Summary

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Debt Retirement Progress Since Acquisition of Aeronautical Systems

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

10/1/02Proforma

12/31/02 3/31/2003 6/30/2003 9/30/2003 12/31/2003

$ in MillionsTotalDebt

+ QUIPS$3,039

Total Debt

+ QUIPS$2,638

Total Debt

+ QUIPS$2,261

Net Debt+ QUIPS$2,893

Net Debt+ QUIPS$2,488 Net Debt

+ QUIPS$2,075

Cash $146

Cash $150

Cash $186

Total debt + QUIPS reduced $824M or 27%; Net debt + QUIPS reduced $1,056M or 37%

Total Debt

+ QUIPS$2,262

Net Debt+ QUIPS$1,994

Cash $268

Total Debt + QUIPS$2,275

Net Debt + QUIPS$1,949

Cash $326

Total Debt + QUIPS$2,215

Net Debt + QUIPS$1,837

Cash $378

Note: See page 30 for definitions of Total Debt and Net Debt and a detailed calculation of these measures as of the dates indicated.

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Cash Flow and Capital Expenditures ($M)

$134$187

$107 $125

$168

$375

$524$553

$0

$100

$200

$300

$400

$500

$600

2000 2001 2002 2003

Cash Flow from Ops Cap Ex

Cash Flow from Operations

2003 Cash FlowCash flow from operations of $553M

• Included $107M in tax refunds• Included $47M cash payments

for facility closures and headcount reductions

Capital Expenditures of $125M

Incentive systems aligned with goalUtilize primarily for debt reduction Ongoing new program investments continuedStable dividend since EnPro spin-off

Three years of significant cash generation

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2004 Outlook Assumptions

RecoveringAirline

Profitability

Global ASMGrowth 3-5%

No New Market

Disruption(Terrorism, SARS)

Stable/SmallIncrease in

Interest Rates

7E7 Launch, Goodrich awards

and timing

GRMacro

Assumptions

RecoveringGlobal

Economy

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Expectations for Goodrich 2004 Sales

Approx. Flat(13%)6%Other

8% - 10%(18%)5%Regional, Business & General Aviation - OE

Low single-digit percent

growth

Approx. Flat

3% - 5%

Flat to Down Slightly

7% - 10%

2004 Expected Change

(4%)

(27%)

(3%)

(10%)

10%

2003 Actual Change*

Average Expected Growth

3%Heavy Airframe Maintenance

30%Military and Space –OE and Aftermarket

$4.4BGoodrich Total Sales

32%Aftermarket – Large Commercial and Regional, Business and GA

24%Boeing and Airbus –OE Production

2003 Sales Mix

Sales by Market Channel

* 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.

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2004 Outlook Considerations

Flat with 20035% below 2003Commercial OE Production

Lower than expectedAs expected ($30M)P&L Headwind

100 to 200 basis point lower rate

Current rate - 33%Effective Tax Rate

Moderate award slippage and normal GR win rate

Contract awards on current schedule. GR wins

disproportionate share

7E7 Program Investments

Dollar strengthensDollar weakness continuesForeign Exchange Rates+ 5%± 3%Global ASM Growth

$1.35$1.202004 EPS Outlook Range High EndLow EndMajor Factors

Other factors outside of outlook considerationResolution of Rohr or Coltec tax litigation in 2004Potential contractual disputes with Northrop Grumman related to the purchase of Aeronautical SystemsPremiums for early retirement of debt

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Near Term Risks & Opportunities

A380 peaked in 20037E7 investment/timing uncertainNew Program Investments

Organizational transition completeMajor headcount reductions completeMost SBU’s profitablePotential NOC contract issues

AS Execution/Integration

Large cash balancesNew revolverNo current debt maturitiesPositive net cash flow last 11 Qtrs

Liquidity/Capital Markets

Capacity downsizing near completionLong term cost reduction focusEnterprise initiativesPortfolio balance

Slower Commercial Market RecoveryEvent risk

Risks GR Positioning

Manageable Risks

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Near Term Risks & Opportunities

Supply chain management($2B annual spend)

Shared services

Enterprise Initiative Savings

Working capital reductionsFurther portfolio pruningAccelerate debt retirement

Higher Cash Generation

Capacity in placeSubstantial upside leverageAirline/OE outsourcing

Faster Commercial Recovery

Opportunities GR Positioning

Opportunities May Accelerate Earnings Momentum

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Agenda

Market Summary

2003 Results and 2004 Outlook

Goodrich Key Initiatives

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Goodrich Strategic Imperatives

Balanced GrowthFaster than the overall marketWin key positions on new aircraft (e.g. 7E7)Migrate commercial products/technologies to military applicationsPenetrate adjacent markets

Leverage the EnterpriseResource allocationTechnology/InnovationEnterprise-wide initiativesCustomer alignment/focus

Operational ExcellenceIntegrate Aeronautical SystemsLean manufacturing/Six SigmaMake/Buy analysis

Successful implementation will enable Goodrich to compete/win in all business environments

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What Investors Should Expect from Goodrich

Continued commitment to integrityNo significant acquisitionsFocused 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 levelsTransparency of financial results and disclosureAccountable to all stakeholders

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Questions and Answers

Smith Barney

17th Annual Global Industrial Manufacturing Conference

March 10, 2004

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Supplemental Information

Pro-forma9/30/2002 10/1/2002 12/31/2002 3/31/2003 6/30/2003 9/30/2003 12/31/2003

Elements of Total DebtPre-positioned

Cash Bridge LoanShort-term bank debt 284.0$ (200.0)$ 1,500.0$ 1,584.0$ 379.2$ -$ -$ -$ 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$

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$

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$

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$

Cash and cash equivalents 346.3$ (200.0)$ -$ 146.3$ 149.9$ 185.8$ 267.8$ 325.9$ 378.4$

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$

Goodrich CorporationReconcilliation of Debt Retirement to GAAP Financial Measures

Adjustmentsto get to Pro-forma*

* 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 is 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.


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