Goodrich Announces Fourth Quarter 2009 Results

Jan. 28, 2010
Goodrich reported a fourth quarter 2009 net income of $105 million.

CHARLOTTE, N.C., Jan. 28, 2010 /PRNewswire-FirstCall/ --

Goodrich Corporation (NYSE: GR) announced results today for the fourth quarter 2009, reaffirmed its outlook for 2010 net income per diluted share and adjusted its outlook for sales and cash flow for the full year 2010.

Commenting on the company's performance and its 2010 outlook, Marshall Larsen, Chairman, President and Chief Executive Officer said, "Our fourth quarter earnings per share were consistent with the 2009 fourth quarter outlook range of $0.72 - $0.87, that we provided last October, and our cash flow significantly exceeded our previous outlook. During the fourth quarter, we experienced strong growth in sales of large commercial airplane original equipment and defense and space products and services. This growth was more than offset by continued weakness in demand for regional, business and general aviation original equipment and commercial aftermarket products and services."

"While the market environment for commercial aftermarket products and services remains challenging, we continue to believe that 2010 will be a year of modest recovery which should allow us to grow our commercial aftermarket sales. We continue to expect aftermarket sales to be weak for the first few months of 2010, with the recovery beginning towards the middle of the year. In our large commercial original equipment market channel, Boeing and Airbus delivered a record 979 new airplanes in 2009 and both manufacturers are striving to maintain stable production for their narrowbody airplanes through at least 2010."

"Our defense and space sales were very strong throughout 2009, growing by about 11 percent for the fourth quarter and 10 percent for the full year. With the inclusion of sales from the recently completed AIS acquisition, we now expect defense and space sales to grow about 15% in 2010 compared to 2009."

Fourth Quarter 2009 Results

Goodrich reported fourth quarter 2009 net income of $105 million, or $0.82 per diluted share, on sales of $1,642 million. In the fourth quarter 2008, the company reported net income of $169 million, or $1.35 per diluted share, on sales of $1,695 million.

The $53 million decrease in sales includes a reduction of $41 million related to the impact of current economic conditions on the company's sales and approximately $36 million for lower reported sales resulting from the formation of the engine controls joint venture with Rolls-Royce, which were partially offset by favorable foreign currency exchange rate sales impacts of approximately $24 million.

For the fourth quarter 2009 compared with the fourth quarter 2008, Goodrich sales changes by market channel were as follows:

-- Large commercial airplane original equipment sales increased by 22 percent. During the fourth quarter 2008, large commercial original equipment sales were adversely affected by the Boeing machinists' strike. There was no similar impact during the fourth quarter 2009, -- Regional, business and general aviation airplane original equipment sales decreased by 44 percent, -- Large commercial, regional, business and general aviation airplane aftermarket sales decreased by 20 percent, and -- Defense and space sales of both original equipment and aftermarket products and services increased by 11 percent.

The change in net income per diluted share is primarily attributable to the impact of lower aftermarket sales, which was partially offset by cost containment initiatives, and included several other factors as noted below:

-- The fourth quarter 2009 results included higher pre-tax expense totaling $10 million, $6 million after-tax or $0.05 per diluted share, related to restructuring charges, acquisition and JV formation-related costs and increased environmental reserves, compared to the fourth quarter 2008. -- The fourth quarter 2009 results included higher pre-tax expense of $11 million, $7 million after-tax or $0.05 per diluted share, related to share-based compensation, compared to the fourth quarter 2008. -- The fourth quarter 2009 results included higher pre-tax expense of $26 million, $16 million after-tax or $0.13 per diluted share, related to worldwide pension plan expense, compared to the fourth quarter 2008. -- The fourth quarter 2009 results included lower pre-tax income of $6 million, $3 million after-tax or $0.03 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 fourth quarter 2008. -- The company reported an effective tax rate of 29 percent for the fourth quarter 2009, compared to an effective tax rate of 23 percent during the fourth quarter 2008, which resulted in lower net income of approximately $0.08 per diluted share, compared to the fourth quarter 2008. -- The prior year's fourth quarter results included pre-tax income of approximately $16 million, $15 million after-tax or $0.12 per diluted share, related to the Rolls-Royce engine controls joint venture, which was completed on December 31, 2008. There was no similar impact during the fourth quarter 2009.

Net cash provided by operating activities, minus capital expenditures, for the fourth quarter 2009 was $176 million, a decrease of $55 million from the same period in 2008. During the fourth quarter 2008, the company received cash totaling $115 million from Rolls-Royce related to the formation of the engine controls joint venture. During the fourth quarter 2009, Goodrich contributed $64 million to its worldwide pension plans, compared to contributions of $126 million in the fourth quarter 2008. Capital expenditures were $54 million in the fourth quarter 2009, compared with capital expenditures of $95 million in the fourth quarter 2008. During the fourth quarter 2009, cash flow provided by operating activities, minus capital expenditures, was 166 percent of income from continuing operations.

Full Year 2009 Results

For the full year 2009, the company reported net income of $597 million, or $4.70 per diluted share, on sales of $6,686 million. During the full year 2008, net income was $681 million, or $5.35 per diluted share, on sales of $7,062 million.

The $376 million decrease in sales is attributable to sales reductions of approximately $148 million related to foreign currency exchange rate impacts, approximately $125 million for lower reported sales resulting from the formation of the engine controls joint venture with Rolls-Royce and the impact of current economic conditions on the company's sales.

For the full year 2009 compared with the full year 2008, Goodrich sales changes by market channel were as follows:

-- Large commercial airplane original equipment sales increased by 3 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 16 percent, and -- Defense and space sales of both original equipment and aftermarket products and services increased by 10 percent

The change in net income per diluted share is primarily attributable to the impact of lower aftermarket sales, which were partially offset by cost containment initiatives, and included several other factors as noted below:

-- The full year 2009 results included higher pre-tax expense of $102 million, $64 million after-tax or $0.51 per diluted share, related to worldwide pension plan expense, compared to the full year 2008. -- The full year 2009 results included higher pre-tax expense of $30 million, $19 million after-tax or $0.16 per diluted share, related to share based compensation, compared to the full year 2008. -- The full year 2009 results included after-tax income from discontinued operations totaling $34 million, or $0.27 per diluted share, primarily associated with resolution of a past environmental claim, compared to after-tax income of $8 million, or $0.06 per diluted share for the full year 2008. -- The full year 2009 results included lower pre-tax income of $67 million, $42 million after-tax or $0.33 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 full year 2008. -- The company reported an effective tax rate of 27 percent for the full year 2009, compared with an effective tax rate of 30 percent during the full year 2008, which resulted in higher net income of approximately $0.20 per diluted share, compared to the full year 2008. -- The full year 2009 results included higher pre-tax expense of $20 million, $12 million after-tax or $0.10 per diluted share, related to restructuring charges, compared to the full year 2008. -- The prior year's results included pre-tax income of approximately $13 million, $13 million after-tax or $0.10 per diluted share, related to the Rolls-Royce engine controls joint venture, which was completed on December 31, 2008. There was no similar impact during 2009.

Net cash provided by operating activities, minus capital expenditures, for the full year 2009 was $488 million, a decrease of $14 million from the same period in 2008. During the full year 2008, the company received cash totaling $115 million from Rolls-Royce related to the formation of the engine controls joint venture. This decrease was partially offset by lower net cash taxes paid in 2009 of $73 million compared to 2008. The decrease was also attributable to lower income from continuing operations and higher spending on non-product inventory, partially offset by lower capital expenditures and lower growth in working capital. During the full year of 2009, Goodrich contributed $238 million to its worldwide pension plans, compared to contributions of $227 million during the full year of 2008. Capital expenditures were $169 million for the full year of 2009, compared to capital expenditures of $285 million for the full year of 2008. During the full year of 2009, cash flow provided by operating activities, minus capital expenditures, was 87 percent of income from continuing operations, compared to 73 percent for the full year of 2008.

Business Highlights

-- Goodrich completed the acquisition of AIS in late December 2009. AIS is a leading provider of mission-critical guidance, stabilization and navigation products and systems for the military and defense market. The acquisition is expected to be slightly accretive to earnings in 2010, including the impact of purchase accounting adjustments. -- The first flight of the Boeing 787 Dreamliner featured a significant number of Goodrich products. Goodrich systems and components on the 787 include the company's nacelle and thrust reverser system, electric braking system, air data sensors, ice detectors, engine data concentrators, fuel management software and the fuel quantity indicating system. In addition, Goodrich provides the aircraft's proximity sensing system, the integrated fuel system for the auxiliary power unit, the cargo operating system, cabin attendant seating, exterior and flight deck lighting systems, integrated heated composite floor panels, and a unique flight deck entry video surveillance system designed to interface with the aircraft's electronic flight bag system. -- Goodrich's Aircraft Wheels and Brakes business was selected by flydubai to supply wheels and carbon brakes for its new fleet of 54 Boeing Next-Generation 737-800 aircraft. Aircraft deliveries with the Goodrich wheel and brake equipment are expected to begin in March 2010 and continue through 2013. The wheels and carbon brakes will use Goodrich's proprietary DURACARB® carbon material, which will provide a weight savings of approximately 700 pounds per airplane compared to high capacity steel brakes, and 550 pounds compared to standard capacity steel brakes. -- Goodrich unveiled its new maintenance, repair and overhaul (MRO) facility located in Sao Carlos, Brazil in the TAM Technological Condominium. The facility initially will focus on repairing International Aero Engine (IAE) V2500-A5 engine inlets, fan cowls and thrust reversers for customers in Latin America and the Caribbean. Capabilities will be expanded in the near future to service other nacelle platforms currently operating in the region. The current 10,000 square foot site serves as an interim location. In 2010 Goodrich will begin renovations on a 40,000 square foot permanent facility adjacent to TAM's heavy maintenance facility in Sao Carlos.

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 current narrowbody production rates are maintained at least through early 2011, and that 787 deliveries begin in late 2010. Additionally, part of the expected growth in sales is related to the 2008 Boeing strike, which adversely impacted first quarter 2009 sales, but will not impact 2010 sales, -- 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 AIS acquisition.

The company's initial full year 2010 sales expectations are for sales of approximately $7.1 billion, representing growth of about 6 - 7 percent compared to 2009. The outlook for 2010 income from continuing operations and net income per diluted share is for a range of $4.15 - $4.40.

The 2010 outlook for income from continuing operations includes, among other factors:

-- A full-year effective tax rate of 29 - 30 percent for 2010, reducing income per diluted share by about $0.19, compared to 2009. The 2010 effective tax rate includes a full-year benefit of approximately 1.5 percent related to an assumed extension of the U.S. research tax credit. -- Pension expense is expected to be about the same as pension expense recorded in 2009. During 2009 Goodrich achieved a return on U.S. plan assets of about 11 percent. The company will use a discount rate of about 5.9 percent for its U.S. plans in 2010.

For 2010, Goodrich now expects 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 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 expects capital expenditures for 2010 to be in a range of $250 - $275 million and worldwide pension plan contributions are now expected to be $100 - $150 million.

The current sales, net income and net cash provided by operating activities outlooks for 2009 and 2010 do not include the impact of potential acquisitions or divestitures.

----------------------

SOURCE Goodrich Corporation