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1
SG Cowen
25th Annual Aerospace Technology Conference
February 10, 2004
Marshall Larsen
Chairman, President and CEO
2
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
3
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
4
Goodrich – A Global Franchise
5
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%
6
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
7
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
8
Agenda
Market Summary
2003 Results and 2004 Outlook
Goodrich Key Initiatives
9
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
10
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
11
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
12
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
13
Aftermarket
0%1%2%3%4%5%6%7%8%9%
10%
2003 2004 2005 2006 2007 2008
ASM, RPM Forecast (yr/yr) - Airline Monitor, GR Est.
RPM ASMDriven 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 ($B)
19%
23%
29%
29%
Airframe Engines Components Line Maintenenace
CAGR (’03-’08) = 4.2%
Source: Back Aviation
Uncertainty remains in near-term aftermarket forecasts
14
Military & Space
Market is global New fighters driving growthIntelligence, Transports and Rotorcraft Markets growingFY05 Defense budget supports expectations Growth opportunity
0
40
80
120
160
200
2002 2003 2004 2005 2006 2007 2008
US Defense Spending ($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
15
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
16
Agenda
Market Summary
2003 Results and 2004 Outlook
Goodrich Key Initiatives
17
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 $0.93 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
18
($1.15)($0.21)
($115)($7)
(3.4%)
($87)
$574
Change
$1.56$1.14
$0.41$0.93
Diluted EPS- Continuing operations- Net income
$164$118
$49$111
Income - Continuing operations- Net income
$419$332Segment operating income
11.0%7.6%- % of Sales
$3,809$4,383Sales
20022003(Dollars in Millions, excluding EPS)
Full-year 2003 – Financial Summary
19
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 $378
Note: See page 30 for definitions of Total Debt and Net Debt and a detailed calculation of these measures as of the dates indicated.
20
Cash Flow and Capital Expenditures ($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
21
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
22
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.
23
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
24
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
25
Near Term Risks & Opportunities
Supply chain management($2B annual spend)
Shared services
Enterprise Initiative Savings
Working capital reductionsFurther portfolio pruningAccelerate debt retirement
Higher Cash Generation
Capacity in placeSubstantial upside leverageAirline/OE outsourcing
Faster Commercial Recovery
Opportunities GR Positioning
Opportunities May Accelerate Earnings Momentum
26
Agenda
Market Summary
2003 Results and 2004 Outlook
Goodrich Key Initiatives
27
Goodrich Strategic Imperatives
Balanced GrowthFaster than the overall marketWin key positions on new aircraft (e.g. 7E7)Migrate commercial products/technologies to military applicationsPenetrate adjacent markets
Leverage the EnterpriseResource allocationTechnology/InnovationEnterprise-wide initiativesCustomer alignment/focus
Operational ExcellenceIntegrate Aeronautical SystemsLean manufacturing/Six SigmaMake/Buy analysis
Successful implementation will enable Goodrich to compete/win in all business environments
28
What Investors Should Expect from Goodrich
Continued commitment to integrityNo significant acquisitionsFocused on the business• “Blocking and Tackling”
- Cash flow- Margin improvement- Aeronautical Systems integration- Working capital management
• New product development- Continue investing in new products and systems
Reduce leverage to target levelsTransparency of financial results and disclosureAccountable to all stakeholders
29
Questions and Answers
SG Cowen
25th Annual Aerospace Technology Conference
February 10, 2004
30
Supplemental Information
Pro-forma9/30/2002 10/1/2002 12/31/2002 3/31/2003 6/30/2003 9/30/2003 12/31/2003
Elements of Total DebtPre-positioned
Cash Bridge LoanShort-term bank debt 284.0$ (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.