[GOODRICH LOGO]
NEWS RELEASE
[GOODRICH LOGO]
Goodrich Fourth Quarter and Full Year 2001 Results Exceed Expectations
- Fourth quarter income from continuing operations of $0.69 per
diluted share, excluding special items, was equal to the prior
year and compared favorably with prior guidance of $0.65 per
diluted share.
- Full year 2001 income from continuing operations, excluding
special items, increased approximately 18% over the prior
year, to $2.87 per diluted share, compared to prior guidance
of "in excess of $2.80 per diluted share."
- Strong free cash flow including the Engineered Industrial
Products business, excluding special items, of $87 million in
the fourth quarter; full year free cash flow of $189 million.
- Fourth quarter consolidation and restructuring related charges
from continuing operations were $187 million pre-tax and $124
million after-tax. These activities are projected to generate
annualized pre-tax savings in excess of $125 million.
- Progress continues on spin-off of Engineered Industrial
Products business.
CHARLOTTE, NC, January 29, 2002 - Goodrich Corporation (NYSE: GR) announced
today that fourth quarter income from continuing operations, excluding special
items, was $73 million, or $0.69 per diluted share, compared to year-ago
results, excluding special items, of $73 million, or $0.69 per diluted share.
For the full year, income from continuing operations, excluding special items,
rose to $306 million, or $2.87 per diluted share, compared to $265 million, or
$2.43 per diluted share, in 2000. First Call consensus estimates on this basis
are $0.67 per diluted share and $2.81 per diluted share for the fourth quarter
and full year 2001, respectively. Sales for the quarter and the full year were
$1.1 billion and $4.2 billion, respectively. Continuing operations excludes the
company's Engineered Industrial Products (EIP) business as well as the company's
former Performance Materials business. Special items include merger-related and
consolidation costs, gains or losses on sold businesses, results of discontinued
operations, asset impairment charges and other restructuring costs.
Commenting on the company's results, David L. Burner, Goodrich's chairman and
chief executive officer, said, "Our aerospace businesses achieved excellent
results under challenging circumstances. Aftermarket sales to our airline
customers, although down in the fourth quarter, were stronger than expected.
This decline was more than offset by contributions from recently acquired
businesses, strong military sales, and expected deliveries to our commercial
transport
Page 1
OE customers. Overall, revenue growth increased nearly 10 percent compared to
the year ago quarter despite the difficult environment for commercial aerospace
products. For the year, we once again achieved record revenues and double-digit
sales growth, which speaks to the strength of our diversified aerospace business
and our ability to respond quickly to changing customer demands."
Including the EIP business, fourth quarter net income, excluding special items,
was $72 million, or $0.70 per diluted share, compared to year-ago results,
excluding special items, of $84 million, or $0.80 per diluted share. For the
full year, including the EIP business, 2001 net income, excluding special items,
rose to $330 million, or $3.14 per diluted share, compared to $317 million, or
$2.97 per diluted share, in 2000. Sales for the quarter and the full year
including the EIP business were $1.2 billion and $4.8 billion, respectively. On
a comparable basis, First Call consensus estimates equaled $0.68 per diluted
share and $3.10 per diluted share for the fourth quarter and full year 2001,
respectively.
Goodrich reported a net loss in the fourth quarter of $54 million, or $0.53 per
diluted share, including an after-tax special charge of $127 million ($124
million for previously announced consolidation and restructuring related
activities primarily in the company's aerospace businesses and a loss of $3
million from discontinued operations). For the full year 2001, reported net
income was $289 million, or $2.76 per diluted share, including an after-tax
special charge of $17 million ($129 million of consolidation and restructuring
related charges net of $112 million of income from discontinued operations).
Free cash flow (operating cash flow from continuing operations adjusted for cash
payments related to special items, less capital expenditures), including the EIP
business, was $87 million in the quarter, which was primarily the result of
improvements in working capital and lower than expected tax payments. Full year
2001 free cash flow including the EIP business was $189 million, in line with
the company's prior guidance.
During the fourth quarter, the company incurred various consolidation and
restructuring related charges of $191 million ($127 million after-tax),
including $187 million from continuing operations and $4 million for EIP. For
the full year, such charges were about $200 million ($132 million after-tax),
including $195 million from continuing operations and $5 million for EIP. These
charges were largely related to costs associated with restructuring activities
undertaken after September 11. As previously announced, these charges are
primarily related to aerospace facility consolidations, a significant workforce
reduction, asset impairment charges, costs associated with reducing the
company's investment in the Boeing 717 program and in its Super 727 re-engining
program. The non-cash component of these charges is expected to be about 70% of
the pre-tax amount. These activities are expected to be largely completed by the
end of 2002. After completion, it is expected that the company's aerospace
businesses will realize annual pre-tax savings in excess of $125 million as a
result of these actions.
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FOURTH QUARTER OPERATIONS REVIEW
In the aerospace businesses, sales increased nearly 10 percent versus the prior
year to $1.1 billion, while operating income, excluding special items, decreased
2 percent to $154 million, and margins decreased to 14.6 percent from 16.4
percent. The sales increase reflects solid demand for almost all of the
company's core products, and a significant contribution by recently acquired
businesses. The Electronic Systems segment was responsible for the largest
component of the sales increase. It supplies products to the military, space and
commercial aviation markets, and experienced sales growth in excess of 42% in
the fourth quarter, compared to the fourth quarter 2000. The aerospace sales in
2001 included an incremental contribution from acquisitions completed since 2000
of approximately $60 million. The decrease in operating income was largely due
to an unfavorable sales mix associated with lower aftermarket revenues and
increased R&D spending. The events of September 11 had an immediate impact on
airline purchases of aftermarket parts and services, which carry a higher margin
than other sales, resulting in a 10% decline in aftermarket revenues versus the
year-ago quarter. Commercial transport OE sales increased 14% during the
quarter, compared to the year-ago quarter, as most customers accepted delivery
of products ordered before September 11. New order inflows for both OE and
aftermarket products decreased during the quarter, which will have a significant
impact on early 2002 results.
In the EIP businesses, reflected as a discontinued operation, sales decreased to
$154 million and net income, excluding special items, decreased to a loss of
$0.9 million. These results were primarily related to weak product demand
resulting from the current economic environment, associated pricing pressures in
the industrial markets served and a changing sales mix to lower margin products.
FOURTH QUARTER HIGHLIGHTS
During the quarter, Goodrich enhanced its long-term outlook by extending recent
successes in winning new business.
Early in the quarter, Lockheed Martin announced that the F-22 "Raptor" fighter
jet had been approved for initial low-rate production. In support of this
program, the company will supply the aircraft's landing gear, ejection seats,
titanium engine bay doors, sensors and fuel delivery technology.
In November, Goodrich announced that it will supply the landing gear and lead
the landing system integration effort for the Lockheed Martin Joint Strike
Fighter (JSF). The estimated potential value of this business is $4 to $5
billion over the life of the new fighter jet program, including original
equipment and aftermarket sales and service, but excluding foreign military
sales that could add significantly to this total.
During the quarter, Goodrich also announced that it has entered into an
agreement with Rolls-Royce plc to supply two major systems for the Trent(R) 900
turbofan engine that will power the Airbus A380 aircraft. Goodrich's
Aerostructures business will manufacture the rear and center fan case sections,
and Goodrich's Electronic Systems business will provide the entire sensor suite
Page 3
for the engine. Earlier this year Goodrich announced that it had been selected
to provide other important systems on the A380 including the fuel delivery
systems for the Trent engine, the body and wing landing gear and the evacuation
system. Total revenue for A380 awards to date is expected to be $3 to $4 billion
over the next twenty years.
SHARE REPURCHASE PROGRAM
On September 17, Goodrich announced a program to repurchase up to $300 million
of its common stock. During the fourth quarter, it repurchased approximately 0.3
million shares. The total cost was $7.2 million, with an average purchase price
of $25.31 per share. In total, for the current program, Goodrich has purchased
approximately 2.5 million shares through the end of December. The total cost of
these shares was approximately $50 million with an average purchase price of
$20.29 per share.
OUTLOOK
Goodrich expects 2002 to be a challenging year for the commercial aerospace
industry. Boeing and Airbus have both announced that new commercial aircraft
delivery estimates for 2002 will be lower than 2001, and most airlines have
announced reductions in their aircraft fleet sizes, as compared to 2001. To
develop its outlook, Goodrich assumed new aircraft production rates based upon
the announced plans of Boeing, Airbus and the regional jet manufacturers.
Goodrich also has assumed that airline capacity reductions will result in more
than a 10 percent decline in 2002 aftermarket sales versus 2001.
Using these assumptions, Goodrich expects that its diluted earnings per share
from continuing operations in 2002, excluding special items, will be in the
range of $2.45 to $2.55. This range compares to the $2.87 per diluted share the
company achieved in 2001. The 2002 estimate includes the net benefit from
eliminating goodwill amortization under FAS 142, expected higher levels of
pension expense, and the savings from the restructuring initiatives discussed
earlier in this release. Revenue is expected to be approximately 5 to 10 percent
lower than the $4.2 billion of revenue recorded in 2001. The company anticipates
generating between $275 and $300 million of free cash flow from continuing
operations, excluding special items. For the first quarter 2002, which is
expected to be the weakest quarter of the year, Goodrich expects earnings per
diluted share from continuing operations, excluding special items, to be between
$0.50 and $0.55 per diluted share. It is expected that each quarter in 2002 will
show sequential improvement, assuming the economy and airline travel recover in
the second half of the year.
In commenting on this outlook, Burner said, "With this year's expected spin-off
of our industrial products business, we will have established a focused and
successful business base as a leading global systems supplier to the aerospace
industry. While we expect 2002 to be another
Page 4
challenging year, we believe our exceptionally well-balanced portfolio of
businesses and our rich technology base strengthen our ability to perform well
in a difficult environment and position us to take advantage of future upswings
in the commercial aerospace market. While the economic environment will continue
to change, and other challenges will arise, we are confident that Goodrich is
poised for long-term success, with the capabilities to continue to expand and
deliver value to customers and shareholders."
ENGINEERED INDUSTRIAL PRODUCTS SPIN-OFF
Goodrich expects to complete the spin-off of its Engineered Industrial Products
business in the second quarter of 2002. The initial SEC filing, the Form 10
Registration Statement, will be made on January 29, 2002. Additional details
regarding the new industrial company and the spin-off will be issued in a
separate press release. The new industrial company will include substantially
all the assets and liabilities of the EIP business, including the associated
asbestos liabilities and related insurance.
Goodrich Corporation (NYSE: GR) is a leading worldwide supplier of aerospace
components, systems and services. Goodrich is ranked by Fortune magazine as one
of the "Most Admired" aerospace companies and is included on Forbes magazine's
"Platinum List" of America's best big companies. Headquartered in Charlotte,
North Carolina, the company's aerospace businesses employ approximately 19,000
people worldwide. For more information, please visit www.goodrich.com.
THE TABLES THAT FOLLOW PROVIDE MORE DETAILED INFORMATION ABOUT GOODRICH RESULTS.
Certain statements made in this release 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. Specifically,
statements that are not historical facts, including statements accompanied by
words such as "believe," "expect," "anticipate," "intend," "estimate" or "plan"
are intended to identify forward-looking statements and convey the uncertainty
of future events or outcomes. 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: production and delivery rates of new commercial and military
aircraft; global demand for aircraft spare parts and aftermarket services; the
impact of the terrorist attacks on September 11, 2001 and their aftermath; the
timing related to restoring consumer confidence in air travel;
Page 5
the health of the commercial aerospace industry, including the impact of
bankruptcies in the airline industry; growth in the company's military, space
and industrial gas turbines businesses; demand for and market acceptance of new
and existing products, including potential cancellation of orders by commercial
customers; successful development of advanced technologies; competitive product
and pricing pressures; the extent to which the company is able to achieve
savings from its restructuring plans; the timing and successful completion of
the spin-off of the company's Engineered Industrial Products business; domestic
and foreign government spending, budgetary and trade policies; economic and
political changes in international markets where the company competes, such as
changes in currency exchange rates, inflation rates, recession and other
external factors over which the company has no control; and the outcome of
contingencies (including completion of acquisitions, divestitures, litigation
and environmental remediation efforts). Further information regarding the
factors that could cause actual results to differ materially from projected
results can be found 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, 2000.
The company cautions you not to place undue reliance on the forward-looking
statements contained in this release, 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.
###
Page 6
GOODRICH CORPORATION
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
DECEMBER 31,
------------------------------------------------------------------------
2001 2001 2000 2000
AS REPORTED AS ADJUSTED(A) AS RESTATED(B) AS ADJUSTED(C)
Sales $ 1,052.8 $ 1,052.8 $ 961.3 $ 961.3
============ ============ ========== ==========
Income (Loss) before Income Taxes
and Trust Distributions (73.1) 113.8 87.4 105.0
Income Tax (Expense) Benefit 24.6 (38.1) (23.6) (29.3)
Distributions on Trust Preferred
Securities (2.6) (2.6) (2.6) (2.6)
------------ ------------ ---------- ----------
Income (Loss) from Continuing Operations (51.1) 73.1 61.2 73.1
Income (Loss) from Discontinued Operations (3.3) -- 17.0 --
------------ ------------ ---------- ----------
Net Income (Loss) $ (54.4) $ 73.1 $ 78.2 $ 73.1
============ ============ ========== ==========
Income (Loss) Per Share:
Basic
Continuing Operations $ (0.50) $ 0.72 $ 0.60 $ 0.72
Discontinued Operations (0.03) -- 0.17 --
------------ ------------ ---------- ----------
Net Income $ (0.53) $ 0.72 $ 0.77 $ 0.72
============ ============ ========== ==========
Diluted
Continuing Operations $ (0.50) $ 0.69 $ 0.57 $ 0.69
Discontinued Operations (0.03) -- 0.18 --
------------ ------------ ---------- ----------
Net Income $ (0.53) $ 0.69 $ 0.75 $ 0.69
============ ============ ========== ==========
Weighted - Average Number
of Shares Outstanding
(in millions):
Basic 101.9 101.9 102.1 102.1
============ ============ ========== ==========
Diluted 102.4 105.2 106.7 106.7
============ ============ ========== ==========
(A) Results exclude the effect of a $92.4 million charge ($61.4 million
after-tax), or $0.59 a diluted share for merger-related and consolidation costs
and a $94.5 million charge ($62.8 million after-tax), or $0.60 a diluted share
recorded in cost of sales for inventory adjustments. Results also exclude the
after-tax effect of income (loss) from discontinued operations ($3.3 million, or
$0.03 a diluted share). Weighted average diluted shares as adjusted include 2.8
million potential shares for assumed conversions of convertible preferred
securities that were anti-dilutive on an as reported basis.
(B) The Company's planned spin-off of its Engineered Industrial Products Segment
to shareholders represents the disposal of a business under APB Opinion No. 30.
Accordingly, the Company's historical results of operations have been restated
to reflect the Company's Engineered Industrial Products Segment as a
discontinued operation.
(C) Results exclude the effect of a $15.1 million charge ($10.2 million
after-tax), or $0.10 a diluted share for merger-related and consolidation costs
and a $2.5 million charge ($1.7 million after-tax), or $0.02 a diluted share
related to an impairment loss on businesses held for disposal. Results also
exclude the after-tax effect of income from discontinued operations ($17.0
million, or $0.18 a diluted share).
Page 7
GOODRICH CORPORATION
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED
DECEMBER 31,
-------------------------------------------------------------------------
2001 2001 2000 2000
AS REPORTED AS ADJUSTED(A) AS RESTATED(B) AS ADJUSTED(C)
Sales $ 4,184.5 $ 4,184.5 $ 3,700.5 $ 3,700.5
============ ============ ============ ============
Income before Income Taxes
and Trust Distributions 281.7 476.3 367.0 413.7
Income Tax Expense (94.3) (159.5) (121.3) (137.7)
Distributions on Trust Preferred
Securities (10.5) (10.5) (10.5) (10.5)
------------ ------------ ------------ ------------
Income from Continuing Operations 176.9 306.3 235.2 265.5
Income from Discontinued Operations 112.3 -- 90.7 --
------------ ------------ ------------ ------------
Net Income $ 289.2 $ 306.3 $ 325.9 $ 265.5
============ ============ ============ ============
Income Per Share:
Basic
Continuing Operations $ 1.72 $ 2.97 $ 2.24 $ 2.53
Discontinued Operations 1.08 -- 0.87 --
------------ ------------ ------------ ------------
Net Income $ 2.80 $ 2.97 $ 3.11 $ 2.53
============ ============ ============ ============
Diluted
Continuing Operations $ 1.65 $ 2.87 $ 2.16 $ 2.43
Discontinued Operations 1.11 -- 0.88 --
------------ ------------ ------------ ------------
Net Income $ 2.76 $ 2.87 $ 3.04 $ 2.43
============ ============ ============ ============
Weighted - Average Number
of Shares Outstanding
(in millions):
Basic 103.1 103.1 104.8 104.8
============ ============ ============ ============
Diluted 106.9 106.9 109.1 109.1
============ ============ ============ ============
(A) Results exclude the effect of a $107.3 million charge ($71.3 million
after-tax), or $0.67 a diluted share for merger-related and consolidation costs,
a $94.5 million charge ($62.8 million after-tax), or $0.59 a diluted share
recorded in cost of sales for inventory adjustments and a $7.2 million gain
($4.7 million after-tax), or $0.04 a diluted share from the sale of a portion of
the Company's interest in a business. Results also exclude the after-tax effect
of income from discontinued operations ($112.3 million, or $1.11 a diluted
share).
(B) The Company's planned spin-off of its Engineered Industrial Products Segment
to shareholders represents the disposal of a segment under APB Opinion No. 30.
Accordingly, the Company's historical results of operations have been restated
to reflect the Company's Engineered Industrial Products Segment as a
discontinued operation.
(C) Results exclude the effect of a $44.2 million charge ($28.6 million
after-tax), or $0.26 a diluted share for merger-related and consolidation costs
and a $2.5 million charge ($1.7 million after-tax), or $0.01 a diluted share
related to an impairment loss on businesses held for disposal. Results also
exclude the after-tax effect of income from discontinued operations ($90.7
million, or $0.88 a diluted share).
Page 8
GOODRICH CORPORATION SEGMENT REPORTING
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED
DECEMBER 31,
------------------------------------------------------------------
2001 2001 2000 2000
AS RECORDED AS ADJUSTED(A) AS RECORDED(B) AS ADJUSTED(C)
Aerostructures and Aviation
Technical Services $ 375.1 $ 375.1 $ 374.1 $ 374.1
Landing Systems 286.3 286.3 272.7 272.7
Engine and Safety Systems 186.4 186.4 170.8 170.8
Electronic Systems 205.0 205.0 143.7 143.7
---------- ---------- -------- --------
Total Sales $ 1,052.8 $ 1,052.8 $ 961.3 $ 961.3
========== ========== ======== ========
Operating Income:
Aerospace:
Aerostructures and Aviation
Technical Services $ (80.5) $ 47.1 $ 53.8 $ 53.8
Landing Systems 0.5 37.9 28.7 40.9
Engine and Safety Systems 11.2 27.5 28.7 30.4
Electronic Systems 36.1 41.1 32.2 32.2
---------- ---------- -------- --------
Total Segment Operating Income $ (32.7) $ 153.6 $ 143.4 $ 157.3
Corporate General and Administrative Costs (17.1) (16.5) (19.1) (17.9)
Merger-related and Consolidation Costs -- (92.4) -- (15.1)
Restructuring-related Inventory Adjustments -- (94.5) -- --
---------- ---------- -------- --------
Total Operating Income $ (49.8) $ (49.8) $ 124.3 $ 124.3
========== ========== ======== ========
* Segment operating income excludes merger-related and consolidation costs as
well as restructuring-related inventory adjustments. Such amounts are presented
separately in the table above. Restructuring-related inventory adjustments are
recorded in cost of sales in the consolidated statement of income.
Page 9
GOODRICH CORPORATION SEGMENT REPORTING
(Dollars in millions)
YEAR ENDED
DECEMBER 31,
--------------------------------------------------------------------------
2001 2001 2000 2000
AS RECORDED AS ADJUSTED* AS RECORDED AS ADJUSTED*
Sales:
Aerospace:
Aerostructures and Aviation
Technical Services $ 1,514.4 $ 1,514.4 $ 1,455.5 $ 1,455.5
Landing Systems 1,149.1 1,149.1 1,057.7 1,057.7
Engine and Safety Systems 762.6 762.6 644.4 644.4
Electronic Systems 758.4 758.4 542.9 542.9
---------- ---------- ---------- ----------
Total Sales $ 4,184.5 $ 4,184.5 $ 3,700.5 $ 3,700.5
========== ========== ========== ==========
Operating Income:
Aerospace:
Aerostructures and Aviation
Technical Services $ 94.1 $ 223.7 $ 205.3 $ 209.0
Landing Systems 108.4 153.1 123.7 149.0
Engine and Safety Systems 114.2 131.9 115.8 117.5
Electronic Systems 128.1 135.4 117.7 118.1
---------- ---------- ---------- ----------
Total Segment Operating Income $ 444.8 $ 644.1 $ 562.5 $ 593.6
Corporate General and Administrative Costs (60.2) (57.7) (72.8) (59.7)
Merger-related and Consolidation Costs -- (107.3) -- (44.2)
Restructuring-related Inventory Adjustments -- (94.5) -- --
---------- ---------- ---------- ----------
Total Operating Income $ 384.6 $ 384.6 $ 489.7 $ 489.7
========== ========== ========== ==========
* Segment operating income excludes merger-related and consolidation costs as
well as restructuring-related inventory adjustments. Such amounts are presented
separately in the table above. Restructuring-related inventory adjustments are
recorded in cost of sales in the consolidated statement of income.
Page 10
GOODRICH SEGMENT RESULTS
FOURTH QUARTER 2001 VERSUS THIRD QUARTER 2001
Continuing Aerospace Businesses
($ millions)
4Q01 3Q01
---- ----
Sales $1,052.8 $1,051.9
Segment Operating Income - as recorded (32.7) 165.5
Margin - as recorded (3%) 15.7%
Consolidation and restructuring related charges (186.3) (1.4)
Segment Operating Income - as adjusted 153.6 166.9
Margin - as adjusted 14.6% 15.9%
As Adjusted - Results from continuing operations, excluding special items
In the Aerospace businesses, sales remained essentially flat from $1,051.9 in
the third quarter 2001 to $1,052.8 in the fourth quarter 2001. Strength in the
Electronics Systems segment, including the full-quarter contribution of the
Hella lighting acquisition completed in September 2001, and slightly increased
sales for the company's Aerostructures OEM products offset decreases in
aftermarket demand (commercial wheels and brakes, Aerostructures, evacuation
slides) as well as a decrease in sales associated with turbo-machinery products
and other Engine and Safety Systems group products.
Operating income, as adjusted, during the same period decreased $13.3 or 8% from
$166.9 in the third quarter to $153.6. This decrease is due primarily to lower
volume and unfavorable product mix associated with lower aftermarket sales,
increased operating losses in the Aviation Technical Services business,
continued R&D investment, and increased pricing pressures.
Page 11
GOODRICH SEGMENT RESULTS
FOURTH QUARTER 2001 VERSUS FOURTH QUARTER 2000
Goodrich Aerospace Businesses
Aerostructures and Aviation Technical Services
($ millions)
FULL-YEAR FULL-YEAR
4Q01 4Q00 2001 2000
---- ---- ---- ----
Sales $ 375.1 $ 374.1 $ 1,514.4 $ 1,455.5
Operating Income - as recorded (80.5) 53.8 94.1 205.3
Operating Margin - as recorded (21.5%) 14.4% 6.2% 14.1%
Consolidation and restructuring related (127.6) -- (129.6) (3.7)
charges
Operating Income - as adjusted 47.1 53.8 223.7 209.0
Operating Margin - as adjusted 12.6% 14.4% 14.8% 14.4%
As Adjusted - Results from continuing operations, excluding special items
Sales for the quarter increased less than 1% from $374.1 in the fourth quarter
of 2000 to $375.1 in the fourth quarter of 2001. This increase was primarily a
result of increased Aerostructures original equipment sales for Airbus products,
offset by decreased sales for aftermarket products and weak demand at Aviation
Technical Services.
Operating income, as adjusted, for the quarter decreased $6.7, or 12%, from
$53.8 in the fourth quarter of 2000 to $47.1 in the fourth quarter of 2001. This
decrease is primarily attributable to decreased aftermarket revenue, primarily
as a result of the events of September 11, and increased operating losses at
Aviation Technical Services (ATS). ATS recorded a loss for the quarter.
Included in the Consolidation and restructuring related charges noted above,
during the 4th quarter Aerostructures recorded inventory charges of $94.5
million. These charges are largely related to the reduced expectations for the
Boeing 717 program and the Super 727 re-engining program. These are entirely
non-cash charges.
Page 12
LANDING SYSTEMS
($ millions)
FULL-YEAR FULL-YEAR
4Q01 4Q00 2001 2000
---- ---- ---- ----
Sales $286.3 $272.7 $1,149.1 $1,057.7
Operating Income - as recorded 0.5 28.7 108.4 123.7
Operating Margin - as recorded 0.0% 10.5% 9.4% 11.7%
Consolidation and restructuring related (37.4) (12.2) (44.7) (25.3)
charges
Operating Income - as adjusted 37.9 40.9 153.1 149.0
Operating Margin - as adjusted 13.2% 15.0% 13.3% 14.1%
As Adjusted - Results from continuing operations, excluding special items
Sales increased $13.6 million, or 5%, from $272.7 million in the fourth quarter
of 2000 to $286.3 million in the fourth quarter of 2001. Sales increased
primarily due to higher landing gear and wheel and brake sales compared to the
same period a year ago. Landing gear sales increased across all major markets
primarily due to increased sales of original equipment to Boeing, Bombardier,
and the U.S. government. Wheel and brake sales were higher than fourth quarter
of 2000 primarily due to increased shipments to the regional and military
markets primarily on the Embraer 145, C-5, and F16 programs. These increases in
sales were partially offset by decreased commercial aftermarket sales for wheels
and brakes, primarily on the Boeing 727 program.
Operating income, as adjusted, decreased $3.0 million, or 7%, from $40.9 million
in the fourth quarter of 2000 to $37.9 million in the fourth quarter of 2001.
This decrease in operating income was primarily the result of decreased
commercial aftermarket sales for wheels and brakes, primarily on the Boeing 727
program, increased sales incentives and pricing pressures. These were partially
offset by increased landing gear original equipment sales as well as improved
results for landing gear services due to implementation of productivity
initiatives.
Page 13
ENGINE & Safety Systems
($ millions)
FULL-YEAR FULL-YEAR
4Q01 4Q00 2001 2000
---- ---- ---- ----
Sales $186.4 $170.8 $762.6 $644.4
Operating Income - as recorded 11.2 28.7 114.2 115.8
Operating Margin - as recorded 6.0% 16.8% 15.0% 18.0%
Consolidation and restructuring related (16.3) (1.7) (17.7) (1.7)
charges
Operating Income - as adjusted 27.5 30.4 131.9 117.5
Operating Margin - as adjusted 14.8% 17.8% 17.3% 18.2%
As Adjusted - Results from continuing operations, excluding special items
Sales for the fourth quarter of 2001 increased $15.6 million, or 9%, from $170.8
million in the fourth quarter of 2000 to $186.4 million in the fourth quarter of
2001. Most product lines in the group experienced increased sales from the same
quarter last year as a result of increased shipments in some military product
lines, increased OE shipments for power generation derivatives, and the
acquisition of OEA Aerospace. These were partially offset by a decline in
commercial transport OE product sales.
Operating income, as adjusted, for the fourth quarter of 2001 decreased $2.9
million, or 10%, from $30.4 million in the fourth quarter of 2000 to $27.5
million in the fourth quarter of 2001. Operating income results declined
primarily due to unfavorable product mix associated with lower aftermarket
sales, inventory adjustments and inefficiencies experienced in the quarter
before cost savings could be realized as a result of implementation of
restructuring related activities. The operating income decline was offset
somewhat by stronger volume for military aftermarket and industrial gas turbine
OE products. The group also continued its R&D spending for passenger restraint
systems at a higher rate than the same quarter last year.
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ELECTRONIC SYSTEMS
($ millions)
FULL-YEAR FULL-YEAR
4Q01 4Q00 2001 2000
---- ---- ---- ----
Sales $205.0 $143.7 $758.4 $542.9
Operating Income - as recorded 36.1 32.2 128.1 117.7
Operating Margin - as recorded 17.6% 22.4% 16.9% 21.7%
Consolidation and restructuring related charges (5.0) -- (7.3) (0.4)
Operating Income - as adjusted 41.1 32.2 135.4 118.1
Operating Margin - as adjusted 20.0% 22.4% 17.9% 21.8%
As Adjusted - Results from continuing operations, excluding special items
Sales for the quarter increased $61.3 or 43%, from $143.7 in the fourth quarter
2000 to $205.0 in the fourth quarter of 2001. The increase was driven primarily
by recent acquisitions, as well as increased sales from core businesses. The
sales attributable to acquisitions were primarily related to the Raytheon
Optical Systems acquisition that was completed in December 2000. For core
businesses, increased sales of sensors, fuel and utility systems as well as
lightning detection and collision avoidance units were partially offset by lower
sales in the segment's legacy space-based businesses.
Operating income, as adjusted, increased $8.9 million, or 28%, from $32.2
million during the fourth quarter 2000 to $41.1 million during the fourth
quarter 2001. The increase was primarily due to the factors noted above,
partially offset by increased R&D spending for several new product programs
including MEMS (micro-electromechanical systems) technologies and products,
Smart Deck Integrated Flight Controls & Display Systems and HUMS systems
(helicopter health and usage management system).
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DISCONTINUED OPERATIONS - ENGINEERED INDUSTRIAL PRODUCTS
($ MILLIONS) FULL-YEAR FULL-YEAR
4Q01 3Q01 4Q00 2001 2000
---- ---- ---- ---- ----
Sales * $154.4 $151.0 $156.1 $641.9 $663.3
Operating Income* 4.3 19.5 26.8 74.7 120.4
Net Income (excluding special (0.9) 6.1 11.0 23.8 52.0
items)
4Q 2001 VS. 3Q 2001
Sales for the fourth quarter of $154.4 million increased by $3.4 million, or 2%,
from $151.0 million in the third quarter, due entirely to the inclusion of
Glacier Bearings' results (which was acquired in September 2001) for the full
quarter. Sales at the other units declined by 6% in the aggregate. The decrease
was attributable to weak conditions in most key markets. Segment operating
income (excluding restructuring charges) of $4.3 million in the fourth quarter
declined by 78% from $19.5 million in the third quarter due partly to lower
sales volumes, which also resulted in higher under-absorption of fixed
manufacturing costs, and continuing pricing pressures. In addition, adjustments
of various accruals and asset balances were recorded in the fourth quarter,
further reducing results. Net income (excluding restructuring charges) declined
from $6.1 million in the third quarter to a loss of $900 thousand in the fourth
quarter. Restructuring charges (before taxes) amounted to $3.8 million in the
fourth quarter.
4Q 2001 VS. 4Q 2000
Sales in 2001 of $154.4 million decreased slightly (1%) from $156.1 million in
the comparable quarter of 2000. Excluding the incremental sales related to the
Glacier acquisition, sales at the remaining units declined by 14% in total, with
all units contributing to the decline. Segment operating income of $4.3 million
in 2001 was 84% lower than the $26.8 million reported for 2000. Weak process and
industrial equipment markets, competitive pricing pressures and a less
profitable mix of products sold were all factors in the decreased operating
results. Various adjustments to accruals and asset balances, as described above,
also accounted for a portion of the decline. Net income (excluding restructuring
charges) declined from $11.0 million in 2000 to a loss of $900 thousand in 2001,
based on the decline in operating income. Pre-tax restructuring charges were
recorded amounting to $3.8 million and $1.4 million in 2001 and 2000,
respectively.
FULL YEAR 2001 VS. 2000
Sales in 2001 of $641.9 million declined by 3% from $663.3 million in 2000.
Excluding Glacier Bearings, sales at the remaining businesses declined by 7%
with only Fairbanks Morse showing increased sales. The increase in this
business's sales relates to higher shipments into the commercial
Page 16
power generation market that generally carry lower margins. Weakness in the
chemical, petroleum, pulp and paper, heavy-duty vehicle and general industrial
markets was the primary factor behind the declines in other businesses. Average
capacity utilization in U.S. factories fell to 20 year lows in 2001 while
domestic industrial production has fallen each month since mid-2000. These
factors have contributed to a cutback in capital spending and delays in
scheduled maintenance programs throughout the process industries. In addition to
the lower unit sales volumes, profitability was negatively impacted by the
inability to reduce fixed costs at the same rate as sales declined, increased
foreign competition due to the strong U.S. dollar which is driving average
pricing levels down in certain product lines, and an unfavorable mix of products
sold. Segment operating income in 2001 of $74.7 million declined by 38% from
$120.4 million in 2000 which caused net income (before restructuring charges) to
drop by more than 50% from $52.0 million in 2000 to $23.8 million in 2001.
Restructuring charges (before tax) amounted to $ 4.7 million and $1.4 million in
2001 and 2000, respectively.
* These numbers are for informational and comparison purposes only. They will
not tie to the 2001 10K that will be filed with the SEC in February 2002 as EIP
will be reported as a discontinued operation.
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NON-SEGMENT EXPENSES*
($ MILLIONS)
4Q01 4Q00
---- ----
Net Interest Expense $ (19.3) $ (28.2)
- - Payment-in-kind interest income $ 5.3 $ 0
(included in Net Interest Expense above)
Distribution on Trust Preferred Securities $ (2.6) $ (2.6)
Other Income (Expense): $ (4.0) $ (8.7)
- - Discontinued Retiree Health Care $ (4.7) $ (2.8)
- - Other Income (Expense) $ 0.7 $ (5.9)
FULL YEAR 2001 FULL YEAR 2000
-------------- --------------
Net Interest Expense $ (83.7) $ (102.1)
- - Payment-in-kind interest income $ 17.6 $ 0
(included in Net Interest Expense above)
Distribution on Trust Preferred Securities $ (10.5) $ (10.5)
Other Income (Expense): $ (19.2) $ (20.6)
- - Discontinued Retiree Health Care $ (18.2) $ (10.9)
- - Other Income (Expense) $ (1.0) $ (9.7)
PRELIMINARY BALANCE SHEET AND CASH FLOW DATA*
($ MILLIONS)
YTD YTD
12/31/2001 12/31/2000
---------- ----------
Cash and Cash Equivalents $ 85.8 $ 77.5
Total Debt $1,426.3 $2,236.2
Net Debt to Capitalization 47.2% 61.4%
Capital Expenditures $ 190.5 $ 133.8
Acquisitions $ 119.2 $ 246.8
Dividends $ 113.7 $ 117.6
Depreciation and Amortization $ 173.8 $ 165.4
- - Depreciation $ 108.5 $ 111.8
- - Amortization $ 65.3 $ 53.6
- Goodwill Amortization $ 30.4 $ 22.2
(included in Amortization, above)
* Based on Goodrich on an as reported basis, with the Engineered Industrial
Products businesses accounted for as a discontinued operation.
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