Goodrich Announces Increased Outlook for 2010 Net Income per Diluted Share and Second Quarter 2010 Results

CHARLOTTE, N.C., July 29, 2010 /PRNewswire-FirstCall/ --

• Full year 2010 outlook for net income per diluted share increased to $4.30 - $4.45.  Sales outlook remains unchanged at approximately $7.1 billion.  Net cash provided by operating activities, minus capital expenditures, remains unchanged, and is expected to exceed 85 percent of net income.  
• Second quarter 2010 income from continuing operations per diluted share of $1.24, compared to second quarter 2009 income from continuing operations per diluted share of $1.15.  Second quarter 2010 net income per diluted share of $1.24, compared to second quarter 2009 net income per diluted share of $1.40.
• Second quarter 2010 segment operating income of $307 million, compared to second quarter 2009 segment operating income of $272 million.  Segment operating income margin rose to 17.9 percent.
• Second quarter 2010 sales of $1,718 million compared to second quarter 2009 sales of $1,700 million.

Goodrich Corporation (NYSE: GR) announced results today for the second quarter 2010 and increased its outlook for 2010 net income per diluted share.

Commenting on the company's performance and its 2010 outlook, Marshall Larsen, Chairman, President and Chief Executive Officer said, "For the first time in several quarters, our results are showing year-over-year growth in sales.  This growth, combined with our continuing cost containment efforts, allowed us to report increased income per diluted share from continuing operations and the highest segment operating income margin we have reported since the third quarter 2008.  Our commercial airplane aftermarket sales rose by about 3 percent sequentially, compared to the first quarter 2010, although they were about 3 percent lower than the second quarter 2009.  We still expect sequential commercial aftermarket sales growth in each quarter of 2010, although we now expect full-year commercial aftermarket growth to be somewhat lower than our prior outlook.  We continue to see positive trends in Goodrich aftermarket sales, as well as customer quote and order activity, which should provide momentum for the second half of 2010 and into 2011."

Second Quarter 2010 Results

Goodrich reported second quarter 2010 income from continuing operations and net income of $159 million, or $1.24 per diluted share, on sales of $1,718 million.  In the second quarter 2009, the company reported income from continuing operations of $146 million, or $1.15 per diluted share, and net income of $177 million, or $1.40 per diluted share, on sales of $1,700 million.  

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

• Large commercial airplane original equipment sales decreased by 1 percent,  
• Regional, business and general aviation airplane original equipment sales decreased by 10 percent,
• Large commercial, regional, business and general aviation airplane aftermarket sales decreased by 3 percent.  Three of the company's eight commercial businesses reported higher aftermarket sales in the second quarter 2010, compared to the second quarter 2009.  Sequentially, commercial aftermarket sales were 3 percent higher than during the first quarter 2010,  and
• Defense and space sales of both original equipment and aftermarket products and services increased by 11 percent, including organic growth of about 2 percent.  

The increase in income from continuing operations is attributable primarily to the impact of strong operational performance, continued success on cost containment initiatives and favorable revisions in estimates for certain long-term contracts, which was partially offset by the impact of lower aftermarket sales and a higher tax rate.  Several of these factors are noted below:  

• The company reported an effective tax rate of 32 percent for the second quarter 2010, compared to an effective tax rate of 27 percent during the second quarter 2009.  Compared to the second quarter 2009, second quarter 2010 results included additional tax expense of approximately $0.10 per diluted share, of which approximately $0.03 is related to the delay in renewal of the U.S. R&D tax credit.    
• The second quarter 2010 results included higher pre-tax income of $24 million, $15 million after-tax or $0.12 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 second quarter 2009.  Total revisions in estimates for the second quarter 2010 were $33 million, pre-tax.  Revisions in both periods were primarily related to favorable cost and operational performance, changes in volume expectations and sales pricing improvements and finalization of contract terms on current and/or follow-on contracts.

Additionally, the second quarter 2009 results included after-tax income from discontinued operations totaling $31 million, or $0.25 per diluted share, primarily associated with the resolution of a past environmental claim.  There were no significant items related to discontinued operations during the second quarter 2010.

Net cash provided by operating activities, minus capital expenditures, for the second quarter 2010 was $193 million, an increase of $124 million from the same period in 2009.  During the second quarter 2010, Goodrich contributed $12 million to its worldwide pension plans, compared to contributions of $152 million in the second quarter 2009.  Capital expenditures were $31 million in the second quarter 2010, compared with capital expenditures of $39 million in the second quarter 2009.  During the second quarter 2010 net cash provided by operating activities, minus capital expenditures, was approximately 121 percent of net income.

Year-to-date 2010 Results

For the first half of 2010, the company reported income from continuing operations of $269 million, or $2.10 per diluted share, on sales of $3,413 million, compared to first half 2009 income from continuing operations of $315 million, or $2.49 per diluted share, on sales of $3,396 million.  

For the first half of 2010, the company reported net income of $270 million, or $2.11 per diluted share, on sales of $3,413 million, compared to first half 2009 net income of $347 million, or $2.74 per diluted share, on sales of $3,396 million.  

The decrease in income from continuing operations is attributable primarily to the impact on income of lower aftermarket sales and a higher effective tax rate, which were partially offset by continued success on cost containment initiatives, increased favorable revisions of estimates on certain long-term contracts and several other factors.   Several of these factors are noted below:  

• The company reported an effective tax rate of 35 percent for the first half of 2010, compared to an effective tax rate of 27 percent for the first half of 2009.  Compared to the first half of 2009, first half 2010 results included additional tax expense of $0.27 per diluted share, of which $0.08 is related to the U.S. health care reform legislation and approximately $0.05 is related to the delay in renewal of the U.S. R&D tax credit.    
• The first half 2010 results included higher pre-tax income of $35 million, $22 million after-tax or $0.17 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 half of 2009.  Total revisions in estimates for the first half of 2010 were $49 million, pre-tax.  Revisions in both periods were primarily related to favorable cost and operational performance, changes in volume expectations and sales pricing improvements and finalization of contract terms on current and/or follow-on contracts.

Additionally, the first half 2009 results included after-tax income from discontinued operations totaling $32 million, or $0.25 per diluted share, primarily associated with resolution of a past environmental claim.  There were no significant items related to discontinued operations during the first half of 2010.

Net cash provided by operating activities, minus capital expenditures, for the first half of 2010 was $201 million, an increase of $100 million from the same period in 2009.  During the first half of 2010, Goodrich contributed $117 million to its worldwide pension plans, compared to contributions of $160 million in the first half of 2009.  Capital expenditures were $52 million in the first half of 2010, compared with capital expenditures of $73 million in the first half of 2009.  

Business Highlights

• In June, Goodrich acquired Crompton Technology Group, Ltd. (CTG), a leading designer and manufacturer of advanced carbon fiber composite products for the aerospace, defense, advanced vehicle and clean energy markets.  CTG's products are used on a number of diverse aerospace platforms in production and development. Primary aerospace products include transmission shafts for flight control and power drive systems as well as specialized pipes used in fuel systems.
• In July, Goodrich announced that it had been selected by Qatar Airways to supply wheels and electrically-actuated brakes for its Boeing 787 aircraft.  Qatar has 30 787 aircraft on order for delivery beginning in October 2011.  The Goodrich electric braking system for the Boeing 787 uses Goodrich's proprietary DURACARB® carbon brakes. DURACARB® carbon provides exceptional brake performance and 35% better brake life than competing carbon friction materials.  
• In July, Goodrich and Mubadala Aerospace signed a heads of agreement (HOA) to establish a joint venture company in the United Arab Emirates (UAE) to perform maintenance, repair and overhaul (MRO) work on landing gear. The joint venture company would be the Middle East's first dedicated landing gear service provider once fully operational in 2012.   The joint venture is subject to negotiation and execution of a definitive joint venture agreement.

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 3 percent,    
• Regional, business and general aviation airplane original equipment sales are expected to decrease by 8 - 10 percent,
• Large commercial, regional, business and general aviation airplane aftermarket sales are expected to grow at a low single-digit rate.  Goodrich expects each quarter in 2010 to show sequential growth, with year-over-year sales growth in the second half of 2010, and
• Defense and space sales of both original equipment and aftermarket products and services are expected to increase by more than 15 percent, including sales generated by the December 2009 acquisition of Atlantic Inertial Systems (AIS).  Organic growth is expected to be more than 5 percent in 2010, compared to 2009.  

The company's full year 2010 sales outlook remains unchanged at approximately $7.1 billion.  For the full year 2010, sales are expected to grow approximately 6 percent, compared to 2009 sales.

The outlook for 2010 net income per diluted share has been increased to $4.30 - $4.45, compared to the prior outlook of $4.15 - $4.40, driven primarily by better operating margin performance.  

The 2010 outlook for net income includes a full-year effective tax rate of approximately 31 percent for 2010.  The 2010 effective tax rate continues to include a full-year benefit of approximately 1.5 percent, or $0.10 per diluted share, related to an assumed extension of the U.S. R&D tax credit, which has not yet occurred.  

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, and low-cost country manufacturing and productivity initiatives that are expected to enhance margins over the near and long term.  The company expects capital expenditures for 2010 to be approximately $250 million and worldwide pension plan contributions to be approximately $150 million.  

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

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Goodrich will hold a conference call on July 29, 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.

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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.

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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 recent and future acquisitions;
• successful development of products and advanced technologies;
• the impact of bankruptcies and/or consolidations in the airline industry;
• the health of the commercial aerospace industry, including the large commercial, regional, business and general aviation aircraft manufacturers;
• 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, joint ventures, 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

Quarter Ended June 30, 2010 Compared with Quarter Ended June 30, 2009

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

• Lower large commercial airplane OE sales of approximately $15 million, primarily in our landing gear and actuation systems businesses;

• Lower regional, business and general aviation airplane OE sales across most businesses of approximately $12 million; and

• Lower other aerospace and non-aerospace sales across most businesses of approximately $13 million; partially offset by

• Higher defense and space OE and aftermarket sales primarily in our landing gear and engine components businesses of approximately $6 million; and

• Higher large commercial, regional, business and general aviation airplane aftermarket sales of approximately $5 million, primarily in our wheels and brakes business.  

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

• Lower income of approximately $11 million due to higher operating costs, primarily in our landing gear and actuation systems businesses; partially offset by

• Favorable product mix partially offset by lower sales volume primarily in our landing gear business, which resulted in higher income of approximately $6 million; and

• Favorable foreign exchange, including remeasurement of monetary assets/liabilities, of approximately $4 million.

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

• Lower large commercial, regional, business and general aviation airplane aftermarket sales of approximately $18 million, primarily in our aerostructures business; and

• Lower defense and space OE and aftermarket sales of approximately $13 million, primarily in our interiors business; partially offset by

• Higher large commercial airplane OE sales of approximately $12 million, across all businesses.

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

• Higher income of approximately $28 million related to revisions in estimates for certain long-term contracts, which were primarily related to favorable cost and operational performance, changes in volume expectations and sales pricing improvements and finalization of contract terms on current and/or follow-on contracts; and

• Reduced operating costs partially offset by unfavorable pricing across most businesses, which resulted in higher income of approximately $7 million; partially offset by

• Lower sales volume partially offset by favorable product mix, primarily in our aerostructures business, which resulted in lower income of approximately $18 million.

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

• Higher defense and space OE and aftermarket sales of approximately $62 million, across most businesses, including sales associated with the acquisition of AIS which occurred in December 2009; and

• Higher other aerospace and non-aerospace sales of approximately $6 million primarily in our sensors and integrated systems and engine controls and electrical power systems businesses.

Electronic Systems segment operating income for the second quarter 2010 increased from the second 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 $14 million; and

• Favorable foreign exchange, including remeasurement of monetary assets/liabilities, of approximately $8 million; partially offset by

• Higher operating costs across all businesses, including incremental costs associated with our recent acquisitions, offset by favorable pricing primarily in our sensors and integrated systems and engine controls and electrical power systems businesses.

SOURCE Goodrich Corporation

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