##### 



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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 June 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              |  | (I.R.S. Employer   
|Incorporation or Organization)               |  | Identification No.)
|                                             |  |                    
|Four Coliseum Centre, 2730 West Tyvola Road, |  |                    
|Charlotte, N.C.                              |  | 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  þ |  | No o
|------ |  | ----

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

|Yes  þ |  | No o
|------ |  | ----

As of June 30, 2003, there were 117,585,771 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 June 30, 2003, and the related
condensed consolidated statements of income and cash flows for the three and
six month periods ended June 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
August 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 |       | Six Months Ended
|                                                          |                                           |   | June 30,           |       | June 30,        
|                                                          |                                           |   |                    |       |                 
|                                                          |                                           |   | 2003               |       | 2002             |   | 2003  |       | 2002
|                                                          |                                           |   |                    |       |                  |   |       |       |     
|Sales                                                     |                                           | $ | 1,094.5            |       |                  | $ | 899.5 |       |      | $ | 2,188.7 |         |   | $ | 1,795.3 |        
|Operating Costs and Expenses:                             |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|                                                          | Cost of sales                             |   |                    | 819.6 |                  |   |       | 675.2 |      |   |         | 1,719.5 |   |   |         | 1,348.7 |  
|                                                          | Selling and administrative expenses       |   |                    | 180.1 |                  |   |       | 117.4 |      |   |         | 362.4   |   |   |         | 229.1   |  
|                                                          | Restructuring and consolidation costs     |   |                    | 28.7  |                  |   |       | 13.3  |      |   |         | 37.8    |   |   |         | 20.0    |  
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|                                                          |                                           |   | 1,028.4            |       |                  |   | 805.9 |       |      |   | 2,119.7 |         |   |   | 1,597.8 |        
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|Operating income                                          |                                           |   | 66.1               |       |                  |   | 93.6  |       |      |   | 69.0    |         |   |   | 197.5   |        
|Interest expense                                          |                                           |   | (38.2              | )     |                  |   | (23.0 | )     |      |   | (78.1   | )       |   |   | (46.1   | )      
|Interest income                                           |                                           |   | 0.5                |       |                  |   | 13.0  |       |      |   | 5.0     |         |   |   | 19.1    |        
|Other income (expense)  net                              |                                           |   | (2.5               | )     |                  |   | 6.9   |       |      |   | (15.1   | )       |   |   | (2.4    | )      
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|Income (loss) before income taxes and Trust distributions |                                           |   | 25.9               |       |                  |   | 90.5  |       |      |   | (19.2   | )       |   |   | 168.1   |        
|Income tax benefit (expense)                              |                                           |   | (8.6               | )     |                  |   | (29.9 | )     |      |   | 6.3     |         |   |   | (55.5   | )      
|Distributions on Trust Preferred Securities               |                                           |   | (2.6               | )     |                  |   | (2.6  | )     |      |   | (5.2    | )       |   |   | (5.2    | )      
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|Income (loss) from continuing operations                  |                                           |   | 14.7               |       |                  |   | 58.0  |       |      |   | (18.1   | )       |   |   | 107.4   |        
|Income (loss) from discontinued operations                |                                           |   | (0.3               | )     |                  |   | (12.1 | )     |      |   | 62.4    |         |   |   | (11.1   | )      
|Cumulative effect of change in accounting                 |                                           |   |                   |       |                  |   |      |       |      |   | (0.5    | )       |   |   | (36.1   | )      
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|Net income                                                |                                           | $ | 14.4               |       |                  | $ | 45.9  |       |      | $ | 43.8    |         |   | $ | 60.2    |        
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|Basic Earnings (Loss) per Share:                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|                                                          | Continuing operations                     |   | $                  | 0.13  |                  |   | $     | 0.57  |      |   | $       | (0.15   | ) |   | $       | 1.05    |  
|                                                          | Discontinued operations                   |   |                    | (0.01 | )                |   |       | (0.12 | )    |   |         | 0.52    |   |   |         | (0.11   | )
|                                                          | Cumulative effect of change in accounting |   |                    |      |                  |   |       |      |      |   |         |        |   |   |         | (0.35   | )
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|                                                          | Net income                                |   | $                  | 0.12  |                  |   | $     | 0.45  |      |   | $       | 0.37    |   |   | $       | 0.59    |  
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|Diluted Earnings (Loss) per Share:                        |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|                                                          | Continuing operations                     |   | $                  | 0.12  |                  |   | $     | 0.55  |      |   | $       | (0.15   | ) |   | $       | 1.02    |  
|                                                          | Discontinued operations                   |   |                    |      |                  |   |       | (0.10 | )    |   |         | 0.52    |   |   |         | (0.08   | )
|                                                          | Cumulative effect of change in accounting |   |                    |      |                  |   |       |      |      |   |         |        |   |   |         | (0.35   | )
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|                                                          | Net income                                |   | $                  | 0.12  |                  |   | $     | 0.45  |      |   | $       | 0.37    |   |   | $       | 0.59    |  
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        
|Dividends declared per common share                       |                                           | $ | 0.20               |       |                  | $ | 0.275 |       |      | $ | 0.40    |         |   | $ | 0.475   |        
|                                                          |                                           |   |                    |       |                  |   |       |       |      |   |         |         |   |   |         |        

See notes to unaudited condensed consolidated financial statements.

2



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##### 



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

|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |              |       |       |         | 
|---------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ----- | -------- | ------- | ------------ | ----- | ----- | ------- | 
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       | June 30, |         | December 31,
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       | 2003     |         | 2002        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|ASSETS                                                                       |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|Current Assets                                                               |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Cash and cash equivalents                                                                                                   |                           | $     | 267.8    |         |              | $     | 149.9 |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Accounts and notes receivable, less allowance for doubtful receivables
($35.8 at June 30, 2003; $31.4 at December 31, 2002) |                           |       | 656.4    |         |              |       | 716.0 |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Inventories                                                                                                                 |                           |       | 950.9    |         |              |       | 962.6 |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Deferred income taxes                                                                                                       |                           |       | 117.2    |         |              |       | 121.3 |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Prepaid expenses and other assets                                                                                           |                           |       | 57.9     |         |              |       | 38.0  |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Assets of discontinued operations                                                                                           |                           |       |         |         |              |       | 46.5  |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             | Total Current Assets      |       |          | 2,050.2 |              |       |       | 2,034.3 | 
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|Property, plant and equipment                                                |                                                                                                                         |                                                                                                                                                                                                     | 1,157.2                                                                                                                     |                           |       |          | 1,222.4 |             
|Prepaid pension                                                              |                                                                                                                         |                                                                                                                                                                                                     | 246.7                                                                                                                       |                           |       |          | 250.5   |             
|Goodwill                                                                     |                                                                                                                         |                                                                                                                                                                                                     | 1,185.6                                                                                                                     |                           |       |          | 1,194.2 |             
|Identifiable intangible assets                                               |                                                                                                                         |                                                                                                                                                                                                     | 473.0                                                                                                                       |                           |       |          | 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                                                                 |                                                                                                                         |                                                                                                                                                                                                     | 610.6                                                                                                                       |                           |       |          | 644.9   |             
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|                                                                             |                                                                                                                         | $                                                                                                                                                                                                   | 5,788.7                                                                                                                     |                           |       | $        | 5,998.3 |             
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |              |       |       |        
|LIABILITIES AND SHAREHOLDERS EQUITY                                         |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|Current Liabilities                                                          |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Short-term bank debt                                                                                                        |                           | $     |         |         |              | $     | 379.2 |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Accounts payable                                                                                                            |                           |       | 408.6    |         |              |       | 435.8 |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Accrued expenses                                                                                                            |                           |       | 618.5    |         |              |       | 576.9 |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Income taxes payable                                                                                                        |                           |       | 253.9    |         |              |       | 150.8 |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Liabilities of discontinued operations                                                                                      |                           |       |         |         |              |       | 16.3  |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     | Current maturities of long-term debt and capital lease obligations                                                          |                           |       | 3.5      |         |              |       | 3.9   |        
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             | Total Current Liabilities |       |          | 1,284.5 |              |       |       | 1,562.9 | 
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|Long-term debt and capital lease obligations                                 |                                                                                                                         |                                                                                                                                                                                                     | 2,133.2                                                                                                                     |                           |       |          | 2,129.0 |             
|Pension obligations                                                          |                                                                                                                         |                                                                                                                                                                                                     | 724.3                                                                                                                       |                           |       |          | 722.1   |             
|Postretirement benefits other than pensions                                  |                                                                                                                         |                                                                                                                                                                                                     | 322.5                                                                                                                       |                           |       |          | 323.2   |             
|Other non-current liabilities                                                |                                                                                                                         |                                                                                                                                                                                                     | 196.1                                                                                                                       |                           |       |          | 202.8   |             
|Commitments and contingent liabilities                                       |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                            |                           |       |          |        |             
|Mandatorily redeemable preferred securities of trust                         |                                                                                                                         |                                                                                                                                                                                                     | 125.6                                                                                                                       |                           |       |          | 125.4   |             
|Shareholders Equity                                                         |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|                                                                             | Common stock - $5 par value                                                                                             |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |              |      
|                                                                             |                                                                                                                         | Authorized 200,000,000 shares; issued 131,111,776 shares at June 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) |                                                                                                                             |                           | 655.6 |          |         |              | 652.9 |      
|                                                                             | Additional capital                                                                                                      |                                                                                                                                                                                                     |                                                                                                                             | 1,033.1                   |       |          |         | 1,027.4      |      
|                                                                             | Income retained in the business                                                                                         |                                                                                                                                                                                                     |                                                                                                                             | 32.8                      |       |          |         | 36.1         |      
|                                                                             | Accumulated other comprehensive income                                                                                  |                                                                                                                                                                                                     |                                                                                                                             | (304.1                    | )     |          |         | (369.1       | )    
|                                                                             | Unearned compensation                                                                                                   |                                                                                                                                                                                                     |                                                                                                                             | (1.8                      | )     |          |         | (1.6         | )    
|                                                                             | Common stock held in treasury, at cost (13,526,005 shares at June 30, 2003,
and 13,506,977 shares at December 31, 2002) |                                                                                                                                                                                                     |                                                                                                                             | (413.1                    | )     |          |         | (412.8       | )    
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|Total Shareholders Equity                                                   |                                                                                                                         |                                                                                                                                                                                                     | 1,002.5                                                                                                                     |                           |       |          | 932.9   |             
|                                                                             |                                                                                                                         |                                                                                                                                                                                                     |                                                                                                                             |                           |       |          |         |             
|                                                                             |                                                                                                                         | $                                                                                                                                                                                                   | 5,788.7                                                                                                                     |                           |       | $        | 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)

|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |      |        |       |       |  
|------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ---------------------------------------- | ------ | ---------------- | ----- | ---- | ------ | ----- | ----- | -
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        | Six Months Ended
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        | June 30,        
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                 
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        | 2003             |       | 2002
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|OPERATING ACTIVITIES                                         |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|                                                             |  | Income (loss) from continuing operations                                                                        |                                                                                                  | $                                        | (18.1  | )                |       | $    | 107.4  |      
|                                                             |  | Adjustments to reconcile income (loss) from continuing operations to net cash
Provided by operating activities: |                                                                                                  |                                          |        |                  |       |      |        |      
|                                                             |  |                                                                                                                 | Restructuring and consolidation:                                                                 |                                          |        |                  |       |      |        |       |      
|                                                             |  |                                                                                                                 |                                                                                                  | Expenses                                 |        |                  | 37.8  |      |        |       | 20.0  |  
|                                                             |  |                                                                                                                 |                                                                                                  | Payments                                 |        |                  | (21.3 | )    |        |       | (32.1 | )
|                                                             |  |                                                                                                                 | Rotable asset
impairment                                                                         |                                          |        | 6.2              |       |      |        |      |      
|                                                             |  |                                                                                                                 | Super 27 asset impairment                                                                        |                                          |        | 79.9             |       |      |        |      |      
|                                                             |  |                                                                                                                 | Depreciation and amortization                                                                    |                                          |        | 108.8            |       |      |        | 78.8  |      
|                                                             |  |                                                                                                                 | Deferred income taxes                                                                            |                                          |        | 8.5              |       |      |        | 1.6   |      
|                                                             |  |                                                                                                                 | Net gains on sales of businesses                                                                 |                                          |        |                 |       |      |        | (2.5  | )    
|                                                             |  |                                                                                                                 | Payment-in-kind interest income                                                                  |                                          |        | (4.3             | )     |      |        | (11.5 | )    
|                                                             |  |                                                                                                                 | Change in assets and liabilities, net of effects of acquisitions and dispositions
of businesses: |                                          |        |                  |       |      |        |       |      
|                                                             |  |                                                                                                                 |                                                                                                  | Receivables                              |        |                  | 40.0  |      |        |       | 42.1  |  
|                                                             |  |                                                                                                                 |                                                                                                  | Change in receivables sold, net          |        |                  | (2.1  | )    |        |       | (32.4 | )
|                                                             |  |                                                                                                                 |                                                                                                  | Inventories                              |        |                  | (14.3 | )    |        |       | (20.3 | )
|                                                             |  |                                                                                                                 |                                                                                                  | Other current assets                     |        |                  | (7.2  | )    |        |       | (0.6  | )
|                                                             |  |                                                                                                                 |                                                                                                  | Accounts payable                         |        |                  | (45.9 | )    |        |       | (86.8 | )
|                                                             |  |                                                                                                                 |                                                                                                  | Accrued expenses                         |        |                  | 32.7  |      |        |       | (17.6 | )
|                                                             |  |                                                                                                                 |                                                                                                  | Income taxes payable                     |        |                  | 25.2  |      |        |       | 94.0  |  
|                                                             |  |                                                                                                                 |                                                                                                  | Other non-current assets and liabilities |        |                  | (8.3  | )    |        |       | 16.6  |  
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|                                                             |  | Net cash provided by operating activities of continuing operations                                              |                                                                                                  |                                          | 217.6  |                  |       |      | 156.7  |      
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|INVESTING ACTIVITIES                                         |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|                                                             |  | Purchases of property and equipment                                                                             |                                                                                                  |                                          | (46.7  | )                |       |      | (36.6  | )    
|                                                             |  | Proceeds from sale of property and equipment                                                                    |                                                                                                  |                                          | 3.4    |                  |       |      | 5.1    |      
|                                                             |  | Proceeds from sale of businesses                                                                                |                                                                                                  |                                          |       |                  |       |      | 6.0    |      
|                                                             |  | Proceeds from sale of payment-in-kind note                                                                      |                                                                                                  |                                          | 151.9  |                  |       |      | 4.8    |      
|                                                             |  | Payments (made) received in connection with acquisitions, net of cash acquired                                  |                                                                                                  |                                          | 31.0   |                  |       |      | (0.4   | )    
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|                                                             |  | Net cash provided (used) by investing activities of continuing operations                                       |                                                                                                  |                                          | 139.6  |                  |       |      | (21.1  | )    
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|FINANCING ACTIVITIES                                         |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|                                                             |  | Increase (decrease) in short-term debt                                                                          |                                                                                                  |                                          | (379.9 | )                |       |      | 113.2  |      
|                                                             |  | Proceeds from issuance of long-term debt                                                                        |                                                                                                  |                                          | 7.0    |                  |       |      | 0.3    |      
|                                                             |  | Repayment of long-term debt and capital lease obligations                                                       |                                                                                                  |                                          | (2.0   | )                |       |      |       |      
|                                                             |  | Proceeds from issuance of capital stock                                                                         |                                                                                                  |                                          |       |                  |       |      | 4.1    |      
|                                                             |  | Purchases of treasury stock                                                                                     |                                                                                                  |                                          |       |                  |       |      | (4.8   | )    
|                                                             |  | Dividends                                                                                                       |                                                                                                  |                                          | (46.9  | )                |       |      | (56.1  | )    
|                                                             |  | Distributions on Trust preferred securities                                                                     |                                                                                                  |                                          | (5.2   | )                |       |      | (8.7   | )    
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|                                                             |  | Net cash provided (used) by financing activities of continuing operations                                       |                                                                                                  |                                          | (427.0 | )                |       |      | 48.0   |      
|DISCONTINUED OPERATIONS                                      |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|                                                             |  | Net cash provided (used) by discontinued operations                                                             |                                                                                                  |                                          | 185.0  |                  |       |      | (122.9 | )    
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|Effect of Exchange Rate Changes on Cash and Cash Equivalents |  |                                                                                                                 | 2.7                                                                                              |                                          |        |                  | 2.2   |     
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|Net Increase in Cash and Cash Equivalents                    |  |                                                                                                                 | 117.9                                                                                            |                                          |        |                  | 62.9  |     
|Cash and Cash Equivalents at Beginning of Period             |  |                                                                                                                 | 149.9                                                                                            |                                          |        |                  | 85.8  |     
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |     
|Cash and Cash Equivalents at End of Period                   |  | $                                                                                                               | 267.8                                                                                            |                                          |        | $                | 148.7 |     
|                                                             |  |                                                                                                                 |                                                                                                  |                                          |        |                  |       |      |        |      

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 six months ended June 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 six months ended June 30, 2003 results, but not the
three and six months ended June 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



---



##### 



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 included 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 |      | Six Months
|                                        |                                                                                                                                  |      | Ended        |      | Ended     
|                                        |                                                                                                                                  |      | June 30,     |      | June 30,  
|                                        |                                                                                                                                  |      |              |      |           
|(In millions, except per share amounts) |                                                                                                                                  | 2003 |              | 2002 |            | 2003 |      | 2002
|                                        |                                                                                                                                  |      |              |      |            |      |      |     
|Net income, as reported                 |                                                                                                                                  | $    | 14.4         |      |            | $    | 45.9 |      |   | $ | 43.8 |      |   | $ | 60.2 |     
|                                        | Stock-based employee compensation
expense (income) included in reported
net income, net of related tax effects                   |      |              | 1.5  |            |      |      | 0.9  |   |   |      | (1.5 | ) |   |      | 4.1  |  
|                                        | Stock-based employee compensation
(expense) income determined under fair
value method for all awards, net of
related tax effects |      |              | (4.0 | )          |      |      | (4.4 | ) |   |      | (4.2 | ) |   |      | (8.8 | )
|                                        |                                                                                                                                  |      |              |      |            |      |      |      |   |   |      |      |   |   |      |     
|Pro forma net income                    |                                                                                                                                  | $    | 11.9         |      |            | $    | 42.4 |      |   | $ | 38.1 |      |   | $ | 55.5 |     
|                                        |                                                                                                                                  |      |              |      |            |      |      |      |   |   |      |      |   |   |      |     
|Earnings per share:                     |                                                                                                                                  |      |              |      |            |      |      |      |   |   |      |      |   |   |      |     
|                                        | Basic, as reported                                                                                                               |      | $            | 0.12 |            |      | $    | 0.45 |   |   | $    | 0.37 |   |   | $    | 0.59 |  
|                                        |                                                                                                                                  |      |              |      |            |      |      |      |   |   |      |      |   |   |      |     
|                                        | Basic, pro forma                                                                                                                 |      | $            | 0.10 |            |      | $    | 0.42 |   |   | $    | 0.32 |   |   | $    | 0.54 |  
|                                        |                                                                                                                                  |      |              |      |            |      |      |      |   |   |      |      |   |   |      |     
|                                        | Diluted, as reported                                                                                                             |      | $            | 0.12 |            |      | $    | 0.45 |   |   | $    | 0.37 |   |   | $    | 0.59 |  
|                                        |                                                                                                                                  |      |              |      |            |      |      |      |   |   |      |      |   |   |      |     
|                                        | Diluted, pro forma                                                                                                               |      | $            | 0.10 |            |      | $    | 0.41 |   |   | $    | 0.32 |   |   | $    | 0.55 |  
|                                        |                                                                                                                                  |      |              |      |            |      |      |      |   |   |      |      |   |   |      |     

The Company recorded income related to stock-based compensation during the
first quarter of 2003 as a result of revisions to the estimated payout on
performance share plans.

Note C: Inventories

Inventories consist of:

|                                                         |                                               |   |                       |       |              |   |         |       |  
|-------------------------------------------------------- | --------------------------------------------- | - | --------------------- | ----- | ------------ | - | ------- | ----- | -
|                                                         |                                               |   | June 30,              |       | December 31,
|                                                         |                                               |   | 2003                  |       | 2002        
|                                                         |                                               |   |                       |       |             
|                                                         |                                               |   | (Dollars in millions)
|FIFO or average cost (which approximates current costs): |                                               |   |                       |       |              |   |         |      
|                                                         | Finished products                             |   | $                     | 220.3 |              |   | $       | 248.4 |  
|                                                         | In-process                                    |   |                       | 595.4 |              |   |         | 557.4 |  
|                                                         | Raw materials and supplies                    |   |                       | 240.4 |              |   |         | 249.8 |  
|                                                         |                                               |   |                       |       |              |   |         |      
|                                                         |                                               |   | 1,056.1               |       |              |   | 1,055.6 |      
|Less:                                                    |                                               |   |                       |       |              |   |         |      
|                                                         | Reserve to reduce certain inventories to LIFO |   |                       | (40.8 | )            |   |         | (40.3 | )
|                                                         | Progress payments and advances                |   |                       | (64.4 | )            |   |         | (52.7 | )
|                                                         |                                               |   |                       |       |              |   |         |      
|Total                                                    |                                               | $ | 950.9                 |       |              | $ | 962.6   |      
|                                                         |                                               |   |                       |       |              |   |         |       |  

The
preproduction and excess over average inventory balance, which is
included in in-process inventory, was $161.9
million as of June 30, 2003.

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.

6



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##### 



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, transmission and
structural health, and aircraft motion control systems. The segments products
also include warning and detection systems, 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.

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 |         | Six Months Ended
|                                              |                    |                        |       | June 30,           |         | June 30,        
|                                              |                    |                        |       |                    |         |                 
|                                              |                    |                        |       | 2003               |         | 2002             |       | 2003                  |       | 2002
|                                              |                    |                        |       |                    |         |                  |       |                       |       |     
|                                              |                    |                        |       |                    |         |                  |       | (Dollars in millions) |       |      |       |      
|Net Customer Sales                            |                    |                        |       |                    |         |                  |       |                       |       |      |       |       |         |  |       |      
|                                              | Airframe Systems   |                        | $     | 451.0              |         |                  | $     | 326.5                 |       |      | $     | 905.7 |         |  | $     | 661.1 |        
|                                              | Engine Systems     |                        |       | 384.0              |         |                  |       | 353.2                 |       |      |       | 769.7 |         |  |       | 698.1 |        
|                                              | Electronic Systems |                        |       | 259.5              |         |                  |       | 219.8                 |       |      |       | 513.3 |         |  |       | 436.1 |        
|                                              |                    |                        |       |                    |         |                  |       |                       |       |      |       |       |         |  |       |      
|                                              |                    | Total Sales            |       | $                  | 1,094.5 |                  |       | $                     | 899.5 |      |       | $     | 2,188.7 |  |       | $     | 1,795.3 | 
|                                              |                    |                        |       |                    |         |                  |       |                       |       |      |       |       |         |  |       |       |        
|Segment Operating Income                      |                    |                        |       |                    |         |                  |       |                       |       |      |       |       |         |  |       |      
|                                              | Airframe Systems   |                        | $     | 20.9               |         |                  | $     | 19.9                  |       |      | $     | 43.7  |         |  | $     | 52.3  |        
|                                              | Engine Systems     |                        |       | 27.8               |         |                  |       | 53.5                  |       |      |       | (8.1  | )       |  |       | 110.4 |        
|                                              | Electronic Systems |                        |       | 32.0               |         |                  |       | 35.7                  |       |      |       | 63.9  |         |  |       | 65.9  |        
|                                              |                    |                        |       |                    |         |                  |       |                       |       |      |       |       |         |  |       |      
|                                              |                    |                        | 80.7  |                    |         |                  | 109.1 |                       |       |      | 99.5  |       |         |  | 228.6 |      
|Corporate General and Administrative Expenses |                    |                        | (14.6 | )                  |         |                  | (15.5 | )                     |       |      | (30.5 | )     |         |  | (31.1 | )    
|                                              |                    |                        |       |                    |         |                  |       |                       |       |      |       |       |         |  |       |      
|                                              |                    | Total Operating Income |       | $                  | 66.1    |                  |       | $                     | 93.6  |      |       | $     | 69.0    |  |       | $     | 197.5   | 
|                                              |                    |                        |       |                    |         |                  |       |                       |       |      |       |       |         |  |       |       |        

7



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##### 



Intersegment
sales have been eliminated in our segment disclosures. Intersegment sales for the Airframe Systems segment were $16.4 million and
$34.6 million for the second quarter 2003 and six months ended June 30, 2003,
respectively. Intersegment sales for the Engine Systems segment were $26.8
million and $48.9 million for the second quarter 2003 and the six months ended
June 30, 2003, respectively. Intersegment sales for the Electronic Systems
segment were $24.9 million and $48.6 million for the second quarter 2003 and
six months ended June 30, 2003, respectively.

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

|       |                                   |              |   |          |         |              |   |         |         | 
|------ | --------------------------------- | ------------ | - | -------- | ------- | ------------ | - | ------- | ------- | 
|       |                                   |              |   | June 30, |         | December 31,
|       |                                   |              |   | 2003     |         | 2002        
|       |                                   |              |   |          |         |             
|Assets |                                   |              |   |          |         |              |   |        
|       | Airframe Systems                  |              | $ | 1,704.2  |         |              | $ | 1,678.8 |        
|       | Engine Systems                    |              |   | 1,918.6  |         |              |   | 1,953.8 |        
|       | Electronic Systems                |              |   | 1,405.9  |         |              |   | 1,502.9 |        
|       | Assets of Discontinued Operations |              |   |         |         |              |   | 46.5    |        
|       | Corporate                         |              |   | 760.0    |         |              |   | 816.3   |        
|       |                                   |              |   |          |         |              |   |        
|       |                                   | Total Assets |   | $        | 5,788.7 |              |   | $       | 5,998.3 | 
|       |                                   |              |   |          |         |              |   |         |        

Note E: Earnings Per Share

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

|                                                                                        |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |       |     | 
|--------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ---- | ------------ | --- | ---------- | ---- | ----- | --- | - | ----- | ----- | --- | - | ----- | ----- | --- | 
|                                                                                        |                                                                                                       |                                                                                              |      | Three Months |     | Six Months
|                                                                                        |                                                                                                       |                                                                                              |      | Ended        |     | Ended     
|                                                                                        |                                                                                                       |                                                                                              |      | June 30,     |     | June 30,  
|                                                                                        |                                                                                                       |                                                                                              |      |              |     |           
|(In millions, except per share amounts)                                                 |                                                                                                       | 2003                                                                                         |      | 2002         |     | 2003       |      | 2002 
|                                                                                        |                                                                                                       |                                                                                              |      |              |     |            |      |      
|Numerator:                                                                              |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      
|Numerator for basic earnings per share  income (loss)
available to common shareholders |                                                                                                       | $                                                                                            | 14.7 |              |     | $          | 58.0 |       |     | $ | (18.1 | )     |     | $ | 107.4 |      
|Denominator:                                                                            |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      
|                                                                                        | Denominator for basic earnings per share  weighted-average
shares                                    |                                                                                              |      | 117.4        |     |            |      | 102.0 |     |   |       | 117.3 |     |   |       | 101.9 |    
|                                                                                        |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      
|                                                                                        | Effect of dilutive securities:                                                                        |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |       |    
|                                                                                        |                                                                                                       | Stock options, performance shares, restricted shares and
employee stock purchase plan shares |      |              | 0.6 |            |      |       | 1.1 |   |       |       | 0.3 |   |       |       | 0.9 | 
|                                                                                        |                                                                                                       | Convertible preferred securities                                                             |      |              |    |            |      |       | 1.9 |   |       |       |    |   |       |       | 2.4 | 
|                                                                                        |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      
|                                                                                        | Dilutive potential common shares                                                                      |                                                                                              |      | 0.6          |     |            |      | 3.0   |     |   |       | 0.3   |     |   |       | 3.3   |    
|                                                                                        |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      
|                                                                                        | Denominator for diluted earnings per share  adjusted
weighted-average shares and assumed conversions |                                                                                              |      | 118.0        |     |            |      | 105.0 |     |   |       | 117.6 |     |   |       | 105.2 |    
|                                                                                        |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      
|Earnings (loss) per share:                                                              |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      
|                                                                                        | Basic                                                                                                 |                                                                                              | $    | 0.13         |     |            | $    | 0.57  |     |   | $     | (0.15 | )   |   | $     | 1.05  |    
|                                                                                        |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      
|                                                                                        | Diluted                                                                                               |                                                                                              | $    | 0.12         |     |            | $    | 0.55  |     |   | $     | (0.15 | )   |   | $     | 1.02  |    
|                                                                                        |                                                                                                       |                                                                                              |      |              |     |            |      |       |     |   |       |       |     |   |       |      

8



---



##### 



Note F: Comprehensive Income

Total comprehensive income consists of the following:

|                             |                                                  |   |                       |      |            |   |      |      |      |   |       |      |  |   |      |      | 
|---------------------------- | ------------------------------------------------ | - | --------------------- | ---- | ---------- | - | ---- | ---- | ---- | - | ----- | ---- |  | - | ---- | ---- | 
|                             |                                                  |   | Three Months          |      | Six Months
|                             |                                                  |   | Ended                 |      | Ended     
|                             |                                                  |   | June 30,              |      | June 30,  
|                             |                                                  |   |                       |      |           
|                             |                                                  |   | 2003                  |      | 2002       |   | 2003 |      | 2002
|                             |                                                  |   |                       |      |            |   |      |      |     
|                             |                                                  |   | (Dollars in millions)
|Net Income                   |                                                  | $ | 14.4                  |      |            | $ | 45.9 |      |      | $ | 43.8  |      |  | $ | 60.2 |     
|Other Comprehensive Income  |                                                 
|                             | Unrealized translation adjustments during period |   |                       | 47.1 |            |   |      | 24.3 |      |   |       | 44.9 |  |   |      | 23.5 | 
|                             | Gain on cash flow hedge                          |   |                       | 22.5 |            |   |      | 3.7  |      |   |       | 19.8 |  |   |      | 3.5  | 
|                             | Gain on certain investments                      |   |                       | 0.3  |            |   |      |     |      |   |       | 0.3  |  |   |      |     | 
|                             |                                                  |   |                       |      |            |   |      |      |      |   |       |      |  |   |      |     
|Total Comprehensive Income   |                                                  | $ | 84.3                  |      |            | $ | 73.9 |      |      | $ | 108.8 |      |  | $ | 87.2 |     
|                             |                                                  |   |                       |      |            |   |      |      |      |   |       |      |  |   |      |     

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

|                                              |  |          |        |              |  |   |        |  
|--------------------------------------------- |  | -------- | ------ | ------------ |  | - | ------ | -
|                                              |  | June 30, |        | December 31,
|                                              |  | 2003     |        | 2002        
|                                              |  |          |        |             
|Cumulative unrealized translation adjustments |  | $        | 36.9   |              |  | $ | (8.0   | )
|Minimum pension liability adjustment          |  |          | (380.5 | )            |  |   | (380.5 | )
|Accumulated gain on cash flow hedges          |  |          | 39.2   |              |  |   | 19.4   |  
|Unrealized gain on certain investments        |  |          | 0.3    |              |  |   |       |  
|                                              |  |          |        |              |  |   |        |  
|                                              |  | $        | (304.1 | )            |  | $ | (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 $17.6 million and $9.6 million at June 30, 2003 and December
31, 2002, respectively.

Note G: Restructuring and Consolidation Costs

For the six months ended June 30, 2003, the Company recorded restructuring
and consolidation charges totaling $37.8 million. The charges were recorded
across the Companys segments as follows:

|                   |  |                       |      | 
|------------------ |  | --------------------- | ---- | 
|                   |  | Six Months Ended     
|                   |  | June 30, 2003        
|                   |  |                      
|                   |  | (Dollars in millions)
|Airframe Systems   |  | $                     | 6.4  | 
|Engine Systems     |  |                       | 27.4 | 
|Electronic Systems |  |                       | 4.0  | 
|                   |  |                       |      | 
|                   |  | $                     | 37.8 | 
|                   |  |                       |      | 

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

|                                 |  |                       |      |           |  |          |      |         |  |      |       |             |  |          |      |         |  |   |      | 
|-------------------------------- |  | --------------------- | ---- | --------- |  | -------- | ---- | ------- |  | ---- | ----- | ----------- |  | -------- | ---- | ------- |  | - | ---- | 
|                                 |  | (Dollars in millions)
|                                 |  | Balance               |      |           |  |          |      |         |  |      |       |             |  |          |      | Balance
|                                 |  | December 31,          |      |           |  |          |      |         |  |      |       | Acquisition |  | June 30,
|                                 |  | 2002                  |      | Provision |  | Activity |      | Related |  | 2003
|                                 |  |                       |      |           |  |          |      |         |  |     
|Personnel-related costs          |  | $                     | 17.6 |           |  | $        | 6.4  |         |  | $    | (16.3 | )           |  | $        | 13.1 |         |  | $ | 20.8 | 
|Facility
closure and other costs |  |                       | 5.7  |           |  |          | 31.4 |         |  |      | (30.8 | )           |  |          | 5.3  |         |  |   | 11.6 | 
|                                 |  |                       |      |           |  |          |      |         |  |      |       |             |  |          |      |         |  |   |      | 
|                                 |  | $                     | 23.3 |           |  | $        | 37.8 |         |  | $    | (47.1 | )           |  | $        | 18.4 |         |  | $ | 32.4 | 
|                                 |  |                       |      |           |  |          |      |         |  |      |       |             |  |          |      |         |  |   |      | 

9



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##### 



The following is a description of key components of the $37.8 million
provision for restructuring and consolidation costs in the first six months of
2003:

Airframe Systems:The segment recorded $6.4 million in restructuring and
consolidation costs, consisting of $2.8 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 $2.6 million in non-cash asset impairment charges
and $1.8 million for environmental remediation for a surplus building, offset
by a reserve reversal of $0.8 million due to a revision of estimated
facility closure and other costs.

Engine Systems:The segment recorded $27.4 million in restructuring and
consolidation costs, consisting of $0.4 million in personnel-related costs net
of a reversal of $1.9 million for a revision of the estimated employee
severance costs and $27.0 million in facility closure and other costs.

The personnel-related charges are for employee severance and benefits.
Facility closure and other costs include $25.7 million in non-cash asset impairment charges
and facility closure costs of $1.3 million for machinery and equipment
relocation and other facility closure costs.

Electronic Systems:The segment recorded $4.0 million in restructuring and
consolidation costs, consisting of $3.2 million in personnel-related costs and
$0.8 million in facility closure and other costs.

The personnel-related charges are for employee severance and benefits.
Facility closure and other costs included $0.2 million in non-cash accelerated depreciation
and $0.6 million in equipment relocation and other facility closure costs.

During the six months ended June 30, 2003, approximately 1,000 employees
were terminated as part of the restructuring activities described above. As of
June 30, 2003, the Company expects to further reduce employment levels by
approximately 1,000 people.

Restructuring and Consolidation Costs  Activity

Of the $47.1 million decrease in reserves, $21.3 million represented cash
payments and $25.8 million represented non-cash reserve reductions.

Restructuring and Consolidation Costs  Acquisition Related

The $18.4 million increase in restructuring reserves in the acquisition
related column relates to reserves the Company recorded in the opening balance
sheet for the Aeronautical Systems acquisition as part of its integration
effort.

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 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 due to the conflict in Iraq and SARS made available more aircraft that
compete with or are newer than these 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 in the first quarter of 2003. Also in the first quarter, the Company
wrote off $0.4 million of related trade receivables and $46.1 million of notes
receivable.

10



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##### 



At June 30, 2003, the Companys remaining notes receivable of $8.3 million
represents the present value of expected future cash flows related to the
receivables. The total carrying value of inventory and other assets related to
the Super 27 business was $18.5 million on June 30, 2003 and represents the
Companys assessment of its 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 six months ended
June 30, 2003, by segment are as follows:

|                   |  |              |         |              |  |                       |      |             |  |          |       |          |  |   |       |   |  |   |         | 
|------------------ |  | ------------ | ------- | ------------ |  | --------------------- | ---- | ----------- |  | -------- | ----- | -------- |  | - | ----- | - |  | - | ------- | 
|                   |  |              |         |              |  | Business              |      |             |  |          |       |          |  |   |       |   |  |  
|                   |  | Balance      |         | Combinations |  |                       |      |             |  | Foreign  |       | Balance 
|                   |  | December 31, |         | Completed    |  |                       |      |             |  | Currency |       | June 30,
|                   |  | 2002         |         | or Finalized |  | Other                 |      | Translation |  | 2003    
|                   |  |              |         |              |  |                       |      |             |  |         
|                   |  |              |         |              |  | (Dollars in millions) |      |             |  |         
|Airframe Systems   |  | $            | 185.1   |              |  | $                     | 6.9  |             |  | $        |      |          |  | $ | 6.5   |   |  | $ | 198.5   | 
|Engine Systems     |  |              | 406.6   |              |  |                       | 10.5 |             |  |          |      |          |  |   | 9.0   |   |  |   | 426.1   | 
|Electronic Systems |  |              | 602.5   |              |  |                       | 26.0 |             |  |          | (46.3 | )        |  |   | (21.2 | ) |  |   | 561.0   | 
|                   |  |              |         |              |  |                       |      |             |  |          |       |          |  |   |       |   |  |   |         | 
|                   |  | $            | 1,194.2 |              |  | $                     | 43.4 |             |  | $        | (46.3 | )        |  | $ | (5.7  | ) |  | $ | 1,185.6 | 
|                   |  |              |         |              |  |                       |      |             |  |          |       |          |  |   |       |   |  |   |         | 

Of the $43.4 million increase to goodwill as a result of business
combinations completed or finalized, $42.4 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 $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.

The allocation of the purchase price for the Aeronautical Systems
acquisition has been performed based on the assignment of fair values to assets
acquired and liabilities assumed. Certain aspects of the purchase price
allocation are based on preliminary estimates and are subject to change. Items
that may affect the ultimate purchase price allocation include revisions to
pension valuations, finalization of restructuring plans that qualify for
accrual in the opening balance sheet and other information that provides a
better estimate of the fair value of assets acquired and liabilities assumed.

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

|                               |                                  |   |                       |       |              |   |      |      | 
|------------------------------ | -------------------------------- | - | --------------------- | ----- | ------------ | - | ---- | ---- | 
|                               |                                  |   | GROSS                 |       | ACCUMULATED 
|                               |                                  |   | AMOUNT                |       | AMORTIZATION
|                               |                                  |   |                       |       |             
|                               |                                  |   | (Dollars in millions)
|Amortizable intangible assets: |                                  |   |                       |       |              |   |      |     
|                               | Patents, trademarks and licenses |   | $                     | 158.1 |              |   | $    | 43.9 | 
|                               | Customer relationships           |   |                       | 273.6 |              |   |      | 9.4  | 
|                               | Technology                       |   |                       | 88.9  |              |   |      | 0.6  | 
|                               | Non-compete agreements           |   |                       | 6.6   |              |   |      | 4.7  | 
|                               | Sourcing contracts               |   |                       | 5.8   |              |   |      | 1.4  | 
|                               |                                  |   |                       |       |              |   |      |     
|                               |                                  | $ | 533.0                 |       |              | $ | 60.0 |     
|                               |                                  |   |                       |       |              |   |      |      | 

Amortization of intangible assets for the six months ended June 30, 2003
was $9.6 million. Amortization expense of these intangible assets for 2004 to
2008 is estimated to be approximately $23 million to $25 million per year.
There were no indefinite lived identifiable intangible assets as of June 30,
2003.

11



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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 |      | Six Months
|                                                                              |                                           |      | Ended        |      | Ended     
|                                                                              |                                           |      | June 30,     |      | June 30,  
|                                                                              |                                           |      |              |      |           
|(Dollars in millions)                                                         |                                           | 2003 |              | 2002 |            | 2003 |       | 2002 
|                                                                              |                                           |      |              |      |            |      |       |      
|Sales:                                                                        |                                           |      |              |      |            |      |       |       |   |   |      |      |   |   |       |      
|                                                                              | Avionics and Passenger Restraints Systems |      | $            |     |            |      | $     | 26.0  |   |   | $    | 24.3 |   |   | $     | 51.4  |  
|                                                                              | Engineered Industrial Products            |      |              |     |            |      |       | 122.6 |   |   |      |     |   |   |       | 289.5 |  
|                                                                              |                                           |      |              |      |            |      |       |       |   |   |      |      |   |   |       |       |  
|                                                                              |                                           | $    |             |      |            | $    | 122.6 |       |   | $ | 24.3 |      |   | $ | 289.5 |      
|                                                                              |                                           |      |              |      |            |      |       |       |   |   |      |      |   |   |       |       |  
|Pretax income (loss) from operations:                                         |                                           |      |              |      |            |      |       |       |   |   |      |      |   |   |       |      
|                                                                              | Avionics and Passenger Restraints Systems |      | $            |     |            |      | $     | 0.9   |   |   | $    | (0.9 | ) |   | $     | 1.1   |  
|                                                                              | Engineered Industrial Products            |      |              |     |            |      |       | (18.2 | ) |   |      |     |   |   |       | (13.5 | )
|                                                                              |                                           |      |              |      |            |      |       |       |   |   |      |      |   |   |       |       |  
|                                                                              |                                           |      |             |      |            |      | (17.3 | )     |   |   | (0.9 | )    |   |   | (12.4 | )    
|Income tax (expense) benefit                                                  |                                           |      |             |      |            |      | 6.5   |       |   |   | 0.3  |      |   |   | 4.6   |      
|Distributions on Trust preferred securities                                   |                                           |      |             |      |            |      | (1.3  | )     |   |   |     |      |   |   | (3.3  | )    
|Gain on sale of Avionics (net of income tax expense
of $39.1 million in 2003) |                                           |      | (0.3         | )    |            |      |      |       |   |   | 63.0 |      |   |   |      |      
|                                                                              |                                           |      |              |      |            |      |       |       |   |   |      |      |   |   |       |       |  
|Income (loss) from discontinued operations                                    |                                           | $    | (0.3         | )    |            | $    | (12.1 | )     |   | $ | 62.4 |      |   | $ | (11.1 | )    
|                                                                              |                                           |      |              |      |            |      |       |       |   |   |      |      |   |   |       |       |  

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., 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.

12



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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 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.

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 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. 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 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 was non-deductible for tax
purposes.

Note L: Financing Arrangements

Credit Facilities

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
and a portion of the proceeds from the sale of its Avionics business.

13



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As of June 30, 2003, the Company had in place $750 million in committed
global syndicated revolving credit facilities with a group of international
banks. These facilities consist of a $425 million three-year agreement expiring
in December 2004 and a $325 million 364-day agreement expiring in September
2003. At June 30, 2003, there were no borrowings under these facilities. At
December 31, 2002, $155 million was borrowed under these facilities. During the
first quarter of 2003, all amounts borrowed 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. In view
of the Companys reduced borrowing needs, the Company plans to replace these
facilities with a smaller committed multi-year global syndicated revolving
credit facility in the third quarter 2003.

The Company also maintains $100 million of uncommitted domestic money
market facilities and $23.9 million of uncommitted foreign working capital
facilities with various banks to meet short-term borrowing requirements. As of
June 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 facilities and with various cash management, trust and other services.

Continued borrowing under the Companys credit facilities is conditioned
upon compliance with financial and other covenants set forth in the related
agreements. The Company is currently in compliance with all such covenants. 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 syndicated revolving credit facilities. 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 credit facilities, and is not expected to impact the Companys
ability to enter into a new syndicated revolving credit facility as described
above.

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 June 30, 2003.
At June 30, 2003, $56.2 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
$151.3 million at June 30, 2003.

Sale of Receivables

At June 30, 2003, the Company had in place a trade receivables
securitization program pursuant to which it could sell receivables up to a
maximum of $140 million. Accounts receivable sold under this program were $95.2
million at June 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 the Companys
revolving credit facilities to satisfy any termination requirements.

14



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##### 



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 June 30, 2003 was $640 million. The fair value of the
forward contracts at June 30, 2003 was an asset of $53.4 million, of which
$19.8 million is recorded in Prepaid Expenses and Other Assets and $33.6
million is recorded in Other Assets. The total gross gain of $56.8 million,
including terminated forward contracts as discussed below (before deferred
taxes of $17.6 million), recorded in accumulated other comprehensive income
will be reflected in income and sales as the individual contracts mature, which
will offset the earnings effect of the hedged item. As of June 30, 2003, the
portion of the $56.8 million gain that would be reclassified into earnings as
an increase to sales, to offset the hedged item, in the next 12 months is a
gain of $22.9 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
June 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.

Note O: Guarantees

The Company extends financial and product performance guarantees to third
parties. As of June 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 |           | $         | 23.8      | 
|Financial Guarantees:                              |                                           |          |           |           |           |  |   |  
|                                                   | TIDES (Note P)                            |          | $         | 150.0     |           |  | $ |  | 
|                                                   | Debt and lease payments (Note P)          |          | $         | 4.0       |           |  | $ |  | 
|                                                   | Residual values on leases (Note M)        |          | $         | 55.2      |           |  | $ |  | 
|                                                   | 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.

15



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##### 



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

|                             |                                        |   |      |       |  
|---------------------------- | -------------------------------------- | - | ---- | ----- | -
|(Dollars in millions)        |                                        |   |      |      
|                             |                                        |   |      |      
|Balance at December 31, 2002 |                                        | $ | 67.9 |      
|                             | Service and product warranty provision |   |      | 17.6  |  
|                             | Foreign currency translation           |   |      | 0.3   |  
|                             | Payments                               |   |      | (22.6 | )
|                             |                                        |   |      |      
|Balance at June 30, 2003     |                                        | $ | 63.2 |      
|                             |                                        |   |      |      

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.

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.

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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 June 30, 2003, the Companys liabilities for environmental remediation
obligations totaled $91.0 million, of which $14.9 million was included in
current liabilities as Accrued Liabilities. Of the $91.0 million, $22.3 million
was associated with ongoing operations and $68.7 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.

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 fibres 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.

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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.

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 June 30, 2003, the
Company has an outstanding contingent liability for guarantees of debt and
lease payments of $4.0 million, letters of credit of $45.6 million, residual
value of leases of $55.2 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.

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Certain Contract and Investment

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 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 due to 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. Based
on an independent appraisal and the Companys assessment of then current market
conditions, the Company wrote down in the first quarter of 2003, the carrying
value of its inventory to equal the estimated market value of $12.2 million.
Also, in the first quarter 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 June 30, 2003, the Companys remaining notes receivable of $8.3
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 $18.5 million on June 30, 2003 and
represents the Companys assessment of its 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.

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, the Company made a $113.7 million payment to the IRS for an
income tax assessment and the related accrued interest. The Company is
currently pursuing its judicial remedies for a refund of this payment. A
reasonable estimation of the Companys potential refund cannot be made at this
time, accordingly, no receivable has been recorded.

Also in 2000, the Internal Revenue Service issued a statutory notice of
deficiency asserting that Rohr, Inc., the Companys subsidiary, was liable for
$85.3 million of additional income taxes. In 2001, Rohr filed a petition in the
US Tax Court opposing the proposed assessment.

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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
entries 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. The Company is currently assessing the effect of
Interpretation No. 46, including the potential consolidation of the Companys
tax advantaged operating leases.

During April 2003, 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.
The Company is currently assessing the effect of Statement 149, but does not
expect the Statement to have a material effect on its 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 is effective at the beginning of the first interim period
beginning after June 15, 2003. The Company is currently assessing the effect of
Statement 150, but does not expect the Statement to have a material effect on
its consolidated financial condition or results of operations.

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Item 2. Managements Discussion and Analysis of Financial Position 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, transmission and
structural health, and aircraft motion control systems. The segments products
also include warning and detection systems, 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., 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

Our expectations for full year 2003 diluted earnings per share (EPS) are
unchanged from the outlook that we provided at the end of the first quarter
2003. We expect diluted EPS for 2003 of $0.80 to $0.95, including $0.52 from
discontinued operations and the cumulative effect of an accounting change. This
outlook is based on our assessment of the current market environment and the
impact of asset impairment charges and facility closure and headcount reduction
actions. We increased our sales expectations slightly, and now expect sales of
approximately $4.3 billion to $4.4 billion in 2003.

We have increased our outlook for cash flow from operations for 2003. We
now expect cash flow from operations to exceed $375 million, including
estimated cash payments for facility closures and headcount reductions of $55
to $65 million. We expect capital expenditures in 2003 to be somewhat lower
than previous estimates, at $130 to $150 million.

Our 2003 outlook is based on the following assumptions. 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 550 to 575 in 2003. Our sales are expected to decline
less than deliveries due to our significant content on Airbus aircraft.                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Large commercial jet aftermarket sales to airlines are expected to
decrease about 5 to 10 percent in 2003.                                                                                                                                                                          
|
| |  |  | 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 up, when compared
to 2002.
|
| |  |  | Military sales (OE and aftermarket) are expected to increase
roughly in line with global military budgets, about 10 percent.                                                                                                                                                        

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Results of Operations

Total Company

Second Quarter of 2003 Compared With Second Quarter of 2002

|                                           |                        |   |                       |      |      |   |       |      | 
|------------------------------------------ | ---------------------- | - | --------------------- | ---- | ---- | - | ----- | ---- | 
|                                           |                        |   | Three Months Ended   
|                                           |                        |   | June 30,             
|                                           |                        |   |                      
|                                           |                        |   | 2003                  |      | 2002
|                                           |                        |   |                       |      |     
|                                           |                        |   | (Dollars in millions)
|Sales                                      |                        | $ | 1,094.5               |      |      | $ | 899.5 |     
|                                           |                        |   |                       |      |      |   |       |     
|Segment Operating Income                   |                        |   | 80.7                  |      |      |   | 109.1 |     
|Corporate General and Administrative Costs |                        |   | (14.6                 | )    |      |   | (15.5 | )   
|                                           |                        |   |                       |      |      |   |       |     
|                                           | Total Operating Income |   |                       | 66.1 |      |   |       | 93.6 | 
|Net Interest Expense                       |                        |   | (37.7                 | )    |      |   | (10.0 | )   
|Other Income (Expense)  net               |                        |   | (2.5                  | )    |      |   | 6.9   |     
|Income Tax (Expense) Benefit               |                        |   | (8.6                  | )    |      |   | (29.9 | )   
|Distribution on Trust Preferred Securities |                        |   | (2.6                  | )    |      |   | (2.6  | )   
|                                           |                        |   |                       |      |      |   |       |     
|Income from Continuing Operations          |                        |   | 14.7                  |      |      |   | 58.0  |     
|Income (Loss) from Discontinued Operations |                        |   | (0.3                  | )    |      |   | (12.1 | )   
|                                           | Net Income             |   | $                     | 14.4 |      |   | $     | 45.9 | 
|                                           |                        |   |                       |      |      |   |       |     

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

Corporate general and administrative costs of $14.6 million for the second
quarter 2003 were lower than the $15.5 million for the second quarter 2002.
Corporate general and administrative costs as a percentage of sales improved to
1.3 percent in the second quarter 2003 from 1.7 percent in the second quarter
2002. The improvement resulted from the acquisition of Aeronautical Systems
with minimal increase in corporate general and administrative costs and lower
incentive compensation.

Interest expense  net increased $27.7 million primarily due to interest
of $14.6 million on the long-term debt of $800 million issued in the fourth
quarter of 2002 to partially finance the acquisition of Aeronautical Systems.
Interest expense-net also increased by $12.5 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 decreased to a loss of $2.5 million for the
second quarter of 2003 from a gain of $6.9 million for the second quarter of
2002. Included in the second quarter 2002 was an $11.8 million gain on the
sale of intangible assets and a $2.4 million gain from the sale of a portion of
an investment in a subsidiary. Equity earnings of affiliated companies was $1.8
million higher in the second quarter 2003 as compared to the second quarter of
2002. Certain employee benefit costs were $2.0 million lower in the second
quarter 2003 as compared to the second quarter of 2002.

Our estimated effective tax rate from continuing operations during the
second quarter 2003 and 2002 was 33.0 percent for each period.

Income from discontinued operations, after tax, was a loss of $0.3 million
during the second quarter of 2003 representing an adjustment to the gain on the
sale of the Avionics business that was completed in the first quarter of 2003.
Our Passenger Restraint Systems business ceased operations in the first quarter
of 2003. Income from discontinued operations for the Avionics and Passenger
Restraint Systems operating results was income of $0.6 million in the second
quarter 2002. Also included in income from discontinued operations was a loss
of $12.7 million in the second quarter 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.

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

|                                           |                        |   |                       |      |      |   |         |       | 
|------------------------------------------ | ---------------------- | - | --------------------- | ---- | ---- | - | ------- | ----- | 
|                                           |                        |   | Six Months Ended     
|                                           |                        |   | June 30,             
|                                           |                        |   |                      
|                                           |                        |   | 2003                  |      | 2002
|                                           |                        |   |                       |      |     
|                                           |                        |   | (Dollars in millions)
|Sales                                      |                        | $ | 2,188.7               |      |      | $ | 1,795.3 |      
|                                           |                        |   |                       |      |      |   |         |      
|Segment Operating Income                   |                        |   | 99.5                  |      |      |   | 228.6   |      
|Corporate General and Administrative Costs |                        |   | (30.5                 | )    |      |   | (31.1   | )    
|                                           |                        |   |                       |      |      |   |         |      
|                                           | Total Operating Income |   |                       | 69.0 |      |   |         | 197.5 | 
|Net Interest Expense                       |                        |   | (73.1                 | )    |      |   | (27.0   | )    
|Other Income (Expense)  net               |                        |   | (15.1                 | )    |      |   | (2.4    | )    
|Income Tax (Expense) Benefit               |                        |   | 6.3                   |      |      |   | (55.5   | )    
|Distribution on Trust Preferred Securities |                        |   | (5.2                  | )    |      |   | (5.2    | )    
|                                           |                        |   |                       |      |      |   |         |      
|Income (Loss) from Continuing Operations   |                        |   | (18.1                 | )    |      |   | 107.4   |      
|Income (Loss) from Discontinued Operations |                        |   | 62.4                  |      |      |   | (11.1   | )    
|Cumulative Effect of an Accounting Change  |                        |   | (0.5                  | )    |      |   | (36.1   | )    
|                                           |                        |   |                       |      |      |   |         |      
|                                           | Net Income             |   | $                     | 43.8 |      |   | $       | 60.2  | 
|                                           |                        |   |                       |      |      |   |         |      

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

Corporate general and administrative costs of $30.5 million for the six
months ended June 30, 2003 were lower than the $31.1 million for the six months
ended June 30, 2002. Corporate general and administrative costs as a percentage
of sales improved to 1.4 percent in the six months ended June 30, 2003 from 1.7
percent in the six months ended June 30, 2002. The improvement resulted from
the acquisition of Aeronautical Systems with minimal increase in corporate
general and administrative costs and lower incentive compensation.

Interest expense  net increased $46.1 million primarily due to interest
of $29.2 million on the long-term debt of $800 million issued in the fourth
quarter of 2002 to partially finance the acquisition of Aeronautical Systems.
Lower interest income of $14.1 million primarily due to the sale of the Noveon
PIK notes in the first quarter of 2003, and increased interest expense-net.

Other income (expense)  net increased by $12.7 million to expense of
$15.1 million in the six months ended June 30, 2003 from expense of $2.4
million in the six months ended June 30, 2002. The increase in expense resulted
from the write-off of our equity investment in Cordiem LLC of $11.7 million 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, offset in part by a gain on the sale of the Noveon
PIK Notes of $6.9 million, higher affiliate income of $3.5 million in 2003,
lower employee benefit costs of $2.3 million in 2003 and a gain on the sale of
real estate of $0.9 million.

Our estimated effective tax rate from continuing operations during the six
months ended June 30, 2003 and 2002 was 33.0 percent for each period.

Income from discontinued operations, after tax, was $62.4 million during
the six months ended June 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 six months ended June 30,
2003 and income of $0.9 million in the six months ended June 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 six months ended June 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.

25



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The cumulative effect of an accounting change, as presented after taxes,
for the six months ended June 30, 2003 of a loss of $0.5 million represents the
adoption of Statement of Financial 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 six months ended June 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 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.

Second Quarter 2003 Compared with Second Quarter 2002

|                         |                          |   |                             |         |      |   |        |       |      |  |       |       |            |  |      |     |  |  |      |      | 
|------------------------ | ------------------------ | - | --------------------------- | ------- | ---- | - | ------ | ----- | ---- |  | ----- | ----- | ---------- |  | ---- | --- |  |  | ---- | ---- | 
|                         |                          |   | Three Months Ended June 30,
|                         |                          |   |                            
|                         |                          |   |                             |         |      |   |        |       |      |  | %     |       | % of Sales
|                         |                          |   |                             |         |      |   |        |       |      |  |       |       |           
|                         |                          |   | 2003                        |         | 2002 |   | Change |       | 2003 |  | 2002 
|                         |                          |   |                             |         |      |   |        |       |      |  |      
|                         |                          |   | (Dollars in millions)      
|NET CUSTOMER SALES       |                         
|Airframe Systems         |                          | $ | 451.0                       |         |      | $ | 326.5  |       |      |  | 38.1  |       |            |  |      |     |  |  |      |     
|Engine Systems           |                          |   | 384.0                       |         |      |   | 353.2  |       |      |  | 8.7   |       |            |  |      |     |  |  |      |     
|Electronics Systems      |                          |   | 259.5                       |         |      |   | 219.8  |       |      |  | 18.1  |       |            |  |      |     |  |  |      |     
|                         |                          |   |                             |         |      |   |        |       |      |  |       |       |            |  |      |     |  |  |      |     
|                         | Total Sales              |   | $                           | 1,094.5 |      |   | $      | 899.5 |      |  |       | 21.7  |            |  |      |     |  |  |      |      | 
|                         |                          |   |                             |         |      |   |        |       |      |  |       |       |            |  |      |     |  |  |      |     
|SEGMENT OPERATING INCOME |                         
|Airframe Systems         |                          | $ | 20.9                        |         |      | $ | 19.9   |       |      |  | 5.0   |       |            |  | 4.6  |     |  |  | 6.1  |     
|Engine Systems           |                          |   | 27.8                        |         |      |   | 53.5   |       |      |  | (48.0 | )     |            |  | 7.2  |     |  |  | 15.1 |     
|Electronic Systems       |                          |   | 32.0                        |         |      |   | 35.7   |       |      |  | (10.4 | )     |            |  | 12.3 |     |  |  | 16.2 |     
|                         |                          |   |                             |         |      |   |        |       |      |  |       |       |            |  |      |     |  |  |      |     
|                         | Segment Operating Income |   | $                           | 80.7    |      |   | $      | 109.1 |      |  |       | (26.0 | )          |  |      | 7.4 |  |  |      | 12.1 | 
|                         |                          |   |                             |         |      |   |        |       |      |  |       |       |            |  |      |     |  |  |      |     

Airframe Systems:Airframe Systems segment sales of $451.0 million in the
second quarter 2003 increased $124.5 million, or 38.1 percent, from $326.5
million in the second quarter 2002. The increase was due to sales associated
with the Aeronautical Systems businesses included in the Airframe Systems
segment, which together, represented about $167 million in sales in the second
quarter of 2003. Excluding these businesses, sales decreased approximately
$42.5 million from the year-ago quarter. The primary reason for the decrease
was lower sales for landing gear original equipment, wheel and brake repair
services and heavy airframe maintenance compared to the year-ago quarter.

Airframe Systems segment operating income increased $1.0 million, or 5.0
percent, from $19.9 million in the second quarter 2002 to $20.9 million in the
second quarter 2003. Asset impairment, facility closure and headcount reduction
charges recorded during the second quarter 2003 were $2.7 million, compared to
$0.7 million in the second quarter 2002. In 2003, these charges primarily
related to facility closure and headcount reduction actions. The increase in
operating income in the second quarter 2003 was attributable to increased sales
for aftermarket wheels and brakes 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. The increase in operating income
was partially offset by decreased sales in heavy airframe maintenance and
engineered polymer products, increased
pension expense and an insurance settlement in the second quarter 2002.
The sales contributed by the Aeronautical Systems businesses resulted in a
slight loss for the second quarter of 2003.

26



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Engine Systems:Engine Systems segment sales in the second quarter 2003 of
$384.0 million increased $30.8 million, or 8.7 percent, from $353.2 million in
the second quarter 2002. The increase was due to sales associated with the
Aeronautical Systems businesses included in the Engine Systems segment, which
together approximated $60 million in sales in the second quarter 2003.
Excluding these businesses, sales decreased approximately $29.2 million from
the year-ago quarter. Slightly lower sales in aerostructures and decreased
sales of industrial gas turbine components at turbomachinery products were the
primary contributors to the decrease.

Engine Systems operating income decreased $25.7 million, or 48 percent,
from $53.5 million in the second quarter 2002 to $27.8 million in the second
quarter 2003. Asset impairment, facility closure and headcount reduction
charges recorded during the second quarter 2003 were $22.5 million, compared to
$10.6 million in the second quarter 2002. In the second quarter 2003, the
majority of these charges were related to an asset impairment for a closed
facility. The book value of this facility has been reduced to reflect its net
realizable value. A significant decrease in operating income from industrial
gas turbine components at turbomachinery products, coupled with a slight
operating income decline at aerostructures and higher pension expense
contributed to the change. The Aeronautical Systems businesses in Engine
Systems contributed a modest amount of operating income during the second
quarter 2003.

Electronic Systems: Sales of the Electronic Systems segment of $259.5
million in the second quarter 2003 increased $39.7 million, or 18.1 percent,
from $219.8 million in the second quarter 2002. The increase was primarily due
to sales associated with the Aeronautical Systems businesses included in the
Electronic Systems segment, which together represented $37 million in sales in
the second quarter 2003. Excluding these businesses, sales in all other
businesses were higher by $2.7 million compared to the year-ago period. Higher
large commercial and military aftermarket sales at sensors and aircraft
evacuation products offset weaknesses in original equipment shipments at most
of the businesses in the segment.

Electronic Systems segment operating income decreased $3.7 million, or
10.4 percent, from $35.7 million in the second quarter 2002 to $32.0 million in
the second quarter 2003. Included in operating income were facility closure and
headcount reduction charges recorded during the second quarter of $3.5 million,
compared to $1.9 million in the second quarter 2002. The Aeronautical Systems
businesses in the Electronic Systems Segment contributed a modest amount to
operating income for the second quarter. Pension expense was also higher in the
second quarter 2003 as compared to the second quarter 2002.

27



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First Six Months of 2003 Compared with First Six Months of 2002

|                                |                                 |   |                           |         |      |   |        |         |      |  |        |       |            |  |      |     |  |  |      |      | 
|------------------------------- | ------------------------------- | - | ------------------------- | ------- | ---- | - | ------ | ------- | ---- |  | ------ | ----- | ---------- |  | ---- | --- |  |  | ---- | ---- | 
|                                |                                 |   | Six Months Ended June 30,
|                                |                                 |   |                          
|                                |                                 |   |                           |         |      |   |        |         |      |  | %      |       | % of Sales
|                                |                                 |   |                           |         |      |   |        |         |      |  |        |       |           
|                                |                                 |   | 2003                      |         | 2002 |   | Change |         | 2003 |  | 2002  
|                                |                                 |   |                           |         |      |   |        |         |      |  |       
|                                |                                 |   | (Dollars in millions)    
|SALES                           |                                
|Airframe Systems                |                                 | $ | 905.7                     |         |      | $ | 661.1  |         |      |  | 37.0   |       |            |  |      |     |  |  |      |     
|Engine Systems                  |                                 |   | 769.7                     |         |      |   | 698.1  |         |      |  | 10.3   |       |            |  |      |     |  |  |      |     
|Electronics Systems             |                                 |   | 513.3                     |         |      |   | 436.1  |         |      |  | 17.7   |       |            |  |      |     |  |  |      |     
|                                |                                 |   |                           |         |      |   |        |         |      |  |        |       |            |  |      |     |  |  |      |     
|                                | Total Sales                     |   | $                         | 2,188.7 |      |   | $      | 1,795.3 |      |  |        | 21.9  |            |  |      |     |  |  |      |      | 
|                                |                                 |   |                           |         |      |   |        |         |      |  |        |       |            |  |      |     |  |  |      |     
|SEGMENT OPERATING INCOME (LOSS) |                                
|Airframe Systems                |                                 | $ | 43.7                      |         |      | $ | 52.3   |         |      |  | (16.4  | )     |            |  | 4.8  |     |  |  | 7.9  |     
|Engine Systems                  |                                 |   | (8.1                      | )       |      |   | 110.4  |         |      |  | (107.3 | )     |            |  | (1.1 | )   |  |  | 15.8 |     
|Electronic Systems              |                                 |   | 63.9                      |         |      |   | 65.9   |         |      |  | (3.0   | )     |            |  | 12.4 |     |  |  | 15.1 |     
|                                |                                 |   |                           |         |      |   |        |         |      |  |        |       |            |  |      |     |  |  |      |     
|                                | Segment Operating Income (Loss) |   | $                         | 99.5    |      |   | $      | 228.6   |      |  |        | (56.5 | )          |  |      | 4.5 |  |  |      | 12.7 | 
|                                |                                 |   |                           |         |      |   |        |         |      |  |        |       |            |  |      |     |  |  |      |     

Airframe Systems:Airframe Systems segment sales of $905.7 million in the
six months ended June 30, 2003 increased $244.6 million, or 37.0 percent, from
$661.1 million in the six months ended June 30, 2002. The increase was due to
sales associated with the Aeronautical Systems businesses included in the
Airframe Systems segment, which together represented about $319.0 million in
sales in the six months ended June 30, 2003. Excluding these businesses, sales
decreased approximately $74.4 million from the year-ago period primarily due to
decreased demand for landing gear original equipment, wheel and brake repair
services and heavy airframe maintenance.

Airframe Systems segment operating income decreased $8.6 million, or 16.4
percent, from $52.3 million in the six months ended June 30, 2002 to $43.7
million in the six months ended June 30, 2003. Asset impairment including
rotable landing gear, facility closure and headcount reduction charges were
$2.8 million in the six months ended June 30, 2002 compared to $12.6 million in
the six months ended June 30, 2003. The decrease in operating income for the
six months ended June 30, 2003 as compared to the six months ended June 30,
2002 was primarily due to decreased sales for landing gear original equipment,
wheel and brake repair services and heavy airframe maintenance, increased
pension expense and a non-recurring insurance settlement in the second quarter
2002. The decrease in operating income was partially offset by increased sales
for aftermarket wheels and brakes 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 six months ended June 30, 2003.

Engine Systems:Engine Systems segment sales in the six months ended June
30, 2003 of $769.7 million increased $71.6 million, or 10.3 percent, from
$698.1 million in the six months ended June 30, 2002. The increase was due to
sales associated with the Aeronautical Systems businesses included in the
Engine Systems segment, which together approximated $122 million in sales in
the six months ended June 30, 2003. Excluding these businesses, sales decreased
approximately $50.4 million from the year-ago period. Lower Aerostructures
aftermarket sales and decline in the demand of industrial gas turbines,
resulting in lower sales of turbomachinery and turbine fuel technology
products, were slightly offset by higher sales of pump and engine controls.

Engine Systems operating income decreased $118.5 million from income of
$110.4 million in the six months ended June 30, 2002 to a loss of $8.1 million
in the six months ended June 30, 2003. Included in the six months ended June
30, 2003 were a write-down 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-Certain Contracts and Investment. Operating income decreased due
to lower sales for the aerostructures and industrial gas turbines businesses,
initial start up 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 contract, an adjustment of margins on an
aerostructures production contract 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 six months ended June 30, 2003 were $3.1 million and
were $13.0 million in the six months ended June 30, 2002.

28



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Electronic Systems: Sales of the Electronic Systems segment of $513.3
million increased $77.2 million, or 17.7 percent, from $436.1 million in the
six months ended June 30, 2002. The increase was primarily due to sales
associated with the Aeronautical Systems businesses included in the Electronic
Systems segment, which together represented $74 million in sales in the six
months ended June 30, 2003. Excluding these businesses, sales were slightly
higher compared to the year-ago period. Slightly higher sales in lighting
systems, fuel and utility systems, primarily due to the HUMS military program,
and de-icing and specialty systems, were almost offset by lower volume of sales
of optical and space systems, sensors and aircraft interior products.

Electronic Systems segment operating income decreased $2.0 million from
$65.9 million in the six months ended June 30, 2002 to $63.9 million in the six
months ended June 30, 2003. Operating income was affected by unfavorable sales
in optical and space systems, new program investments, primarily at power
systems and aircraft interior products, and higher pension expense. Operating
income for the Aeronautical Systems businesses included in the Electronic
Systems segment was breakeven. Restructuring and consolidation costs included
in operating income were $4.0 million and $3.9 million in the six months ended
June 30, 2003 and June 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 June 30, 2003, we had cash and marketable securities of $267.8 million,
as compared to $149.9 million at December 31, 2002.

Credit Facilities

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.

As of June 30, 2003, we had in place a $750 million in committed global
syndicated revolving credit facilities with a group of international banks.
These facilities consist of a $425 million three-year agreement expiring in
December 2004 and a $325 million 364-day agreement expiring in September 2003.
At June 30, 2003, there were no borrowings under these facilities. At December
31, 2002, $155 million was borrowed under these facilities. During the first
quarter of 2003, all amounts borrowed 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. In view of our reduced
borrowing needs, we plan to replace these facilities with a smaller committed
multi-year global syndicated revolving credit facility in the third quarter
2003.

We also maintain $100 million of uncommitted domestic money market
facilities and $23.9 million of uncommitted foreign working capital facilities
with various banks to meet short-term borrowing requirements. As of June 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 facilities and
with various cash management, trust and other services.

29



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Continued borrowing under our credit facilities is conditioned upon
compliance with financial and other covenants set forth in the related
agreements. We are currently in compliance with all such covenants. Our credit
facilities do not contain any credit rating downgrade triggers that would
accelerate the maturity of our indebtedness. However, a further ratings
downgrade would result in an additional increase in the interest rate and fees payable
under our syndicated revolving credit facilities. 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 credit facilities, and
is not expected to impact our ability to enter into a new syndicated revolving
credit facility as described above.

Long Term Financing

At June 30, 2003, we had long-term debt of $2,132.2 million, with
maturities ranging from 2004 to 2046. Current maturities of long-term debt at
June 30, 2003 were $1.6 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.

QUIPS

At June 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.

Off-Balance Sheet Arrangements

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

|                                |  |              |       |             |  |   |      | 
|------------------------------- |  | ------------ | ----- | ----------- |  | - | ---- | 
|                                |  | UNDISCOUNTED |       |             |  |  
|                                |  | MINIMUM      |       |             |  |  
|                                |  | FUTURE LEASE |       | RECEIVABLES
|(IN MILLIONS)                   |  | PAYMENTS     |       | SOLD       
|                                |  |              |       |            
|Tax Advantaged Operating Leases |  | $            | 56.2  |             |  |   |      | 
|Standard Operating Leases       |  |              | 151.3 |             |  |   |      | 
|                                |  |              |       |             |  |   |      | 
|                                |  | $            | 207.5 |             |  |   |      | 
|                                |  |              |       |             |  |   |      | 
|Short-term Receivables          |  |              |       |             |  | $ | 95.2 | 

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 June 30, 2003. At June 30, 2003, $56.2 million of future minimum
lease payments were outstanding under these arrangements. In addition, we also
have various other operating lease agreements in which the lessor claims the
deduction for tax depreciation. Future minimum lease payments under these
agreements approximated $151.3 million at June 30, 2003.

30



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Sale of Receivables

At June 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 $95.2 million at June
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 our revolving 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 June 30, 2003 was $640 million. The fair value of the
forward contracts at June 30, 2003 was an asset of $53.4 million, of which
$19.8 million is recorded in Prepaid Expenses and Other Assets and $33.6
million is recorded in Other Assets. The total gross gain of $56.8 million,
including terminated forward contracts as discussed below (before deferred
taxes of $17.6 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 June 30, 2003, the portion
of the $56.8 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 $22.9 million.

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

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:

|                         |                                               |  |                       |        |      |  |        |        |   |  |   |        |  
|------------------------ | --------------------------------------------- |  | --------------------- | ------ | ---- |  | ------ | ------ | - |  | - | ------ | -
|                         |                                               |  | Six Months Ended,     |        |      |  |       
|                         |                                               |  | June 30,              |        |      |  |       
|                         |                                               |  |                       |        |      |  |       
|                         |                                               |  | 2003                  |        | 2002 |  | Change
|                         |                                               |  |                       |        |      |  |       
|                         |                                               |  | (Dollars in millions)
|Cash provided (used) by: |                                               |  |                       |        |      |  |        |        |   |  |   |       
|                         | Operating activities of continuing operations |  | $                     | 217.6  |      |  | $      | 156.7  |   |  | $ | 60.9   |  
|                         | Investing activities of continuing operations |  | $                     | 139.6  |      |  | $      | (21.1  | ) |  | $ | 160.7  |  
|                         | Financing activities of continuing operations |  | $                     | (427.0 | )    |  | $      | 48.0   |   |  | $ | (475.0 | )
|                         | Discontinued operations                       |  | $                     | 185.0  |      |  | $      | (122.9 | ) |  | $ | 307.9  |  

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Net cash provided by operating activities of continuing operations
increased $60.9 million from $156.7 million during the six months ended June
30, 2002 to $217.6 million during the six months ended June 30, 2003 due to
favorable management of working capital. Cash flow from operating activities
included tax refunds of $55 million in the six months ended June 30, 2003 and
$50 million in the six months ended June 30, 2002. Cash flow from operating
activities was reduced by pension contributions of $27 million in the six
months ended June 30, 2003 and $4 million in the six months ended June 30,
2002.

Net cash provided by investing activities of continuing operations
improved by $160.7 million in the six months ended June 30, 2003 from the six
months ended June 30, 2002 due to proceeds from the sale of the Noveon PIK
Notes of $151.9 million and the receipt of $35.0 million related to the
acquisition of Aeronautical Systems. Capital expenditures were $10.1 million
higher in the six months ended June 30, 2003 as compared to the six months
ended June 30, 2002.

Net cash used by financing activities of continuing operations was $427.0
million in the six months ended June 30, 2003, compared to net cash provided by
financing activities of continuing operations of $48.0 million for the six
months ended June 30, 2002. Short-term debt was repaid during the six months
ended June 30, 2003 using the net cash proceeds from the sale of our Avionics
business of $181 million, cash proceeds from the sale of the Noveon PIK Notes
of $151.9 million and cash provided by operating activities of $217.6 million,
offset in part by dividends of $46.9 million and capital expenditures of $46.7
million.

Net cash provided by discontinued operations of $185.0 million in the six
months ended June 30, 2003 included $181 million net proceeds from the sale of
the Avionics business.

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.

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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 June 30, 2003, our liabilities for environmental remediation
obligations totaled $91.0 million, of which $14.9 million was included in
current liabilities as Accrued Liabilities. Of the $91.0 million, $22.3 million
was associated with ongoing operations and $68.7 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. 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.

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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.

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 June 30, 2003, we have an
outstanding contingent liability for guarantees of debt and lease payments of
$4.0 million, letters of credit of $45.6 million, residual value of leases of
$55.2 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.

Certain Contract and Investment

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.

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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 due to the military conflict in Iraq and SARS made available more
aircraft that compete with or are newer than the 727 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 June 30, 2003, our remaining notes receivable of $8.3 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 $18.5 million at June 30, 2003 and represents our
assessment of its 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, 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, we made a $113.7 million payment to the IRS for an income tax
assessment and the related accrued interest. We are currently pursuing our
judicial remedies for a refund of this payment. A reasonable estimation of our
potential refund cannot be made at this time; accordingly, no receivable has
been recorded.

Also in 2000, the Internal Revenue Service issued a statutory notice of
deficiency asserting that Rohr, Inc., our subsidiary, was liable for $85.3
million of additional income taxes. In 2001, Rohr filed a petition in the US
Tax Court opposing the proposed assessment.

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
entries 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. We are currently assessing the effect of Interpretation
No. 46, including the potential consolidation of our tax advantaged operating
leases.

During April 2003, the Financial Accounting Standards Board (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. We are currently
assessing the effect of Statement 149, but do not expect the Statement to 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 is effective at the beginning of the first interim period
beginning after June 15, 2003. We are currently assessing the effect of
Statement 150, but do not expect the Statement to have a material effect on our
consolidated financial condition or results of operations.

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 also 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. If a change were to be made, it would be made no earlier than January 1, 2004.

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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 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.

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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 the 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.

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 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 programs 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 plans 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.

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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 military conflict in Iraq;                                                                                                                                                                                                                                                                                                     
|
| |  |  | the impact of Severe Acute Respiratory Syndrome (SARS) on global travel;                                                                                                                                                                                                                                                                                                                              
|
| |  |  | 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.

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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, that 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.

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 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 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, the
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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

40



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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 4. Submission of Matters to a Vote of Security Holders.

The 2003 Annual Meeting of Shareholders was held on April 15, 2003 at 10:00
a.m. Eastern time at the Companys headquarters in Charlotte, North Carolina.
As described in the 2003 Proxy Statement, the following actions were taken:



| |  | The thirteen nominees for director were elected.                                            
|- |  | --------------------------------------------------------------------------------------------
| 
| |  | The appointment of Ernst & Young LLP as independent auditors for the year 2003 was ratified.

The votes were as follows:

For Director:

|                        |  |           |             |               |  |  |            | 
|----------------------- |  | --------- | ----------- | ------------- |  |  | ---------- | 
|                        |  | Number of |             | Number of    
|                        |  | Shares    |             | Shares       
|                        |  | Voted For |             | Vote Withheld
|                        |  |           |             |              
|David L. Burner         |  |           | 98,709,280  |               |  |  | 5,182,297  | 
|Diane C. Creel          |  |           | 96,513,938  |               |  |  | 7,377,639  | 
|George A. Davidson, Jr. |  |           | 96,545,918  |               |  |  | 7,345,659  | 
|Harris E. DeLoach, Jr.  |  |           | 96,481,216  |               |  |  | 7,410,361  | 
|James J. Glasser        |  |           | 96,364,287  |               |  |  | 7,527,290  | 
|James W. Griffith       |  |           | 96,458,994  |               |  |  | 7,432,583  | 
|William R. Holland      |  |           | 75,242,933  |               |  |  | 28,648,644 | 
|Marshall O. Larsen      |  |           | 100,310,667 |               |  |  | 3,580,910  | 
|Douglas E. Olesen       |  |           | 96,460,749  |               |  |  | 7,430,828  | 
|Richard de J. Osborne   |  |           | 96,428,470  |               |  |  | 7,463,107  | 
|Alfred M. Rankin, Jr.   |  |           | 96,468,428  |               |  |  | 7,423,149  | 
|James R. Wilson         |  |           | 96,452,334  |               |  |  | 7,439,243  | 
|A. Thomas Young         |  |           | 96,439,327  |               |  |  | 7,452,250  | 

For ratification of independent auditors:



|96,487,593 shares voted for; 6,569,285 shares voted against; and 834,699 shares
abstained from voting.
|------------------------------------------------------------------------------------------------------

41



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##### 



Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits.
| | --- |  | ---------

|             |  |                                                                                                                                                                                                                         
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 3.1  |  | Restated Certificate of Incorporation of Goodrich
Corporation, as amended, filed as Exhibit 4(A) to Goodrich
Corporations Registration Statement on Form S-3 (File No.
333-98165), is incorporated herein by reference.
|             |  |                                                                                                                                                                                                                         
|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 |  | 2003  2005 Long-Term Incentive Plan Description and form of
award agreement                                                                                                                                            
|             |  |                                                                                                                                                                                                                         
|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.                                                                                                                                                            
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Current Report on Form 8-K furnished April 28, 2003 (relating to the
announcement of the Companys earnings for the three months ended March 31,
2003 and its outlook for 2003).
|   
|    |  | Current Report on Form 8-K furnished June 3, 2003 (relating to the posting of
a written presentation on the Companys website).                                                 

42



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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.

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

43



---



##### 



EXHIBIT INDEX

|             |  |                                                                                                                                                                                                                         
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 3.1  |  | Restated Certificate of Incorporation of Goodrich
Corporation, as amended, filed as Exhibit 4(A) to Goodrich
Corporations Registration Statement on Form S-3 (File No.
333-98165), is incorporated herein by reference.
|             |  |                                                                                                                                                                                                                         
|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 |  | 2003  2005 Long-Term Incentive Plan Description and form of
award agreement.                                                                                                                                           
|             |  |                                                                                                                                                                                                                         
|Exhibit 15   |  | Letter Re: Unaudited Interim Financial Information                                                                                                                                                                      
|             |  |                                                                                                                                                                                                                         
|Exhibit 31   |  | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                                                                                                
|             |  |                                                                                                                                                                                                                         
|Exhibit 32   |  | Section 1350 Certifications.                                                                                                                                                                                            

44