Goodrich Announces 17 Percent Increase in Second Quarter 2011 Sales

Second quarter 2011 sales grew 17 percent to $2,001 million, compared to second quarter 2010 sales of $1,718 million.

Second quarter 2011 commercial aftermarket sales grew 16 percent, compared to second quarter 2010.

Second quarter 2011 net income per diluted share of $1.38, including landing gear plant closure and Microtecnica acquisition-related costs totaling $0.14 per share, increased 11 percent compared to second quarter 2010 net income per diluted share of $1.24.

Full year 2011 outlook for net income per diluted share increased to $5.85 – $6.00, including costs of $0.16 per diluted share associated with plant closure and Microtecnica acquisition-related costs. The prior outlook was for net income per diluted share of $5.40 – $5.55, which did not include the costs noted above. Excluding these costs, earnings guidance for 2011 has increased by more than ten percent.

Sales are now expected to be about $8.1 billion, compared to the prior outlook of $7.8 billion. The outlook for net cash provided by operating activities, minus capital expenditures, is unchanged and is expected to exceed 85 percent of net income.

Goodrich Corporation (NYSE: GR) announced results today for the second quarter 2011, and updated its full year outlook for 2011.

Commenting on the company’s performance and its outlook, Marshall Larsen, Chairman, President and Chief Executive Officer said, "We announced today a very significant increase in our sales and earnings expectations for 2011. For the full year of 2011, we now expect sales to be about $8.1 billion, including about $150 million in sales from the recent acquisition of Microtecnica, a growth rate of about 16 percent compared to 2010.

“Net income per diluted share is expected to grow significantly faster than sales as we further demonstrate the success of our continuous improvement initiatives. Our strong performance in sales growth and margins has allowed us to increase our net income per diluted share outlook for 2011. Our revised outlook of $5.85 – $6.00 per diluted share includes the expected full year costs of $0.16 per diluted share associated with plant closure and Microtecnica acquisition-related costs, and results in a growth rate of more than 30 percent in net income per diluted share for 2011, compared to 2010.

“With our second quarter results, we continued the strong growth trends we experienced in the first quarter 2011. Our sales increase of 17 percent included strong growth in all of our major market channels. Commercial aftermarket sales increased by 16 percent, compared to the second quarter 2010, an acceleration of the very good growth we experienced during the first quarter 2011. We now expect commercial aftermarket sales to increase by about 13 percent this year.

“Our defense and space sales also experienced strong growth of 10 percent, including 6 percent organic growth. We continue to believe that our presence in attractive, high growth markets such as ISR, helicopters and precision munitions will enable us to grow our defense and space sales at a mid-single digit growth rate for the next several years, despite the difficult global defense budget environment.

“As expected, our large commercial airplane OE market experienced a much higher growth rate in the second quarter than in the first quarter. Our 17 percent second quarter growth rate was indicative of the positive impact of the production rate increases announced by the aircraft manufacturers over the last two years. We remain comfortable with our expected growth rate of about 15 percent in 2011, and anticipate continued growth in this market channel through at least 2014.

“Our reported segment operating income margin for the second quarter 2011 was a very strong 17.2 percent, including plant closure and Microtecnica acquisition-related costs. Excluding these costs, segment operating income margins would have been 18.4 percent.”

Second Quarter 2011 Results

Goodrich reported second quarter 2011 net income of $177 million, or $1.38 per diluted share, on sales of $2,001 million. In the second quarter 2010, the company reported net income of $159 million, or $1.24 per diluted share, on sales of $1,718 million.

Segment operating income margin for the second quarter 2011 was 17.2 percent. Excluding plant closure and Microtecnica acquisition-related costs, segment operating income margins would have been 18.4 percent.

For the second quarter 2011 compared with the second quarter 2010, Goodrich sales changes by market channel were as follows:

Large commercial airplane original equipment sales increased by 17 percent,
Regional, business and general aviation airplane original equipment sales increased by 58 percent, of which about 23 percent was organic growth,
Large commercial, regional, business and general aviation airplane aftermarket sales increased by 16 percent, of which about 14 percent was organic growth. Sequentially, commercial aftermarket sales were 6 percent higher than the first quarter 2011, and
Defense and space sales of both original equipment and aftermarket products and services increased by 10 percent, including sales associated with the recent Microtecnica acquisition. Organic sales growth for this market channel was 6 percent.

The increase in net income is attributable primarily to the impact of sales growth in all of the company’s major market channels, strong operational performance, further success on continuous improvement initiatives and favorable changes in estimates for certain long-term contracts, partially offset by plant closure and Microtecnica acquisition-related costs. Several of these factors are noted below:

As previously announced, the company recorded pre-tax costs, related to a plant closure decision, of $16 million, $10 million after-tax or $0.08 per diluted share, during the second quarter 2011. The landing gear costs are included in the segment operating income for Actuation and Landing Systems.

The second quarter 2011 results included pre-tax and after-tax costs of $7 million, or $0.06 per diluted share, associated with the Microtecnica acquisition. These costs are included in the segment operating income for Actuation and Landing Systems.

The second quarter 2011 results included lower pre-tax income of $12 million, $8 million after-tax or $0.06 per diluted share, related to the changes in estimates for certain long-term contracts primarily in our aerostructures and aircraft wheels and brakes businesses, compared to the second quarter 2010. Total pre-tax changes in estimates for the second quarter 2011 were $21 million. Changes 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.

The second quarter 2011 results included pre-tax expense of $19 million, $12 million after-tax or $0.09 per diluted share, related to world-wide pension plan expense, compared to pre-tax pension expense of $38 million, $24 million after-tax or $0.19 per diluted share, recorded during the second quarter 2010.

The company reported an effective tax rate of 32.6 percent for the second quarter 2011, compared to an effective tax rate of 32.1 percent during the second quarter 2010.

The second quarter 2011 results included higher pre-tax expenses of $14 million, $9 million after-tax, or $0.07 per diluted share, related to share-based compensation, compared to the second quarter 2010.

Net cash provided by operating activities, minus capital expenditures, for the second quarter 2011 was $179 million, a decrease of $14 million from the same period in 2010. The decrease was due primarily to higher capital expenditures during the second quarter 2011, compared to the second quarter 2010. Capital expenditures were $62 million in the second quarter 2011, compared with capital expenditures of $31 million in the second quarter 2010.

Year-to-date 2011 Results

For the first half of 2011, the company reported net income of $371 million, or $2.90 per diluted share, on sales of $3,897 million, compared to first half 2010 net income of $270 million, or $2.11 per diluted share, on sales of $3,413 million.

The increase in net income is attributable primarily to the impact of sales growth in all of the company’s major market channels, strong operational performance, further success on continuous improvement initiatives, a lower effective tax rate and favorable changes in estimates for certain long-term contracts. Several of these factors are noted below:

The first half 2011 results included pre-tax costs related to a plant closure decision, of $16 million, $10 million after-tax or $0.08 per diluted share. The landing gear costs are included in the segment operating income for Actuation and Landing Systems.

The first half 2011 results included pre-tax and after-tax costs of $8 million, or $0.06 per diluted share, associated with the Microtecnica acquisition. These costs are included in the segment operating income for Actuation and Landing Systems.

The first half 2011 results included lower pre-tax income of $8 million, $5 million after-tax or $0.04 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 2010. Total revisions in estimates for the first half of 2011 were $41 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.

The first half 2011 results included pre-tax pension expense of $41 million, $26 million after-tax or $0.20 per diluted share, compared to pre-tax pension expense of $81 million, $51 million after-tax or $0.40 per diluted share, recorded during the first half 2010.

The company reported an effective tax rate of 28.5 percent for the first half of 2011, compared to an effective tax rate of 34.6 percent for the first half of 2010. Compared to the first half of 2010, first half 2011 results included a benefit of $21 million, or $0.17 per diluted share related to a tax settlement and the benefit of the U.S. R&D tax credit, which had not been renewed in the first half of 2010.

The first half 2011 results included higher pre-tax expenses of $13 million, $8 million after-tax, or $0.07 per diluted share, related to share-based compensation, compared to the first half 2010.
Net cash provided by operating activities, minus capital expenditures, for the first half of 2011 was $240 million, an increase of $38 million from the same period in 2010. During the first half of 2011, Goodrich contributed $75 million to its worldwide pension plans, compared to contributions of $117 million in the first half of 2010. Capital expenditures were $98 million in the first half of 2011, compared with capital expenditures of $52 million in the first half of 2010.

Significant Events

Goodrich announced that the ORS-1 satellite, built under contract to the U.S. Air Force, was successfully launched. ORS-1 is the first satellite in the Operationally Responsive Space program designed to support combatant command operations and will provide a battlespace awareness capability supporting U.S. Central Command’s mission needs. Goodrich is the prime contractor for the ORS-1 satellite.

Goodrich announced that it completed the acquisition of Microtecnica, a leading provider of flight control actuation systems for helicopter, regional and business aircraft, missile actuation, and aircraft thermal and environmental control systems. Microtecnica employs approximately 700 people at facilities in Italy and the UK. Major customers include AgustaWestland, Alenia, Hamilton Sundstrand, Avio, Bombardier and Eurocopter. Microtecnica is part of Goodrich’s Actuation Systems business, within its Actuation and Landing Systems segment.

Goodrich announced that it will close its Marble Avenue landing gear facility in Cleveland, Ohio by the end of 2012, and will record pre-tax charges totaling approximately $37 million of which 40 percent are non-cash. Approximately $20 million ($0.10 per diluted share) is expected to be recorded in 2011 and approximately $15 million ($0.07 per diluted share) is expected to be recorded in 2012.

2011 Outlook

The company’s 2011 sales outlook is based on market assumptions for each of its major market channels. The current market assumptions for the full year 2011, compared with the full year 2010 results, include:

Large commercial airplane original equipment sales are expected to increase about 15 percent.
This outlook assumes all announced production rate increases are implemented, and Boeing 787 and 747-8 deliveries are consistent with the latest schedule announced by Boeing,
Regional, business and general aviation airplane original equipment sales are expected to grow by about 40 percent, of which about 16 percent is organic growth,
Large commercial, regional, business and general aviation airplane aftermarket sales are expected to increase by about 13 percent, of which about 12 percent is organic growth, and
Defense and space sales of both original equipment and aftermarket products and services are expected to increase by about 15 percent, including sales associated with the Microtecnica acquisition. Organic growth is expected to be about 10 percent.

The company’s full year 2011 sales are now expected to be approximately $8.1 billion, representing growth of over 16 percent from the full year 2010 results. Organic growth is expected to be approximately 13 percent. The outlook for 2011 net income per diluted share has been increased to a range of $5.85 – $6.00, an increase of more than 30 percent compared to 2010 net income per diluted share of $4.51. The prior outlook for net income per diluted share was $5.40 – $5.55.

The sales and net income per diluted share outlook for 2011 includes the impact of the Microtecnica acquisition, which is expected to increase sales in 2011 by about $150 million. The outlook does not include any other potential acquisitions or divestitures. The 2011 outlook includes, among other factors:

Pre-tax costs, related to the previously announced plant closure decision, of approximately $20 million, $13 million after-tax or $0.10 per diluted share. The landing gear costs are included in the segment operating income for Actuation and Landing Systems.

Pre-tax and after-tax costs of approximately $8 million, or $0.06 per diluted share, associated with the Microtecnica acquisition. These costs are included in the segment operating income for Actuation and Landing Systems.

Lower worldwide pre-tax pension expense of approximately $78 million, $49 million after-tax or $0.39 per diluted share. For 2011, the company expects total worldwide pre-tax pension expense of approximately $84 million, compared to $162 million in 2010.

A full-year effective tax rate of approximately 30 percent for 2011, which is unchanged from our previous outlook. On average, Goodrich expects an effective tax rate of approximately 32 percent for the remaining two quarters of 2011.

For 2011, 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 the Boeing 787, Airbus A350 XWB and A320neo, Bombardier CSeries and Mitsubishi Regional Jet (MRJ) aircraft programs, fixed assets and working capital to support announced production rate increases associated with the Boeing 737 and Airbus A320 aircraft, and competitive cost country manufacturing and productivity initiatives that are expected to enhance margins over the near and long term. The company expects capital expenditures for 2011 to be in a range of $300 – $350 million. Pre-tax worldwide pension plan contributions are expected to be approximately $100 million.