Goodrich Announces First Quarter 2010 Results, Reaffirms Outlook for 2010 Sales, Net Income per Diluted Share and Cash Flow

CHARLOTTE, N.C., April 22, 2010 /PRNewswire-FirstCall/ -- Goodrich Corporation (NYSE: GR) announced results today for the first quarter 2010 and reaffirmed its outlook for 2010 sales, net income per diluted share and cash flow.  

Commenting on the company's performance and its 2010 outlook, Marshall Larsen, Chairman, President and Chief Executive Officer said, "Our first quarter 2010 results were consistent with our expectations.  Despite the unexpected tax expense related to the health care reform legislation, we are maintaining our outlook for earnings per share.  Our large commercial airplane original equipment and our defense and space market channels both experienced significant growth.  Our commercial airplane aftermarket sales rose by about 9 percent sequentially, compared to the fourth quarter 2009, although they were about 10 percent lower than the first quarter 2009.  We see positive indicators that commercial aftermarket sales will be trending upward throughout this year, and we still expect sequential growth each quarter of 2010.  We continue to expect year-over-year growth during the second half of this year and 4 - 7 percent growth for the full year 2010, compared to 2009."  

"At the same time as we are seeing improving trends in commercial airplane aftermarket sales, Boeing and Airbus recently announced production rate increases for a variety of programs.  These announcements, in conjunction with expected 787 deliveries, should provide us with strong large commercial original equipment sales growth for many years to come."  

"Our defense and space sales exhibited strong growth in the first quarter of 2010, increasing by 13 percent, compared to the first quarter 2009.  Our acquisition of AIS contributed 8 percent of this growth and organic sales growth of about 5 percent was driven primarily by strong sales in our sensors and integrated systems and intelligence, surveillance and reconnaissance businesses."  

First quarter 2010 Results

Goodrich reported first quarter 2010 net income of $111 million, or $0.87 per diluted share, on sales of $1,695 million.  In the first quarter 2009, the company reported net income of $170 million, or $1.35 per diluted share, on sales of $1,696 million.  

For the first quarter 2010 compared with the first quarter 2009, Goodrich sales changes by market channel were as follows:

• Large commercial airplane original equipment sales increased by 12 percent.  During the first quarter 2009, large commercial original equipment sales were adversely affected by the Boeing machinists' strike.  There was no similar impact during the first quarter 2010.  For the first quarter 2010, compared to the first quarter 2009, sales to Boeing grew by about 24 percent and sales to Airbus grew by about 5 percent,  
• Regional, business and general aviation airplane original equipment sales decreased by 31 percent,
• Large commercial, regional, business and general aviation airplane aftermarket sales decreased by 10 percent.  Three of the company's eight commercial businesses reported higher aftermarket sales in the first quarter 2010, compared to the first quarter 2009.  Sequentially, commercial aftermarket sales were 9 percent higher than commercial aftermarket sales during the fourth quarter 2009,  and
• Defense and space sales of both original equipment and aftermarket products and services increased by 13 percent, including organic growth of about 5 percent.  

The change in net income per diluted share is primarily attributable to the impact of lower aftermarket sales and a higher tax rate, which was partially offset by cost containment initiatives.  Several important factors are noted below:  

• The company reported an effective tax rate of 38 percent for the first quarter 2010, compared to an effective tax rate of 26 percent during the first quarter 2009.  Compared to the first quarter 2009, first quarter 2010 results included additional tax expense of $0.08 per diluted share for the U.S. health care reform legislation and $0.02 per diluted share related to the delay in renewal of the U.S. R&D tax credit.  The tax rate in the first quarter 2009 included a benefit of $0.12 per diluted share related to a state tax dispute.  
• The first quarter 2010 results included higher pre-tax income of $12 million, $7 million after-tax or $0.06 per diluted share, related to the revision of estimates for certain long-term contracts primarily in our aerostructures and aircraft wheels and brakes businesses, compared to the first quarter 2009.  Total changes in estimates for the first quarter 2010 were $16 million, pre-tax.  
• The first quarter 2010 results included higher pre-tax expense of $14 million, $9 million after-tax or $0.07 per diluted share, related to higher corporate general and administrative expenses, compared to the first quarter 2009.  The increased expenses were primarily related to unfavorable foreign exchange, higher incentive and share based compensation and higher lease-related costs.

Net cash provided by operating activities, minus capital expenditures, for the first quarter 2010 was $9 million, a decrease of $24 million from the same period in 2009.  During the first quarter 2010, Goodrich contributed $105 million to its worldwide pension plans, compared to contributions of $8 million in the first quarter 2009.  Capital expenditures were $21 million in the first quarter 2010, compared with capital expenditures of $34 million in the first quarter 2009.  During the first quarter 2010, excluding the pension contribution, net cash provided by operating activities, minus capital expenditures, was more than 100 percent of net income.

2010 Outlook

The company's 2010 sales outlook is based on market assumptions for each of its major market channels.  The current market assumptions for the full year 2010, compared with the full year 2009, include:

• Large commercial airplane original equipment sales are expected to increase by about 5 percent.  This outlook assumes that 787 deliveries begin in late 2010,    
• Regional, business and general aviation airplane original equipment sales are expected to decrease by more than 10 percent,
• Large commercial, regional, business and general aviation airplane aftermarket sales are expected to increase by about 4 - 7 percent.  This outlook assumes that worldwide available seat miles (ASMs) increase in the range of 1 – 3 percent in 2010.  Goodrich expects year-over-year sales growth beginning towards the middle of 2010, and
• Defense and space sales of both original equipment and aftermarket products and services are expected to increase by about 15 percent, including sales generated by the December 2009 acquisition of AIS.  

The company's full year 2010 sales expectation of approximately $7.1 billion is unchanged from its prior outlook, and represents growth of about 6 percent compared to 2009.  The outlook for 2010 net income per diluted share remains in a range of $4.15 - $4.40.  

The 2010 outlook for net income includes a full-year effective tax rate of approximately 31 percent for 2010, which has been increased from the prior range of 29 – 30 percent due to the inclusion of the tax expense related to the U.S. health care reform legislation.  The 2010 effective tax rate continues to include a full-year benefit of approximately 1.5 percent related to an assumed extension of the U.S. R&D tax credit, which has not been extended as of April 22, 2010.  

For 2010, Goodrich continues to expect net cash provided by operating activities, minus capital expenditures, to exceed 85 percent of net income.  This outlook reflects ongoing investments to support the current schedule for new airplane programs, such as the Boeing 787 and Airbus A350 XWB airplane programs, and low-cost country manufacturing and productivity initiatives that are expected to enhance margins over the near and long term.  The company continues to expect capital expenditures for 2010 to be in a range of $250 - $275 million and worldwide pension plan contributions to be $100 - $150 million.  

The current sales, net income and net cash provided by operating activities outlooks for 2010 do not include the impact of potential acquisitions or divestitures.

The supplemental discussion and tables that follow provide more detailed information about the first quarter 2010 segment results.

Goodrich will hold a conference call on April 22, 2010 at 10:00 AM U.S. Eastern Time to discuss this announcement.  Interested parties can listen to a live webcast of the conference call, and view the related presentation materials, at www.goodrich.com, or listen via telephone by dialing 913-312-1235.

Goodrich Corporation, a Fortune 500 company, is a global supplier of systems and services to aerospace, defense and homeland security markets.  With one of the most strategically diversified portfolios of products in the industry, Goodrich serves a global customer base with significant worldwide manufacturing and service facilities.  For more information visit http://www.goodrich.com.

FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY

Certain statements made in this document are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding our future plans, objectives and expected performance. Specifically, statements that are not historical facts, including statements accompanied by words such as "believe," "expect," "anticipate," "intend," "should," "estimate," or "plan," are intended to identify forward-looking statements and convey the uncertainty of future events or outcomes. We caution readers that any such forward-looking statements are based on assumptions that we believe 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 from expected performance 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 Mitsubishi Regional Jet (MRJ), the Bombardier CSeries, the Dassault Falcon 7X, the Lockheed Martin F-35 Lightning II and the Northrop Grumman Joint STARS re-engining program;

• our ability to extend our commercial OE contracts beyond the initial contract periods;

• cancellation or delays of orders or contracts by customers or with suppliers, including delays or cancellations associated with the Boeing 787 Dreamliner, the Airbus A380 and A350 XWB aircraft programs, and major military programs;

• our ability to obtain price adjustments pursuant to certain of our long-term contracts;

• the financial viability of key suppliers and the ability of our suppliers to perform under existing contracts;

• the extent to which we are successful in integrating and achieving expected operating synergies for AIS and other potential acquisitions;

• successful development of products and advanced technologies;

• the health of the commercial aerospace industry, including the impact of bankruptcies and/or consolidations in the airline industry;

• global demand for aircraft spare parts and aftermarket services;

• changing priorities or reductions in the defense budgets in the U.S. and other countries, U.S. foreign policy and the level of activity in military flight operations;

• the possibility of restructuring and consolidation actions;

• threats and events associated with and efforts to combat terrorism;

• the extent to which changes in regulation and/or assumptions result in changes to expenses relating to employee and retiree medical and pension benefits;

• competitive product and pricing pressures;

• our ability to recover under contractual rights of indemnification for environmental, asbestos and other claims arising out of the divestiture of our tire, vinyl, engineered industrial products and other businesses;

• the effect of changes in accounting policies or legislation, including tax legislation;

• cumulative catch-up adjustments or loss contract reserves on long-term contracts accounted for under the percentage of completion method of accounting;

• domestic and foreign government spending, budgetary and trade policies;

• economic and political changes in international markets where we compete, such as changes in currency exchange rates, inflation, fuel prices, deflation, recession and other external factors over which we have no control;

• the outcome of contingencies including completion of acquisitions, divestitures, tax audits, litigation and environmental remediation efforts; and

• the impact of labor difficulties or work stoppages at our, a customer's or a supplier's facilities

We caution you not to place undue reliance on the forward-looking statements contained in this document, which speak only as of the date on which such statements are made. We undertake 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.

Supplemental Data

Segment Review

Actuation and Landing Systems:  Actuation and Landing Systems segment sales for the first quarter 2010 increased from the first quarter 2009 primarily due to the following:

• Higher large commercial airplane OE sales of approximately $37 million, primarily in our landing gear business; and

• Higher large commercial, regional, business and general aviation airplane aftermarket sales of approximately $4 million, primarily in our aircraft wheels and brakes and actuation systems businesses; partially offset by

• Lower regional, business and general aviation airplane OE sales across all businesses of approximately $22 million;

• Lower other non-aerospace sales of approximately $10 million, primarily in our engine components business; and

• Lower defense and space OE and aftermarket sales primarily in our landing gear and aircraft wheels and brakes businesses of approximately $8 million.

Actuation and Landing Systems segment operating income for the first quarter 2010 decreased from the first quarter 2009 primarily as a result of the following:

• Unfavorable product mix and sales volume across most businesses resulting in lower income of approximately $12 million; partially offset by

• Favorable pricing partially offset by higher operating costs across most businesses, which resulted in higher income of approximately $2 million; and

• Higher income of approximately $2 million related to changes in estimates for certain long-term contracts in our wheels and brakes business that were more favorable in 2010.

Nacelles and Interior Systems:  Nacelles and Interior Systems segment sales for the first quarter 2010 decreased from the first quarter 2009 primarily due to the following:

• Lower large commercial, regional, business and general aviation airplane aftermarket sales of approximately $66 million, primarily in our aerostructures business;

• Lower regional, business, and general aviation airplane OE sales of approximately $15 million, across all businesses; and

• Lower defense and space OE and aftermarket sales of approximately $6 million, primarily in our interiors business; partially offset by

• Higher large commercial airplane OE sales of approximately $11 million, across all businesses.

Nacelles and Interior Systems segment operating income for the first quarter 2010 decreased from the first quarter 2009 primarily due to the following:

• Unfavorable product mix and sales volume, primarily in our aerostructures business, which resulted in lower income of approximately $59 million; partially offset by

• Favorable pricing and reduced operating costs across all businesses, which resulted in higher income of approximately $18 million; and

• Higher income of approximately $12 million related to changes in estimates for certain long-term contracts in our aerostructures business that were more favorable in 2010.

Electronic Systems:  Electronic Systems segment sales for the first quarter 2010 increased from the first quarter 2009 primarily due to the following:

• Higher defense and space OE and aftermarket sales of approximately $73 million, across most businesses, including sales of approximately $40 million associated with the acquisitions of Cloud Cap Technology, Inc. (Cloud Cap) and Atlantic Inertial Systems, Inc. (AIS) which occurred subsequent to the first quarter 2009; and

• Higher large commercial, regional, business and general aviation airplane aftermarket sales primarily in our sensors and integrated business of approximately $2 million; partially offset by

• Lower regional, business and general aviation airplane OE sales of approximately $5 million, primarily in our sensors and integrated systems business.

Electronic Systems segment operating income for the first quarter 2010 increased from the first quarter 2009 primarily due to the following:

• Higher sales volume partially offset by unfavorable product mix across most businesses, which resulted in higher income of approximately $6 million; partially offset by

• Higher operating costs, including incremental costs associated with our recent acquisitions, partially offset by favorable pricing, which resulted in lower income of approximately $2 million. The incremental costs associated with our recent acquisitions included the effect of the write-up of inventory of approximately $3 million from purchase accounting that will not recur.

SOURCE Goodrich Corporation

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