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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

|   |  |                                                                                         
|-- |  | ----------------------------------------------------------------------------------------
|x  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 
|   |  |                                                                                         
|   |  | For The Quarterly Period Ended September 30, 2003                                       
|   |  |                                                                                         
|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



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Goodrich Corporation

(Exact Name of Registrant as Specified in its Charter)

|                                                                       |  |                                     
|---------------------------------------------------------------------- |  | ------------------------------------
|New York                                                               |  | 34-0252680                          
|(State or Other Jurisdiction of
Incorporation or Organization)         |  | (I.R.S. Employer
Identification No.)
|                                                                       |  |                                     
|Four Coliseum Centre, 2730 West Tyvola Road,
Charlotte, North Carolina |  | 28217                               
|(Address of Principal Executive Offices)                               |  | (Zip Code)                          



| | 
| | 

Registrants Telephone Number, Including Area Code:
704-423-7000

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes x       No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes x       No o

As of September 30, 2003, there were 117,605,382 shares of common stock
outstanding (excluding 14,000,000 shares held by a wholly owned subsidiary).
There is only one class of common stock.



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##### 



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Independent Accountants Review Report

To the Shareholders and Board of Directors of Goodrich Corporation

We have reviewed the accompanying condensed consolidated balance sheet of
Goodrich Corporation and subsidiaries as of September 30, 2003, and the related
condensed consolidated statements of income and cash flows for the three and
nine month periods ended September 30, 2003 and 2002. These financial
statements are the responsibility of the Companys management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with accounting principles
generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Goodrich
Corporation and subsidiaries as of December 31, 2002, and the related
consolidated statements of income, shareholders equity, and cash flows for the
year then ended, not presented herein; and in our report dated February 4,
2003, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 2002, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.

| |  |                      
| |  | ---------------------
| |  | /s/ Ernst & Young LLP

Charlotte, North Carolina
November 7, 2003

1



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##### 



GOODRICH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |         |  
|-------------------------------------------------- | ----------------------------------------- | - | ------------------ | ----- | ----------------- | - | ----- | ----- | ---- | - | ------- | ------- |  | - | ------- | ------- | -
|                                                   |                                           |   | Three Months Ended |       | Nine Months Ended
|                                                   |                                           |   | September 30,      |       | September 30,    
|                                                   |                                           |   |                    |       |                  
|                                                   |                                           |   | 2003               |       | 2002              |   | 2003  |       | 2002
|                                                   |                                           |   |                    |       |                   |   |       |       |     
|Sales                                              |                                           | $ | 1,063.9            |       |                   | $ | 856.2 |       |      | $ | 3,252.6 |         |  | $ | 2,651.5 |        
|Operating Costs and Expenses:                      |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|                                                   | Cost of sales                             |   |                    | 785.2 |                   |   |       | 645.9 |      |   |         | 2,504.7 |  |   |         | 1,994.5 |  
|                                                   | Selling and administrative expenses       |   |                    | 170.8 |                   |   |       | 103.8 |      |   |         | 533.3   |  |   |         | 332.9   |  
|                                                   | Restructuring and consolidation costs     |   |                    | 6.1   |                   |   |       | 6.9   |      |   |         | 43.8    |  |   |         | 27.0    |  
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|                                                   |                                           |   | 962.1              |       |                   |   | 756.6 |       |      |   | 3,081.8 |         |  |   | 2,354.4 |        
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|Operating income                                   |                                           |   | 101.8              |       |                   |   | 99.6  |       |      |   | 170.8   |         |  |   | 297.1   |        
|Interest expense                                   |                                           |   | (38.9              | )     |                   |   | (23.7 | )     |      |   | (117.1  | )       |  |   | (69.9   | )      
|Interest income                                    |                                           |   | 0.3                |       |                   |   | 6.8   |       |      |   | 5.4     |         |  |   | 25.9    |        
|Other expense  net                                |                                           |   | (9.8               | )     |                   |   | (11.2 | )     |      |   | (24.9   | )       |  |   | (13.6   | )      
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|Income before income taxes and Trust distributions |                                           |   | 53.4               |       |                   |   | 71.5  |       |      |   | 34.2    |         |  |   | 239.5   |        
|Income tax expense                                 |                                           |   | (16.7              | )     |                   |   | (23.6 | )     |      |   | (10.4   | )       |  |   | (79.0   | )      
|Distributions on Trust Preferred Securities        |                                           |   | (2.7               | )     |                   |   | (2.6  | )     |      |   | (7.9    | )       |  |   | (7.9    | )      
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|Income from continuing operations                  |                                           |   | 34.0               |       |                   |   | 45.3  |       |      |   | 15.9    |         |  |   | 152.6   |        
|Income (loss) from discontinued operations         |                                           |   |                   |       |                   |   | 0.7   |       |      |   | 62.4    |         |  |   | (10.3   | )      
|Cumulative effect of change in accounting          |                                           |   |                   |       |                   |   |      |       |      |   | (0.5    | )       |  |   | (36.1   | )      
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|Net income                                         |                                           | $ | 34.0               |       |                   | $ | 46.0  |       |      | $ | 77.8    |         |  | $ | 106.2   |        
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|Basic Earnings (Loss) per Share:                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|                                                   | Continuing operations                     |   | $                  | 0.29  |                   |   | $     | 0.44  |      |   | $       | 0.14    |  |   | $       | 1.49    |  
|                                                   | Discontinued operations                   |   |                    |      |                   |   |       | 0.01  |      |   |         | 0.52    |  |   |         | (0.10   | )
|                                                   | Cumulative effect of change in accounting |   |                    |      |                   |   |       |      |      |   |         |        |  |   |         | (0.35   | )
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|                                                   | Net income                                |   | $                  | 0.29  |                   |   | $     | 0.45  |      |   | $       | 0.66    |  |   | $       | 1.04    |  
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|Diluted Earnings (Loss) per Share:                 |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|                                                   | Continuing operations                     |   | $                  | 0.29  |                   |   | $     | 0.44  |      |   | $       | 0.13    |  |   | $       | 1.46    |  
|                                                   | Discontinued operations                   |   |                    |      |                   |   |       | 0.01  |      |   |         | 0.53    |  |   |         | (0.07   | )
|                                                   | Cumulative effect of change in accounting |   |                    |      |                   |   |       |      |      |   |         |        |  |   |         | (0.35   | )
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|                                                   | Net income                                |   | $                  | 0.29  |                   |   | $     | 0.45  |      |   | $       | 0.66    |  |   | $       | 1.04    |  
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        
|Dividends declared per common share                |                                           | $ | 0.20               |       |                   | $ | 0.20  |       |      | $ | 0.60    |         |  | $ | 0.675   |        
|                                                   |                                           |   |                    |       |                   |   |       |       |      |   |         |         |  |   |         |        

See notes to unaudited condensed consolidated financial statements.

2



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##### 



GOODRICH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN MILLIONS)

|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |              |       |         |         | 
|---------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------------- | ----- | ------------- | ------- | ------------ | ----- | ------- | ------- | 
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       | September 30, |         | December 31,
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       | 2003          |         | 2002        
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|ASSETS                                                                       |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|Current Assets                                                               |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|                                                                             |                                                                                                                                                                                                          | Cash and cash equivalents                                                                                                        |                           | $                    | 325.9 |               |         | $            | 149.9 |        
|                                                                             |                                                                                                                                                                                                          | Accounts and notes receivable, less allowance for
doubtful receivables
($32.2 at September 30, 2003; $31.4 at December 31, 2002) |                           |                      | 633.3 |               |         |              | 716.0 |        
|                                                                             |                                                                                                                                                                                                          | Inventories                                                                                                                      |                           |                      | 950.5 |               |         |              | 962.6 |        
|                                                                             |                                                                                                                                                                                                          | Deferred income taxes                                                                                                            |                           |                      | 117.0 |               |         |              | 121.3 |        
|                                                                             |                                                                                                                                                                                                          | Prepaid expenses and other assets                                                                                                |                           |                      | 56.5  |               |         |              | 38.0  |        
|                                                                             |                                                                                                                                                                                                          | Assets of discontinued operations                                                                                                |                           |                      |      |               |         |              | 46.5  |        
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           | Total Current Assets |       |               | 2,083.2 |              |       |         | 2,034.3 | 
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|Property, plant and equipment                                                |                                                                                                                                                                                                          |                                                                                                                                  | 1,151.4                   |                      |       |               | 1,222.4 |             
|Prepaid pension                                                              |                                                                                                                                                                                                          |                                                                                                                                  | 230.1                     |                      |       |               | 250.5   |             
|Goodwill                                                                     |                                                                                                                                                                                                          |                                                                                                                                  | 1,258.6                   |                      |       |               | 1,194.2 |             
|Identifiable intangible assets                                               |                                                                                                                                                                                                          |                                                                                                                                  | 466.6                     |                      |       |               | 464.8   |             
|Payment-in-kind notes receivable, less discount ($11.0 at December 31, 2002) |                                                                                                                                                                                                          |                                                                                                                                  |                          |                      |       |               | 141.7   |             
|Deferred income taxes                                                        |                                                                                                                                                                                                          |                                                                                                                                  | 65.4                      |                      |       |               | 45.5    |             
|Other assets                                                                 |                                                                                                                                                                                                          |                                                                                                                                  | 609.0                     |                      |       |               | 644.9   |             
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|                                                                             |                                                                                                                                                                                                          | $                                                                                                                                | 5,864.3                   |                      |       | $             | 5,998.3 |             
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|LIABILITIES AND SHAREHOLDERS EQUITY                                         |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|Current Liabilities                                                          |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|                                                                             |                                                                                                                                                                                                          | Short-term bank debt                                                                                                             |                           | $                    |      |               |         | $            | 379.2 |        
|                                                                             |                                                                                                                                                                                                          | Accounts payable                                                                                                                 |                           |                      | 378.5 |               |         |              | 435.8 |        
|                                                                             |                                                                                                                                                                                                          | Accrued expenses                                                                                                                 |                           |                      | 650.6 |               |         |              | 576.9 |        
|                                                                             |                                                                                                                                                                                                          | Income taxes payable                                                                                                             |                           |                      | 265.2 |               |         |              | 150.8 |        
|                                                                             |                                                                                                                                                                                                          | Liabilities of discontinued operations                                                                                           |                           |                      |      |               |         |              | 16.3  |        
|                                                                             |                                                                                                                                                                                                          | Mandatorily
redeemable preferred securities of trust  current                                                                   |                           |                      | 63.0  |               |         |              |      |        
|                                                                             |                                                                                                                                                                                                          | Current maturities of
long-term debt and capital lease obligations                                                               |                           |                      | 4.3   |               |         |              | 3.9   |        
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  | Total Current Liabilities |                      |       | 1,361.6       |         |              |       | 1,562.9 |        
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|Long-term debt and capital lease obligations                                 |                                                                                                                                                                                                          |                                                                                                                                  | 2,144.1                   |                      |       |               | 2,129.0 |             
|Pension obligations                                                          |                                                                                                                                                                                                          |                                                                                                                                  | 730.4                     |                      |       |               | 722.1   |             
|Postretirement benefits other than pensions                                  |                                                                                                                                                                                                          |                                                                                                                                  | 321.5                     |                      |       |               | 323.2   |             
|Other non-current liabilities                                                |                                                                                                                                                                                                          |                                                                                                                                  | 199.7                     |                      |       |               | 202.8   |             
|Commitments and contingent liabilities                                       |                                                                                                                                                                                                          |                                                                                                                                  |                          |                      |       |               |        |             
|Mandatorily redeemable preferred securities of trust                         |                                                                                                                                                                                                          |                                                                                                                                  | 63.5                      |                      |       |               | 125.4   |             
|Shareholders Equity                                                         |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|                                                                             | Common stock  $5 par value                                                                                                                                                                              |                                                                                                                                  |                           |                      |       |               |         |              |      
|                                                                             | Authorized 200,000,000 shares; issued 131,133,242 shares at September
30, 2003, and 130,568,582 shares at December 31, 2002 (excluding
14,000,000 shares held by a wholly-owned subsidiary at each date) |                                                                                                                                  |                           | 655.7                |       |               |         | 652.9        |      
|                                                                             | Additional paid-in capital                                                                                                                                                                               |                                                                                                                                  |                           | 1,033.4              |       |               |         | 1,027.4      |      
|                                                                             | Income retained in the business                                                                                                                                                                          |                                                                                                                                  |                           | 43.3                 |       |               |         | 36.1         |      
|                                                                             | Accumulated other comprehensive loss                                                                                                                                                                     |                                                                                                                                  |                           | (274.2               | )     |               |         | (369.1       | )    
|                                                                             | Unearned compensation                                                                                                                                                                                    |                                                                                                                                  |                           | (1.6                 | )     |               |         | (1.6         | )    
|                                                                             | Common stock held in treasury, at cost (13,527,860 shares at September
30, 2003,
and 13,506,977 shares at December 31, 2002)                                                                             |                                                                                                                                  |                           | (413.1               | )     |               |         | (412.8       | )    
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|Total Shareholders Equity                                                   |                                                                                                                                                                                                          |                                                                                                                                  | 1,043.5                   |                      |       |               | 932.9   |             
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             
|                                                                             |                                                                                                                                                                                                          | $                                                                                                                                | 5,864.3                   |                      |       | $             | 5,998.3 |             
|                                                                             |                                                                                                                                                                                                          |                                                                                                                                  |                           |                      |       |               |         |             

See notes to unaudited condensed consolidated financial statements.

3



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##### 



GOODRICH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(DOLLARS IN MILLIONS)

|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |        |       |        |  
|------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ---------------------------------------- | ------ | ----------------- | ----- | ----- | ------ | ----- | ------ | -
|                                                             |                                                                                                          |                                                                                                  |                                          |        | Nine Months Ended
|                                                             |                                                                                                          |                                                                                                  |                                          |        | September 30,    
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                  
|                                                             |                                                                                                          |                                                                                                  |                                          |        | 2003              |       | 2002 
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |      
|OPERATING ACTIVITIES                                         |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|                                                             | Income from continuing operations                                                                        |                                                                                                  | $                                        | 15.9   |                   |       | $     | 152.6  |      
|                                                             | Adjustments to reconcile income from continuing operations to net cash
Provided by operating activities: |                                                                                                  |                                          |        |                   |       |       |        |      
|                                                             |                                                                                                          | Restructuring and consolidation:                                                                 |                                          |        |                   |       |       |        |       |       
|                                                             |                                                                                                          |                                                                                                  | Expenses                                 |        |                   | 43.3  |       |        |       | 27.0   |  
|                                                             |                                                                                                          |                                                                                                  | Payments                                 |        |                   | (37.8 | )     |        |       | (41.8  | )
|                                                             |                                                                                                          | Rotable asset impairment                                                                         |                                          |        | 6.2               |       |       |        |      |       
|                                                             |                                                                                                          | Super 27 asset impairment                                                                        |                                          |        | 79.9              |       |       |        |      |       
|                                                             |                                                                                                          | Depreciation and amortization                                                                    |                                          |        | 163.6             |       |       |        | 118.4 |       
|                                                             |                                                                                                          | Deferred income taxes                                                                            |                                          |        | 8.4               |       |       |        | 0.8   |       
|                                                             |                                                                                                          | Net gains on sales of businesses                                                                 |                                          |        |                  |       |       |        | (2.5  | )     
|                                                             |                                                                                                          | Payment-in-kind interest income                                                                  |                                          |        | (4.3              | )     |       |        | (17.4 | )     
|                                                             |                                                                                                          | Change in assets and liabilities, net of effects of acquisitions and
dispositions of businesses: |                                          |        |                   |       |       |        |       |       
|                                                             |                                                                                                          |                                                                                                  | Receivables                              |        |                   | 59.8  |       |        |       | 87.4   |  
|                                                             |                                                                                                          |                                                                                                  | Change in receivables sold, net          |        |                   | (6.6  | )     |        |       | (21.9  | )
|                                                             |                                                                                                          |                                                                                                  | Inventories                              |        |                   | (15.5 | )     |        |       | 23.1   |  
|                                                             |                                                                                                          |                                                                                                  | Other current assets                     |        |                   | 10.9  |       |        |       | (0.4   | )
|                                                             |                                                                                                          |                                                                                                  | Accounts payable                         |        |                   | (75.6 | )     |        |       | (112.3 | )
|                                                             |                                                                                                          |                                                                                                  | Accrued expenses                         |        |                   | 41.4  |       |        |       | 4.6    |  
|                                                             |                                                                                                          |                                                                                                  | Income taxes payable                     |        |                   | 59.7  |       |        |       | 114.7  |  
|                                                             |                                                                                                          |                                                                                                  | Other non-current assets and liabilities |        |                   | (0.5  | )     |        |       | 12.3   |  
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|                                                             | Net cash provided by operating activities of continuing operations                                       |                                                                                                  |                                          | 348.8  |                   |       |       | 344.6  |      
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|INVESTING ACTIVITIES                                         |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|                                                             | Purchases of property and equipment                                                                      |                                                                                                  |                                          | (75.0  | )                 |       |       | (55.5  | )    
|                                                             | Proceeds from sale of property and equipment                                                             |                                                                                                  |                                          | 5.4    |                   |       |       | 5.9    |      
|                                                             | Proceeds from sale of businesses                                                                         |                                                                                                  |                                          |       |                   |       |       | 6.0    |      
|                                                             | Proceeds from sale of payment-in-kind note                                                               |                                                                                                  |                                          | 151.9  |                   |       |       | 4.8    |      
|                                                             | Payments received (made) in connection with acquisitions, net of cash acquired                           |                                                                                                  |                                          | 26.6   |                   |       |       | (0.4   | )    
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|                                                             | Net cash provided (used) by investing activities of continuing operations                                |                                                                                                  |                                          | 108.9  |                   |       |       | (39.2  | )    
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|FINANCING ACTIVITIES                                         |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|                                                             | Increase (decrease) in short-term debt                                                                   |                                                                                                  |                                          | (379.9 | )                 |       |       | 169.5  |      
|                                                             | Proceeds from long-term debt and capital lease obligations                                               |                                                                                                  |                                          | 12.5   |                   |       |       | 0.4    |      
|                                                             | Proceeds from issuance of capital stock                                                                  |                                                                                                  |                                          |       |                   |       |       | 4.1    |      
|                                                             | Purchases of treasury stock                                                                              |                                                                                                  |                                          |       |                   |       |       | (4.9   | )    
|                                                             | Dividends                                                                                                |                                                                                                  |                                          | (70.4  | )                 |       |       | (76.5  | )    
|                                                             | Distributions on Trust preferred securities                                                              |                                                                                                  |                                          | (7.9   | )                 |       |       | (7.9   | )    
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|                                                             | Net cash provided (used) by financing activities of continuing operations                                |                                                                                                  |                                          | (445.7 | )                 |       |       | 84.7   |      
|DISCONTINUED OPERATIONS                                      |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|                                                             | Net cash provided (used) by discontinued operations                                                      |                                                                                                  |                                          | 161.5  |                   |       |       | (133.0 | )    
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|Effect of Exchange Rate Changes on Cash and Cash Equivalents |                                                                                                          |                                                                                                  | 2.5                                      |        |                   |       | 0.8   |       
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|Net Increase in Cash and Cash Equivalents                    |                                                                                                          |                                                                                                  | 176.0                                    |        |                   |       | 257.9 |       
|Cash and Cash Equivalents at Beginning of Period             |                                                                                                          |                                                                                                  | 149.9                                    |        |                   |       | 85.8  |       
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |       
|Cash and Cash Equivalents at End of Period                   |                                                                                                          | $                                                                                                | 325.9                                    |        |                   | $     | 343.7 |       
|                                                             |                                                                                                          |                                                                                                  |                                          |        |                   |       |       |        |      

See notes to unaudited condensed consolidated financial statements.

4



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##### 



GOODRICH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note A: Basis of Interim Financial Statement Preparation

The accompanying unaudited condensed consolidated financial statements of
Goodrich Corporation and its subsidiaries have been prepared in accordance with
the instructions to Form 10-Q and do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. Unless indicated otherwise or the
context requires, the terms we, our, us, Goodrich or Company refer to
Goodrich Corporation and its subsidiaries. In our opinion, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Certain amounts in prior year financial
statements have been reclassified to conform to the current year presentation.
Operating results for the three and nine months ended September 30, 2003 are
not necessarily indicative of the results that may be achieved for the year
ending December 31, 2003. For further information, refer to the consolidated
financial statements and footnotes included in our Annual Report on Form 10-K
for the year ended December 31, 2002.

The Company completed its acquisition of TRW Inc.s Aeronautical Systems
businesses during the fourth quarter of 2002. The results of the Aeronautical
Systems businesses are included from the date of acquisition, and are therefore
included in the three and nine months ended September 30, 2003 results, but not
the three and nine months ended September 30, 2002 results.

As discussed in Note J, our former Engineered Industrial Products segment,
our former Avionics business and our former Passenger Restraints Systems
business have been accounted for as discontinued operations. Unless otherwise
noted, disclosures herein pertain to our continuing operations.

Note B: Stock-Based Employee Compensation

During the first quarter of 2003, the Company adopted Statement No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosures (SFAS
148), which amends Statement No. 123 Accounting for Stock-Based Compensation
(SFAS 123). The interim disclosures required by SFAS 148 are presented below.

The Company grants stock options and performance shares to certain
employees, and administers an employee stock purchase plan. Stock-based
employee compensation is accounted for in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees. No
compensation expense is included in net income for stock options or employee
stock purchase plan shares. Compensation expense is recognized for performance
shares based on an estimate of the number of shares that will be earned
adjusted for changes in the market price of the Companys common stock.

5



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##### 



The following table represents the effect on net income and earnings per
share if the Company had applied the fair value based method and recognition
provisions of SFAS 123. For purposes of the pro forma disclosures, the
estimated fair value of stock options at the date of grant is amortized to
expense over the stock option vesting period. Pro forma compensation expense
for the employee stock purchase plan awards in a given year include both the
fair value of the option to purchase shares at the date of grant and additional
compensation to reflect the discounted purchase price. The grant date fair
value of performance shares is amortized to expense over the three-year plan
cycle without adjustments for subsequent changes in the market price of the
Companys common stock.

|                                        |                                                                                                                                          |      |               |      |               |      |      |      |   |   |      |      |   |   |       |       |  
|--------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------- | ---- | ------------- | ---- | ---- | ---- | - | - | ---- | ---- | - | - | ----- | ----- | -
|                                        |                                                                                                                                          |      | Three Months  |      | Nine Months  
|                                        |                                                                                                                                          |      | Ended         |      | Ended        
|                                        |                                                                                                                                          |      | September 30, |      | September 30,
|                                        |                                                                                                                                          |      |               |      |              
|(In millions, except per share amounts) |                                                                                                                                          | 2003 |               | 2002 |               | 2003 |      | 2002
|                                        |                                                                                                                                          |      |               |      |               |      |      |     
|Net income, as reported                 |                                                                                                                                          | $    | 34.0          |      |               | $    | 46.0 |      |   | $ | 77.8 |      |   | $ | 106.2 |      
|                                        | Reverse:
Stock-based employee compensation expense
(income) included in net income,
as reported above (net of related tax effects)       |      |               | 1.5  |               |      |      | (3.8 | ) |   |      | (0.1 | ) |   |       | 0.3   |  
|                                        | Deduct:
Stock-based employee compensation (expense)
income determined under fair value method
for all awards, net of related tax
effects |      |               | (3.9 | )             |      |      | (4.4 | ) |   |      | (8.1 | ) |   |       | (13.2 | )
|                                        |                                                                                                                                          |      |               |      |               |      |      |      |   |   |      |      |   |   |       |      
|Pro forma net income                    |                                                                                                                                          | $    | 31.6          |      |               | $    | 37.8 |      |   | $ | 69.6 |      |   | $ | 93.3  |      
|                                        |                                                                                                                                          |      |               |      |               |      |      |      |   |   |      |      |   |   |       |      
|Earnings per share:                     |                                                                                                                                          |      |               |      |               |      |      |      |   |   |      |      |   |   |       |      
|                                        | Basic, as reported                                                                                                                       |      | $             | 0.29 |               |      | $    | 0.45 |   |   | $    | 0.66 |   |   | $     | 1.04  |  
|                                        |                                                                                                                                          |      |               |      |               |      |      |      |   |   |      |      |   |   |       |      
|                                        | Basic, pro forma                                                                                                                         |      | $             | 0.27 |               |      | $    | 0.37 |   |   | $    | 0.59 |   |   | $     | 0.91  |  
|                                        |                                                                                                                                          |      |               |      |               |      |      |      |   |   |      |      |   |   |       |      
|                                        | Diluted, as reported                                                                                                                     |      | $             | 0.29 |               |      | $    | 0.45 |   |   | $    | 0.66 |   |   | $     | 1.04  |  
|                                        |                                                                                                                                          |      |               |      |               |      |      |      |   |   |      |      |   |   |       |      
|                                        | Diluted, pro forma                                                                                                                       |      | $             | 0.27 |               |      | $    | 0.37 |   |   | $    | 0.59 |   |   | $     | 0.90  |  
|                                        |                                                                                                                                          |      |               |      |               |      |      |      |   |   |      |      |   |   |       |      

Note C: Inventories

Inventories consist of:

|                                                         |                                               |   |                       |       |              |   |         |       |  
|-------------------------------------------------------- | --------------------------------------------- | - | --------------------- | ----- | ------------ | - | ------- | ----- | -
|                                                         |                                               |   | September 30,         |       | December 31,
|                                                         |                                               |   | 2003                  |       | 2002        
|                                                         |                                               |   |                       |       |             
|                                                         |                                               |   | (Dollars in millions)
|FIFO or average cost (which approximates current costs): |                                               |   |                       |       |              |   |         |      
|                                                         | Finished products                             |   | $                     | 199.7 |              |   | $       | 248.4 |  
|                                                         | In-process                                    |   |                       | 624.4 |              |   |         | 557.4 |  
|                                                         | Raw materials and supplies                    |   |                       | 238.9 |              |   |         | 249.8 |  
|                                                         |                                               |   |                       |       |              |   |         |       |  
|                                                         |                                               |   | 1,063.0               |       |              |   | 1,055.6 |      
|Less:                                                    |                                               |   |                       |       |              |   |         |      
|                                                         | Reserve to reduce certain inventories to LIFO |   |                       | (41.0 | )            |   |         | (40.3 | )
|                                                         | Progress payments and advances                |   |                       | (71.5 | )            |   |         | (52.7 | )
|                                                         |                                               |   |                       |       |              |   |         |       |  
|Total                                                    |                                               | $ | 950.5                 |       |              | $ | 962.6   |      
|                                                         |                                               |   |                       |       |              |   |         |       |  

The preproduction and excess over average inventory balance, which is
included in in-process inventory, was $181.5 million and $112.9 million as of
September 30, 2003 and December 31, 2002, respectively.

6



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##### 



Note D: Business Segment Information

Effective January 1, 2003, the Company reorganized into three business
segments: Airframe Systems, Engine Systems and Electronic Systems. The
reorganization was designed to enhance communication and maximize synergies in
a streamlined organization. Segment financial results for prior periods have
been restated to reflect the new organization.

Airframe Systems:Airframe Systems provides systems and components
pertaining to aircraft taxi, take-off, landing and stopping. Several business
units within the segment are linked by their ability to contribute to the
integration, design, manufacture and service of entire aircraft undercarriage
systems, including landing gear, wheels and brakes and certain brake controls.
Airframe Systems also includes the aviation technical services division which
performs comprehensive total aircraft maintenance, repair, overhaul and
modification services for many commercial airlines, independent operators,
aircraft leasing companies and airfreight carriers. The segment also includes
the actuation systems, flight controls and customer services business units
that were acquired as part of Aeronautical Systems. Actuation systems provides
systems that control the movement of steering systems for missiles and
electro-mechanical systems that are characterized by high power, low weight,
low maintenance, resistance to extreme temperatures and vibrations and high
reliability. Flight controls provides actuators for primary flight control
systems that operate elevators, ailerons and rudders, and secondary flight
controls systems such as flaps and slats. The customer service business
supports aftermarket products for the businesses that were acquired as part of
Aeronautical Systems.

Engine Systems:Engine Systems includes the Aerostructures business unit,
a leading supplier of nacelles, pylons, thrust reversers and related aircraft
engine housing components. The segment also produces engine and fuel controls,
pumps, fuel delivery systems, and structural and rotating components such as
discs, blisks, shafts and airfoils for both aerospace and industrial gas
turbine applications. The segment includes the cargo systems and engine
controls business units, which were acquired as a part of Aeronautical Systems.
Cargo systems produces fully-integrated main deck and lower lobe cargo systems
for wide body aircraft. Engine systems provides engine control systems and
components for jet engines used on commercial and military aircraft, including
fuel metering controls, fuel pumping systems, electronic control software and
hardware, variable geometry actuation controls, afterburner fuel pump and
metering unit nozzles, and engine health monitoring systems.

Electronic Systems:Electronic Systems produces a wide array of products
that provide flight performance measurements, flight management, and control
and safety data. Included are a variety of sensors systems that measure and
manage aircraft fuel and monitor oil debris, engine and transmission and
structural health. The segments products also include ice detection systems,
test equipment, aircraft lighting systems, landing gear cables and harnesses,
satellite control, data management and payload systems, launch and missile
telemetry systems, airborne surveillance and reconnaissance systems and laser
warning systems, aircraft evacuation systems, de-icing systems, ejection seats
and crew and attendant seating. The power systems business unit, which was
acquired as part of Aeronautical Systems, provides systems that produce and
control electrical power for commercial and military aircraft, including
electric generators for both main and back-up electrical power, electric
starters and electric starter generating systems
and power management and distribution systems. The hoists and winches
business unit, also acquired as part of Aeronautical Systems, provides airborne
hoists and winches used on both helicopters and fixed wing aircraft.

7



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##### 



Segment operating income is total segment revenue reduced by operating
expenses identifiable with that business segment. The accounting policies of
the reportable segments are the same as those for Goodrich consolidated.

|                                              |                    |                        |       |                       |         |                   |       |       |       |      |       |         |         |   |       |         |         | 
|--------------------------------------------- | ------------------ | ---------------------- | ----- | --------------------- | ------- | ----------------- | ----- | ----- | ----- | ---- | ----- | ------- | ------- | - | ----- | ------- | ------- | 
|                                              |                    |                        |       | Three Months Ended    |         | Nine Months Ended
|                                              |                    |                        |       | September 30,         |         | September 30,    
|                                              |                    |                        |       |                       |         |                  
|                                              |                    |                        |       | 2003                  |         | 2002              |       | 2003  |       | 2002
|                                              |                    |                        |       |                       |         |                   |       |       |       |     
|                                              |                    |                        |       | (Dollars in millions)
|Net Customer Sales                            |                   
|                                              | Airframe Systems   |                        | $     | 427.5                 |         |                   | $     | 311.9 |       |      | $     | 1,333.3 |         |   | $     | 973.0   |        
|                                              | Engine Systems     |                        |       | 381.2                 |         |                   |       | 322.7 |       |      |       | 1,150.9 |         |   |       | 1,020.8 |        
|                                              | Electronic Systems |                        |       | 255.2                 |         |                   |       | 221.6 |       |      |       | 768.4   |         |   |       | 657.7   |        
|                                              |                    |                        |       |                       |         |                   |       |       |       |      |       |         |         |   |       |        
|                                              |                    | Total Sales            |       | $                     | 1,063.9 |                   |       | $     | 856.2 |      |       | $       | 3,252.6 |   |       | $       | 2,651.5 | 
|                                              |                    |                        |       |                       |         |                   |       |       |       |      |       |         |         |   |       |        
|Segment Operating Income                      |                   
|                                              | Airframe Systems   | $                      | 18.7  |                       |         | $                 | 34.8  |       |       | $    | 62.4  |         |         | $ | 87.1  |        
|                                              | Engine Systems     |                        |       | 61.8                  |         |                   |       | 33.8  |       |      |       | 53.6    |         |   |       | 144.2   |        
|                                              | Electronic Systems |                        |       | 37.4                  |         |                   |       | 41.4  |       |      |       | 101.3   |         |   |       | 107.3   |        
|                                              |                    |                        |       |                       |         |                   |       |       |       |      |       |         |         |   |       |        
|                                              |                    |                        | 117.9 |                       |         |                   | 110.0 |       |       |      | 217.3 |         |         |   | 338.6 |        
|Corporate General and Administrative Expenses |                    |                        | (16.1 | )                     |         |                   | (10.4 | )     |       |      | (46.5 | )       |         |   | (41.5 | )      
|                                              |                    |                        |       |                       |         |                   |       |       |       |      |       |         |         |   |       |        
|                                              |                    | Total Operating Income |       | $                     | 101.8   |                   |       | $     | 99.6  |      |       | $       | 170.8   |   |       | $       | 297.1   | 
|                                              |                    |                        |       |                       |         |                   |       |       |       |      |       |         |         |   |       |        

Intersegment sales have been eliminated in the Companys segment
disclosures. Intersegment sales for the Airframe Systems segment were $16.6
million and $51.3 million for the third quarter 2003 and nine months ended
September 30, 2003, respectively. Intersegment sales for the Engine Systems
segment were $25.0 million and $73.9 million for the third quarter 2003 and the
nine months ended September 30, 2003, respectively. Intersegment sales for the
Electronic Systems segment were $18.8 million and $67.5 million for the third
quarter 2003 and nine months ended September 30, 2003, respectively.
Intersegment sales for the three months and nine months ended September 30,
2002 were not significant.

Segment assets include assets directly identifiable with each segment.
Corporate assets include assets not specifically identified with a business
segment, including cash.

|       |                                   |              |   |                       |         |              |   |         |         | 
|------ | --------------------------------- | ------------ | - | --------------------- | ------- | ------------ | - | ------- | ------- | 
|       |                                   |              |   | September 30,         |         | December 31,
|       |                                   |              |   | 2003                  |         | 2002        
|       |                                   |              |   |                       |         |             
|       |                                   |              |   | (Dollars in millions)
|Assets |                                  
|       | Airframe Systems                  |              | $ | 1,699.8               |         |              | $ | 1,678.8 |        
|       | Engine Systems                    |              |   | 1,927.4               |         |              |   | 1,953.8 |        
|       | Electronic Systems                |              |   | 1,431.2               |         |              |   | 1,502.9 |        
|       | Assets of Discontinued Operations |              |   |                      |         |              |   | 46.5    |        
|       | Corporate                         |              |   | 805.9                 |         |              |   | 816.3   |        
|       |                                   |              |   |                       |         |              |   |        
|       |                                   | Total Assets |   | $                     | 5,864.3 |              |   | $       | 5,998.3 | 
|       |                                   |              |   |                       |         |              |   |        

8



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##### 



Note E: Earnings Per Share

The computation of basic and diluted earnings per share from continuing
operations is as follows:

|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |       |     | 
|----------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ---- | ------------------ | --- | ----------------- | ---- | ----- | --- | - | ---- | ----- | --- | - | ----- | ----- | --- | 
|                                                                                                            |                                                                                                       |                                                                                              |      | Three Months Ended |     | Nine Months Ended
|                                                                                                            |                                                                                                       |                                                                                              |      | September 30,      |     | September 30,    
|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                  
|(In millions, except per share amounts)                                                                     |                                                                                                       | 2003                                                                                         |      | 2002               |     | 2003              |      | 2002 
|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                   |      |      
|Numerator:                                                                                                  |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      
|Numerator for basic earnings per share  income from
continuing operations available to common
shareholders |                                                                                                       | $                                                                                            | 34.0 |                    |     | $                 | 45.3 |       |     | $ | 15.9 |       |     | $ | 152.6 |      
|Denominator:                                                                                                |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      
|                                                                                                            | Denominator
for basic earnings per share  weighted-average shares                                    |                                                                                              |      | 117.5              |     |                   |      | 102.1 |     |   |      | 117.4 |     |   |       | 102.0 |    
|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      
|                                                                                                            | Effect of dilutive securities:                                                                        |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |       |    
|                                                                                                            |                                                                                                       | Stock options, performance shares, restricted
shares and employee stock purchase plan shares |      |                    | 1.1 |                   |      |       | 0.3 |   |      |       | 0.6 |   |       |       | 0.6 | 
|                                                                                                            |                                                                                                       | Convertible preferred securities                                                             |      |                    |    |                   |      |       |    |   |      |       |    |   |       |       | 1.6 | 
|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      
|                                                                                                            | Dilutive potential common shares                                                                      |                                                                                              |      | 1.1                |     |                   |      | 0.3   |     |   |      | 0.6   |     |   |       | 2.2   |    
|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      
|                                                                                                            | Denominator for diluted earnings per share  adjusted
weighted-average shares and assumed conversions |                                                                                              |      | 118.6              |     |                   |      | 102.4 |     |   |      | 118.0 |     |   |       | 104.2 |    
|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      
|Earnings per share from continuing operations:                                                              |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      
|                                                                                                            | Basic                                                                                                 |                                                                                              | $    | 0.29               |     |                   | $    | 0.44  |     |   | $    | 0.14  |     |   | $     | 1.49  |    
|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      
|                                                                                                            | Diluted                                                                                               |                                                                                              | $    | 0.29               |     |                   | $    | 0.44  |     |   | $    | 0.13  |     |   | $     | 1.46  |    
|                                                                                                            |                                                                                                       |                                                                                              |      |                    |     |                   |      |       |     |   |      |       |     |   |       |      

At September 30, 2003 and 2002, the Company had approximately 11.3 million
and 9.6 million stock options outstanding, respectively. Stock options are
included in the diluted earnings per share calculation using the treasury stock
method, unless the effect of including the stock options would be
anti-dilutive. Of the 11.3 million and 9.6 million stock options outstanding,
8.4 million and 8.9 million options were anti-dilutive stock options at
September 30, 2003 and 2002, respectively.

9



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##### 



Note F: Comprehensive Income

Total comprehensive income consists of the following:

|                            |                                                  |   |                       |      |               |   |      |      |      |   |       |      |  |   |       |      | 
|--------------------------- | ------------------------------------------------ | - | --------------------- | ---- | ------------- | - | ---- | ---- | ---- | - | ----- | ---- |  | - | ----- | ---- | 
|                            |                                                  |   | Three Months          |      | Nine Months  
|                            |                                                  |   | Ended                 |      | Ended        
|                            |                                                  |   | September 30,         |      | September 30,
|                            |                                                  |   |                       |      |              
|                            |                                                  |   | 2003                  |      | 2002          |   | 2003 |      | 2002
|                            |                                                  |   |                       |      |               |   |      |      |     
|                            |                                                  |   | (Dollars in millions)
|Net Income                  |                                                  | $ | 34.0                  |      |               | $ | 46.0 |      |      | $ | 77.8  |      |  | $ | 106.2 |     
|Other Comprehensive Income: |                                                  |   |                       |      |               |   |      |      |      |   |       |      |  |   |       |     
|                            | Unrealized translation adjustments during period |   |                       | 27.1 |               |   |      | (1.6 | )    |   |       | 71.9 |  |   |       | 21.7 | 
|                            | Gain (loss) on cash flow hedges                  |   |                       | 2.9  |               |   |      | (0.7 | )    |   |       | 22.7 |  |   |       | 2.8  | 
|                            | Gain on certain investments                      |   |                       |     |               |   |      |     |      |   |       | 0.3  |  |   |       |     | 
|                            |                                                  |   |                       |      |               |   |      |      |      |   |       |      |  |   |       |     
|Total Comprehensive Income  |                                                  | $ | 64.0                  |      |               | $ | 43.7 |      |      | $ | 172.7 |      |  | $ | 130.7 |     
|                            |                                                  |   |                       |      |               |   |      |      |      |   |       |      |  |   |       |     

Accumulated other comprehensive income consists of the following (dollars in
millions):

|                                              |  |               |        |              |  |   |        |  
|--------------------------------------------- |  | ------------- | ------ | ------------ |  | - | ------ | -
|                                              |  | September 30, |        | December 31,
|                                              |  | 2003          |        | 2002        
|                                              |  |               |        |             
|Cumulative unrealized translation adjustments |  | $             | 63.9   |              |  | $ | (8.0   | )
|Minimum pension liability adjustment          |  |               | (380.5 | )            |  |   | (380.5 | )
|Accumulated gain on cash flow hedges          |  |               | 42.1   |              |  |   | 19.4   |  
|Unrealized gain on certain investments        |  |               | 0.3    |              |  |   |       |  
|                                              |  |               |        |              |  |   |        |  
|                                              |  | $             | (274.2 | )            |  | $ | (369.1 | )
|                                              |  |               |        |              |  |   |        |  

The minimum pension liability amounts above are net of deferred taxes of
$204.9 million. The accumulated gain on cash flow hedges above is net of
deferred taxes of $19.1 million and $9.6 million at September 30, 2003 and
December 31, 2002, respectively.

Note G: Restructuring and Consolidation Costs

For the three months and the nine months ended September 30, 2003, the
Company recorded restructuring and consolidation charges totaling $6.0 and
$43.8 million, respectively. The charges were recorded across the Companys
segments as follows:

|                   |  |                       |     |                       |  |   |      | 
|------------------ |  | --------------------- | --- | --------------------- |  | - | ---- | 
|                   |  | Three Months Ended    |     | Nine Months Ended    
|                   |  | September 30, 2003    |     | September 30, 2003   
|                   |  |                       |     |                      
|                   |  | (Dollars in millions) |     | (Dollars in millions)
|Airframe Systems   |  | $                     | 2.2 |                       |  | $ | 8.6  | 
|Engine Systems     |  |                       | 1.8 |                       |  |   | 29.2 | 
|Electronic Systems |  |                       | 2.0 |                       |  |   | 6.0  | 
|                   |  |                       |     |                       |  |   |      | 
|                   |  | $                     | 6.0 |                       |  | $ | 43.8 | 
|                   |  |                       |     |                       |  |   |      | 

Restructuring and consolidation reserves at December 31, 2002 and
September 30, 2003, as well as activity during the nine months ended September
30, 2003, consisted of:

|                                 |  |                       |      |           |  |          |      |       |  |      |       |         |  |               |      |  |  |   |      | 
|-------------------------------- |  | --------------------- | ---- | --------- |  | -------- | ---- | ----- |  | ---- | ----- | ------- |  | ------------- | ---- |  |  | - | ---- | 
|                                 |  | (Dollars in millions)
|                                 |  | Balance               |      |           |  |          |      |       |  |      |       | Opening |  | Balance      
|                                 |  | December 31,          |      |           |  |          |      |       |  |      |       | Balance |  | September 30,
|                                 |  | 2002                  |      | Provision |  | Activity |      | Sheet |  | 2003
|                                 |  |                       |      |           |  |          |      |       |  |     
|Personnel-related costs          |  | $                     | 17.6 |           |  | $        | 11.9 |       |  | $    | (27.4 | )       |  | $             | 16.3 |  |  | $ | 18.4 | 
|Facility closure and other costs |  |                       | 5.7  |           |  |          | 31.9 |       |  |      | (32.1 | )       |  |               | 8.1  |  |  |   | 13.6 | 
|                                 |  |                       |      |           |  |          |      |       |  |      |       |         |  |               |      |  |  |   |      | 
|                                 |  | $                     | 23.3 |           |  | $        | 43.8 |       |  | $    | (59.5 | )       |  | $             | 24.4 |  |  | $ | 32.0 | 
|                                 |  |                       |      |           |  |          |      |       |  |      |       |         |  |               |      |  |  |   |      | 

10



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##### 



During the nine months ended September 30, 2003, approximately 1,350
employees were terminated as part of the restructuring activities described
below. As of September 30, 2003, the Company expects to further reduce
employment levels by approximately 650 people as part of those restructuring
activities.

The following is a description of key components of the $43.8 million
provision for restructuring and consolidation costs in the first nine months of
2003:

Airframe Systems:The segment recorded $8.6 million in restructuring and
consolidation costs, consisting of $5.0 million in personnel-related costs and
$3.6 million in facility closure and other costs.

The personnel-related charge was for employee severance and benefits.
Facility closure and other costs include $2.7 million in non-cash asset
impairment charges and $1.8 million for environmental remediation for a surplus
building, offset by a reserve reversal of $0.9 million due to a revision of
estimated facility closure and other costs.

Engine Systems:The segment recorded $29.2 million in restructuring and
consolidation costs, consisting of $5.0 million in personnel-related costs
offset by a $3.1 million reversal based on a revision of estimated employee
severance costs and $27.3 million in facility closure and other costs.

The personnel-related charges are for employee severance and benefits.
Facility closure and other costs include $25.8 million in non-cash asset
impairment charges and facility closure costs of $1.5 million for machinery and
equipment relocation and other facility closure costs.

Electronic Systems:The segment recorded $6.0 million in restructuring and
consolidation costs, consisting of $5.0 million in personnel-related costs and
$1.0 million in facility closure and other costs.

The $5.0 million personnel-related charges, net of a $0.2 million reserve
reversal, are for employee severance and benefits. Facility closure and other
costs included $0.2 million in non-cash accelerated depreciation and $0.8
million in equipment relocation and other facility closure costs.

Restructuring and Consolidation Costs  Activity

Of the $59.5 million decrease in reserves, $37.8 million represented cash
payments and $21.7 million represented non-cash reserve reductions.

Restructuring and Consolidation Costs  Opening Balance Sheet

The $24.4 million increase in restructuring reserves in the opening
balance sheet column relates to reserves, primarily for personnel related
costs, the Company recorded in the opening balance sheet for the Aeronautical
Systems acquisition as part of its integration effort in accordance with EITF
Issue No. 95-3 Recognition of Liabilities in Connection with a Purchase
Business Combination.

Note H: Asset Impairments

During the first quarter of 2003, the Company recorded a non-cash $79.9
million pre-tax asset impairment charge for the Companys Super 27 re-engining
program, reflecting a revaluation of the assets in light of current market
conditions.

In March 2003, the Company repossessed four 727 aircraft from a receivable
obligor who was in financial difficulty and also received a revised cash flow
forecast indicating a significant decline in the financial strength of another
receivable obligor. In addition, the deterioration in the commercial airline
market resulting from the conflict in Iraq and SARS made available more
aircraft that compete with or are newer than the Super 27 aircraft. Because of
these events, the Company concluded that its ability to recover the recorded
values of the Companys inventory and notes receivable was significantly
affected. In the first quarter 2003, based on an independent appraisal and the
Companys assessment of then current market conditions, the Company wrote-down
the carrying value of its inventory to equal the estimated market value of
$12.2 million. Also in the first quarter of 2003, the Company wrote-off $0.4
million of related trade receivables and $46.1 million of notes receivable from
a receivable obligor.

11



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##### 



As of September 30, 2003, the Companys remaining notes receivable of $8.0
million represents the present value of expected future cash flows related to
those receivables. The total carrying value of inventory and other assets
related to the Super 27 business was $16.3 million at September 30, 2003 and
represents the Companys assessment of the current market value.

During the first quarter 2003, the Company recorded a non-cash $11.7
million pre-tax asset impairment charge related to its equity investment in
Cordiem LLC and a non-cash $6.2 million pre-tax impairment charge on rotable
landing gear assets.

Note I: Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended
September 30, 2003, by segment are as follows:

|                   |  |                       |         |              |  |          |      |             |  |          |       |               |  |   |       |   |  |   |         | 
|------------------ |  | --------------------- | ------- | ------------ |  | -------- | ---- | ----------- |  | -------- | ----- | ------------- |  | - | ----- | - |  | - | ------- | 
|                   |  |                       |         |              |  | Business |      |             |  |          |       |               |  |   |       |   |  |  
|                   |  | Balance               |         | Combinations |  |          |      |             |  | Foreign  |       | Balance      
|                   |  | December 31,          |         | Completed    |  |          |      |             |  | Currency |       | September 30,
|                   |  | 2002                  |         | or Finalized |  | Other    |      | Translation |  | 2003    
|                   |  |                       |         |              |  |          |      |             |  |         
|                   |  | (Dollars in millions)
|Airframe Systems   |  | $                     | 185.1   |              |  | $        | 30.3 |             |  | $        |      |               |  | $ | 15.1  |   |  | $ | 230.5   | 
|Engine Systems     |  |                       | 406.6   |              |  |          | 31.5 |             |  |          |      |               |  |   | 6.5   |   |  |   | 444.6   | 
|Electronic Systems |  |                       | 602.5   |              |  |          | 38.0 |             |  |          | (46.3 | )             |  |   | (10.7 | ) |  |   | 583.5   | 
|                   |  |                       |         |              |  |          |      |             |  |          |       |               |  |   |       |   |  |   |         | 
|                   |  | $                     | 1,194.2 |              |  | $        | 99.8 |             |  | $        | (46.3 | )             |  | $ | 10.9  |   |  | $ | 1,258.6 | 
|                   |  |                       |         |              |  |          |      |             |  |          |       |               |  |   |       |   |  |   |         | 

Of the $99.8 million increase to goodwill as a result of business
combinations completed or finalized, $98.8 million related to revisions to the
purchase price allocation for the Aeronautical Systems acquisition and $1.0
million related to the adjustment of the purchase price of an acquisition due
to an earn-out agreement.

The purchase price allocation for Aeronautical Systems has been finalized
as of the third quarter of 2003.

The $46.3 million reduction in goodwill in Electronic Systems represents
the goodwill allocated to the Avionics business, which was sold during the
first quarter of 2003.

Identifiable intangible assets as of September 30, 2003 are comprised of:

|                               |                                  |   |                       |       |              |   |      |      | 
|------------------------------ | -------------------------------- | - | --------------------- | ----- | ------------ | - | ---- | ---- | 
|                               |                                  |   | GROSS                 |       | ACCUMULATED 
|                               |                                  |   | AMOUNT                |       | AMORTIZATION
|                               |                                  |   |                       |       |             
|                               |                                  |   | (Dollars in millions)
|Amortizable intangible assets: |                                  |   |                       |       |              |   |      |     
|                               | Patents, trademarks and licenses |   | $                     | 161.8 |              |   | $    | 46.2 | 
|                               | Customer relationships           |   |                       | 270.6 |              |   |      | 11.2 | 
|                               | Technology                       |   |                       | 86.7  |              |   |      | 0.8  | 
|                               | Non-compete agreements           |   |                       | 6.6   |              |   |      | 4.8  | 
|                               | Sourcing contracts               |   |                       | 5.8   |              |   |      | 1.9  | 
|                               |                                  |   |                       |       |              |   |      |      | 
|                               |                                  | $ | 531.5                 |       |              | $ | 64.9 |     
|                               |                                  |   |                       |       |              |   |      |      | 

Amortization of intangible assets for the nine months ended September 30,
2003 was $14.8 million. Amortization expense of these intangible assets for
2004 to 2008 is estimated to be approximately $23 million to $26 million per
year. There were no indefinite lived identifiable intangible assets as of
September 30, 2003.

12



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Note J: Discontinued Operations

The disposition of the former Engineered Industrial Products segment, the
former Avionics business and the former Passenger Restraints Systems business
each represented the disposal of a component of an entity under FASB Statement
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
Accordingly, the revenues, costs and expenses, assets and liabilities, and cash
flows of Engineered Industrial Products, Avionics and Passenger Restraints
Systems have been segregated in the accompanying unaudited condensed
consolidated statement of income, unaudited condensed consolidated balance
sheet and unaudited condensed consolidated statement of cash flows.

The following summarizes the results of discontinued operations:

|                                                                              |                                           |      |               |      |               |      |      |      |  |   |      |      |   |   |       |       |  
|----------------------------------------------------------------------------- | ----------------------------------------- | ---- | ------------- | ---- | ------------- | ---- | ---- | ---- |  | - | ---- | ---- | - | - | ----- | ----- | -
|                                                                              |                                           |      | Three Months  |      | Nine Months  
|                                                                              |                                           |      | Ended         |      | Ended        
|                                                                              |                                           |      | September 30, |      | September 30,
|                                                                              |                                           |      |               |      |              
|(Dollars in millions)                                                         |                                           | 2003 |               | 2002 |               | 2003 |      | 2002
|                                                                              |                                           |      |               |      |               |      |      |     
|Net
Customer Sales:                                                           |                                           |      |               |      |               |      |      |      |  |   |      |      |   |   |       |      
|                                                                              | Avionics and Passenger Restraints Systems |      | $             |     |               |      | $    | 25.8 |  |   | $    | 24.3 |   |   | $     | 77.3  |  
|                                                                              | Engineered Industrial Products            |      |               |     |               |      |      |     |  |   |      |     |   |   |       | 289.5 |  
|                                                                              |                                           |      |               |      |               |      |      |      |  |   |      |      |   |   |       |       |  
|                                                                              |                                           | $    |              |      |               | $    | 25.8 |      |  | $ | 24.3 |      |   | $ | 366.8 |      
|                                                                              |                                           |      |               |      |               |      |      |      |  |   |      |      |   |   |       |       |  
|Pretax income (loss) from operations:                                         |                                           |      |               |      |               |      |      |      |  |   |      |      |   |   |       |      
|                                                                              | Avionics and Passenger Restraints Systems |      | $             |     |               |      | $    | 1.0  |  |   | $    | (0.9 | ) |   | $     | 2.1   |  
|                                                                              | Engineered Industrial Products            |      |               |     |               |      |      |     |  |   |      |     |   |   |       | (13.5 | )
|                                                                              |                                           |      |               |      |               |      |      |      |  |   |      |      |   |   |       |       |  
|                                                                              |                                           |      |              |      |               |      | 1.0  |      |  |   | (0.9 | )    |   |   | (11.4 | )    
|Income tax (expense) benefit                                                  |                                           |      |              |      |               |      | (0.3 | )    |  |   | 0.3  |      |   |   | 4.4   |      
|Distributions on Trust preferred securities                                   |                                           |      |              |      |               |      |     |      |  |   |     |      |   |   | (3.3  | )    
|Gain on sale of Avionics (net of income tax expense of $39.1 million
in 2003) |                                           |      |              |      |               |      |     |      |  |   | 63.0 |      |   |   |      |      
|                                                                              |                                           |      |               |      |               |      |      |      |  |   |      |      |   |   |       |       |  
|Income (loss) from discontinued operations                                    |                                           | $    |              |      |               | $    | 0.7  |      |  | $ | 62.4 |      |   | $ | (10.3 | )    
|                                                                              |                                           |      |               |      |               |      |      |      |  |   |      |      |   |   |       |       |  

Avionics and Passenger Restraints Systems

On March 28, 2003, the Company completed the sale of its Avionics business
to L-3 Communications Corporation for $188 million. Accordingly, this business
has been reported as a discontinued operation beginning with the first quarter
of 2003.

During the first quarter of 2003, the Company ceased all operations of its
Passenger Restraints Systems business. Accordingly, this business has been
reported as a discontinued operation beginning with the first quarter of 2003.

Engineered Industrial Products

On May 31, 2002, the Company completed the tax-free spin-off of its former
Engineered Industrial Products (EIP) segment. The spin-off was effected through
a tax-free distribution to the Companys shareholders of all of the capital
stock of EnPro Industries, Inc. (EnPro), then a wholly-owned subsidiary of
Goodrich. In the spin-off, the Companys shareholders received one share of
EnPro common stock for every five shares of the Companys common stock owned on
the record date, May 28, 2002.

At the time of the spin-off, EnPros only material asset was all of the
capital stock and certain indebtedness of Coltec Industries Inc (Coltec).
Coltec and its subsidiaries owned substantially all of the assets and
liabilities of the EIP segment, including the associated asbestos liabilities
and related insurance.

Prior to the spin-off, Coltec also owned and operated an aerospace
business. Before completing the spin-off, Coltecs aerospace business assumed
all intercompany balances outstanding between Coltec and the Company and Coltec
then transferred to the Company by way of a dividend all of the assets,
liabilities and operations of Coltecs aerospace business, including these
assumed balances. Following this transfer and prior to the spin-off, all of the
capital stock of Coltec was contributed to EnPro, with the result that at the
time of the spin-off Coltec was a wholly-owned subsidiary of EnPro.

13



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In connection with the spin-off, the Company and EnPro entered into a
distribution agreement, a tax matters agreement, a transition services
agreement, an employee matters agreement and an indemnification agreement,
which govern the relationship between the Company and EnPro after the spin-off
and provide for the allocation of employee benefits, tax and other liabilities
and obligations attributable to periods prior to the spin-off.

The spin-off was recorded as a dividend and resulted in a reduction in
shareholders equity of $409.1 million representing the recorded value of net
assets of the business distributed, including cash of $47.0 million. The
distribution agreement provided for certain post-distribution adjustments
relating to the amount of cash to be included in the net assets distributed.
The final adjustment has been calculated and is subject to a dispute resolution
process. The Company expects that the final resolution of this process on its
financial condition and results of operations will be immaterial.

The $150 million of outstanding Coltec Capital Trust 5 1/4 percent
convertible trust preferred securities (TIDES) that were reflected in
liabilities of discontinued operations prior to the spin-off remained
outstanding as part of the EnPro capital structure following the spin-off. The
TIDES are convertible into shares of both Goodrich and EnPro common stock until
April 15, 2028. The Company has guaranteed amounts owed by Coltec Capital Trust
with respect to the TIDES and has guaranteed Coltecs performance of its
obligations with respect to the TIDES and the underlying Coltec convertible
subordinated debentures. EnPro, Coltec and Coltec Capital Trust have agreed to
indemnify the Company for any costs and liabilities arising under or related to
the TIDES after the spin-off.

Note K: Cumulative Effect of Change in Accounting

The cumulative effect of an accounting change, as presented after taxes,
in 2003 of a loss of $0.5 million represents the adoption of Statement of
Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations. The Company established a liability for contractual obligations
for the retirement of long-lived assets. The cumulative effect of an accounting
change, as presented after taxes, in 2002 of a loss of $36.1 million represents
the adoption of Statement of Financial Accounting Standards No. 142 Goodwill
and Other Intangible Assets. Based upon the impairment test of goodwill and
indefinite lived intangible assets, the Company determined that goodwill relating
to the aviation technical services reporting unit, reported in the Airframe
Systems segment, had been impaired. As a result, the Company recognized an
impairment charge, representing total goodwill of the aviation technical services
reporting unit. The goodwill write-off was non-deductible for tax purposes.

Note L: Financing Arrangements

Credit Facilities

In August 2003, the Company replaced its committed syndicated revolving
credit facilities (composed of a three-year facility expiring in December 2004
and a 364-day facility expiring in September 2003) with a new committed
syndicated revolving credit facility expiring in August 2006. The new facility
permits borrowing up to a maximum of $500 million (compared to $750 million
under the previous facilities) and otherwise has similar terms and is with the
same group of global banks as the previous facilities. At September 30, 2003,
there were no borrowings and $14.3 million in outstanding letters of credit
under this facility. At December 31, 2002, there were $155 million in
borrowings and $9.7 million in letters of credit under the previous facilities.
During the first quarter of 2003, all amounts borrowed under the previous
facilities were repaid with a portion of the proceeds from the sale of the
Companys Avionics business, cash flow from operations and proceeds from the
sale of certain non-operating assets.

The level of unused borrowing capacity under the Companys committed
syndicated revolving credit facility varies from time to time depending in part
upon the Companys consolidated net worth and leverage ratio levels. In
addition, the Companys ability to borrow under this facility is conditioned
upon compliance with financial and other covenants set forth in the related
agreement, including a consolidated net worth requirement and maximum leverage
ratio. The Company is currently in compliance with all such covenants.

14



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The Company also maintains $75 million of uncommitted domestic money
market facilities and $24.7 million of uncommitted foreign working capital
facilities with various banks to meet short-term borrowing requirements. As of
September 30, 2003, there were no borrowings under these facilities. At
December 31, 2002, $23.5 million was borrowed under these facilities. These
uncommitted credit facilities are provided by a small number of commercial
banks that also provide the Company with committed credit through the
syndicated revolving credit facility and with various cash management, trust
and other services.

In October 2002, the Company borrowed $1.5 billion under a committed
syndicated credit agreement expiring in July 2003, to finance the acquisition
of Aeronautical Systems from TRW Inc. During 2002, the Company repaid $1.3
billion with the proceeds from the issuance of common stock and long-term debt,
operating cash flow and the proceeds from the sale of certain non-operating
assets. In March 2003, the Company repaid the balance of $200 million with the
proceeds from the sale of the Noveon International, Inc. payment-in-kind notes
(Noveon PIK Notes) and a portion of the proceeds from the sale of the Companys
Avionics business.

The Companys credit facilities do not contain any credit rating downgrade
triggers that would accelerate the maturity of its indebtedness. However, a
ratings downgrade would result in an increase in the interest rate and fees
payable under the Companys committed syndicated revolving credit facility.
Such a downgrade also could adversely affect the Companys ability to renew
existing or obtain access to new credit facilities in the future and could
increase the cost of such new facilities.

In July 2003, Standard & Poors reduced its rating on the Companys
long-term senior unsecured debt from BBB to BBB-. The rating change
resulted in a small increase in the interest rate and fees payable under the
Companys committed syndicated revolving credit facility.

QUIPS

At September 30, 2003, there were $126.5 million in outstanding 8.30%
Cumulative Quarterly Income Preferred Securities, Series A (QUIPS) issued by
BFGoodrich Capital, a Delaware business trust (Trust), all of the common equity
of which is owned by the Company. The QUIPS are supported by the Companys
8.30% Junior Subordinated Debentures, Series A, due 2025 (QUIPS Debentures).
The Company has unconditionally guaranteed all distributions required to be
made by the Trust, but only to the extent the Trust has funds legally available
for such distributions.

As of September 30, 2003, approximately $63.0 million of the QUIPS were
reported as Mandatorily Redeemable Preferred Securities of Trust  Current as
the QUIPS were called for redemption in the third quarter of 2003. On October
6, 2003, the Company completed the redemption of approximately $63.0 million of
the QUIPS.

Note M: Off-Balance Sheet Arrangements

Lease Agreements

The Company finances its use of certain equipment, including corporate
aircraft, under committed lease arrangements provided by financial
institutions. Certain of these arrangements allow the Company to claim a
deduction for the tax depreciation on the assets, rather than the lessor, and
allowed the Company to lease up to a maximum of $95 million at September 30,
2003. At September 30, 2003, $53.8 million of future minimum lease payments
were outstanding under these arrangements. In addition, the Company has other
operating lease agreements in which the lessor claims the deduction for tax
depreciation. Future minimum lease payments under these agreements approximated
$149.4 million at September 30, 2003.

15



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Sale of Receivables

At September 30, 2003, the Company had in place a trade receivables
securitization program pursuant to which the Company could sell receivables up
to a maximum of $140 million. Accounts receivable sold under this program were
$90.7 million at September 30, 2003, as compared to $97.3 million at December
31, 2002.

Continued availability of the securitization program is conditioned upon
compliance with covenants, related primarily to operation of the
securitization, set forth in the related agreements. The Company is currently
in compliance with all such covenants. The securitization agreement includes a
credit rating downgrade trigger pursuant to which the agreement may be
terminated upon a rating downgrade to levels below BB- by Standard & Poors and
Ba3 by Moodys Investor Services. If such an event were to occur, the Company
expects that it would have sufficient capital resources through its cash and
credit facilities to satisfy any termination requirements.

Note N: Derivatives and Hedging Activities

The Company has subsidiaries that conduct a substantial portion of their
business in Euros, Great Britain Pound Sterling and Canadian Dollars, but have
significant sales contracts that are denominated in U.S. dollars. Periodically,
the Company enters into forward contracts to exchange U.S. dollars for Euros,
Great Britain Pound Sterling and Canadian Dollars.

The forward contracts described above are used to mitigate the potential
volatility to cash flow arising from changes in currency exchange rates. The
forward contracts are being accounted for as cash flow hedges. The forward
contracts are recorded at fair value with the offset reflected in accumulated
other comprehensive income, net of deferred taxes. The notional value of the
forward contracts at September 30, 2003 was $695 million. The fair value of the
forward contracts at September 30, 2003 was an asset of $58.1 million, of which
$26.1 million is recorded in Prepaid Expenses and Other Assets and $32.0
million is recorded in Other Assets. The total gross gain of $61.5 million,
including terminated forward contracts as discussed below (before deferred
taxes of $19.1 million), recorded in accumulated other comprehensive income,
will be reflected in income as the individual contracts mature which will
offset the earnings effect of the hedged item. As of September 30, 2003, the
portion of the $61.5 million gain that would be reclassified into earnings to
offset the effect of the hedged item as an increase in sales in the next 12
months is a gain of $29.5 million.

In June 2003, the Company terminated certain forward contracts prior to
their scheduled maturities in 2004 and received cash of $3.4 million. As of
September 30, 2003, other comprehensive income included a gain of $3.4 million
related to these terminated contracts which will be reflected in income and
sales when the original contracts would have matured.

In July 2003, the Company entered into a $100 million fixed-to-floating
interest rate swap on the Companys 6.45 percent senior notes due in 2007 to
manage the Companys interest rate exposure. The settlement and maturity dates
on the swap are the same as those on the notes. In
accordance with FASB Statement No. 133, the carrying value of the notes
has been adjusted to reflect the fair value of the interest rate swap.

In October 2003, the Company entered into two $50 million
fixed-to-floating interest rate swaps to manage the Companys interest rate
exposure. One $50 million swap is on the Companys 7.50 percent senior notes
due in 2008 and the other $50 million swap is on the Companys 6.45 percent
medium-term notes due in 2008. The settlement and maturity dates on the swaps
are the same as those on the notes. In accordance with FASB Statement No. 133,
the carrying values of the notes will be adjusted to reflect the fair values of
the interest rate swaps.

16



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Note O: Guarantees

The Company extends financial and product performance guarantees to third
parties. As of September 30, 2003, the following financial guarantees were
outstanding:

|                                                   |                                           |          |           |           |           |  |   |   | 
|-------------------------------------------------- | ----------------------------------------- | -------- | --------- | --------- | --------- |  | - | - | 
|                                                   |                                           |          | MAXIMUM   |           | CARRYING 
|                                                   |                                           |          | POTENTIAL |           | AMOUNT OF
|(Dollars in millions)                              |                                           | PAYMENT  |           | LIABILITY
|                                                   |                                           |          |           |          
|Environmental remediation indemnification (Note P) |                                           | No limit |           | $         | 23.9      | 
|Financial Guarantees:                              |                                           |          |           |           |           |  |   |  
|                                                   | TIDES (Note P)                            |          | $         | 150.0     |           |  | $ |  | 
|                                                   | Debt and lease payments (Note P)          |          | $         | 3.7       |           |  | $ |  | 
|                                                   | Residual values on leases (Note M)        |          | $         | 53.8      |           |  | $ |  | 
|                                                   | Executive loans to purchase company stock |          | $         | 9.3       |           |  | $ |  | 

Prior to the adoption of FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others (FIN 45), the Company accrued for costs
associated with guarantees when it was probable that a liability has been
incurred and the amount could be reasonably estimated. The most likely cost to
be incurred was accrued based on an evaluation of currently available facts,
and where no amount within a range of estimates was more likely, the minimum
was accrued. Guarantees extended subsequent to the adoption of FIN 45 will be
recorded at fair value.

The Company provides service and warranty policies on its products.
Liability under service and warranty policies is based upon a review of
historical warranty and service claim experience. Adjustments are made to
accruals as claim data and historical experience warrant. In addition, the
Company incurs discretionary costs to service its products in connection with
product performance issues.

The changes in the carrying amount of service and product warranties for
the nine months ended September 30, 2003, are as follows:

|                              |                                        |   |      |       |  
|----------------------------- | -------------------------------------- | - | ---- | ----- | -
|(Dollars in millions)         |                                        |   |      |      
|Balance at December 31, 2002  |                                        | $ | 67.9 |      
|                              | Service and product warranty provision |   |      | 30.6  |  
|                              | Foreign currency translation           |   |      | 0.6   |  
|                              | Payments                               |   |      | (27.4 | )
|                              |                                        |   |      |      
|Balance at September 30, 2003 |                                        | $ | 71.7 |      
|                              |                                        |   |      |      

Note P: Contingencies

General

There are pending or threatened against the Company or its subsidiaries
various claims, lawsuits and administrative proceedings, all arising from the
ordinary course of business with respect to commercial, product liability,
asbestos and environmental matters, which seek remedies or damages. The Company
believes that any liability that may finally be determined
with respect to commercial and non-asbestos product liability claims
should not have a material effect on its consolidated financial position,
results of operations or cash flow. From time to time, the Company is also
involved in legal proceedings as a plaintiff involving contract, patent
protection, environmental and other matters. Gain contingencies, if any, are
recognized when they are realized.

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Environmental

The Company is subject to various domestic and international environmental
laws and regulations which may require that it investigate and remediate the
effects of the release or disposal of materials at sites associated with past
and present operations, including sites at which the Company has been
identified as a potentially responsible party under the federal Superfund laws
and comparable state laws. The Company is currently involved in the
investigation and remediation of a number of sites under these laws.

The measurement of environmental liabilities by the Company is based on
currently available facts, present laws and regulations and current technology.
Such estimates take into consideration the Companys prior experience in site
investigation and remediation, the data concerning cleanup costs available from
other companies and regulatory authorities and the professional judgment of the
Companys environmental specialists in consultation with outside environmental
specialists, when necessary. Estimates of the Companys environmental
liabilities are further subject to uncertainties regarding the nature and
extent of site contamination, the range of remediation alternatives available,
evolving remediation standards, imprecise engineering evaluations and estimates
of appropriate cleanup technology, methodology and cost, the extent of
corrective actions that may be required and the number and financial condition
of other potentially responsible parties, as well as the extent of their
responsibility for the remediation.

Accordingly, as investigation and remediation of these sites proceed, it
is likely that adjustments in the Companys accruals will be necessary to
reflect new information. The amounts of any such adjustments could have a
material adverse effect on the Companys results of operations in a given
period, but the amounts, and the possible range of loss in excess of the
amounts accrued, are not reasonably estimable. Based on currently available
information, however, the Company does not believe that future environmental
costs in excess of those accrued with respect to sites with which it has been
identified as a potentially responsible party are likely to have a material
adverse effect on the Companys financial condition. There can be no assurance,
however, that additional future developments, administrative actions or
liabilities relating to environmental matters will not have a material adverse
effect on the Companys results of operations or cash flows in a given period.

Environmental liabilities are recorded when the Companys liability is
probable and the costs are reasonably estimable, which generally is not later
than at completion of a feasibility study or when the Company has recommended a
remedy or has committed to an appropriate plan of action. The liabilities are
reviewed periodically and, as investigation and remediation proceed,
adjustments are made as necessary. Liabilities for losses from environmental
remediation obligations do not consider the effects of inflation, and
anticipated expenditures are not discounted to their present value. The
liabilities are not reduced by possible recoveries from insurance carriers or
other third parties, but do reflect anticipated allocations among potentially
responsible parties at federal Superfund sites or similar state-managed sites
and an assessment of the likelihood that such parties will fulfill their
obligations at such sites.

At September 30, 2003, the Companys liabilities for environmental
remediation obligations totaled $89.4 million, of which $20.6 million was
included in current liabilities as Accrued
Liabilities. Of the $89.4 million, $22.1 million was associated with
ongoing operations and $67.3 million was associated with businesses previously
disposed of or discontinued.

The timing of expenditures depends on a number of factors that vary by
site, including the nature and extent of contamination, the number of
potentially responsible parties, the timing of regulatory approvals, the
complexity of the investigation and remediation, and the standards for
remediation. The Company expects that it will expend present accruals over many
years, and will complete remediation of all sites with which it has been
identified in up to 30 years. This period includes operation and monitoring
costs that are generally incurred over 15 to 25 years.

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Asbestos

The Company and a number of its subsidiaries have been named as defendants
in various actions by plaintiffs alleging injury or death as a result of
exposure to asbestos fibers in products, or which may have been present in the
Companys facilities. A number of these cases involve maritime claims, which
have been and are expected to continue to be administratively dismissed by the
court. These actions primarily relate to previously owned businesses. The
Company believes that pending and reasonably anticipated future actions, net of
anticipated insurance recoveries, are not likely to have a material adverse
effect on the Companys financial condition, results of operations or cash
flows.

The Company believes that it has substantial insurance coverage available
to it related to any remaining claims. However, a major portion of the primary
layer of insurance coverage for these claims is provided by the Kemper
Insurance Companies. Kemper has indicated that, due to capital constraints and
downgrades from various rating agencies, it has substantially ceased
underwriting new business and now focuses on administering policy commitments
from prior years. The Company cannot predict the long-term impact of these
actions on the availability of the Kemper insurance.

Liabilities of Divested Businesses

Asbestos

At the time of the EIP spin-off, two subsidiaries of Coltec were
defendants in a significant number of personal injury claims relating to
alleged asbestos-containing products sold by those subsidiaries. It is possible
that asbestos-related claims might be asserted against the Company on the
theory that the Company has some responsibility for the asbestos-related
liabilities of EnPro, Coltec or its subsidiaries, even though the activities
that led to those claims occurred prior to the Companys ownership of any of
those subsidiaries. Also, it is possible that a claim might be asserted against
the Company that Coltecs dividend of its aerospace business to the Company
prior to the spin-off was made at a time when Coltec was insolvent or caused
Coltec to become insolvent. Such a claim could seek recovery from the Company
on behalf of Coltec of the fair market value of the dividend.

A limited number of asbestos-related claims have been asserted against the
Company as successor to Coltec or one of its subsidiaries. The Company
believes that it has substantial legal defenses against these claims, as well
as against any other claims that may be asserted against the Company on the
theories described above. In addition, the agreement between EnPro and the
Company that was used to effectuate the spin-off provides the Company with an
indemnification from EnPro covering, among other things, these liabilities. The
success of any such asbestos-related claims would likely require, as a
practical matter, that Coltecs subsidiaries were unable to satisfy their
asbestos-related liabilities and that Coltec was found to be responsible for
these liabilities and was unable to meet its financial obligations. The Company
believes any such claims would be without merit and that Coltec was solvent
both before and after the dividend of its aerospace business to the Company. If
the Company is ultimately found to be responsible for the asbestos-related
liabilities of Coltecs subsidiaries, the Company believes it would not have a
material adverse effect on its financial condition, but could have a material
adverse effect on its results of operations and cash flows in a particular
period. However, because of the uncertainty as to the number, timing and payments
related to future asbestos-related claims, there can be no assurance that any
such claims will not have a material adverse effect on the Companys financial
condition, results of operations and cash flows. If a claim related to the
dividend of Coltecs aerospace business were successful, it could have a
material adverse impact on the Companys financial condition, results of
operations and cash flows.

Other

In connection with the divestiture of the Companys tire, vinyl and other
businesses, the Company has received contractual rights of indemnification from
third parties for environmental and other claims arising out of the divested
businesses. Failure of these third parties to honor their indemnification
obligations could have a material adverse effect on the Companys consolidated
financial condition, results of operations and cash flow.

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Guarantees

The Company has guaranteed amounts owed by Coltec Capital Trust with
respect to the $150 million of outstanding TIDES and has guaranteed Coltecs
performance of its obligations with respect to the TIDES and the underlying
Coltec convertible subordinated debentures. Following the spin-off of the EIP
segment, the TIDES remained outstanding as an obligation of Coltec Capital
Trust and the Companys guarantee with respect to the TIDES remains an
obligation of the Company. EnPro, Coltec and Coltec Capital Trust have agreed
to indemnify the Company for any costs and liabilities arising under or related
to the TIDES after the spin-off.

In addition to the Companys guarantee of the TIDES, at September 30,
2003, the Company has an outstanding contingent liability for guarantees of
debt and lease payments of $3.7 million, letters of credit of $46.8 million,
residual value of leases of $53.8 million and executive loans to purchase the
Companys stock of $9.3 million.

Commercial Airline Customers

The downturn in the commercial air transport market, the terrorist attacks
on September 11, 2001, the military conflict in Iraq and the outbreak of Severe
Acute Respiratory Syndrome (SARS) have adversely affected the financial
condition of many of the Companys commercial airline customers. The Company
performs ongoing credit evaluations on the financial condition of its customers
and maintains reserves for uncollectible accounts receivable based upon
expected collectibility. Although the Company believes its reserves are
adequate, the Company is not able to predict the future financial stability of
these customers. Any material change in the financial status of any one or
group of customers could have a material adverse effect on the Companys
financial condition, results of operations or cash flows. The extent to which
extended payment terms are granted to customers may negatively affect future
cash flow.

Super 27 Program

The Companys aerostructures business unit, included in the Engine Systems
segment, includes a business to re-engine 727 aircraft to meet sound
attenuation requirements and improve their fuel efficiency (Super 27 program).
At December 31, 2002, the Company had an investment in the Super 27 program of
$105.9 million consisting of $44.7 of inventory and $61.2 million of notes
receivable. The inventory included three Super 27 aircraft, seven nacelle kits
and other spare parts.

In March 2003, the Company repossessed four 727 aircraft from a receivable
obligor who was in financial difficulty and also received a revised cash flow
forecast indicating a significant decline in the financial strength of another
receivable obligor. In addition, the deterioration in the commercial airline
market resulting from the military conflict in Iraq and SARS made available
more aircraft that compete with or are newer than the Super 27 aircraft.
Because of these events, the Company concluded that its ability to recover the
recorded values of its inventory and notes receivable was significantly
affected. In the first quarter 2003, based on an independent appraisal
and the Companys assessment of then current market conditions, the
Company wrote-down the carrying value of its inventory to equal the estimated
market value of $12.2 million. Also in the first quarter of 2003, the Company
wrote-off $0.4 million of related trade receivables and $46.1 million of notes
receivable from a receivable obligor.

As of September 30, 2003, the Companys remaining notes receivable of $8.0
million represents the present value of expected future cash flows related to
those receivables. The total carrying value of inventory and other assets
related to the Super 27 business was $16.3 million at September 30, 2003 and
represents the Companys assessment of the current market value.

Collection of these receivables and inventory may be negatively affected
if the overall deterioration in the commercial aerospace market and the market
for Super 27 program aircraft continues. Because of these conditions, the
Company will continue to assess the value of these assets and their ultimate
recovery.

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Cordiem

During 2000, the Company invested as a minority shareholder in Cordiem LLC
(Cordiem). Cordiem was an aerospace e-business venture between suppliers and
airlines whose purpose was to utilize internet-based solutions to lower costs
of business transactions and inventory, to expand product awareness and
availability to more customers and to improve information flow between
participants. As of December 31, 2002, the Companys investment in Cordiem,
including internal-use software, was $12.9 million. Cordiem ceased operations
in the first quarter 2003. As a result, the Company recorded a pre-tax,
non-cash charge of approximately $11.7 million to write-off its equity
investment in Cordiem in the first quarter 2003.

Tax Litigation

In 2000, Coltec made a $113.7 million payment to the Internal Revenue
Service (IRS) for an income tax assessment and the related accrued interest
arising out of certain capital loss deductions and tax credits taken in 1996.
On February 13, 2001, Coltec filed suit against the IRS in the U.S. Court of
Claims seeking a refund of this payment. Trial is scheduled for May 2004.
Coltec has agreed to pay to the Company an amount equal to any refunds or
credits of taxes and interest received by it as a result of the litigation. If
the IRS prevails in this case, Coltec will not owe any additional interest or
taxes with respect to 1996. However, the Company may be required by the IRS to
pay up to $24 million plus accrued interest with respect to the same items
claimed by Coltec in its tax returns for 1997 and 1998. The potential tax
liability for 1997 and 1998 has been fully reserved. A reasonable estimation
of the potential refund for 1996, if any, cannot be made at this time;
accordingly, no receivable has been recorded.

In 2000, the IRS issued a statutory notice of deficiency asserting that
Rohr, Inc. (Rohr), the Companys subsidiary, was liable for $85.3 million of
additional income taxes for the fiscal years ended July 31, 1986 through 1989.
In 2003, the IRS issued an additional statutory notice of deficiency asserting
that Rohr was liable for $23 million of additional income taxes for the fiscal
years ended July 31, 1990 through 1993. The proposed assessments relate
primarily to the timing of certain tax deductions and tax credits. Rohr has
filed petitions in the U.S. Tax Court opposing the proposed assessments. Rohr
expects that these cases will go to trial in late 2004 or in 2005 and that it
will ultimately be successful in these cases. However, if Rohr is not
successful in these cases, the Company believes that the net cost to Rohr at
the time of the final determination by the court would not exceed $100 million
(including interest) as the court will take into account the timing benefit of
the disallowed tax deductions at that time. The Company believes that any
liability resulting from these cases has been fully reserved.

Note Q: New Accounting Standards

During January 2003, the Financial Accounting Standard Board (FASB) issued
FASB Interpretation No. 46 Consolidation of Variable Interest Entities. This
Interpretation of Accounting Research Bulletin No. 51 Consolidated Financial
Statement addresses
consolidation by business enterprises of variable interest entities which
have certain characteristics defined in Interpretation No. 46. The provisions
of this Interpretation are required to be applied to arrangements existing
prior to February 1, 2003 in interim periods beginning after June 15, 2003. On
October 8, 2003, the FASB delayed the effective date of the interpretation
until periods ending after December 15, 2003. The Company is currently
assessing the effect of Interpretation No. 46, including the potential
deconsolidation of BFGoodrich Capital. See Financing Arrangements  QUIPS
(Note L) for a description of BFGoodrich Capital.

During April 2003, the FASB issued Statement No. 149 Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. The Statement
amends and clarifies accounting for derivatives, including certain derivatives
instruments embedded in other contracts, and for hedging activities under
Statement No. 133. Statement 149 is effective for contracts entered into or
modified after June 30, 2003, except for certain circumstances, and for hedging
relationships designated after June 30, 2003. The guidance should be applied

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prospectively. Statement 149 did not have a material effect on the Companys
consolidated financial condition or results of operations.

During May 2003, the FASB issued Financial Accounting Standards No. 150
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. The Statement establishes standards for classifying
and measuring as liabilities certain financial instruments that embody
obligations of the issuer and have characteristics of both liabilities and
equity. The Statement was to take effect at the beginning of the first interim period
beginning after June 15, 2003. On November 7, 2003, the
FASB issued FSP 150-3 which indefinitely deferred the effective date
of applying the provisions of the Statement to certain mandatorily
redeemable noncontrolling interests, such as the Companys
QUIPS, pending further action by the FASB.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations

YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF GOODRICH CORPORATION INCLUDED
ELSEWHERE IN THIS DOCUMENT.

THIS MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS. SEE FORWARD-LOOKING
INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY FOR A DISCUSSION OF THE
UNCERTAINTIES, RISKS AND ASSUMPTIONS ASSOCIATED WITH THESE STATEMENTS.

OUR FORMER ENGINEERED INDUSTRIAL PRODUCTS SEGMENT, AVIONICS BUSINESS AND
PASSENGER RESTRAINT SYSTEMS BUSINESS HAVE BEEN ACCOUNTED FOR AS DISCONTINUED
OPERATIONS. UNLESS OTHERWISE NOTED HEREIN, DISCLOSURES PERTAIN ONLY TO OUR
CONTINUING OPERATIONS.

Overview

We are one of the largest worldwide suppliers of aerospace components,
systems and services to the commercial, regional, business and general aviation
markets. We are also a leading supplier of aircraft and satellite systems
products to the global military and space markets. Our business is conducted on
a global basis with manufacturing, service and sales undertaken in various
locations throughout the world. Our products and services are principally sold
to customers in North America and Europe.

Business Segments

Effective January 1, 2003, we reorganized into three business segments:
Airframe Systems, Engine Systems and Electronic Systems. The reorganization was
designed to enhance communication and maximize synergies in a streamlined
organization. Segment financial results for prior periods have been restated to
reflect the new organization.

Airframe Systems:Airframe Systems provides systems and components
pertaining to aircraft taxi, take-off, landing and stopping. Several business
units within the segment are linked by their ability to contribute to the
integration, design, manufacture and service of entire aircraft undercarriage
systems, including landing gear, wheels and brakes and certain brake controls.
Airframe Systems also includes the aviation technical services division which
performs comprehensive total aircraft maintenance, repair, overhaul and
modification services for many commercial airlines, independent operators,
aircraft leasing companies and airfreight carriers. The segment also includes
the actuation systems, flight controls and customer services business units
that were acquired as part of Aeronautical Systems. Actuation systems provides
systems that control the movement of steering systems for missiles and
electro-mechanical systems that are characterized by high power, low weight,
low maintenance, resistance to extreme temperatures and vibrations and high
reliability. Flight controls provides actuators for primary
flight control systems that operate elevators, ailerons and rudders, and
secondary flight controls systems such as flaps and slats. The customer service
business supports aftermarket products for the businesses that were acquired as
part of Aeronautical Systems.

Engine Systems:Engine Systems includes the aerostructures business unit,
a leading supplier of nacelles, pylons, thrust reversers and related aircraft
engine housing components. The segment also produces engine and fuel controls,
pumps, fuel delivery systems, and structural and rotating components such as
discs, blisks, shafts and airfoils for both aerospace and industrial gas
turbine applications. The segment includes the cargo systems and engine
controls business units, which were acquired as a part of Aeronautical Systems.
Cargo systems produces fully-integrated main deck and lower lobe cargo systems
for wide body aircraft. Engine systems provides engine control systems and
components for jet engines used on commercial and military aircraft, including
fuel metering controls, fuel pumping systems, electronic control software and
hardware, variable geometry actuation controls, afterburner fuel pump and
metering unit nozzles, and engine health monitoring systems.

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Electronic Systems:Electronic Systems produces a wide array of products
that provide flight performance measurements, flight management, and control
and safety data. Included are a variety of sensors systems that measure and
manage aircraft fuel and monitor oil debris, engine and transmission and
structural health. The segments products also include ice detection systems,
test equipment, aircraft lighting systems, landing gear cables and harnesses,
satellite control, data management and payload systems, launch and missile
telemetry systems, airborne surveillance and reconnaissance systems, laser
warning systems, aircraft evacuation systems, de-icing systems, ejection seats
and crew and attendant seating. The power systems business unit, which was
acquired as part of Aeronautical Systems, provides systems that produce and
control electrical power for commercial and military aircraft, including
electric generators for both main and back-up electrical power, electric
starters and electric starter generating systems and power management and
distribution systems. The hoists and winches business unit, also acquired as
part of Aeronautical Systems, provides airborne hoists and winches used on both
helicopters and fixed wing aircraft.

Acquisition and Divestitures

Acquisition of TRWs Aeronautical Systems Businesses

On October 1, 2002, we completed our acquisition of TRW Inc.s
Aeronautical Systems businesses. The acquired businesses design and manufacture
commercial and military aerospace systems and equipment, including engine
controls, flight controls, power systems, cargo systems, hoists and winches and
actuation systems. At the time of acquisition, these businesses employed
approximately 6,200 employees in 22 facilities in nine countries, including
manufacturing and service operations in the United Kingdom, France, Germany,
Canada, the United States and several Asia/Pacific countries.

The purchase price for these businesses, after giving effect to
post-closing purchase price adjustments, was approximately $1.4 billion. We
financed the acquisition through a $1.5 billion, 364-day credit facility
provided by some of our existing lenders. In the fourth quarter of 2002,
we repaid $1.3 billion of the credit facility using proceeds from an
offering of our common stock for net proceeds of $216.2 million, the issuance
of $800 million of 5 and 10-year notes for net proceeds of $793.1 million, cash
flow from operations and the sale of non-operating assets. During the first
quarter 2003, we repaid the balance of the facility with funds generated from
the sale of the Noveon International, Inc. payment-in-kind notes and a portion
of the proceeds from the sale of our Avionics business.

As a result of integration activities with respect to the Aeronautical
Systems businesses, we expect to realize annual cost savings of approximately
$30 to $40 million, net of anticipated incremental costs, by the beginning of
2005. These cost savings are expected to result from consolidation of duplicate
facilities, reduction of personnel and expenditures, expansion of procurement
initiatives and the use of best practices across the combined businesses.

Sale of the Avionics Business

On March 28, 2003, we completed the sale of our Avionics business to L-3
Communications Corporation for $188 million, or $181 million net of fees and
expenses. The gain on the sale was $63.0 million after tax, which was reported
as income from discontinued operations. The Avionics business marketed a
variety of state-of-the art avionics instruments and systems primarily for
general aviation, business jet and military aircraft. Prior periods have been
restated to reflect the Avionics business as a discontinued operation.

Spin-Off of Engineered Industrial Products

On May 31, 2002, we completed the tax-free spin-off of our former
Engineered Industrial Products (EIP) segment. The spin-off was effected through
a tax-free distribution to our shareholders of all of the capital stock of
EnPro Industries, Inc. (EnPro), then a wholly-owned subsidiary of Goodrich. In
the spin-off, our shareholders received one share of EnPro common stock for
every five shares of our common stock owned on the record date, May 28, 2002.

At the time of the spin-off, EnPros only material asset was all of the
capital stock and certain indebtedness of Coltec Industries Inc (Coltec).
Coltec and its subsidiaries owned substantially all of the assets and
liabilities of the EIP segment, including the associated asbestos liabilities
and related insurance.

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Prior to the spin-off, Coltec also owned and operated an aerospace
business. Before completing the spin-off, Coltecs aerospace business assumed
all intercompany balances outstanding between Coltec and us and Coltec then
transferred to us by way of a dividend all of the assets, liabilities and
operations of Coltecs aerospace business, including these assumed balances.
Following this transfer and prior to the spin-off, all of the capital stock of
Coltec was contributed to EnPro, with the result that at the time of the
spin-off Coltec was a wholly-owned subsidiary of EnPro.

In connection with the spin-off, we and EnPro entered into a distribution
agreement, a tax matters agreement, a transition services agreement, an
employee matters agreement and an indemnification agreement, which govern the
relationship between us and EnPro after the spin-
off and provide for the allocation of employee benefits, tax and other
liabilities and obligations attributable to periods prior to the spin-off.

The spin-off was recorded as a dividend and resulted in a reduction in
shareholders equity of $409.1 million representing the recorded value of net
assets of the business distributed, including cash of $47.0 million. The
distribution agreement provided for certain post-distribution adjustments
relating to the amount of cash to be included in the net assets distributed.
The final adjustment has been calculated and is subject to a dispute resolution
process. We expect that the final resolution of this process on our financial
condition and results of operations will be immaterial.

The
$150 million of outstanding Coltec Capital Trust 51⁄4 percent
convertible trust preferred securities (TIDES) that were reflected in
liabilities of discontinued operations prior to the spin-off remained
outstanding as part of the EnPro capital structure following the spin-off. The
TIDES are convertible into shares of both Goodrich and EnPro common stock until
April 15, 2028. We have guaranteed amounts owed by Coltec Capital Trust with
respect to the TIDES and have guaranteed Coltecs performance of its
obligations with respect to the TIDES and the underlying Coltec convertible
subordinated debentures. EnPro, Coltec and Coltec Capital Trust have agreed to
indemnify us for any costs and liabilities arising under or related to the
TIDES after the spin-off.

Outlook

We have revised our 2003 diluted earnings per share (EPS) outlook from the
prior range of $0.80 to $0.95 to a new range of $0.85 to $0.95, largely to
reflect the shift of certain expenses for facility closure and headcount
reduction actions into 2004. We now expect charges associated with facility
closure and headcount reduction actions to total $15 million to $20 million
pre-tax for the fourth quarter 2003, and $30 million to $35 million pre-tax for
the full year 2003. This change is not expected to impact savings from these
actions anticipated for 2004 and beyond. We expect 2003 sales to be around the
mid-point of the previously stated range of $4.3 billion to $4.4 billion.

We have increased our outlook for cash flow from operations for 2003. We
now expect cash flow from operations to exceed $450 million, including
estimated cash payments for facility closures and headcount reductions of $50
million to $60 million. We expect capital expenditures in 2003 to be somewhat
lower than previous estimates, at $120 million to $140 million.

Our current 2003 outlook is based on the following market assumptions,
which are largely unchanged from the assumptions contained in our Quarterly
Report on Form 10-Q for the second quarter 2003. The basis for comparison is
2002 pro-forma sales including Aeronautical Systems for the full year 2002.



| |  |  | Deliveries of Boeing and Airbus aircraft are expected to total
approximately 575 units in 2003, a 16 percent reduction from 2002
deliveries. Boeing deliveries are expected to decline approximately
25 percent, while Airbus deliveries are expected to be relatively
flat. Our sales are expected to decline less than total deliveries due
to our significant content on Airbus aircraft.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Large commercial jet aftermarket sales to airlines are expected to
decrease about 5 percent to 10 percent in 2003, compared to 2002.                                                                                                                                                                                                                                                        
|
| |  |  | Regional jet aircraft sales are expected to be relatively flat in
2003, while sales of business aircraft are expected to decline
dramatically. Aftermarket sales for regional, business and general
aviation aircraft are expected to be flat or slightly down when
compared to 2002.                                                                                                       
|
| |  |  | Military sales (OE and aftermarket) should increase about 10
percent roughly in line with global military budgets.                                                                                                                                                                                                                                                                          

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Looking ahead to 2004, we expect commercial aircraft production rates to
decline slightly from 2003, and global available seat miles (ASMs) to
experience modest growth in the 3 percent to 5 percent range. Military and
space markets should continue to grow at about the same levels experienced in
2003.

Based on current expectations for these key market trends, we expect low
single-digit growth in 2004 sales, when compared to 2003. Combining this
expected sales growth with benefits from recent facility closure and headcount
reduction actions, improvements in the Aeronautical Systems businesses and an
improving sales mix, we expect segment operating margins to grow faster than
sales.

Offsetting these positive developments, we believe that certain medical
expenses, liability insurance premiums, litigation costs and performance-based
management incentive compensation expenses included in Corporate General and
Administrative and Other Income (Expense) will increase by approximately $20
million to $25 million, in the aggregate, in 2004. Other items included in
Corporate General and Administrative are still being evaluated as part of our
planning process.

The outlook for 2004 will be affected by the external market trends noted
above and by several other factors, all of which are difficult to predict at
the present time. These other factors include, but are not limited to, further
facility closure and headcount reductions, debt retirement strategies, possible
tax law changes, new program investments (such as the Boeing 7E7 commercial
airliner) and the impact of potential accounting changes. We believe that we
will have more clarity on these factors by the end of 2003 and expect to
formalize our 2004 outlook when we announce our results for 2003.

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Results of Operations

Total Company

Third Quarter of 2003 Compared With Third Quarter of 2002

|                                           |                        |   |                       |       |      |   |       |      | 
|------------------------------------------ | ---------------------- | - | --------------------- | ----- | ---- | - | ----- | ---- | 
|                                           |                        |   | Three Months Ended   
|                                           |                        |   | September 30,        
|                                           |                        |   |                      
|                                           |                        |   | 2003                  |       | 2002
|                                           |                        |   |                       |       |     
|                                           |                        |   | (Dollars in millions)
|Sales                                      |                        | $ | 1,063.9               |       |      | $ | 856.2 |     
|                                           |                        |   |                       |       |      |   |       |     
|Segment Operating Income                   |                        |   | 117.9                 |       |      |   | 110.0 |     
|Corporate General and Administrative Costs |                        |   | (16.1                 | )     |      |   | (10.4 | )   
|                                           |                        |   |                       |       |      |   |       |     
|                                           | Total Operating Income |   |                       | 101.8 |      |   |       | 99.6 | 
|Net Interest Expense                       |                        |   | (38.6                 | )     |      |   | (16.9 | )   
|Other Income (Expense)  net               |                        |   | (9.8                  | )     |      |   | (11.2 | )   
|Income Tax Expense                         |                        |   | (16.7                 | )     |      |   | (23.6 | )   
|Distribution on Trust Preferred Securities |                        |   | (2.7                  | )     |      |   | (2.6  | )   
|                                           |                        |   |                       |       |      |   |       |     
|Income from Continuing Operations          |                        |   | 34.0                  |       |      |   | 45.3  |     
|Income from Discontinued Operations        |                        |   |                      |       |      |   | 0.7   |     
|                                           |                        |   |                       |       |      |   |       |     
|                                           | Net Income             |   | $                     | 34.0  |      |   | $     | 46.0 | 
|                                           |                        |   |                       |       |      |   |       |     

Changes in sales and segment operating income are discussed within the
Business Segment Performance section below.

Corporate general and administrative costs of $16.1 million for the third
quarter 2003 increased $5.7 million, or 54.8 percent, from $10.4 million for
the third quarter 2002. The increase was primarily due to higher stock-based
incentive compensation costs and higher non-qualified pension costs in the
third quarter of 2003. Corporate general and administrative costs as a
percentage of sales increased to 1.5 percent in the third quarter 2003 from 1.2
percent in the third quarter 2002.

Net interest expense increased $21.7 million, or 128.4 percent, to $38.6
million primarily due to interest of $14.6 million on the $800 million
long-term debt issued in the fourth quarter of 2002 to partially finance the
acquisition of Aeronautical Systems. Net interest expense also increased by
$5.9 million primarily due to the loss of interest income from the Noveon PIK
Notes that were sold in the first quarter of 2003.

Other income (expense)  net improved $1.4 million, or 12.5 percent, to
expense of $9.8 million for the third quarter of 2003 from expense of $11.2
million for the third quarter of 2002. Included in the third quarter of 2003
was a favorable adjustment of $3.3 million related to executive life insurance
policies.

Our estimated effective tax rate from continuing operations was 31.3
percent during the third quarter 2003 and 33.0 percent during the third quarter
of 2002.

Income from discontinued operations, after tax, was a gain of $0.7 million
during the third quarter of 2002, representing Avionics and Passenger Restraint
Systems operating results. Our Passenger Restraint Systems business ceased
operations in the first quarter of 2003.

27



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First Nine Months of 2003 as Compared to the First Nine Months of 2002

|                                           |                        |   |                       |       |      |   |         |       | 
|------------------------------------------ | ---------------------- | - | --------------------- | ----- | ---- | - | ------- | ----- | 
|                                           |                        |   | Nine Months Ended    
|                                           |                        |   | September 30,        
|                                           |                        |   |                      
|                                           |                        |   | 2003                  |       | 2002
|                                           |                        |   |                       |       |     
|                                           |                        |   | (Dollars in millions)
|Sales                                      |                        | $ | 3,252.6               |       |      | $ | 2,651.5 |      
|                                           |                        |   |                       |       |      |   |         |      
|Segment Operating Income                   |                        |   | 217.3                 |       |      |   | 338.6   |      
|Corporate General and Administrative Costs |                        |   | (46.5                 | )     |      |   | (41.5   | )    
|                                           |                        |   |                       |       |      |   |         |      
|                                           | Total Operating Income |   |                       | 170.8 |      |   |         | 297.1 | 
|Net Interest Expense                       |                        |   | (111.7                | )     |      |   | (44.0   | )    
|Other Income (Expense)  net               |                        |   | (24.9                 | )     |      |   | (13.6   | )    
|Income Tax Expense                         |                        |   | (10.4                 | )     |      |   | (79.0   | )    
|Distribution on Trust Preferred Securities |                        |   | (7.9                  | )     |      |   | (7.9    | )    
|                                           |                        |   |                       |       |      |   |         |      
|Income from Continuing Operations          |                        |   | 15.9                  |       |      |   | 152.6   |      
|Income (Loss) from Discontinued Operations |                        |   | 62.4                  |       |      |   | (10.3   | )    
|Cumulative Effect of an Accounting Change  |                        |   | (0.5                  | )     |      |   | (36.1   | )    
|                                           |                        |   |                       |       |      |   |         |      
|                                           | Net Income             |   | $                     | 77.8  |      |   | $       | 106.2 | 
|                                           |                        |   |                       |       |      |   |         |      

Changes in sales and segment operating income are discussed within the
Business Segment Performance section below.

Corporate general and administrative costs of $46.5 million for the nine
months ended September 30, 2003 increased $5.0 million, or 12.0 percent, from
$41.5 million for the nine months ended September 30, 2002 primarily due to
higher non-qualified pension costs and unfavorable foreign currency exchange
losses. Corporate general and administrative costs as a percentage of sales
improved to 1.4 percent in the nine months ended September 30, 2003 from 1.6
percent in the nine months ended September 30, 2002. The improvement resulted
from the increase in sales from the acquisition of Aeronautical Systems coupled
with modest increases in corporate general and administrative costs as a result
of the acquisition.

Net interest expense increased $67.7 million, or 153.9 percent, primarily
due to interest of $43.8 million on the $800 million of long-term debt issued
in the fourth quarter of 2002 to partially finance the acquisition of
Aeronautical Systems. Net interest expense also increased due to lower interest
income of $20.5 million primarily due to the sale of the Noveon PIK notes in
the first quarter of 2003.

Other income (expense)  net increased by $11.3 million, or 83.1 percent,
to expense of $24.9 million in the nine months ended September 30, 2003 from
expense of $13.6 million in the nine months ended September 30, 2002. The
increase in expense resulted from the write-off of our equity investment in
Cordiem LLC of $11.7 million in 2003 and the absence of a gain on the sale of
intangible assets and a gain from the sale of a portion of an investment in a
subsidiary sold in 2002 of $11.8 million and $2.4 million, respectively. These
items were offset in part by several favorable 2003 items, including a gain on
the sale of the Noveon PIK Notes of $6.9 million, higher affiliate income of
$3.5 million, lower employee benefit and divested operations costs of $4.2
million and a gain on the sale of real estate of $0.9 million.

Our estimated effective tax rate from continuing operations was 30.4
percent during the nine months ended September 30, 2003 and 33.0 percent during
the nine months ended September 30, 2002.

28



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Income from discontinued operations, after tax, was $62.4 million during
the nine months ended September 30, 2003 primarily representing the gain on the
sale of the Avionics business in the first quarter of 2003 of $63.0 million.
Income from discontinued operations for the Avionics and Passenger Restraint
Systems operating results was a loss of $0.6 million in the nine months ended
September 30, 2003 and income of $1.7 million in the nine months ended
September 30, 2002. Our Passenger Restraint Systems business ceased operations
in the first quarter of 2003. Also included in income from discontinued
operations was a loss of $12.0 million in the nine months ended September 30,
2002 for the Engineered Industrial Products segment which was spun-off to
shareholders on May 31, 2002. A charge for a court ruling related to an
employee benefit matter of a previously discontinued business of $7.4 million
and fees and expenses related to the spin-off of the segment contributed to the
loss.

The cumulative effect of an accounting change, as presented after taxes,
for the nine months ended September 30, 2003 of a loss of $0.5 million
represents the adoption of Statement of Financial Accounting Standards No. 143
Accounting for Asset Retirement Obligations. We established a liability for
contractual obligations for the retirement of long-lived assets. The cumulative
effect of an accounting change, as presented after taxes, for the nine months
ended September 30, 2002 of a loss of $36.1 million represents the adoption of
Statement of Financial Accounting Standards No. 142 Goodwill and Other
Intangible Assets. Based upon the impairment test of goodwill and indefinite
lived intangible assets, we determined that goodwill relating to the aviation
technical services reporting unit, reported in the Airframe Systems segment,
had been impaired. As a result, we recognized an impairment charge,
representing total goodwill of the aviation technical services reporting unit.
The goodwill write-off was non-deductible for tax purposes.

Business Segment Performance

Segment Analysis

Our operations are reported as three business segments: Airframe Systems,
Engine Systems and Electronic Systems.

An expanded analysis of net customer sales and operating income by
business segment follows.

In the following tables, segment operating income is total segment revenue
reduced by operating expenses directly identifiable with that business segment.

Third Quarter 2003 Compared with Third Quarter 2002

|                         |                          |   |                                  |         |      |   |        |       |      |  |       |      |            |  |      |      |  |  |      |      | 
|------------------------ | ------------------------ | - | -------------------------------- | ------- | ---- | - | ------ | ----- | ---- |  | ----- | ---- | ---------- |  | ---- | ---- |  |  | ---- | ---- | 
|                         |                          |   | Three Months Ended September 30,
|                         |                          |   |                                 
|                         |                          |   |                                  |         |      |   |        |       |      |  | %     |      | % of Sales
|                         |                          |   |                                  |         |      |   |        |       |      |  |       |      |           
|                         |                          |   | 2003                             |         | 2002 |   | Change |       | 2003 |  | 2002 
|                         |                          |   |                                  |         |      |   |        |       |      |  |      
|                         |                          |   | (Dollars in millions)           
|NET CUSTOMER SALES       |                          |   |                                  |         |      |   |        |       |      |  |       |      |            |  |      |      |  |  |      |     
|Airframe Systems         |                          | $ | 427.5                            |         |      | $ | 311.9  |       |      |  | 37.1  |      |            |  |      |      |  |  |      |     
|Engine Systems           |                          |   | 381.2                            |         |      |   | 322.7  |       |      |  | 18.1  |      |            |  |      |      |  |  |      |     
|Electronic Systems       |                          |   | 255.2                            |         |      |   | 221.6  |       |      |  | 15.2  |      |            |  |      |      |  |  |      |     
|                         |                          |   |                                  |         |      |   |        |       |      |  |       |      |            |  |      |      |  |  |      |     
|                         | Total Sales              |   | $                                | 1,063.9 |      |   | $      | 856.2 |      |  |       | 24.3 |            |  |      |      |  |  |      |      | 
|                         |                          |   |                                  |         |      |   |        |       |      |  |       |      |            |  |      |      |  |  |      |     
|SEGMENT OPERATING INCOME |                          |   |                                  |         |      |   |        |       |      |  |       |      |            |  |      |      |  |  |      |     
|Airframe Systems         |                          | $ | 18.7                             |         |      | $ | 34.8   |       |      |  | (46.3 | )    |            |  | 4.4  |      |  |  | 11.2 |     
|Engine Systems           |                          |   | 61.8                             |         |      |   | 33.8   |       |      |  | 82.8  |      |            |  | 16.2 |      |  |  | 10.5 |     
|Electronic Systems       |                          |   | 37.4                             |         |      |   | 41.4   |       |      |  | (9.7  | )    |            |  | 14.7 |      |  |  | 18.7 |     
|                         |                          |   |                                  |         |      |   |        |       |      |  |       |      |            |  |      |      |  |  |      |     
|                         | Segment Operating
Income |   | $                                | 117.9   |      |   | $      | 110.0 |      |  |       | 7.2  |            |  |      | 11.1 |  |  |      | 12.8 | 
|                         |                          |   |                                  |         |      |   |        |       |      |  |       |      |            |  |      |      |  |  |      |     

29



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Airframe Systems:Airframe Systems segment sales of $427.5 million in the
third quarter 2003 increased $115.6 million, or 37.1 percent, from $311.9
million in the third quarter 2002. The increase was due to sales associated
with the Aeronautical Systems businesses included in this segment, which
represented about $151 million in sales in the third quarter of 2003. Excluding
these businesses, sales decreased approximately $35.4 million from the year-ago
quarter. The primary reason for the decrease was lower sales volume of
aircraft wheels and brakes, landing gear and aviation technical services.

Airframe Systems segment operating income decreased $16.1 million, or
46.3 percent, from $34.8 million in the third quarter 2002 to $18.7 million in
the third quarter 2003. Headcount reduction charges recorded during the third
quarter 2003 were $2.2 million, compared to $0.5 million in the third quarter
2002. The decrease in operating income in the third quarter 2003 was
attributable to lower sales volume at aircraft wheels and brakes, landing
gear and aviation technical services and included a $2 million asset impairment
charge related to the Boeing 767 program. The sales contributed by the
Aeronautical Systems businesses resulted in a loss for the quarter, due
primarily to decreased spares and maintenance, repair and overhaul (MRO) sales
in these businesses and increased engineering investments in new programs.
Higher pension costs and unfavorable foreign currency exchange also contributed
to the decrease.

Engine Systems:Engine Systems segment sales in the third quarter 2003 of
$381.2 million increased $58.5 million, or 18.1 percent, from $322.7 million in
the third quarter 2002. The increase was due to sales associated with the
Aeronautical Systems businesses included in this segment, which approximated
$54 million in sales in the third quarter 2003. Excluding these businesses,
sales increased approximately $4.6 million from the year-ago quarter. Higher
sales in aerostructures were mostly offset by decreased sales of aerospace and
industrial gas turbine components at turbomachinery products and turbine fuel
technologies.

Engine Systems operating income increased $28.0 million, or 82.8 percent,
from $33.8 million in the third quarter 2002 to $61.8 million in the third
quarter 2003. Headcount reduction charges recorded during the third quarter
2003 were $1.7 million, compared to $4.7 million in the third quarter 2002.
The primary contributor to the increased operating income was the
aerostructures business. Included in the third quarter 2002 were approximately
$27 million of loss provisions on certain aerostructures contracts, partially
offset by approximately $7 million of favorable reserve adjustments related to
the implementation of new SAP systems last year. Excluding these items,
aerostructures had an increase in operating income that was consistent with the
sales increase. Turbomachinery products also reported improved operating income
although sales declined due to a successful implementation of facility closure
and headcount reduction actions. Pension expense was higher in the third
quarter 2003 as compared to the third quarter 2002. The Aeronautical Systems
businesses in this segment contributed a profit during the third quarter 2003.

Electronic Systems: Sales of the Electronic Systems segment of $255.2
million in the third quarter 2003 increased $33.6 million, or 15.2 percent,
from $221.6 million in the third quarter 2002. The increase was due to sales
associated with the Aeronautical Systems businesses included in this segment
which represented $36 million in sales in the third quarter 2003. Excluding
these businesses, sales in all other businesses were lower by $2.4 million
compared to
the year-ago period. Increased sales for the lighting systems and
propulsion systems businesses were largely offset by decreased sales in the
fuel and utility systems and optical and space systems businesses.

Electronic Systems segment operating income decreased $4.0 million, or 9.7
percent, from $41.4 million in the third quarter 2002 to $37.4 million in the
third quarter 2003. Included in operating income were headcount reduction
charges recorded during the third quarter 2003 of $2.1 million, compared to
$1.7 million in the third quarter 2002. Primary contributors to the decrease in
operating income were the de-icing and specialty systems and the optical and
space systems businesses. The Aeronautical Systems businesses in this segment
contributed a modest amount of profit to operating income for the third quarter
2003. Pension expense was also higher in the third quarter 2003 as compared to
the third quarter 2002.

30



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First Nine Months of 2003 Compared with First Nine Months of 2002

|                         |                          |   |                                 |         |      |   |         |         |      |  |       |       |            |  |      |     |  |  |      |      | 
|------------------------ | ------------------------ | - | ------------------------------- | ------- | ---- | - | ------- | ------- | ---- |  | ----- | ----- | ---------- |  | ---- | --- |  |  | ---- | ---- | 
|                         |                          |   | Nine Months Ended September 30,
|                         |                          |   |                                
|                         |                          |   |                                 |         |      |   |         |         |      |  | %     |       | % of Sales
|                         |                          |   |                                 |         |      |   |         |         |      |  |       |       |           
|                         |                          |   | 2003                            |         | 2002 |   | Change  |         | 2003 |  | 2002 
|                         |                          |   |                                 |         |      |   |         |         |      |  |      
|                         |                          |   | (Dollars in millions)          
|NET CUSTOMER SALES       |                          |   |                                 |         |      |   |         |         |      |  |       |       |            |  |      |     |  |  |      |     
|Airframe Systems         |                          | $ | 1,333.3                         |         |      | $ | 973.0   |         |      |  | 37.0  |       |            |  |      |     |  |  |      |     
|Engine Systems           |                          |   | 1,150.9                         |         |      |   | 1,020.8 |         |      |  | 12.7  |       |            |  |      |     |  |  |      |     
|Electronic Systems       |                          |   | 768.4                           |         |      |   | 657.7   |         |      |  | 16.8  |       |            |  |      |     |  |  |      |     
|                         |                          |   |                                 |         |      |   |         |         |      |  |       |       |            |  |      |     |  |  |      |     
|                         | Total Sales              |   | $                               | 3,252.6 |      |   | $       | 2,651.5 |      |  |       | 22.7  |            |  |      |     |  |  |      |      | 
|                         |                          |   |                                 |         |      |   |         |         |      |  |       |       |            |  |      |     |  |  |      |     
|SEGMENT OPERATING INCOME |                          |   |                                 |         |      |   |         |         |      |  |       |       |            |  |      |     |  |  |      |     
|Airframe Systems         |                          | $ | 62.4                            |         |      | $ | 87.1    |         |      |  | (28.4 | )     |            |  | 4.7  |     |  |  | 9.0  |     
|Engine Systems           |                          |   | 53.6                            |         |      |   | 144.2   |         |      |  | (62.8 | )     |            |  | 4.7  |     |  |  | 14.1 |     
|Electronic Systems       |                          |   | 101.3                           |         |      |   | 107.3   |         |      |  | (5.6  | )     |            |  | 13.2 |     |  |  | 16.3 |     
|                         |                          |   |                                 |         |      |   |         |         |      |  |       |       |            |  |      |     |  |  |      |     
|                         | Segment Operating Income |   | $                               | 217.3   |      |   | $       | 338.6   |      |  |       | (35.8 | )          |  |      | 6.7 |  |  |      | 12.8 | 
|                         |                          |   |                                 |         |      |   |         |         |      |  |       |       |            |  |      |     |  |  |      |     

Airframe Systems:Airframe Systems segment sales of $1,333.3 million in
the nine months ended September 30, 2003 increased $360.3 million, or 37.0
percent, from $973.0 million in the nine months ended September 30, 2002. The
increase was due to sales associated with the Aeronautical Systems businesses
included in this segment which represented about $470.0 million in sales in the
nine months ended September 30, 2003. Excluding these businesses, sales
decreased approximately $109.7 million from the year-ago period primarily due
to lower demand for landing gear original equipment, wheel and brake repair
services and heavy airframe maintenance.

Airframe Systems segment operating income decreased $24.7 million, or 28.4
percent, from $87.1 million in the nine months ended September 30, 2002 to
$62.4 million in the nine months ended September 30, 2003. Asset impairment
including rotable landing gear, facility closure and headcount reduction
charges were $3.3 million in the nine months ended September 30, 2002 compared
to $14.8 million in the nine months ended September 30, 2003. The decrease in
operating income for the nine months ended September 30, 2003 as compared to
the nine months ended September 30, 2002 was primarily due to decreased sales
for landing gear, wheel and brake repair services and heavy airframe
maintenance, increased pension expense, an impairment charge related to the
Boeing 767 program in 2003 and a non-recurring favorable insurance settlement
in the second quarter 2002. These items impacting reductions in operating
income were partially offset by increased sales for aftermarket wheels and
brakes in 2003 and a charge for inventory, capitalized sales incentives and
supplier termination costs relating to the Fairchild Dornier 728 and 928
programs in the second quarter 2002. Operating income for the Aeronautical
Systems businesses in the Airframe Systems segment resulted in a slight loss
for the nine months ended September 30, 2003.

Engine Systems:Engine Systems segment sales in the nine months ended
September 30, 2003 of $1,150.9 million increased $130.1 million, or 12.7
percent, from $1,020.8 million in the
nine months ended September 30, 2002. The increase was due to sales
associated with the Aeronautical Systems businesses included in this segment
which approximated $176 million in sales in the nine months ended September 30,
2003. Excluding these businesses, sales decreased approximately $45.9 million
from the year-ago period. Lower aerostructures aftermarket spares sales and a
decline in the demand for industrial gas turbine components, resulting in lower
sales of turbomachinery and turbine fuel technology products, were offset
partially by higher sales of aerostructures MRO and sales of pump and engine
controls products.

Engine Systems operating income decreased $90.6 million, or 62.8 percent,
from $144.2 million in the nine months ended September 30, 2002 to $53.6
million in the nine months ended September 30, 2003. Included in the nine
months ended September 30, 2003 were write-downs of inventory and long-term
receivables relating to the Super 27 re-engining program of $79.9 million and
an impairment of a facility that is now held for sale of $24.4 million. The
write-down of the Super 27 re-engining program is described below in detail at
Contingencies  Super 27 Program. Operating income from sales
from the Aeronautical Systems businesses and cost reductions recently
implemented increased operating income in this segment. Included in the third
quarter 2002 were approximately $27 million of loss provisions on certain
aerostructures contracts, partially offset by approximately $7 million of
favorable reserve adjustments related to the implementation of new SAP systems
last

31



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##### 



year. The increase was mitigated by initial costs for the next generation
747 cargo system introduced in the first quarter of 2003, higher spending on
pre-certification costs on the aerostructures Trent 900 engine contract,
adjustments of margins on aerostructures production contracts and higher
pension expense. The Aeronautical Systems businesses included in the Engine
Systems segment contributed a modest operating profit to the segments
operating income. Restructuring and consolidation costs in the nine months
ended September 30, 2003 were $4.8 million compared to $17.7 million in the
nine months ended September 30, 2002.

Electronic Systems: Sales of the Electronic Systems segment of $768.4
million in the nine months ended September 30, 2003 increased $110.7 million,
or 16.8 percent, from $657.7 million in the nine months ended September 30,
2002. The increase was primarily due to sales associated with the Aeronautical
Systems businesses included in this segment which represented $109 million in
sales in the nine months ended September 30, 2003. Excluding these businesses,
sales were slightly higher compared to the year-ago period. The increase was
due primarily to higher sales in lighting systems and propulsion products
partially offset by lower sales in fuel and utility systems and optical and
space systems.

Electronic Systems segment operating income decreased $6.0 million, or 5.6
percent, from $107.3 million in the nine months ended September 30, 2002 to
$101.3 million in the nine months ended September 30, 2003. Operating income
was affected by lower sales in optical and space systems, new program
investments, primarily at power systems and aircraft interior products,
unfavorable foreign currency translation and higher pension expense. The
Aeronautical Systems businesses included in the Electronic Systems segment
contributed a profit in the nine months ended September 30, 2003. Restructuring
and consolidation costs included in operating income were $6.0 million and $5.6
million in the nine months ended September 30, 2003 and September 30, 2002,
respectively.

Capital Resources and Liquidity

We currently expect to fund expenditures for capital requirements as well
as liquidity needs from a combination of cash, internally generated funds and
financing arrangements. We believe that our internal liquidity, together with
access to external capital resources, will be sufficient to satisfy existing
commitments and plans and also provide adequate financial flexibility.

Cash

At September 30, 2003, we had cash and marketable securities of $325.9
million, as compared to $149.9 million at December 31, 2002.

Credit Facilities

In August 2003, we replaced our syndicated revolving credit facilities
(composed of a three-year facility expiring in December 2004 and a 364-day
facility expiring in September 2003) with a new committed syndicated revolving
credit facility expiring in August 2006. The new facility permits borrowing up
to a maximum of $500 million (compared to $750 million under the previous
facilities) and otherwise has similar terms and is with the same group of
global banks as the previous facilities. At September 30, 2003, there were no
borrowings and $14.3 million in outstanding letters of credit under this
facility. At December 31, 2002, there were $155 million in borrowings and $9.7
million in letters of credit under the previous facilities. During the first
quarter of 2003, all amounts borrowed under the previous facilities were repaid
with a portion of the proceeds from the sale of our Avionics business, cash
flow from operations and proceeds from the sale of certain non-operating
assets.

The level of unused borrowing capacity under our committed syndicated
revolving credit facility varies from time to time depending in part upon the
our consolidated net worth and leverage ratio levels. In addition, our ability
to borrow under this facility is conditioned upon compliance with financial and
other covenants set forth in the related agreement, including a consolidated
net worth requirement and maximum leverage ratio. We are currently in
compliance with all such covenants.

32



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##### 



We also maintain $75 million of uncommitted domestic money market
facilities and $24.7 million of uncommitted foreign working capital facilities
with various banks to meet short-term borrowing requirements. As of September
30, 2003, there were no borrowings under these facilities. At December 31,
2002, $23.5 million was borrowed under these facilities. These uncommitted
credit facilities are provided by a small number of commercial banks that also
provide us with committed credit through the syndicated revolving credit
facility and with various cash management, trust and other services.

In October 2002, we borrowed $1.5 billion under a committed syndicated
credit agreement expiring in July 2003, to finance the acquisition of
Aeronautical Systems from TRW Inc. During 2002, we repaid $1.3 billion with the
proceeds from the issuance of common stock and long-term debt, operating cash
flow and the proceeds from the sale of certain non-operating assets. In March
2003, we repaid the balance of $200 million with the proceeds from the sale of
the Noveon PIK Notes and a portion of the proceeds from the sale of our
Avionics business.

Our credit facilities do not contain any credit rating downgrade triggers
that would accelerate the maturity of our indebtedness. However, a ratings
downgrade would result in an increase in the interest rate and fees payable
under our committed syndicated revolving credit facility. Such a downgrade
also could adversely affect our ability to renew existing or obtain access to
new credit facilities in the future and could increase the cost of such new
facilities.

In July 2003, Standard & Poors reduced its rating on our long-term senior
unsecured debt from BBB to BBB-. The rating change resulted in a small
increase in the interest rate and fees payable under our committed syndicated
revolving credit facility.

QUIPS

At September 30, 2003, there were $126.5 million in outstanding 8.30%
Cumulative Quarterly Income Preferred Securities, Series A (QUIPS) issued by
BFGoodrich Capital, a Delaware business trust (Trust), all of the common equity
of which is owned by us. The QUIPS are supported by our 8.30% Junior
Subordinated Debentures, Series A, due 2025 (QUIPS Debentures). We have
unconditionally guaranteed all distributions required to be made by the Trust,
but only to the extent the Trust has funds legally available for such
distributions.

As of September 30, 2003, approximately $63.0 million of the QUIPS were
reported as Mandatorily Redeemable Preferred Securities of Trust  Current as
they were called for redemption in the third quarter of 2003. On October 6,
2003, we completed the redemption of approximately $63.0 million of the QUIPS.

Long Term Financing

At September 30, 2003, we had long-term debt and capital leases of
$2,148.4 million with maturities ranging from 2004 to 2046. Current maturities
of long-term debt at September 30, 2003 were $4.3 million. The earliest
maturity of a material long-term debt obligation is December 2007. We also
maintain a shelf registration statement that allows us to issue up to $1.4
billion of debt securities, series preferred stock, common stock, stock
purchase contracts and stock purchase units.

In July 2003, we entered into a $100 million fixed-to-floating interest
rate swap on our 6.45 percent senior notes due in 2007 to manage our interest
rate exposure. The settlement and maturity dates on the swap are the same as
those on the notes. In accordance with FASB Statement No. 133, the carrying
value of the notes has been adjusted to reflect the fair value of the interest
rate swap.

In October 2003, we entered into two $50 million fixed-to-floating
interest rate swaps to manage our interest rate exposure. One $50 million swap
is on our 7.50 percent senior notes due in 2008 and the other $50 million swap
is on our 6.45 percent medium-term notes due in 2008. The settlement and
maturity dates on the swaps are the same as those on the notes. In accordance
with FASB Statement No. 133, the carrying values of the notes will be adjusted
to reflect the fair values of the interest rate swaps.

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Off-Balance Sheet Arrangements

We utilize several forms of off-balance sheet financing arrangements. At
September 30, 2003, these arrangements included:

|                                |  |              |       |             |  |   |      | 
|------------------------------- |  | ------------ | ----- | ----------- |  | - | ---- | 
|                                |  | UNDISCOUNTED |       |             |  |  
|                                |  | MINIMUM      |       |             |  |  
|                                |  | FUTURE LEASE |       | RECEIVABLES
|(IN MILLIONS)                   |  | PAYMENTS     |       | SOLD       
|                                |  |              |       |            
|Tax Advantaged Operating Leases |  | $            | 53.8  |             |  |   |      | 
|Standard Operating Leases       |  |              | 149.4 |             |  |   |      | 
|                                |  |              |       |             |  |   |      | 
|                                |  | $            | 203.2 |             |  |   |      | 
|                                |  |              |       |             |  |   |      | 
|Short-term Receivables          |  |              |       |             |  | $ | 90.7 | 

Lease Agreements

We finance our use of certain equipment, including corporate aircraft,
under committed lease arrangements provided by financial institutions. Certain
of these arrangements allow us to claim a deduction for the tax depreciation on
the assets, rather than the lessor, and allowed us to lease up to a maximum of
$95 million at September 30, 2003. At September 30, 2003, $53.8 million of
future minimum lease payments were outstanding under these arrangements. In
addition, we also have various other operating lease agreements. Future minimum
lease payments under these agreements approximated $149.4 million at September
30, 2003.

Sale of Receivables

At September 30, 2003, we had in place a trade receivables securitization
program pursuant to which we could sell receivables up to a maximum of $140
million. Accounts receivable sold under this program were $90.7 million at
September 30, 2003, as compared to $97.3 million at December 31, 2002.

Continued availability of the securitization program is conditioned upon
compliance with covenants, related primarily to operation of the
securitization, set forth in the related agreements. We are currently in
compliance with all such covenants. The securitization agreement includes a
credit rating downgrade trigger pursuant to which the agreement may be
terminated upon a rating downgrade to levels below BB- by Standard & Poors and
Ba3 by Moodys Investor Services. If such an event were to occur, we expect
that we would have sufficient capital resources through cash and our credit
facilities to satisfy any termination requirements.

Cash Flow Hedges

We have subsidiaries that conduct a substantial portion of their business
in Euros, Great Britain Pound Sterling and Canadian Dollars, but have
significant sales contracts that are denominated in U.S. dollars. Periodically,
we enter into forward contracts to exchange U.S. dollars for Euros, Great
Britain Pound Sterling and Canadian Dollars.

The forward contracts described above are used to mitigate the potential
volatility to cash flow arising from changes in currency exchange rates. The
forward contracts are being accounted for as cash flow hedges. The forward
contracts are recorded at fair value with the offset reflected in Accumulated
Other Comprehensive Income, net of deferred taxes. The notional value of the
forward contracts at September 30, 2003 was $695 million. The fair value of the
forward contracts at September 30, 2003 was an asset of $58.1 million, of which
$26.1 million is recorded in Prepaid Expenses and Other Assets and $32.0
million is recorded in Other Assets. The total gross gain of $61.5 million,
including terminated forward contracts as discussed below (before deferred
taxes of $19.1 million), recorded in Accumulated Other Comprehensive Income,
will be reflected in income as the individual contracts mature which will
offset the earnings effect of the hedged item. As of September 30, 2003, the
portion of the $61.5 million gain that would be reclassified into earnings to
offset the effect of the hedged item as an increase in sales in the next 12
months is a gain of $29.5 million.

In June 2003, we terminated certain forward contracts prior to their
scheduled maturities in 2004 and received cash of $3.4

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million. As of September
30, 2003, Accumulated Other Comprehensive Income included a gain of $3.4
million related to these terminated contracts which will be reflected in income
and sales when the original contracts would have matured.

Change in Dividend Policy

On May 17, 2002, our Board of Directors approved a change in our dividend
policy to achieve a net income payout ratio that we believe is consistent with
other leading aerospace companies. Specifically, our quarterly dividend was
reduced to 20 cents per share from the previous level of 27.5 cents per share
on our common stock, effective with the regular quarterly dividend payable July
1, 2002, to shareholders of record as of June 10, 2002.

Cash Flows

The following table summarizes our cash flow activities for the periods
indicated:

|                         |                                               |  |                       |        |      |  |        |        |   |  |   |        |  
|------------------------ | --------------------------------------------- |  | --------------------- | ------ | ---- |  | ------ | ------ | - |  | - | ------ | -
|                         |                                               |  | Nine Months Ended,    |        |      |  |       
|                         |                                               |  | September 30,         |        |      |  |       
|                         |                                               |  |                       |        |      |  |       
|                         |                                               |  | 2003                  |        | 2002 |  | Change
|                         |                                               |  |                       |        |      |  |       
|                         |                                               |  | (Dollars in millions)
|Cash provided (used) by: |                                               |  |                       |        |      |  |        |        |   |  |   |       
|                         | Operating activities of continuing operations |  | $                     | 348.8  |      |  | $      | 344.6  |   |  | $ | 4.2    |  
|                         | Investing activities of continuing operations |  | $                     | 108.9  |      |  | $      | (39.2  | ) |  | $ | 148.1  |  
|                         | Financing activities of continuing operations |  | $                     | (445.7 | )    |  | $      | 84.7   |   |  | $ | (530.4 | )
|                         | Discontinued operations                       |  | $                     | 161.5  |      |  | $      | (133.0 | ) |  | $ | 294.5  |  

Net cash provided by operating activities of continuing operations
increased $4.2 million from $344.6 million during the nine months ended
September 30, 2002 to $348.8 million during the nine months ended September 30,
2003. Cash flow from operating activities included tax refunds of $55 million
in the nine months ended September 30, 2003 and $50 million in the nine months
ended September 30, 2002. Cash flow from operating activities was reduced by
worldwide pension contributions of approximately $42 million in the nine months
ended September 30, 2003 and approximately $13 million in the nine months ended
September 30, 2002.

Net cash provided by investing activities of continuing operations
improved by $148.1 million in the nine months ended September 30, 2003 from the
nine months ended September 30, 2002 due to proceeds from the sale of the
Noveon PIK Notes of $151.9 million and the receipt of a $35.0 million purchase
price adjustment related to the acquisition of Aeronautical Systems. Capital
expenditures were $19.5 million higher in the nine months ended September 30,
2003 as compared to the nine months ended September 30, 2002.

Net cash used by financing activities of continuing operations was $445.7
million in the nine months ended September 30, 2003, compared to net cash
provided by financing activities of continuing operations of $84.7 million for
the nine months ended September 30, 2002. Short-term debt was repaid during the
nine months ended September 30, 2003 using the net after tax cash proceeds from
the sale of our Avionics business, cash proceeds from the sale of the Noveon
PIK Notes and cash provided by operating activities of net of dividends and
capital expenditures.

Net cash provided by discontinued operations of $161.5 million in the nine
months ended September 30, 2003 included $157.5 million net after-tax proceeds
from the sale of the Avionics business.

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Contingencies

General

There are pending or threatened against us or our subsidiaries various
claims, lawsuits and administrative proceedings, all arising from the ordinary
course of business with respect to commercial, product liability, asbestos and
environmental matters, which seek remedies or damages. We believe that any
liability that may finally be determined with respect to commercial and
non-asbestos product liability claims should not have a material effect on our
consolidated financial position, results of operations or cash flows. From time
to time, we are also involved in legal proceedings as a plaintiff involving
contract, patent protection, environmental and other matters. Gain
contingencies, if any, are recognized when they are realized.

Environmental

We are subject to various domestic and international environmental laws
and regulations which may require that we investigate and remediate the effects
of the release or disposal of materials at sites associated with past and
present operations, including sites at which we have been identified as a
potentially responsible party under the federal Superfund laws and comparable
state laws. We are currently involved in the investigation and remediation of a
number of sites under these laws.

The measurement of environmental liabilities by us is based on currently
available facts, present laws and regulations and current technology. Such
estimates take into consideration our prior experience in site investigation
and remediation, the data concerning cleanup costs available from other
companies and regulatory authorities and the professional judgment of our
environmental specialists in consultation with outside environmental
specialists, when necessary. Estimates of our environmental liabilities are
further subject to uncertainties regarding the nature and extent of site
contamination, the range of remediation alternatives available, evolving
remediation standards, imprecise engineering evaluations and estimates of
appropriate cleanup technology, methodology and cost, the extent of corrective
actions that may be required and the number and financial condition of other
potentially responsible parties, as well as the extent of their responsibility
for the remediation.

Accordingly, as investigation and remediation of these sites proceed, it
is likely that adjustments in our accruals will be necessary to reflect new
information. The amounts of any such adjustments could have a material adverse
effect on our results of operations in a given period, but the amounts, and the
possible range of loss in excess of the amounts accrued, are not reasonably
estimable. Based on currently available information, however, we do not believe
that future environmental costs in excess of those accrued with respect to
sites with which we have been identified as a potentially responsible party are
likely to have a material adverse effect on our financial condition. There can
be no assurance, however, that additional future developments, administrative
actions or liabilities relating to environmental matters will not have a
material adverse effect on our results of operations or cash flows in a given
period.

Environmental liabilities are recorded when our liability is probable and
the costs are reasonably estimable, which generally is not later than at
completion of a feasibility study or when we have recommended a remedy or have
committed to an appropriate plan of action. The liabilities are reviewed
periodically and, as investigation and remediation proceed, adjustments are
made as necessary. Liabilities for losses from environmental remediation
obligations do not consider the effects of inflation, and anticipated
expenditures are not discounted to their present value. The liabilities are not
reduced by possible recoveries from insurance carriers or other third parties,
but do reflect anticipated allocations among potentially responsible parties at
federal Superfund sites or similar state-managed sites and an assessment of the
likelihood that such parties will fulfill their obligations at such sites.

At September 30, 2003, our liabilities for environmental remediation
obligations totaled $89.4 million, of which $20.6 million was included in
current liabilities as Accrued Liabilities. Of the $89.4 million, $22.1 million
was associated with ongoing operations and $67.3 million was associated with
businesses previously disposed of or discontinued.

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The timing of expenditures depends on a number of factors that vary by
site, including the nature and extent of contamination, the number of
potentially responsible parties, the timing of regulatory approvals, the
complexity of the investigation and remediation, and the standards for
remediation. We expect that we will expend present accruals over many years,
and will complete remediation of all sites with which we have been identified
in up to 30 years. This period includes operation and monitoring costs that are
generally incurred over 15 to 25 years.

Asbestos

We and a number of our subsidiaries have been named as defendants in
various actions by plaintiffs alleging injury or death as a result of exposure
to asbestos fibres in products, or which may have been present in our
facilities. A number of these cases involve maritime claims, which have been
and are expected to continue to be administratively dismissed by the court.
These actions primarily relate to previously owned businesses. We believe that
pending and reasonably anticipated future actions, net of anticipated insurance
recoveries, are not likely to have a material adverse effect on our financial
condition, results of operations or cash flows.

We believe that we have substantial insurance coverage available to us
related to any remaining claims. However, a major portion of the primary layer
of insurance coverage for these claims is provided by the Kemper Insurance
Companies. Kemper has indicated that, due to capital constraints and downgrades
from various rating agencies, it has substantially ceased underwriting new
business and now focuses on administering policy commitments from prior years.
We cannot predict the long-term impact of these actions on the availability of
the Kemper insurance.

Liabilities of Divested Businesses

Asbestos

At the time of the EIP spin-off, two subsidiaries of Coltec were
defendants in a significant number of personal injury claims relating to
alleged asbestos-containing products sold by those subsidiaries. It is possible
that asbestos-related claims might be asserted against us on the theory that we
have some responsibility for the asbestos-related liabilities of EnPro, Coltec
or its subsidiaries, even though the activities that led to those claims
occurred prior to our ownership of any of those subsidiaries. Also, it is
possible that a claim might be asserted against us that Coltecs dividend of
its aerospace business to us prior to the spin-off was made at a time when
Coltec was insolvent or caused Coltec to become insolvent. Such a claim could
seek recovery from us on behalf of Coltec of the fair market value of the
dividend.

A limited number of asbestos-related claims have been asserted against us
as successor to Coltec or one of its subsidiaries. We believe that we have
substantial legal defenses against these claims, as well as against any other
claims that may be asserted against us on the theories described above. In
addition, the agreement between EnPro and us that was used to effectuate the
spin-off provides us with an indemnification from EnPro covering, among other
things, these liabilities. The success of any such asbestos-related claims
would likely require, as a practical matter, that Coltecs subsidiaries were
unable to satisfy their asbestos-related liabilities and that
Coltec was found to be responsible for these liabilities and was unable to
meet its financial obligations. We believe any such claims would be without
merit and that Coltec was solvent both before and after the dividend of its
aerospace business to us. If we are ultimately found to be responsible for the
asbestos-related liabilities of Coltecs subsidiaries, we believe it would not
have a material adverse effect on our financial condition, but could have a
material adverse effect on our results of operations and cash flows in a
particular period. However, because of the uncertainty as to the number, timing
and payments related to future asbestos-related claims, there can be no
assurance that any such claims will not have a material adverse effect on our
financial condition, results of operations and cash flows. If a claim related
to the dividend of Coltecs aerospace business were successful, it could have a
material adverse impact on our financial condition, results of operations and
cash flows.

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Other

In connection with the divestiture of our tire, vinyl and other
businesses, we have received contractual rights of indemnification from third
parties for environmental and other claims arising out of the divested
businesses. Failure of these third parties to honor their indemnification
obligations could have a material adverse effect on our consolidated financial
condition, results of operations and cash flow.

Guarantees

We have guaranteed amounts owed by Coltec Capital Trust with respect to
the $150 million of outstanding TIDES and have guaranteed Coltecs performance
of its obligations with respect to the TIDES and the underlying Coltec
convertible subordinated debentures. Following the spin-off of the EIP segment,
the TIDES remained outstanding as an obligation of Coltec Capital Trust and our
guarantee with respect to the TIDES remains an obligation of ours. EnPro,
Coltec and Coltec Capital Trust have agreed to indemnify us for any costs and
liabilities arising under or related to the TIDES after the spin-off.

In addition to our guarantee of the TIDES, at September 30, 2003, we have
an outstanding contingent liability for guarantees of debt and lease payments
of $3.7 million, letters of credit of $46.8 million, residual value of leases
of $53.8 million and executive loans to purchase our stock of $9.3 million.

Commercial Airline Customers

The downturn in the commercial air transport market, the terrorist attacks
on September 11, 2001, the military conflict in Iraq and the outbreak of Severe
Acute Respiratory Syndrome (SARS) have adversely affected the financial
condition of many of our commercial airline customers. We perform ongoing
credit evaluations on the financial condition of all of our customers and
maintain reserves for uncollectible accounts receivable based upon expected
collectibility. Although we believe our reserves are adequate, we are not able
to predict the future financial stability of these customers. Any material
change in the financial status of any one or group of customers could have a
material adverse effect on our financial condition, results of operations or
cash flows. The extent to which extended payment terms are granted to customers
may negatively affect future cash flow.

Super 27 Program

Our aerostructures business unit, included in the Engine Systems segment,
includes a business to re-engine 727 aircraft to meet sound attenuation
requirements and improve their fuel efficiency (Super 27 program). At December
31, 2002, we had an investment in the Super 27 program of $105.9 million
consisting of $44.7 of inventory and $61.2 million of notes receivable. The
inventory included three Super 27 aircraft, seven nacelle kits and other spare
parts.

In March 2003, we repossessed four 727 aircraft from a receivable obligor
who was in financial difficulty and also received a revised cash flow forecast
indicating a significant decline in the financial strength of another
receivable obligor. In addition, the deterioration in the commercial airline
market resulting from the military conflict in Iraq and SARS made available
more aircraft that compete with or are newer than these aircraft. Because of
these events, we concluded that our ability to recover the recorded values of
our inventory and notes receivable was significantly affected. In the first
quarter 2003, based on an independent appraisal and our assessment of then
current market conditions, we wrote-down the carrying value of our inventory to
equal the estimated market value of $12.2 million. Also in the first quarter
2003, we wrote-off $0.4 million of related trade receivables and $46.1 million
of notes receivable from a receivable obligor.

As of September 30, 2003, our remaining notes receivable of $8.0 million
represents the present value of expected future cash flows related to those
receivables. The total carrying value of inventory and other assets related to
the Super 27 business was $16.3 million at September 30, 2003 and represents
our assessment of the current market value.

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Collection of these receivables and inventory may be negatively affected
if the overall deterioration in the commercial aerospace market and the market
for Super 27 program aircraft continues. Because of these conditions, we will
continue to assess the value of these assets and their ultimate recovery.

Cordiem

During 2000, we invested as a minority shareholder in Cordiem LLC
(Cordiem). Cordiem was an aerospace e-business venture between suppliers and
airlines whose purpose was to utilize internet-based solutions to lower costs
of business transactions and inventory, to expand product awareness and
availability to more customers and to improve information flow between
participants. As of December 31, 2002, our investment in Cordiem, including
internal-use software, was $12.9 million. Cordiem ceased operations in the
first quarter 2003. As a result, we recorded a pre-tax, non-cash charge of
approximately $11.7 million in the first quarter 2003 to write-off our equity
investment in Cordiem.

Tax Litigation

In 2000, Coltec made a $113.7 million payment to the Internal Revenue
Service (IRS) for an income tax assessment and the related accrued interest
arising out of certain capital loss deductions and tax credits taken in 1996.
On February 13, 2001, Coltec filed suit against the IRS in the U.S. Court of
Claims seeking a refund of this payment. Trial is scheduled for May 2004.
Coltec has agreed to pay to us an amount equal to any refunds or credits of
taxes and interest received by it as a result of the litigation. If the IRS
prevails in this case, Coltec will not owe any additional interest or taxes
with respect to 1996. However, we may be required by the IRS to pay up to $24
million plus accrued interest with respect to the same items claimed by Coltec
in its tax returns for 1997 and 1998. The potential tax liability for 1997 and
1998 has been fully reserved. A reasonable estimation of the potential refund
for 1996, if any, cannot be made at this time; accordingly, no receivable has
been recorded.

In 2000, the IRS issued a statutory notice of deficiency asserting that
Rohr, Inc. (Rohr), our subsidiary, was liable for $85.3 million of additional
income taxes for the fiscal years ended July 31, 1986 through 1989. In 2003,
the IRS issued an additional statutory notice of deficiency asserting that Rohr
was liable for $23 million of additional income taxes for the fiscal years
ended July 31, 1990 through 1993. The proposed assessments relate primarily to
the timing of certain tax deductions and tax credits. Rohr has filed petitions
in the U.S. Tax Court opposing the proposed assessments. Rohr expects that
these cases will go to trial in late 2004 or in 2005 and that it will
ultimately be successful in these cases. However, if Rohr is not successful in
these cases, we believe that the net cost to Rohr at the time of the final
determination by the court would not exceed $100 million (including interest)
as the court will take into account the timing benefit of the disallowed tax
deductions at that time. We believe that any liability resulting from these
cases has been fully reserved.

New Accounting Standards

During January 2003, the Financial Accounting Standard Board (FASB) issued
FASB Interpretation No. 46 Consolidation of Variable Interest Entities. This
Interpretation of Accounting Research Bulletin No. 51 Consolidated Financial
Statement addresses consolidation by business enterprises of variable interest
entities which have certain characteristics defined in Interpretation No. 46.
The provisions of this Interpretation are required to be applied to
arrangements existing prior to February 1, 2003 in interim periods beginning
after June 15, 2003. On October 8, 2003, the FASB delayed the effective date of
the interpretation until periods ending after December 15, 2003. We are
currently assessing the effect of Interpretation No. 46, including the
potential deconsolidation of BFGoodrich Capital. See Capital Resources and
Liquidity-QUIPS for a description of BFGoodrich Capital.

During April 2003, the FASB issued Statement No. 149 Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. The Statement
amends and clarifies accounting for derivatives, including certain derivatives
instruments embedded in other contracts, and for hedging activities under
Statement No. 133. Statement 149 is effective for contracts entered into or
modified after June 30, 2003, except for certain circumstances, and for hedging
relationships designated after June 30, 2003. The guidance should be applied
prospectively. Statement 149 did not have a material effect on our consolidated
financial condition or results of operations.

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During May 2003, the FASB issued Financial Accounting Standards No. 150
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. The Statement establishes standards for classifying
and measuring as liabilities certain financial instruments that embody
obligations of the issuer and have characteristics of both liabilities and
equity. The Statement was to take effect at the beginning of the first interim period
beginning after June 15, 2003. On November 7, 2003, the
FASB issued FSP 150-3 which indefinitely deferred the effective date
of applying the provisions of the Statement to certain mandatorily
redeemable noncontrolling interests, such as our QUIPS, pending
further action by the FASB.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of
operations are based upon our unaudited condensed consolidated financial
statements, which have been prepared in
accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including
those related to customer programs and incentives, product returns, bad debts,
inventories, investments, intangible assets, income taxes, financing
operations, warranty obligations, excess component order cancellation costs,
restructuring, long-term service contracts, pensions and other postretirement
benefits, and contingencies and litigation. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.

Revenue Recognition

For revenues not recognized under the contract method of accounting, we
recognize revenues from the sale of products at the point of passage of title,
which is at the time of shipment. Revenues earned from providing maintenance
service are recognized when the service is complete.

Contract Accounting-Percentage of Completion

Revenue Recognition

We have sales under long-term, fixed-priced contracts, many of which
contain escalation clauses, requiring delivery of products over several years
and frequently providing the buyer with option pricing on follow-on orders.
Sales and profits on each contract are recognized in accordance with the
percentage-of-completion method of accounting, using the units-of-delivery
method. We follow the guidelines of Statement of Position 81-1 (SOP 81-1),
Accounting for Performance of Construction-Type and Certain Production-Type
Contracts (the contract method of accounting) except that our contract
accounting policies differ from the recommendations of SOP 81-1 in that
revisions of estimated profits on contracts are included in earnings under the
reallocation method rather than the cumulative catch-up method. Under the
reallocation method, the impact of revisions in estimates related to units
shipped to date is recognized ratably over the remaining life of the contract,
while under the cumulative catch-up method, such impact would be recognized
immediately. During 2003, we are reviewing and assessing changes to our
contract accounting methods, including a change to the cumulative catch-up
method from the reallocation method for accounting for changes in contract
estimates. The impact of any such change on our financial statements has yet
to be determined. If a change were to be made, it would be made no earlier than
January 1, 2004.

Profit is estimated based on the difference between total estimated
revenue and total estimated cost of a contract, excluding that reported in
prior periods, and is recognized evenly in the
current and future periods as a uniform percentage of sales value on all
remaining units to be delivered. Current revenue does not anticipate higher or
lower future prices, but includes units delivered at actual sales prices. Cost
includes the estimated cost of the preproduction effort, primarily tooling and
design, plus the estimated cost of manufacturing a specified number of
production units. The specified number of production units used to establish
the profit margin is predicated upon contractual terms adjusted for market
forecasts and does not exceed the lesser of those quantities assumed in
original contract pricing

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or those quantities which we now expect to deliver in
the timeframe/periods assumed in the original contract pricing. Our policies
only allow the estimated number of production units to be delivered to exceed
the quantity assumed within the original contract pricing when we receive firm
orders for additional units. The timeframe/periods assumed in the original
contract pricing is generally equal to the period specified in the contract. If
the contract is a life of program contract, then such period is equal to the
time period used in the original pricing model which generally equals the time
period required to recover our preproduction costs. Option quantities are
combined with prior orders when follow-on orders are released.

The contract method of accounting involves the use of various estimating
techniques to project costs at completion and includes estimates of recoveries
asserted against the customer for changes in specifications. These estimates
involve various assumptions and projections relative to the outcome of future
events, including the quantity and timing of product deliveries. Also included
are assumptions relative to future labor performance and rates, and projections
relative to material and overhead costs. These assumptions involve various
levels of expected performance improvements. We reevaluate our contract
estimates periodically and reflect changes in estimates in the current and
future periods under the reallocation method.

Included in sales are amounts arising from contract terms that provide for
invoicing a portion of the contract price at a date after delivery. Also
included are negotiated values for units delivered and anticipated price
adjustments for contract changes, claims, escalation and estimated earnings in
excess of billing provisions, resulting from the percentage-of-completion
method of accounting. Certain contract costs are estimated based on the
learning curve concept discussed below.

Inventory

Inventoried costs on long-term contracts include certain preproduction
costs, consisting primarily of tooling and design costs and production costs,
including applicable overhead. The costs attributed to units delivered under
long-term commercial contracts are based on the estimated average cost of all
units expected to be produced and are determined under the learning curve
concept, which anticipates a predictable decrease in unit costs as tasks and
production techniques become more efficient through repetition. This usually
results in an increase in inventory (referred to as excess-over average)
during the early years of a contract.

If in-process inventory plus estimated costs to complete a specific
contract exceeds the anticipated remaining sales value of such contract, such
excess is charged to current earnings, thus reducing inventory to estimated
realizable value.

Identifiable Intangible Assets

Identifiable intangible assets are recorded at cost, or when acquired as
part of a business combination, at estimated fair value. These assets include
patents and other technology agreements, sourcing contracts, trademarks,
licenses, customer relationships and non-compete agreements. Intangible assets
are generally amortized using the straight-line method over estimated useful
lives of 5 to 25 years for all acquisitions completed prior to June 30, 2001.
For acquisitions completed subsequent to June 30, 2001, identifiable intangible
assets are amortized over their useful life using undiscounted cash flows, a
method that reflects the pattern in which the economic benefits of the
intangible assets are consumed.

Impairments of identifiable intangible assets are recognized when events
or changes in circumstances indicate that the carrying amount of the asset, or
related groups of assets, may not be recoverable and our estimate of
undiscounted cash flows over the assets remaining useful life are less than the
carrying value of the assets. The determination of undiscounted cash flow is
based on our segments plans. The revenue growth is based upon aircraft build
projections from aircraft manufacturers and widely available external
publications. The profit margin assumption is based upon the current cost
structure and anticipated cost reductions. Measurement of the amount of
impairment may be based upon an appraisal, market values of similar assets or
estimated discounted future cash flows resulting from the use and ultimate
disposition of the asset.

41



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Sales Incentives

We offer sales incentives to certain commercial customers in connection
with sales contracts. These incentives may consist of up-front cash payments,
merchandise credits and/or free products. The cost of these incentives is
recognized in the period incurred unless it is specifically guaranteed of
recovery within the contract by the customer. If the contract contains such a
guarantee, then the cost of the sales incentive is capitalized and amortized
over the contract period.

Entry Fees-Investment in Risk and Revenue Sharing Programs

Some aerospace customers may negotiate an entry fee, representing an
up-front cash investment in a new program. The payment effectively demonstrates
our commitment to participate in new product programs and is part of the
exclusive supply agreement. In return, we receive a percentage of the product
sales in the supply periods after flight certification. Entry fees differ from
sales incentives, as entry fees are an investment in a program which will
generate a benefit from the total sales of the program, not just sales from our
products, while sales incentives that are capitalized are recovered during the
contract period of our products pursuant to a specific guarantee of recovery by
the customer. The entry fees are recognized as Other Assets and amortized on a
straight-line basis over the programs useful life following certification,
which approximates 10 to 20 years. The value of the investment is evaluated for
impairment based on the criteria in Identifiable Intangible Assets above. The
estimated lives are reviewed periodically based upon the expected program lives
as communicated by the customer.

Employee Benefits

Assumptions used in determining the projected benefit obligations and the
fair value of plan assets for our pension and postretirement benefits other
than pensions are evaluated by us in consultation with an outside actuary.
Changes in assumptions are based upon our historical data, such as the rate of
compensation increase and the long-term rate of return on plan assets.
Assumptions, including the discount rate, the long-term rate of return on plan
assets and the health care cost projections are evaluated and updated annually.

Forward-Looking Information is Subject to Risk and Uncertainty

Certain statements made in this document are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
regarding our 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. We caution readers that any such
forward-looking statements are based on assumptions that we believe are
reasonable, but are subject to a wide range of risks, and actual results may
differ materially.

Important factors that could cause actual results to differ include, but
are not limited to:



| |  |  | the extent to which we are successful in integrating Aeronautical
Systems and achieving expected operating synergies;                                              
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the nature, extent and timing of our proposed restructuring and
consolidation actions and the extent to which we will be able to
achieve saving from these actions;
|
| |  |  | the possibility of additional restructuring and consolidation
actions beyond those previously announced by us;                                                     
|
| |  |  | global demand for aircraft spare parts and aftermarket services;                                                                                                   
|
| |  |  | threats associated with and efforts to combat terrorism, including
the current situation in Iraq;                                                                  
|
| |  |  | the impact of Severe Acute Respiratory Syndrome (SARS) on global travel;                                                                                           

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| |  |  | the timing related to restoring consumer confidence in air travel;                                                                                                                                                                                                                                                                                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the health of the commercial aerospace industry, including the
impact of bankruptcies in the airline industry;                                                                                                                                                                                                                                                                                       
|
| |  |  | demand for and market acceptance of new and existing products, such
as the Airbus A380 and the Joint Strike Fighter;                                                                                                                                                                                                                                                                                 
|
| |  |  | potential cancellation of orders by customers;                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | successful development of products and advanced technologies;                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | the effect of changes in accounting policies, including possible
changes to our contract accounting methods;                                                                                                                                                                                                                                                                                         
|
| |  |  | competitive product and pricing pressures;                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | possible assertion of claims against us on the theory that we, as
the former corporate parent of Coltec Industries Inc, bear some of the
responsibility for the asbestos-related liabilities of Coltec and its
subsidiaries, or that Coltecs dividend of its aerospace business to us
prior to the EnPro spin-off was made at a time when Coltec was
insolvent or caused Coltec to become insolvent;
|
| |  |  | 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,
deflation, recession and other external factors over which we have no
control; and                                                                                                                                                                                  
|
| |  |  | the outcome of contingencies (including completion of acquisitions,
divestitures, litigation and environmental remediation efforts).                                                                                                                                                                                                                                                                 

We caution you not to place undue reliance on the forward-looking
statements contained in this document, which speak only as of the date on which
such statements were made. We undertake 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks as part of our ongoing business
operations, including risks from changes in interest rates and foreign currency
exchange rates, which could impact our financial condition, results of
operations and cash flows. We manage our exposure to these and other market
risks through regular operating and financing activities, and on a limited
basis, through the use of derivative financial instruments. We intend to use
such derivative financial instruments as risk management tools and not for
speculative investment purposes. Our discussion of Market Risk in our 2002
Annual Report on Form 10-K provides more discussion as to the types of
instruments used to manage risk. Refer to Note N: Derivatives and Hedging in
Part 1  Item 1 of this Form 10-Q for a description of current developments
involving our hedging activities.

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Item 4. Controls and Procedures



|(a) |  | Evaluation of Disclosure Controls and Procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms, and that such information is
accumulated and communicated to our management, including our Chairman,
President and Chief Executive Officer and Executive Vice President and
Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. Management necessarily applied its judgment
in assessing the costs and benefits of such controls and procedures, which,
by their nature, can provide only reasonable assurance regarding
managements control objectives.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | On October 1, 2002, we completed our acquisition of TRW Inc.s Aeronautical
Systems businesses. At the time of the acquisition, these businesses
employed approximately 6,200 employees in 22 facilities in nine countries,
including manufacturing and service operations in the United Kingdom,
France, Germany, Canada, the United States and several Asia/Pacific
countries, thus adding a significant level of complexity and diversity to
our portfolio. We are in the process of integrating these businesses into
Goodrich from both an operational as well as a financial reporting and
control perspective. In order to ensure the effectiveness of our disclosure
controls and procedures during this integration period, we have devoted
substantial additional internal and external resources to verify the
information being reported by these businesses. As a result of this
process, we have concluded that while additional enhancements to certain
reporting processes, procedures and systems are expected to be made in the
future, the disclosure controls and procedures of Aeronautical Systems were
effective as of the end of the period covered by this Quarterly Report (the
Evaluation Date).
|   
|    |  | We have carried out an evaluation, under the supervision and with the
participation of our management, including our Chairman, President and
Chief Executive Officer and Executive Vice President and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the Evaluation Date. Based upon that
evaluation, our Chairman, President and Chief Executive Officer and
Executive Vice President and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of the Evaluation
Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(b) |  | Changes in Internal Controls.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | There were no changes in our internal control over financial reporting that
occurred during our most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We and certain of our subsidiaries are defendants in various claims,
lawsuits and administrative proceedings. In addition, we have been notified
that we are among potentially responsible parties under federal environmental
laws, or similar state laws, relative to the cost of investigating and in some
cases remediating contamination by hazardous materials at several sites. See
Note P to the accompanying unaudited condensed consolidated financial
statements, which is incorporated herein by reference.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits.

|             |  |                                                                                                                                                                                           
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 3.1  |  | Restated Certificate of Incorporation of Goodrich Corporation.                                                                                                                            
|             |  |                                                                                                                                                                                           
|Exhibit 3.2  |  | By-Laws of Goodrich Corporation, as amended, filed as Exhibit
4(B) to Goodrich Corporations Registration Statement on Form S-3
(File No. 333-98165), is incorporated herein by reference.
|             |  |                                                                                                                                                                                           
|Exhibit 10.1 |  | Three Year Credit Agreement dated as of August 20, 2003 among
Goodrich Corporation, the lenders parties thereto and Citibank,
N.A., as paying agent for such lenders.                     
|             |  |                                                                                                                                                                                           
|Exhibit 15   |  | Letter Re: Unaudited Interim Financial Information.                                                                                                                                       
|             |  |                                                                                                                                                                                           
|Exhibit 31   |  | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                                                                  
|             |  |                                                                                                                                                                                           
|Exhibit 32   |  | Section 1350 Certifications.                                                                                                                                                              

(b)  Reports on Form 8-K.

No Current Reports on Form 8-K were filed during the period covered by this
report.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                  |  |                                                       
|----------------- |  | ------------------------------------------------------
|November 12, 2003 |  | GOODRICH CORPORATION                                  
|                  |  |                                                       
|                  |  | /s/ ULRICH SCHMIDT                                    
|                  |  |                                                       
|                  |  | Ulrich Schmidt                                        
|                  |  | Executive Vice President and
Chief Financial Officer  
|                  |  |                                                       
|                  |  | /s/ ROBERT D. KONEY, JR                               
|                  |  |                                                       
|                  |  | Robert D. Koney, Jr.                                  
|                  |  | Vice President & Controller
(Chief Accounting Officer)

46



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##### 



EXHIBIT INDEX

|             |  |                                                                                                                                                                                           
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 3.1  |  | Restated Certificate of Incorporation of Goodrich Corporation.                                                                                                                            
|             |  |                                                                                                                                                                                           
|Exhibit 3.2  |  | By-Laws of Goodrich Corporation, as amended, filed as Exhibit
4(B) to Goodrich Corporations Registration Statement on Form S-3
(File No. 333-98165), is incorporated herein by reference.
|             |  |                                                                                                                                                                                           
|Exhibit 10.1 |  | Three Year Credit Agreement dated as of August 20, 2003 among
Goodrich Corporation, the lenders parties thereto and Citibank,
N.A., as paying agent for such lenders.                     
|             |  |                                                                                                                                                                                           
|Exhibit 15   |  | Letter Re: Unaudited Interim Financial Information                                                                                                                                        
|             |  |                                                                                                                                                                                           
|Exhibit 31   |  | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                                                                  
|             |  |                                                                                                                                                                                           
|Exhibit 32   |  | Section 1350 Certifications.                                                                                                                                                              

47