##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-892
 GOODRICH CORPORATION
 (Exact name of registrant as specified in its charter)
 New York(State of Incorporation)
    
    34-0252680(I.R.S. Employer Identification No.)Four Coliseum Centre2730 West Tyvola RoadCharlotte, North Carolina
    
    28217(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (704) 423-7000
 þ o
  Large accelerated filer þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    61Item 4. Controls and Procedures
    
    
    61PART II. OTHER INFORMATION
    
    
    62Item 1. Legal Proceedings
    
    
    62Item 1A. Risk Factors
    
    
    62Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    63Item 6. Exhibits
    
    
    64SIGNATURE
    
    
    65EXHIBIT INDEX
    
    
    66Exhibit 10.1Exhibit 15Exhibit 31.1Exhibit 31.2Exhibit 32Exhibit 10.1Exhibit 15Exhibit 31.1Exhibit 31.2Exhibit 32
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
      /s/ Ernst & Young LLP 
 3




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CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in millions, except per share amounts)Sales
    
    $
    1,772.3
    
    
    $
    1,601.7
    
    
    $
    5,366.6
    
    
    $
    4,724.4Operating costs and expenses:Cost of sales
    
    
    1,214.9
    
    
    
    1,102.9
    
    
    
    3,715.2
    
    
    
    3,293.4Selling and administrative costs
    
    
    260.6
    
    
    
    262.6
    
    
    
    791.6
    
    
    
    777.01,475.5
    
    
    
    1,365.5
    
    
    
    4,506.8
    
    
    
    4,070.4Operating Income
    
    
    296.8
    
    
    
    236.2
    
    
    
    859.8
    
    
    
    654.0Interest expense
    
    
    (26.7
    )
    
    
    (31.5
    )
    
    
    (85.2
    )
    
    
    (93.8
    )Interest income
    
    
    1.4
    
    
    
    2.2
    
    
    
    5.1
    
    
    
    5.5Other income (expense)  net
    
    
    (9.6
    )
    
    
    (12.5
    )
    
    
    (32.2
    )
    
    
    (45.6
    )Income from continuing operations before income taxes
    
    
    261.9
    
    
    
    194.4
    
    
    
    747.5
    
    
    
    520.1Income tax expense
    
    
    (94.1
    )
    
    
    (54.2
    )
    
    
    (242.5
    )
    
    
    (156.9
    )Income From Continuing Operations
    
    
    167.8
    
    
    
    140.2
    
    
    
    505.0
    
    
    
    363.2Income (loss) from discontinued operations  net of income taxes
    
    
    0.2
    
    
    
    (13.4
    )
    
    
    7.5
    
    
    
    (11.8
    )Net Income
    
    $
    168.0
    
    
    $
    126.8
    
    
    $
    512.5
    
    
    $
    351.4Basic Earnings Per ShareContinuing operations
    
    $
    1.35
    
    
    $
    1.12
    
    
    $
    4.04
    
    
    $
    2.90Discontinued operations
    
    
    
    
    
    
    (0.11
    )
    
    
    0.06
    
    
    
    (0.09
    )Net Income
    
    $
    1.35
    
    
    $
    1.01
    
    
    $
    4.10
    
    
    $
    2.81Diluted Earnings Per ShareContinuing operations
    
    $
    1.33
    
    
    $
    1.10
    
    
    $
    3.97
    
    
    $
    2.84Discontinued operations
    
    
    
    
    
    
    (0.11
    )
    
    
    0.06
    
    
    
    (0.09
    )Net Income
    
    $
    1.33
    
    
    $
    0.99
    
    
    $
    4.03
    
    
    $
    2.75Dividends Declared Per Common Share
    
    $
    0.225
    
    
    $
    0.20
    
    
    $
    0.675
    
    
    $
    0.60
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CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
 September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in millions,except share amounts)Current AssetsCash and cash equivalents
    
    $
    246.9
    
    
    $
    406.0Accounts and notes receivable, less allowances for doubtful receivables
($22.4 at September 30, 2008 and $14.3 at December 31, 2007)
    
    
    1,138.4
    
    
    
    1,006.2Inventories  net
    
    
    1,985.0
    
    
    
    1,775.6Deferred income taxes
    
    
    177.0
    
    
    
    178.2Prepaid expenses and other assets
    
    
    59.7
    
    
    
    108.4Income taxes receivable
    
    
    5.5
    
    
    
    74.4Total Current Assets
    
    
    3,612.5
    
    
    
    3,548.8Property, plant and equipment  net
    
    
    1,424.9
    
    
    
    1,387.4Prepaid pension
    
    
    28.4
    
    
    
    16.1Goodwill
    
    
    1,410.2
    
    
    
    1,363.2Identifiable intangible assets  net
    
    
    447.8
    
    
    
    452.1Deferred income taxes
    
    
    23.0
    
    
    
    11.1Other assets
    
    
    674.8
    
    
    
    755.3Total Assets
    
    $
    7,621.6
    
    
    $
    7,534.0Current LiabilitiesShort-term debt
    
    $
    112.5
    
    
    $
    21.9Accounts payable
    
    
    677.3
    
    
    
    586.7Accrued expenses
    
    
    892.0
    
    
    
    930.8Income taxes payable
    
    
    103.7
    
    
    
    10.6Deferred income taxes
    
    
    31.0
    
    
    
    29.7Current maturities of long-term debt and capital lease obligations
    
    
    122.1
    
    
    
    162.9Total Current Liabilities
    
    
    1,938.6
    
    
    
    1,742.6Long-term debt and capital lease obligations
    
    
    1,405.4
    
    
    
    1,562.9Pension obligations
    
    
    381.6
    
    
    
    417.8Postretirement benefits other than pensions
    
    
    337.1
    
    
    
    358.9Long-term income taxes payable
    
    
    121.6
    
    
    
    146.0Deferred income taxes
    
    
    133.6
    
    
    
    170.2Other non-current liabilities
    
    
    576.0
    
    
    
    556.2Shareholders EquityCommon stock  $5 par valueAuthorized 200,000,000 shares; issued 143,507,229 shares at
September 30, 2008 and 142,372,162 shares at December 31, 2007
(excluding 14,000,000 shares held by a wholly owned subsidiary)
    
    
    717.5
    
    
    
    711.9Additional paid-in capital
    
    
    1,513.3
    
    
    
    1,453.1Income retained in the business
    
    
    1,481.7
    
    
    
    1,054.8Accumulated other comprehensive income (loss)
    
    
    (191.7
    )
    
    
    14.4Common stock held in treasury, at cost (20,408,729 shares at
September 30, 2008 and 17,761,696 shares at December 31, 2007)
    
    
    (793.1
    )
    
    
    (654.8
    )Total Shareholders Equity
    
    
    2,727.7
    
    
    
    2,579.4Total Liabilities And Shareholders Equity
    
    $
    7,621.6
    
    
    $
    7,534.0
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 Nine Months EndedSeptember 30,2008
    
    
    2007(Dollars in millions)Operating ActivitiesNet income
    
    $
    512.5
    
    
    $
    351.4Adjustments to reconcile net income to net cash provided by operating activities:(Income) loss from discontinued operations
    
    
    (7.5
    )
    
    
    11.8Restructuring and consolidation:Expenses
    
    
    1.3
    
    
    
    1.5Payments
    
    
    (1.7
    )
    
    
    (2.9
    )Pension and postretirement benefits:Expenses
    
    
    76.9
    
    
    
    95.6Contributions and benefit payments
    
    
    (124.2
    )
    
    
    (137.4
    )Depreciation and amortization
    
    
    192.0
    
    
    
    188.6Excess tax benefits related to share-based payment arrangements
    
    
    (8.4
    )
    
    
    (11.7
    )Share-based compensation expense
    
    
    25.5
    
    
    
    55.3Deferred income taxes
    
    
    (9.0
    )
    
    
    (11.9
    )Change in assets and liabilities, net of effects of acquisitions and divestitures:Receivables
    
    
    (149.1
    )
    
    
    (93.5
    )Inventories, net of pre-production and excess-over-average
    
    
    (144.4
    )
    
    
    (120.0
    )Pre-production and excess-over-average inventories
    
    
    (83.3
    )
    
    
    (86.7
    )Other current assets
    
    
    (2.8
    )
    
    
    7.8Accounts payable
    
    
    107.9
    
    
    
    11.8Accrued expenses
    
    
    (55.5
    )
    
    
    76.8Income taxes payable/receivable
    
    
    151.2
    
    
    
    68.3Other non-current assets and liabilities
    
    
    (20.6
    )
    
    
    1.3Net Cash Provided By Operating Activities
    
    
    460.8
    
    
    
    406.1Investing ActivitiesPurchases of property, plant and equipment
    
    
    (189.6
    )
    
    
    (160.6
    )Proceeds from sale of property, plant and equipment
    
    
    2.8
    
    
    
    0.8Payments made for acquisitions, net of cash acquired
    
    
    (131.8
    )
    
    
    Net Cash Used In Investing Activities
    
    
    (318.6
    )
    
    
    (159.8
    )Financing ActivitiesIncrease (decrease) in short-term debt, net
    
    
    90.6
    
    
    
    (0.3
    )Repayment of long-term debt and capital lease obligations
    
    
    (198.1
    )
    
    
    (1.1
    )Proceeds from issuance of common stock
    
    
    24.2
    
    
    
    78.9Purchases of treasury stock
    
    
    (138.3
    )
    
    
    (152.5
    )Dividends paid
    
    
    (85.7
    )
    
    
    (75.9
    )Excess tax benefits related to share-based payment arrangements
    
    
    8.4
    
    
    
    11.7Distributions to minority interest holders
    
    
    (6.8
    )
    
    
    (3.2
    )Net Cash Used In Financing Activities
    
    
    (305.7
    )
    
    
    (142.4
    )Discontinued OperationsNet cash provided by (used in) operating activities
    
    
    (2.6
    )
    
    
    6.6Net cash provided by (used in) investing activities
    
    
    15.7
    
    
    
    (1.4
    )Net cash provided by (used in) financing activities
    
    
    
    
    
    
    Net cash provided by (used in) discontinued operations
    
    
    13.1
    
    
    
    5.2Effect of exchange rate changes on cash and cash equivalents
    
    
    (8.7
    )
    
    
    3.9Net increase (decrease) in cash and cash equivalents
    
    
    (159.1
    )
    
    
    113.0Cash and cash equivalents at beginning of period
    
    
    406.0
    
    
    
    201.3Cash and cash equivalents at end of period
    
    $
    246.9
    
    
    $
    314.3
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1. Basis of Interim Financial Statement Preparation and Use of Estimates
    Note 2. New Accounting Standards
 Accounting Standards Adopted on January 1, 2008
 Fair Value Measurements
  7




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Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards
  Accounting for Postretirement Benefits Associated with Split-Dollar Life Insurance
  Accounting Standards Not Yet Adopted
 Two-class Method of Computing Earnings Per Share
  Disclosures about Derivative Instruments and Hedging Activities
  8




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Business Combinations and Noncontrolling Interests
  Note 3. Business Segment Information
  
    
    The Actuation and Landing Systems segment provides systems, components and related
services pertaining to aircraft taxi, take-off, flight control, landing and stopping, and
engine components, including fuel delivery systems and rotating assemblies.
 
    
    The Nacelles and Interior Systems segment produces products and provides maintenance,
repair and overhaul services associated with aircraft engines, including thrust reversers,
cowlings, nozzles and their components, and aircraft interior products, including slides,
seats, cargo and lighting systems.
 
    
    The Electronic Systems segment produces a wide array of systems and components that
provide flight performance measurements, flight management, fuel controls, electrical
systems, and control and safety data, and reconnaissance and surveillance systems.
 9




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in millions)Sales:Actuation and Landing Systems
    
    $
    664.2
    
    
    $
    607.8
    
    
    $
    2,035.9
    
    
    $
    1,764.1Nacelles and Interior Systems
    
    
    596.5
    
    
    
    545.2
    
    
    
    1,882.1
    
    
    
    1,625.8Electronic Systems
    
    
    511.6
    
    
    
    448.7
    
    
    
    1,448.6
    
    
    
    1,334.5$
    1,772.3
    
    
    $
    1,601.7
    
    
    $
    5,366.6
    
    
    $
    4,724.4Intersegment sales:Actuation and Landing Systems
    
    $
    8.5
    
    
    $
    8.0
    
    
    $
    26.4
    
    
    $
    21.2Nacelles and Interior Systems
    
    
    1.9
    
    
    
    5.1
    
    
    
    11.3
    
    
    
    14.2Electronic Systems
    
    
    6.6
    
    
    
    5.9
    
    
    
    19.3
    
    
    
    23.0$
    17.0
    
    
    $
    19.0
    
    
    $
    57.0
    
    
    $
    58.4Operating income:Actuation and Landing Systems
    
    $
    80.0
    
    
    $
    73.6
    
    
    $
    238.6
    
    
    $
    182.0Nacelles and Interior Systems
    
    
    162.4
    
    
    
    143.6
    
    
    
    501.9
    
    
    
    404.7Electronic Systems
    
    
    79.3
    
    
    
    58.7
    
    
    
    199.8
    
    
    
    175.7321.7
    
    
    
    275.9
    
    
    
    940.3
    
    
    
    762.4Corporate general and administrative expenses
    
    
    (21.1
    )
    
    
    (34.5
    )
    
    
    (67.8
    )
    
    
    (95.9
    )ERP implementation costs
    
    
    (3.8
    )
    
    
    (5.2
    )
    
    
    (12.7
    )
    
    
    (12.5
    )Total operating income
    
    $
    296.8
    
    
    $
    236.2
    
    
    $
    859.8
    
    
    $
    654.0
 Note 4. Other Income (Expense) net
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in millions)Retiree health care expenses related to previously owned businesses
    
    $
    (3.8
    )
    
    $
    (4.6
    )
    
    $
    (14.6
    )
    
    $
    (13.8
    )Expenses related to previously owned businesses
    
    
    (2.1
    )
    
    
    (4.8
    )
    
    
    (5.9
    )
    
    
    (16.1
    )Minority interest and equity in affiliated companies
    
    
    (3.5
    )
    
    
    (4.7
    )
    
    
    (12.3
    )
    
    
    (17.6
    )Other  net
    
    
    (0.2
    )
    
    
    1.6
    
    
    
    0.6
    
    
    
    1.9Other income (expense)  net
    
    $
    (9.6
    )
    
    $
    (12.5
    )
    
    $
    (32.2
    )
    
    $
    (45.6
    )
  10




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Note 5. Discontinued Operations
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in millions)Sales  ATS
    
    $
    
    
    
    $
    34.4
    
    
    $
    
    
    
    $
    122.6Operations  ATS  net of tax for the three and nine months
ended September 30, 2007 of $0.2 and $1.3, respectively
    
    $
    
    
    
    $
    0.6
    
    
    $
    
    
    
    $
    2.5Estimated loss on sale of ATS net of income tax benefit of $37.5
    
    
    
    
    
    
    (13.9
    )
    
    
    
    
    
    
    (13.9
    )Previously discontinued operations  net of tax expense for
the three and nine months ended September 30, 2008 of $0 and
$0.6, respectively; net of tax benefit for the three and nine
months ended September 30, 2007 of $0.1 and $0.3, respectively
    
    
    0.2
    
    
    
    (0.1
    )
    
    
    7.5
    
    
    
    (0.4
    )Income (loss) from discontinued operations
    
    $
    0.2
    
    
    $
    (13.4
    )
    
    $
    7.5
    
    
    $
    (11.8
    )
 Note 6. Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In millions, except per share amounts)NumeratorNumerator for basic and diluted earnings per share  income from
continuing operations
    
    $
    167.8
    
    
    $
    140.2
    
    
    $
    505.0
    
    
    $
    363.2DenominatorDenominator for basic earnings per share  weighted-average shares
    
    
    124.4
    
    
    
    125.0
    
    
    
    124.9
    
    
    
    125.2Effect of dilutive securities:Stock options, employee stock purchase plan, restricted shares and
restricted share units
    
    
    1.8
    
    
    
    2.6
    
    
    
    2.1
    
    
    
    2.5Other deferred compensation shares
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.11.9
    
    
    
    2.7
    
    
    
    2.2
    
    
    
    2.6Denominator for diluted earnings per share  adjusted
weighted-average shares and assumed conversion
    
    
    126.3
    
    
    
    127.7
    
    
    
    127.1
    
    
    
    127.8Per share income from continuing operationsBasic
    
    $
    1.35
    
    
    $
    1.12
    
    
    $
    4.04
    
    
    $
    2.90Diluted
    
    $
    1.33
    
    
    $
    1.10
    
    
    $
    3.97
    
    
    $
    2.84
 11




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Note 7. Fair Value Measurements
    
  BalanceSeptember 30,2008
    
    Level 1
    
    Level 2
    
    Level 3(Dollars in millions)Cash Equivalents
    
    $
    37.5
    
    
    $
    37.5
    
    
    $
    
    
    
    $
    Derivative Financial Instruments (1)Cash Flow Hedges
    
    
    (7.4
    )
    
    
    
    
    
    
    (7.4
    )
    
    
    Fair Value Hedges
    
    
    3.6
    
    
    
    
    
    
    
    3.6
    
    
    
    Other Forward Contracts
    
    
    2.1
    
    
    
    
    
    
    
    2.1
    
    
    
    Rabbi Trust Assets (2)
    
    
    40.5
    
    
    
    40.5
    
    
    
    
    
    
    
    
 
 (1)
    
    See Note 16, Derivatives and Hedging Activities.(2)
    
    Rabbi trust assets include mutual funds and cash equivalents for payment of certain
non-qualified benefits for retired, terminated and active employees. 12




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Note 8. Inventories
  September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in millions)FIFO or average cost (which approximates current costs):Finished products
    
    $
    250.6
    
    
    $
    252.9In-process
    
    
    1,272.0
    
    
    
    1,067.0Raw materials and supplies
    
    
    553.1
    
    
    
    533.32,075.7
    
    
    
    1,853.2Less:Reserve to reduce certain inventories to LIFO basis
    
    
    (52.4
    )
    
    
    (49.5
    )Progress payments and advances
    
    
    (38.3
    )
    
    
    (28.1
    )Total
    
    $
    1,985.0
    
    
    $
    1,775.6
   Note 9. Goodwill
  Balance
    
    
    
    
    
    
    Foreign
    
    
    BalanceDecember 31,
    
    
    Business
    
    
    Currency
    
    
    September 30,2007
    
    
    Combinations (3)
    
    
    Translation
    
    
    2008(Dollars in millions)Actuation and Landing Systems
    
    $
    331.5
    
    
    $
    
    
    
    $
    (16.7
    )
    
    $
    314.8Nacelles and Interior Systems
    
    
    433.1
    
    
    
    3.6
    (1)
    
    
    (0.7
    )
    
    
    436.0Electronic Systems
    
    
    598.6
    
    
    
    61.0
    (2)
    
    
    (0.2
    )
    
    
    659.4$
    1,363.2
    
    
    $
    64.6
    
    
    $
    (17.6
    )
    
    $
    1,410.2
 
 (1)
    
    On January 18, 2008, the Company acquired Skyline Industries, Inc. (Skyline) for $9.5 million
in cash. Based upon an independent valuation, identifiable intangibles were $4.1 million and
will be amortized over a weighted-average useful life of 20 years.(2)
    
    On April 17, 2008, the Company acquired TEAC Aerospace Holdings, Inc. (TEAC) for $84 million
in cash, net of cash acquired. Based upon an independent valuation, identifiable intangibles
were $30.9 million and will be amortized over a weighted-average useful life of 11 years. 13




---



##### Table of Contents



On July 28, 2008, the Company acquired certain assets of Recon/Optical, Inc. (ROI) for $38.4
million in cash. Based upon an independent valuation, identifiable intangibles were $7.9 million
and will be amortized over a weighted-average useful life of 12 years.(3)
    
    Goodwill amounts are preliminary and may be adjusted when certain pre-acquisition
contingencies are resolved. Note 10. Financing Arrangements
  
    
    The amount borrowed;
 
    
    The Companys public debt rating by Standard & Poors, Moodys and Fitch; and
 
    
    At the Companys option, rates tied to the agent banks prime rate or, for U.S. Dollar
and Great Britain Pounds Sterling borrowings, the London Interbank Offered Rate and for Euro
Dollar borrowings, the Euro Interbank Offered Rate.
    14




---



##### Table of Contents



Long-term Debt Repayments
  
    
    $119 million principal amount of the 7.5% notes; and
 
    
    $43 million principal amount of the 6.45% notes.
  Lease Commitments
    15




---



##### Table of Contents



Note 11. Pensions and Postretirement Benefits Other Than Pensions
 Pensions
  U.S. Plans
    
    
    U.K. Plans
    
    
    Other PlansThree Months Ended
    
    
    Three Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in millions)Service cost
    
    $
    10.7
    
    
    $
    11.4
    
    
    $
    7.1
    
    
    $
    7.4
    
    
    $
    1.4
    
    
    $
    1.3Interest cost
    
    
    41.9
    
    
    
    39.5
    
    
    
    10.7
    
    
    
    10.0
    
    
    
    1.6
    
    
    
    1.4Expected return on plan assets
    
    
    (50.0
    )
    
    
    (47.7
    )
    
    
    (16.2
    )
    
    
    (15.2
    )
    
    
    (1.7
    )
    
    
    (1.6
    )Amortization of prior service cost
    
    
    1.4
    
    
    
    1.8
    
    
    
    (0.3
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    12.3
    
    
    
    14.3
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    0.3Net periodic benefit cost
    
    
    16.3
    
    
    
    19.3
    
    
    
    1.3
    
    
    
    1.9
    
    
    
    1.5
    
    
    
    1.4Settlements and curtailments loss
    
    
    0.1
    
    
    
    6.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net benefit cost
    
    $
    16.4
    
    
    $
    25.3
    
    
    $
    1.3
    
    
    $
    1.9
    
    
    $
    1.5
    
    
    $
    1.4
 U.S. Plans
    
    
    U.K. Plans
    
    
    Other PlansNine Months Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in millions)Service cost
    
    $
    32.1
    
    
    $
    34.9
    
    
    $
    22.1
    
    
    $
    21.9
    
    
    $
    4.3
    
    
    $
    3.6Interest cost
    
    
    125.7
    
    
    
    120.0
    
    
    
    32.8
    
    
    
    29.5
    
    
    
    4.8
    
    
    
    4.0Expected return on plan assets
    
    
    (150.1
    )
    
    
    (146.3
    )
    
    
    (50.1
    )
    
    
    (45.0
    )
    
    
    (5.2
    )
    
    
    (4.5
    )Amortization of prior service cost
    
    
    4.2
    
    
    
    5.6
    
    
    
    (0.8
    )
    
    
    (0.8
    )
    
    
    0.1
    
    
    
    Amortization of actuarial loss
    
    
    36.7
    
    
    
    47.0
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    0.8Net periodic benefit cost
    
    
    48.6
    
    
    
    61.2
    
    
    
    4.0
    
    
    
    5.6
    
    
    
    4.7
    
    
    
    3.9Settlements and curtailments loss
    
    
    0.1
    
    
    
    6.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net benefit cost
    
    $
    48.7
    
    
    $
    67.2
    
    
    $
    4.0
    
    
    $
    5.6
    
    
    $
    4.7
    
    
    $
    3.9
  U.S. Plans
    
    U.K. Plans
    
    Other Plans2008
    
    2007
    
    2008
    
    2007
    
    2008
    
    2007Discount rate
    
    
    6.30
    %
    
    
    
    
    
    
    5.50
    %
    
    
    5.00
    %
    
    
    5.28
    %
    
    
    4.88
    %1/1/07  9/20/07
    
    
    
    
    
    
    5.89
    %9/21/07  9/30/07
    
    
    
    
    
    
    6.28
    %Expected long-term rate of return
on assets
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    8.24
    %
    
    
    8.28
    %Rate of compensation increase
    
    
    4.10
    %
    
    
    3.86
    %
    
    
    3.75
    %
    
    
    3.50
    %
    
    
    3.38
    %
    
    
    3.36
    %
  16




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##### Table of Contents



Anticipated Contributions to Defined Benefit Plans and Trusts
  Postretirement Benefits Other Than Pensions
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in millions)Service cost
    
    $
    0.3
    
    
    $
    0.4
    
    
    $
    1.2
    
    
    $
    1.4Interest cost
    
    
    5.5
    
    
    
    5.6
    
    
    
    16.5
    
    
    
    17.1Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )Amortization of actuarial (gain) loss
    
    
    0.5
    
    
    
    1.4
    
    
    
    1.9
    
    
    
    2.2Net periodic benefit cost
    
    $
    6.3
    
    
    $
    7.4
    
    
    $
    19.5
    
    
    $
    20.6
  Three and Nine Months Ended September 30,2008
    
    2007Discount rate
    
    
    6.12
    %
    
    
    5.79
    %Healthcare trend rate
    
    8.3% in 2008 to 5% in 2015
    
    9% in 2007 to 5% in 2013
 Note 12. Comprehensive Income (Loss)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in millions)Net income
    
    $
    168.0
    
    
    $
    126.8
    
    
    $
    512.5
    
    
    $
    351.4Other comprehensive income (loss):Unrealized foreign currency translation gains (losses) during period
    
    
    (147.7
    )
    
    
    51.4
    
    
    
    (117.4
    )
    
    
    109.6Pension/OPEB liability adjustments during the period, net of tax
for the three and nine months ended September 30, 2008 of $(5.7)
and ($11.8), respectively; net of tax for the three and nine months
ended September 30, 2007 of ($66.3) and ($70.4), respectively
    
    
    8.1
    
    
    
    100.9
    
    
    
    15.0
    
    
    
    127.4Gain (loss) on cash flow hedges, net of tax for the three and nine
months ended September 30, 2008 of $49.4 and $55.7, respectively;
net of tax for the three and nine months ended September 30, 2007
of ($16.3) and ($28.2), respectively
    
    
    (91.7
    )
    
    
    29.1
    
    
    
    (103.7
    )
    
    
    53.4Total comprehensive income (loss)
    
    $
    (63.3
    )
    
    $
    308.2
    
    
    $
    306.4
    
    
    $
    641.8
 17




---



##### Table of Contents



September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in millions)Cumulative unrealized foreign currency translation gains
    
    $
    232.2
    
    
    $
    349.6Pension/OPEB liability adjustments, net of deferred taxes of $273.8 and $285.6, respectively
    
    
    (417.8
    )
    
    
    (432.8
    )Accumulated gains (losses) on cash flow hedges, net of deferred taxes of $2.3 and $(53.4),
respectively
    
    
    (6.1
    )
    
    
    97.6Total accumulated other comprehensive income (loss)
    
    $
    (191.7
    )
    
    $
    14.4
  Note 13. Income Taxes
   18




---



##### Table of Contents



Note 14. Contingencies
 General
  Environmental
   19




---



##### Table of Contents



Asbestos
  20




---



##### Table of Contents



Insurance Coverage
    Liabilities of Divested Businesses
 Asbestos
  Other
  21




---



##### Table of Contents



Aerostructures Long-term Contracts
     
    
    Ability to recover costs incurred for change orders and claims;
    
    Costs, including material and labor costs and related escalation;
    
    Labor improvements due to the learning curve experience;
    
    Anticipated cost productivity improvements related to new manufacturing methods and
processes;
    
    Supplier pricing, including escalation where applicable, supplier claims (see Dispute
with Supplier below), and the suppliers ability to perform;
    
    The cost impact of product design changes that frequently occur during the flight test
and certification phases of a program; and
    
    Effect of foreign currency exchange fluctuations.
   22




---



##### Table of Contents



Dispute with Supplier
   Tax
  Tax Years 2000 to 2004
  Tax Years Prior to 2000
  Coltec Industries Inc. and Subsidiaries
    
    December, 1997  July, 1999 (through date of acquisition)Goodrich Corporation and Subsidiaries
    
    1998  1999 (including Rohr and Coltec)
 23




---



##### Table of Contents



Note 15. Guarantees
  Maximum
    
    CarryingPotential
    
    Amount ofPayment
    
    LiabilityEnvironmental remediation and other indemnifications (Note 14)
    
    No limit
    
    $
    19.5Guarantees of residual value on leases (Note 10)
    
    $
    24.8
    
    
    $
    
 Service and Product Warranties
  24




---



##### Table of Contents



Balance at December 31, 2007
    
    $
    164.3Net provisions for warranties issued during the period
    
    
    38.7Net provisions for warranties existing at the beginning of the year
    
    
    1.1Payments
    
    
    (41.3
    )Foreign currency translation
    
    
    (6.3
    )Balance at September 30, 2008
    
    $
    156.5
  September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in millions)Accrued expenses
    
    $
    68.9
    
    
    $
    66.3Other non-current liabilities
    
    
    87.6
    
    
    
    98.0Total
    
    $
    156.5
    
    
    $
    164.3
 Note 16. Derivatives and Hedging Activities
  Cash Flow Hedges
  Fair Value Hedges
  Other Forward Contracts
  25




---



##### Table of Contents



Note 17. Share-Based Compensation
     Note 18. Subsequent Event
  26




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    OVERVIEW
  Key Market Channels for Products and Services, Growth Drivers and Industry and our Highlights
  Commercial, Regional, Business and General Aviation Airplane OE
    27




---



##### Table of Contents



Commercial, Regional, Business and General Aviation Airplane Aftermarket
     Defense and Space
   28




---



##### Table of Contents



Long-term Sustainable Growth
  
    
    Awards for key products on important new and expected programs, including the Airbus A380
and A350 XWB, the Boeing 787 and 747-8, the Embraer 190, the Pratt & Whitney Geared Turbofan
engine, the Dassault Falcon 7X and the Lockheed Martin F-35 Lightning II and F-22 Raptor;
    
    Growing commercial airplane fleet and strong positions on newer, more fuel-efficient
airplanes, which should fuel sustained aftermarket strength;
    
    Balance in the large commercial airplane market, with strong sales to both Airbus and
Boeing;
    
    Aging of the existing large commercial and regional airplane fleets, which should result
in increased aftermarket support;
    
    Increased number of long-term agreements for product sales on new and existing commercial
airplanes;
    
    Increased opportunities for aftermarket growth due to airline outsourcing;
    
    Growth in global maintenance, repair and overhaul (MRO) opportunities for our systems and
components, particularly in Europe, Asia and the Middle East, where we have expanded our
capacity; and
    
    Expansion of our product offerings in support of high growth areas in the defense and
space market channel, such as helicopter products and systems and intelligence, surveillance
and reconnaissance products.
 29




---



##### Table of Contents



Third Quarter 2008 Sales Content by Market Channel
  Airbus Commercial OE
    
    
    13
    %Boeing Commercial OE
    
    
    10
    %Regional, Business and General Aviation Airplane OE
    
    
    9
    %Total Commercial, Regional, Business and General Aviation Airplane OE
    
    
    32
    %Large Commercial Airplane Aftermarket
    
    
    29
    %Regional, Business and General Aviation Airplane Aftermarket
    
    
    7
    %Total Commercial, Regional, Business and General Aviation Airplane Aftermarket
    
    
    36
    %Total Defense and Space
    
    
    26
    %Other
    
    
    6
    %Total
    
    
    100
    %
 Results of Operations  Third Quarter 2008 as Compared to Third Quarter 2007
 Third Quarter
    
    
    $
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    Change(Dollars in millions, except diluted EPS)Sales
    
    $
    1,772.3
    
    
    $
    1,601.7
    
    
    $
    170.6
    
    
    
    10.7Segment operating income (1)
    
    $
    321.7
    
    
    $
    275.9
    
    
    $
    45.8
    
    
    
    16.6Corporate general and administrative costs
    
    
    (24.9
    )
    
    
    (39.7
    )
    
    
    14.8
    
    
    
    37.3Total operating income
    
    
    296.8
    
    
    
    236.2
    
    
    
    60.6
    
    
    
    25.7Net interest expense
    
    
    (25.3
    )
    
    
    (29.3
    )
    
    
    4.0
    
    
    
    13.7Other income (expense)  net
    
    
    (9.6
    )
    
    
    (12.5
    )
    
    
    2.9
    
    
    
    23.2Income tax expense
    
    
    (94.1
    )
    
    
    (54.2
    )
    
    
    (39.9
    )
    
    
    73.6Income from continuing operations
    
    
    167.8
    
    
    
    140.2
    
    
    
    27.6
    
    
    
    19.7Income (loss) from discontinued operations
    
    
    0.2
    
    
    
    (13.4
    )
    
    
    13.6
    
    
    
    101.5Net income
    
    $
    168.0
    
    
    $
    126.8
    
    
    $
    41.2
    
    
    
    32.5Effective tax rate
    
    
    35.9
    %
    
    
    27.9
    %Diluted EPS:Continuing operations
    
    $
    1.33
    
    
    $
    1.10
    
    
    $
    0.23
    
    
    
    20.9Net income
    
    $
    1.33
    
    
    $
    0.99
    
    
    $
    0.34
    
    
    
    34.3
 
 (1)
    
    We measure each reporting segments profit based upon operating income. Accordingly, we
do not allocate net interest expense, other income (expense)  net and income taxes to our
reporting segments. The company-wide Enterprise Resource Planning (ERP) implementation
costs that are not directly associated with a specific business were not allocated to the
segments. For a reconciliation of total segment operating income to total operating income,
see Note 3, Business Segment Information to our Condensed Consolidated Financial
Statements. 30




---



##### Table of Contents



Sales
  
    
    Large commercial airplane original equipment sales increased by approximately 1%;
    
    Regional, business and general aviation airplane original equipment sales increased by
approximately 29%;
    
    Large commercial, regional, business and general aviation airplane aftermarket sales
increased by approximately 13%; and
    
    Defense and space sales of both original equipment and aftermarket products and services
increased by approximately 12%.
  Segment operating income
  Corporate general and administrative costs
  Net interest expense
  Other income (expense)  net
  31




---



##### Table of Contents



Income from continuing operations
  Increase (Decrease)Before
    
    
    After
    
    
    DilutedTax
    
    
    Tax
    
    
    EPS(Dollars in millions, except diluted EPS)Changes in estimates on long-term contracts
    
    $
    19.5
    
    
    $
    12.0
    
    
    $
    0.10Lower share-based compensation
    
    $
    13.4
    
    
    $
    8.2
    
    
    $
    0.06Settlement of customer claims in 2007
    
    $
    (21.6
    )
    
    $
    (13.5
    )
    
    $
    (0.10
    )Higher effective tax rate
    
    $
    
    
    
    $
    (15.6
    )
    
    $
    (0.12
    )
 Changes in estimates on long-term contracts
  Share-based compensation
  
    
    The impact of unfavorable changes in our share price, which resulted in lower expense of
approximately $13 million; and
    
    Approximately $6 million of costs in 2007 related to the 2007 special stock options (see
Note 17, Share-Based Compensation, to our Condensed Consolidated Financial Statements);
partially offset by
    
    Approximately $4 million of costs for retirement eligible individuals resulting from a
change in the vesting requirements in 2008.
 Settlement of customer claims
  Higher effective tax rate
  Income (loss) from discontinued operations
  32




---



##### Table of Contents



Effective tax rate
  Results of Operations  Nine Months Ended September 30, 2008 as Compared to Nine Months Ended
September 30, 2007
 Nine Months Ended
    
    
    $
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    Change(Dollars in millions, except diluted EPS)Sales
    
    $
    5,366.6
    
    
    $
    4,724.4
    
    
    $
    642.2
    
    
    
    13.6Segment Operating Income (1)
    
    $
    940.3
    
    
    $
    762.4
    
    
    $
    177.9
    
    
    
    23.3Corporate general and administrative costs
    
    
    (80.5
    )
    
    
    (108.4
    )
    
    
    27.9
    
    
    
    25.7Total operating income
    
    
    859.8
    
    
    
    654.0
    
    
    
    205.8
    
    
    
    31.5Net interest expense
    
    
    (80.1
    )
    
    
    (88.3
    )
    
    
    8.2
    
    
    
    9.3Other income (expense)  net
    
    
    (32.2
    )
    
    
    (45.6
    )
    
    
    13.4
    
    
    
    29.4Income tax expense
    
    
    (242.5
    )
    
    
    (156.9
    )
    
    
    (85.6
    )
    
    
    54.6Income from continuing operations
    
    
    505.0
    
    
    
    363.2
    
    
    
    141.8
    
    
    
    39.0Income (loss) from discontinued operations
    
    
    7.5
    
    
    
    (11.8
    )
    
    
    19.3
    
    
    
    163.6Net income
    
    $
    512.5
    
    
    $
    351.4
    
    
    $
    161.1
    
    
    
    45.8Effective tax rate
    
    
    32.4
    %
    
    
    30.2
    %Diluted EPS:Continuing operations
    
    $
    3.97
    
    
    $
    2.84
    
    
    $
    1.13
    
    
    
    39.8Net income
    
    $
    4.03
    
    
    $
    2.75
    
    
    $
    1.28
    
    
    
    46.5
 
 (1)
    
    We measure each reporting segments profit based upon operating income. Accordingly, we
do not allocate net interest expense, other income (expense)  net and income taxes to our
reporting segments. The company-wide Enterprise Resource Planning (ERP) implementation
costs that are not directly associated with a specific business were not allocated to the
segments. For a reconciliation of total segment operating income to total operating income,
see Note 3, Business Segment Information to our Condensed Consolidated Financial
Statements. Sales
  
    
    Large commercial airplane original equipment sales increased by approximately 14%;
    
    Regional, business and general aviation airplane original equipment sales increased by
approximately 26%;
    
    Large commercial, regional, business and general aviation airplane aftermarket sales
increased by approximately 11%; and
    
    Defense and space sales of both original equipment and aftermarket products and services
increased by approximately 12%.
 33




---



##### Table of Contents



Segment operating income
  Corporate general and administrative
  Net interest expense
  Other income (expense)  net
  
    
    Lower expenses related to previously owned businesses of approximately $10 million,
primarily for environmental litigation and remediation costs; and
    
    Higher income from equity in affiliated companies of approximately $3 million;
 Income from continuing operations
  Increase (Decrease)Before
    
    
    After
    
    
    DilutedTax
    
    
    Tax
    
    
    EPS(Dollars in millions, except diluted EPS)Changes in estimates on long-term contracts
    
    $
    33.0
    
    
    $
    20.4
    
    
    $
    0.16Lower share-based compensation
    
    $
    29.8
    
    
    $
    18.1
    
    
    $
    0.14Foreign exchange rate impact, including net monetary asset remeasurement
    
    $
    (19.4
    )
    
    $
    (11.8
    )
    
    $
    (0.09
    )Settlement of customer claims in 2007
    
    $
    (21.6
    )
    
    $
    (13.2
    )
    
    $
    (0.10
    )
 34




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##### Table of Contents



Changes in estimates on long-term contracts
  Share-based compensation
  
    
    The impact of unfavorable changes in our share price, which resulted in lower expense of
approximately $35 million; and
    
    Approximately $8 million of costs in 2007 related to the 2007 special stock options (see
Note 17, Share-Based Compensation, to our Condensed Consolidated Financial Statements);
partially offset by
    
    Approximately $12 million of costs for retirement eligible individuals resulting from a
change in the vesting requirements in 2008.
 Foreign exchange rate impact
  
    
    Approximately $31 million relating to unfavorable foreign currency translation of net
costs in currencies other than the U.S. Dollar, partially offset by approximately $4 million
of higher net gains on cash flow hedges settled during the nine months ended September 30,
2008; partially offset by
    
    Approximately $24 million of increased net transaction gains relating to remeasuring
monetary assets/liabilities into the local functional currency, partially offset by
approximately $16 million of higher net losses on forward contracts we entered into to
offset the impact of net monetary asset gains/losses.
 Settlement of customer claims
  Income (loss) from discontinued operations
  35




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Effective tax rate
  2008 OUTLOOK
  2008 Outlook
    
    2007 ActualSales
    
    $7.1 billion
    
    $6.4 billionDiluted EPS  Net Income
    
    $4.90 to $5.00 per share
    
    $3.78 per shareCapital Expenditures
    
    $275 to $325 million
    
    $282.6 millionOperating Cash Flow net of Capital Expenditures
    
    65% of net income
    
    64% of net income
 Sales
  
    
    Large commercial airplane OE sales are expected to increase by approximately 5% to 10%,
depending on the outcome of the Boeing labor dispute;
    
    Regional, business and general aviation airplane OE sales are expected to increase by
approximately 20%;
    
    Large commercial, regional, business and general aviation airplane aftermarket sales are
expected to increase by approximately 9% to 11%; and
    
    Defense and space sales of both OE and aftermarket products and services are expected to
increase by approximately 11%.
 Diluted EPS  Net Income
  36




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##### Table of Contents



Cash Flow
  2009 OUTLOOK
  2009 Outlook
    
    2008 OutlookSales
    
    $7.7 to $7.8 billion
    
    $7.1 billionDiluted EPS  Net Income
    
    $5.05 to $5.25 per share
    
    $4.90 to $5.00 per shareCapital Expenditures
    
    $275 to $300 million
    
    $275 to $325 millionOperating Cash Flow net of Capital Expenditures
    
    Exceed 75% of net income
    
    65% of net income
  
    
    A full-year effective tax rate of approximately 33%;
    
    Higher pre-tax pension expense of up to $55 million, or $0.27 per diluted share. The
higher pension expense assumes a negative return on plan assets of 13% in 2008 and a 2009
discount rate of approximately 7.5%, which reflects experience through September 30, 2008.
Pension expense for 2009 will be finalized based on December 31, 2008 actual asset values
and discount rates;
    
    Unfavorable foreign exchange translation costs of approximately $12 million; and
    
    Closing of the Rolls-Royce joint venture around the end of 2008.
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##### Table of Contents



Sales
  
    
    Large commercial airplane OE sales are expected to increase by approximately 20%. This
outlook assumes the delivery of approximately 1,000 to 1,025 large commercial airplanes in
2009 and that the Boeing labor dispute ends in late October or early November 2008;
    
    Regional, business and general aviation airplane OE sales are expected to increase by
approximately 7% to 8%;
    
    Large commercial, regional, business and general aviation airplane aftermarket sales are
expected to increase by approximately 4% to 7%. This outlook assumes that worldwide ASMs
change in the range of negative 2% to positive 2% in 2009; and
    
    Defense and space sales of both OE and aftermarket products and services are expected to
increase by approximately 5% to 7%.
 Cash Flow
  BUSINESS SEGMENT PERFORMANCE
  
    
    The Actuation and Landing Systems segment provides systems, components and related
services pertaining to aircraft taxi, take-off, flight control, landing and stopping, and
engine components, including fuel delivery systems and rotating assemblies.
    
    The Nacelles and Interior Systems segment produces products and provides maintenance,
repair and overhaul services associated with aircraft engines, including thrust reversers,
cowlings, nozzles and their components, and aircraft interior products, including slides,
seats, cargo and lighting systems.
    
    The Electronic Systems segment produces a broad array of systems and components that
provide flight performance measurements, flight management information, engine controls,
fuel controls, electrical power systems, safety data, and reconnaissance and surveillance
systems.
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Third Quarter 2008 Compared with Third Quarter 2007
 Third Quarter
    
    
    
    
    
    
    
    
    
    
    % of SalesIncrease/
    
    
    %2008
    
    
    2007
    
    
    (Decrease)
    
    
    Change
    
    
    2008
    
    
    2007(Dollars in millions)NET CUSTOMER SALESActuation and Landing Systems
    
    $
    664.2
    
    
    $
    607.8
    
    
    $
    56.4
    
    
    
    9.3Nacelles and Interior Systems
    
    
    596.5
    
    
    
    545.2
    
    
    
    51.3
    
    
    
    9.4Electronic Systems
    
    
    511.6
    
    
    
    448.7
    
    
    
    62.9
    
    
    
    14.0$
    1,772.3
    
    
    $
    1,601.7
    
    
    $
    170.6
    
    
    
    10.7SEGMENT OPERATING INCOMEActuation and Landing Systems
    
    $
    80.0
    
    
    $
    73.6
    
    
    $
    6.4
    
    
    
    8.7
    
    
    
    12.0
    
    
    
    12.1Nacelles and Interior Systems
    
    
    162.4
    
    
    
    143.6
    
    
    
    18.8
    
    
    
    13.1
    
    
    
    27.2
    
    
    
    26.3Electronic Systems
    
    
    79.3
    
    
    
    58.7
    
    
    
    20.6
    
    
    
    35.1
    
    
    
    15.5
    
    
    
    13.1$
    321.7
    
    
    $
    275.9
    
    
    $
    45.8
    
    
    
    16.6
    
    
    
    18.2
    
    
    
    17.2
 Actuation and Landing Systems:
 
    
    Higher large commercial, regional, business and general aviation airplane aftermarket
sales of approximately $41 million, primarily in our aircraft wheels and brakes and landing
gear business units; and
    
    Higher regional, business and general aviation airplane OE sales of approximately $16
million, primarily in our landing gear business unit; partially offset by
    
    Lower large commercial airplane OE sales of approximately $4 million, primarily in our
landing gear business unit.
  
    
    Favorable product mix across most business units, which resulted in higher income of
approximately $22 million;
    
    Higher income resulting from changes in estimates on certain long-term contracts of
approximately $11 million; and
    
    Favorable foreign exchange of approximately $2 million; partially offset by
    
    Settlement of claims with a customer in the third quarter of 2007 that did not recur in
2008, which resulted in lower income of approximately $15 million in 2008; and
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
    
    Increased operating costs net of higher pricing across all business units, which resulted
in lower income of approximately $13 million.
 Nacelles and Interior Systems:
 
    
    Higher large commercial airplane aftermarket sales, including spare parts and MRO volume,
of approximately $27 million, primarily in our aerostructures and interiors business units;
    
    Higher defense and space OE and aftermarket sales of approximately $18 million, primarily
in our interiors and aerostructures business units; and
    
    Higher regional, business, and general aviation airplane OE sales of approximately $8
million, primarily in our aerostructures and interiors business units.
  
    
    Higher sales volume, primarily in our interiors and aerostructures business units, which
resulted in higher income of approximately $17 million; and
    
    Higher income resulting from changes in estimates for certain long-term contracts at our
aerostructures business unit of approximately $7 million; partially offset by
    
    Settlement of a claim with a customer in the third quarter of 2007 that did not recur in
2008, which resulted in lower income of approximately $7 million in 2008; and
    
    Unfavorable foreign exchange of approximately $2 million.
 Electronic Systems:
 
    
    Higher defense and space OE and aftermarket sales of approximately $33 million, primarily
in our sensors and integrated systems business unit, including sales associated with the
acquisitions of TEAC Aerospace Holdings, Inc. (TEAC) and Recon/Optical, Inc (ROI) of
approximately $11 million;
    
    Higher regional, business and general aviation airplane OE sales of approximately $11
million, primarily in our sensors and integrated systems and engine control and electrical
power business units;
    
    Higher large commercial airplane aftermarket sales of approximately $10 million,
primarily in our sensors and integrated systems business unit, including sales associated
with the acquisition of TEAC of approximately $4 million; and
    
    Higher large commercial airplane OE sales of approximately $9 million, primarily in our
engine control and electrical power business unit.
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
    
    Higher sales volume and favorable product mix across all business units, which resulted
in higher income of approximately $30 million; partially offset by
    
    Higher operating costs of approximately $8 million across all business units.
 Nine Months Ended September 30, 2008 Compared with Nine Months Ended September 30, 2007
 Nine Months EndedSeptember 30,
    
    
    
    
    
    
    
    
    % of SalesIncrease/
    
    
    %2008
    
    
    2007
    
    
    (Decrease)
    
    
    Change
    
    
    2008
    
    
    2007(Dollars in millions)NET CUSTOMER SALESActuation and Landing Systems
    
    $
    2,035.9
    
    
    $
    1,764.1
    
    
    $
    271.8
    
    
    
    15.4Nacelles and Interior Systems
    
    
    1,882.1
    
    
    
    1,625.8
    
    
    
    256.3
    
    
    
    15.8Electronic Systems
    
    
    1,448.6
    
    
    
    1,334.5
    
    
    
    114.1
    
    
    
    8.6$
    5,366.6
    
    
    $
    4,724.4
    
    
    $
    642.2
    
    
    
    13.6SEGMENT OPERATING INCOMEActuation and Landing Systems
    
    $
    238.6
    
    
    $
    182.0
    
    
    $
    56.6
    
    
    
    31.1
    
    
    
    11.7
    
    
    
    10.3Nacelles and Interior Systems
    
    
    501.9
    
    
    
    404.7
    
    
    
    97.2
    
    
    
    24.0
    
    
    
    26.7
    
    
    
    24.9Electronic Systems
    
    
    199.8
    
    
    
    175.7
    
    
    
    24.1
    
    
    
    13.7
    
    
    
    13.8
    
    
    
    13.2$
    940.3
    
    
    $
    762.4
    
    
    $
    177.9
    
    
    
    23.3
    
    
    
    17.5
    
    
    
    16.1
 Actuation and Landing Systems:
 
    
    Higher regional, business and general aviation airplane OE and aftermarket sales of
approximately $79 million, primarily in our landing gear, aircraft wheels and brakes and
actuation systems business units;
    
    Higher large commercial airplane OE sales of approximately $72 million, primarily in our
landing gear and actuation systems business units;
    
    Higher defense and space OE and aftermarket sales of approximately $53 million, primarily
in our landing gear, actuation systems and aircraft wheels and brakes business units;
    
    Higher large commercial airplane aftermarket sales of approximately $30 million,
primarily in our landing gear, aircraft wheels and brakes and actuation systems business
units; and
    
    Higher non-aerospace sales of approximately $17 million, primarily in our engine
components business unit.
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
    
    Higher sales volume and favorable product mix across all business units, which resulted
in higher income of approximately $60 million;
    
    Higher pricing net of increased operating costs across all business units, which resulted
in higher income of approximately $13 million; and
    
    Higher income resulting from changes in estimates on certain long-term contracts of
approximately $10 million; partially offset by
    
    Settlement of claims with a customer in 2007 that did not recur in 2008, which resulted
in lower income of approximately $15 million in 2008; and
    
    Unfavorable foreign exchange of approximately $12 million.
 Nacelles and Interior Systems:
 
    
    Higher large commercial airplane aftermarket sales, including spare parts and MRO volume,
of approximately $104 million, primarily in our aerostructures and interiors business units;
    
    Higher large commercial airplane OE sales of approximately $76 million, primarily in our
aerostructures and interiors business units;
    
    Higher defense and space OE and aftermarket sales of approximately $41 million, primarily
in our interiors business unit; and
    
    Higher regional, business, and general aviation airplane OE sales, primarily in our
aerostructures business unit, of approximately $35 million.
  
    
    Increased sales volume and favorable product mix, primarily in our aerostructures and
interiors business units, which resulted in increased income of approximately $92 million;
and
    
    Higher income resulting from changes in estimates for certain long-term contracts at our
aerostructures business unit of approximately $19 million; partially offset by
    
    Unfavorable foreign exchange of approximately $8 million; and
    
    Settlement of a claim with a customer in 2007 that did not recur in 2008, which resulted
in lower income of approximately $7 million in 2008.
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Electronic Systems:
 
    
    Higher defense and space OE and aftermarket sales of approximately $48 million, primarily
in our sensors and integrated systems business unit, including sales associated with the
acquisitions of TEAC and ROI of approximately $17 million;
    
    Higher large commercial airplane aftermarket sales of approximately $28 million,
primarily in our sensors and integrated systems business unit, including sales associated
with the acquisition of TEAC of approximately $10 million;
    
    Higher large commercial OE sales of approximately $17 million, primarily in our engine
control and electrical power and sensors and integrated systems business units;
    
    Higher regional, business and general aviation airplane OE and aftermarket sales of
approximately $16 million, primarily in our sensors and integrated systems and engine
control and electrical power business units; and
    
    Higher non-aerospace sales of approximately $11 million, primarily in our engine control
and electrical power business unit.
  
    
    Higher sales volume and favorable product mix across most business units, which resulted
in higher income of approximately $46 million; partially offset by
    
    Higher operating costs of approximately $14 million across all business units; and
    
    Unfavorable foreign exchange of approximately $4 million.
 LIQUIDITY AND CAPITAL RESOURCES
  43




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
    
    On October 23, 2007, our Board of Directors declared a quarterly dividend of $0.225 per
share of common stock, payable January 2, 2008 to shareholders of record on December 3,
2007;
    
    On February 19, 2008, our Board of Directors declared a quarterly dividend of $0.225 per
share of common stock, payable April 1, 2008 to shareholders of record as of March 3, 2008;
    
    We used cash from operations to repay $162 for notes which matured on April 15, 2008;
    
    On April 17, 2008, we completed the acquisition of TEAC, a leading provider of
proprietary airborne mission data, video recording and debrief products for the defense
industry, and cabin video systems for commercial airlines, for approximately $84 million in
cash, net of cash acquired. TEAC is reported in the Electronic Systems segment;
    
    On April 22, 2008, our Board of Directors declared a quarterly dividend of $0.225 per
share of common stock, payable July 1, 2008 to shareholders of record as of June 2, 2008;
    
    On July 1, 2008, Standard & Poors upgraded our credit rating from BBB, outlook positive
to BBB+, outlook stable. On August 6, 2008, Fitch Ratings upgraded our credit rating from
BBB, outlook positive to BBB+, outlook stable;
    
    On July 28, 2008, we completed the acquisition of certain assets of ROI, a leading
provider of low-to-medium altitude airborne reconnaissance camera and optical products for
the homeland security and military market, for approximately $38 million in cash. ROI is
reported in the Electronic Systems segment; and
    
    During the nine months ended September 30, 2008, we have repurchased 2.5 million shares
for approximately $127 million under our share repurchase program.
   Cash
  44




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Credit Facilities
  
    
    $500 million committed global revolving credit facility that expires in May 2012, of
which $393.7 million was available at September 30, 2008; and
    
    $75 million of uncommitted domestic money market facilities and $174.9 million of
uncommitted and committed foreign working capital facilities with various banks to meet
short-term borrowing requirements, of which $207.4 million was available at September 30,
2008.
 Off-Balance Sheet Arrangements
 Lease Commitments
    Derivatives
  
    
    Foreign Currency Contracts Designated as Cash Flow Hedges:At September 30, 2008, our
contracts had a notional amount of $1,648.4 million, fair value of a $7.4 million net
liability and maturity dates ranging from October 2008 to December 2012. The amount of
accumulated other comprehensive income that would be reclassified into earnings in the next
12 months was a gain of $7 million. During the third quarter of 2008 and 2007, we realized
net gains of $12.9 million and $19.7 million respectively, related to contracts that
settled. During the nine months ended September 30, 2008 and 2007, we realized net gains of
$54.2 million and $50.3 million respectively, related to contracts that settled.
    
    Interest Rate Swaps Designated as Fair Value Hedges:At September 30, 2008, our contracts
had a notional amount of $100 million, fair value of a $3.6 million net asset and maturity
dates ranging from December 2012 to July 2016.
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##### Table of Contents




    
    Foreign Currency Contracts not Designated as Hedges:At September 30, 2008, our contracts
had a notional amount of $20.7 million with maturity dates ranging from January 2009 to
February 2011. During the third quarter of 2008 and 2007, we realized a net loss of $18
million and a net gain of $5.5 million, respectively. During the nine months ended September
30, 2008 and September 30, 2007, we realized a net loss of $9.7 million and a net gain of $6
million, respectively, related to contracts that settled. The fair value of these contracts
was a net asset of $2.1 million at September 30, 2008.
  Contractual Obligations and Other Commercial Commitments
  Long-term Debt Repayments
  
    
    $119 million principal amount of the 7.5% notes; and
    
    $43 million principal amount of the 6.45% notes.
  CASH FLOW
  2008
    
    2007
    
    Change(Dollars in millions)Operating activities of continuing operations
    
    $
    460.8
    
    
    $
    406.1
    
    
    $
    54.7Investing activities of continuing operations
    
    $
    (318.6
    )
    
    $
    (159.8
    )
    
    $
    (158.8
    )Financing activities of continuing operations
    
    $
    (305.7
    )
    
    $
    (142.4
    )
    
    $
    (163.3
    )Discontinued operations
    
    $
    13.1
    
    
    $
    5.2
    
    
    $
    7.9
 46




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##### Table of Contents



Operating Activities of Continuing Operations
  Investing Activities of Continuing Operations
  
    
    Skyline Industries, Inc. for $9.5 million in cash;
    
    TEAC for approximately $84 million in cash, net of cash acquired; and
    
    ROI for approximately $38 million in cash.
 Financing Activities of Continuing Operations
  
    
    Long-term debt repayments of approximately $197 million primarily in connection with the
repayment of notes which matured in April 2008; and
    
    A decrease of proceeds from the issuance of our common stock, primarily for stock
compensation programs, of approximately $55 million; partially offset by
    
    Increased net borrowings under our committed global syndicated revolving credit facility
of approximately $35 million; and
    
    Lower purchases of our common stock in connection with our share repurchase program of
approximately $14 million.
  Discontinued Operations
  47




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CONTINGENCIES
 General
  Environmental
     48




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Asbestos
  Insurance Coverage
    49




---



##### Table of Contents



Liabilities of Divested Businesses
 Asbestos
  Other
  Guarantees
  Aerostructures Long-term Contracts
    50




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
    
    Ability to recover costs incurred for change orders and claims;
    
    Costs, including material and labor costs and related escalation;
    
    Labor improvements due to the learning curve experience;
    
    Anticipated cost productivity improvements related to new manufacturing methods and
processes;
    
    Supplier pricing including escalation where applicable, supplier claims (see Dispute
with Supplier below) and the suppliers ability to perform;
    
    The cost impact of product design changes that frequently occur during the flight test
and certification phases of a program; and
    
    Effect of foreign currency exchange fluctuations.
   Dispute with Supplier
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Tax
  Tax Years 2000 to 2004
  Tax Years Prior to 2000
  Coltec Industries Inc. and Subsidiaries
Goodrich Corporation and Subsidiaries
    
    December, 1997  July, 1999 (through date of acquisition) 
1998  1999 (including Rohr and Coltec)
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NEW ACCOUNTING STANDARDS NOT YET ADOPTED
  
    
    Financial Accounting Standards Board (FASB) Staff Position No. EITF 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions are Participating
Securities.
    
    Statement of Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133.
    
    Statement of Financial Accounting Standards No. 141(R), Business Combinations.
    
    Statement of Financial Accounting Standards No. 160 Accounting and Reporting of
Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.
  CRITICAL ACCOUNTING POLICIES
   53




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Contract Accounting-Percentage of Completion
 Revenue Recognition
   
    
    Escalation of future sales prices under the contracts;
    
    Ability to recover costs incurred for change orders and claims;
    
    Costs, including material and labor costs and related escalation;
    
    Labor improvements due to the learning curve experience;
    
    Anticipated cost productivity improvements related to new manufacturing methods and
processes;
    
    Supplier pricing including escalation where applicable, supplier claims and the
suppliers ability to perform;
    
    The cost impact of product design changes that frequently occur during the flight test
and certification phases of a program; and
    
    Effect of foreign currency exchange fluctuations.
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Inventory
   Income Taxes
  Goodwill and Identifiable Intangible Assets
  55




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##### Table of Contents



Other Assets
  
    
    Changes in market conditions that may affect product sales under the program, including
market acceptance and competition from others;
    
    Performance of subcontract suppliers and other production risks;
    
    Bankruptcy or other less significant financial difficulties of other program
participants, including the aircraft manufacturer, the OE manufacturers (OEM) and other
program suppliers or the aircraft customer; and
    
    Availability of specialized raw materials in the marketplace.
 Participation Payments
  56




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Entry Fees
  Sales Incentives
  Flight Certification Costs
  57




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Service and Product Warranties
   
    
    The historical performance of our products and changes in performance of newer products;
    
    The mix and volumes of products being sold; and
    
    The impact of product changes.
 Share-Based Compensation
  Stock Options
  2008
    
    2007Risk-free interest rate %
    
    
    3.3
    
    
    
    4.5Expected dividend yield %
    
    
    1.3
    
    
    
    1.7Historical volatility factor %
    
    
    31.2
    
    
    
    34.6Weighted-average expected life of the options (years)
    
    
    5.6
    
    
    
    5.5
  Restricted Stock Units
  58




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Performance Units
  Pension and Postretirement Benefits Other Than Pensions
  FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
   
    
    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 and the Lockheed Martin F-35 Lightning II and
F-22 Raptor;
    
    our ability to extend our commercial OE contracts beyond the initial contract periods;
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
    
    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;
    
    the financial viability of key suppliers and the ability of our suppliers to perform
under existing contracts;
    
    successful development of products and advanced technologies;
    
    the health of the commercial aerospace industry, including the impact of bankruptcies
and/or consolidations in the airline industry;
    
    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 expenses relating to employee and retiree medical and pension
benefits change;
    
    competitive product and pricing pressures;
    
    our ability to recover under contractual rights of indemnification for environmental and
other claims arising out of the divestiture of our tire, vinyl and other businesses;
    
    possible assertion of claims against us on the theory that we, as the former corporate
parent of Coltec Industries Inc, bear some responsibility for the asbestos-related
liabilities of Coltec and its subsidiaries;
    
    the effect of changes in accounting policies or 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, 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.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
   
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   61




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Changes in Internal Control
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  62




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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  ISSUER PURCHASES OF EQUITY SECURITIES
 (d) Maximum Number(or ApproximateDollarValue) of Shares(c) Total Number of
    
    
    that MayShares Purchased as
    
    
    Yet Be Purchased(a) Total Number
    
    
    
    
    
    
    Part of Publicly
    
    
    Underof Shares
    
    
    (b) Average Price
    
    
    Announced Plans or
    
    
    the Plans orPeriod
    
    Purchased (1)
    
    
    Paid Per Share
    
    
    Programs (2)
    
    
    Programs (3)July 2008
    
    
    319,421
    
    
    $
    48.17
    
    
    
    310,000August 2008
    
    
    504,554
    
    
    
    49.65
    
    
    
    501,500September 2008
    
    
    1,236,894
    
    
    
    48.85
    
    
    
    1,232,676Total
    
    
    2,060,869
    
    
    
    48.94
    
    
    
    2,044,176
    
    
    $
    246 million
 
 (1)
    
    The category includes 16,693 shares delivered to us by employees to pay withholding taxes due
upon vesting of a restricted unit award and to pay the exercise price of employee stock
options.(2)
    
    This balance represents the number of shares that were repurchased under the Companys
repurchase program (the Program). The Program was initially announced on October 24, 2006. On
February 19, 2008, the Company announced that its Board of Directors had increased the dollar
amount of shares that could be purchased under the Program from $300 million to $600 million.
Unless terminated earlier by resolution of the Companys Board of Directors, the Program will
expire when the Company has purchased all shares authorized for repurchase. The Program does
not obligate the Company to repurchase any particular amount of common stock, and may be
suspended or discontinued at any time without notice.(3)
    
    This balance represents the value of shares that can be repurchased under the Program. 63




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##### Table of Contents



Item 6. Exhibits.
  Exhibit 3.1
    
    Restated Certificate of Incorporation of Goodrich Corporation,
filed as Exhibit 3.1 to Goodrich Corporations Quarterly Report
on Form 10-Q for the quarter ended September 30, 2003 (File No.
1-892), is incorporated herein by reference.Exhibit 3.2
    
    By-Laws of Goodrich Corporation, as amended, filed as Exhibit
3.1 to Goodrich Corporations Current Report on Form 8-K dated
July 26, 2007, is incorporated herein by reference. In
accordance with Item 601(b)(4)(iii)(A) of Regulation S-K,
Goodrich Corporation hereby undertakes to furnish to the
Securities and Exchange Commission upon request, a copy of all
instruments defining the rights of holders of long-term debt.Exhibit 10.1
    
    Amendment Number 5 to the Goodrich Corporation Severance Program.Exhibit 15
    
    Letter Re: Unaudited Interim Financial Information.Exhibit 31.1
    
    Rule 13a-14(a)/15d-14(a) Certification.Exhibit 31.2
    
    Rule 13a-14(a)/15d-14(a) Certification.Exhibit 32
    
    Section 1350 Certifications.
 64




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##### Table of Contents



SIGNATURE
  October 27, 2008
    GOODRICH CORPORATION/s/ SCOTT E. KUECHLEScott E. KuechleExecutive Vice President and Chief Financial Officer/s/ SCOTT A. COTTRILLScott A. CottrillVice President and Controller
(Principal Accounting Officer) 65




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##### Table of Contents



EXHIBIT INDEX
 Exhibit 3.1
    
    Restated Certificate of Incorporation of Goodrich Corporation,
filed as Exhibit 3.1 to Goodrich Corporations Quarterly Report
on Form 10-Q for the quarter ended September 30, 2003 (File No.
1-892), is incorporated herein by reference.Exhibit 3.2
    
    By-Laws of Goodrich Corporation, as amended, filed as Exhibit 3.1
to Goodrich Corporations Current Report on Form 8-K dated July
26, 2007, is incorporated herein by reference. In accordance with
Item 601(b)(4)(iii)(A) of Regulation S-K, Goodrich Corporation
hereby undertakes to furnish to the Securities and Exchange
Commission upon request, a copy of all instruments defining the
rights of holders of long-term debt.Exhibit 10.1
    
    Amendment Number 5 to the Goodrich Corporation Severance Program.*Exhibit 15
    
    Letter Re: Unaudited Interim Financial Information.*Exhibit 31.1
    
    Rule 13a-14(a)/15d-14(a) Certification.*Exhibit 31.2
    
    Rule 13a-14(a)/15d-14(a) Certification.*Exhibit 32
    
    Section 1350 Certifications.*
 
 *
    
    Submitted electronically herewith. 66