##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-892
 
 GOODRICH CORPORATION
 (Exact name of registrant as specified in its charter)
 New York(State of Incorporation)Four Coliseum Centre 
2730 West Tyvola Road 
Charlotte, North Carolina(Address of Principal Executive Offices)
    
    34-0252680(I.R.S. Employer Identification No.)28217(Zip Code)
 Registrants telephone number, including area code: (704) 423-7000
 þ o
  þ o o
 o þ




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONItem 1. Financial Statements.Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 3. Quantitative and Qualitative Disclosures About Market Risk.Item 4. Controls and Procedures.PART II. OTHER INFORMATIONItem 1. Legal Proceedings.Item 1A. Risk Factors.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Item 4. Submission of Matters to a Vote of Security HoldersItem 6. Exhibits.SIGNATUREEXHIBIT INDEXExhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 15Exhibit 31Exhibit 32    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
      /s/ Ernst & Young LLP 
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CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions, except per share amounts)Sales
    
    $
    1,622.4
    
    
    $
    1,483.2
    
    
    $
    3,210.9
    
    
    $
    2,907.0Operating costs and expenses:Cost of sales
    
    
    1,139.1
    
    
    
    1,088.0
    
    
    
    2,272.8
    
    
    
    2,131.9Selling and administrative costs
    
    
    261.1
    
    
    
    227.3
    
    
    
    516.9
    
    
    
    464.51,400.2
    
    
    
    1,315.3
    
    
    
    2,789.7
    
    
    
    2,596.4Operating Income
    
    
    222.2
    
    
    
    167.9
    
    
    
    421.2
    
    
    
    310.6Interest expense
    
    
    (30.8
    )
    
    
    (31.3
    )
    
    
    (62.4
    )
    
    
    (63.3
    )Interest income
    
    
    1.5
    
    
    
    1.1
    
    
    
    3.3
    
    
    
    2.2Other income (expense)  net
    
    
    (17.7
    )
    
    
    (20.9
    )
    
    
    (33.3
    )
    
    
    (31.5
    )Income from continuing operations before income taxes
    
    
    175.2
    
    
    
    116.8
    
    
    
    328.8
    
    
    
    218.0Income tax benefit (expense)
    
    
    (50.1
    )
    
    
    (35.7
    )
    
    
    (103.9
    )
    
    
    63.4Income
From Continuing Operations
    
    
    125.1
    
    
    
    81.1
    
    
    
    224.9
    
    
    
    281.4Income (loss) from discontinued operations  net of income taxes
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    (0.3
    )
    
    
    0.5Cumulative effect of change in accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Net Income
    
    $
    124.8
    
    
    $
    81.0
    
    
    $
    224.6
    
    
    $
    282.5Basic Earnings Per ShareContinuing operations
    
    $
    1.00
    
    
    $
    0.65
    
    
    $
    1.79
    
    
    $
    2.27Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net Income
    
    $
    1.00
    
    
    $
    0.65
    
    
    $
    1.79
    
    
    $
    2.28Diluted Earnings Per ShareContinuing operations
    
    $
    0.98
    
    
    $
    0.64
    
    
    $
    1.76
    
    
    $
    2.23Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net Income
    
    $
    0.98
    
    
    $
    0.64
    
    
    $
    1.76
    
    
    $
    2.24Dividends Declared Per Common Share
    
    $
    0.20
    
    
    $
    0.20
    
    
    $
    0.40
    
    
    $
    0.40
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CONSENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
 June 30,
    
    
    December 31,2007
    
    
    2006(Dollars in millions,except share amounts)Current AssetsCash and cash equivalents
    
    $
    213.4
    
    
    $
    201.3Accounts and notes receivable, less allowances for doubtful receivables
($19.6 at June 30, 2007 and $19.8 at December 31, 2006)
    
    
    1,039.9
    
    
    
    912.4Inventories  net
    
    
    1,749.6
    
    
    
    1,551.8Deferred income taxes
    
    
    232.8
    
    
    
    250.3Prepaid expenses and other assets
    
    
    83.0
    
    
    
    91.7Total Current Assets
    
    
    3,318.7
    
    
    
    3,007.5Property, plant and equipment  net
    
    
    1,351.5
    
    
    
    1,327.7Prepaid pension
    
    
    2.6
    
    
    
    2.3Goodwill
    
    
    1,350.7
    
    
    
    1,341.3Identifiable intangible assets  net
    
    
    466.9
    
    
    
    472.0Deferred income taxes
    
    
    43.4
    
    
    
    35.5Other assets
    
    
    736.8
    
    
    
    714.9Total Assets
    
    $
    7,270.6
    
    
    $
    6,901.2Current LiabilitiesShort-term debt
    
    $
    10.4
    
    
    $
    11.8Accounts payable
    
    
    661.1
    
    
    
    584.6Accrued expenses
    
    
    867.6
    
    
    
    819.0Income taxes payable
    
    
    102.6
    
    
    
    212.5Deferred income taxes
    
    
    3.3
    
    
    
    3.3Current maturities of long-term debt and capital lease obligations
    
    
    1.1
    
    
    
    1.4Total Current Liabilities
    
    
    1,646.1
    
    
    
    1,632.6Long-term debt and capital lease obligations
    
    
    1,720.5
    
    
    
    1,721.7Pension obligations
    
    
    535.0
    
    
    
    612.1Postretirement benefits other than pensions
    
    
    371.2
    
    
    
    379.1Long-term income taxes payable
    
    
    148.5
    
    
    
    Deferred income taxes
    
    
    60.5
    
    
    
    57.2Other non-current liabilities
    
    
    533.0
    
    
    
    521.8Commitments and contingent liabilities
    
    
    
    
    
    
    Shareholders EquityCommon stock  $5 par valueAuthorized 200,000,000 shares; issued 141,455,931 shares at June 30,
2007 and 139,041,884 shares at December 31, 2006 (excluding
14,000,000 shares held by a wholly owned subsidiary)
    
    
    707.3
    
    
    
    695.2Additional paid-in capital
    
    
    1,401.6
    
    
    
    1,313.3Income retained in the business
    
    
    850.6
    
    
    
    666.5Accumulated other comprehensive income (loss)
    
    
    (151.8
    )
    
    
    (260.8
    )Common stock held in treasury, at cost (16,211,703 shares at
June 30, 2007 and 14,090,913 shares at December 31, 2006)
    
    
    (551.9
    )
    
    
    (437.5
    )Total Shareholders Equity
    
    
    2,255.8
    
    
    
    1,976.7Total Liabilities And Shareholders Equity
    
    $
    7,270.6
    
    
    $
    6,901.2
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 Six Months EndedJune 30,2007
    
    
    2006(Dollars in millions)Operating ActivitiesNet income
    
    $
    224.6
    
    
    $
    282.5Adjustments to reconcile net income to net cash provided by
operating activities:(Income) loss from discontinued operations
    
    
    0.3
    
    
    
    (0.5
    )Cumulative effect of change in accounting
    
    
    
    
    
    
    (0.6
    )Restructuring and consolidation:Expenses
    
    
    0.8
    
    
    
    3.6Payments
    
    
    (2.1
    )
    
    
    (3.6
    )Pension and postretirement benefits:Expenses
    
    
    61.3
    
    
    
    73.9Contributions and benefit payments
    
    
    (114.7
    )
    
    
    (32.3
    )Asset impairments
    
    
    
    
    
    
    0.9Depreciation and amortization
    
    
    124.6
    
    
    
    117.6Excess tax benefits related to share-based payment arrangements
    
    
    (9.6
    )
    
    
    (4.0
    )Share-based compensation expense
    
    
    32.2
    
    
    
    28.6Loss on
exchange and extinguishment of debt
    
    
    
    
    
    
    1.0Deferred income taxes
    
    
    (20.3
    )
    
    
    (19.4
    )Change in assets and liabilities, net of effects of acquisitions
and divestitures:Receivables
    
    
    (113.0
    )
    
    
    (134.3
    )Change in receivables sold, net
    
    
    
    
    
    
    (97.1
    )Inventories, net of pre-production and excess-over-average
    
    
    (104.5
    )
    
    
    (100.3
    )Pre-production and excess-over-average inventories
    
    
    (64.3
    )
    
    
    (52.5
    )Other current assets
    
    
    9.1
    
    
    
    11.9Accounts payable
    
    
    66.2
    
    
    
    64.7Accrued expenses
    
    
    32.0
    
    
    
    (21.1
    )Income taxes payable
    
    
    76.2
    
    
    
    (38.3
    )Other non-current assets and liabilities
    
    
    (1.1
    )
    
    
    (25.8
    )Net Cash Provided By Operating Activities
    
    
    197.7
    
    
    
    54.9Investing ActivitiesPurchases of property, plant and equipment
    
    
    (96.2
    )
    
    
    (95.1
    )Proceeds from sale of property, plant and equipment
    
    
    0.7
    
    
    
    1.4Net Cash
Used In Investing Activities
    
    
    (95.5
    )
    
    
    (93.7
    )Financing
ActivitiesIncrease (decrease) in short-term debt, net
    
    
    (1.8
    )
    
    
    8.0Loss on exchange or extinguishment of debt
    
    
    
    
    
    
    (3.5
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    512.8Repayment of long-term debt and capital lease obligations
    
    
    (0.7
    )
    
    
    (534.0
    )Proceeds from issuance of common stock
    
    
    68.1
    
    
    
    46.1Purchases of treasury stock
    
    
    (113.3
    )
    
    
    (1.9
    )Dividends
    
    
    (50.5
    )
    
    
    (49.8
    )Excess tax benefits related to share-based payment arrangements
    
    
    9.6
    
    
    
    4.0Distributions to minority interest holders
    
    
    (2.5
    )
    
    
    (1.9
    )Net Cash Used In Financing Activities
    
    
    (91.1
    )
    
    
    (20.2
    )Discontinued OperationsNet cash provided by (used in) operating activities
    
    
    (0.7
    )
    
    
    11.2Net cash provided by (used in) investing activities
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    
    
    
    
    Net cash (used in) provided by discontinued operations
    
    
    (0.7
    )
    
    
    11.2Effect of exchange rate changes on cash and cash equivalents
    
    
    1.7
    
    
    
    4.9Net increase in cash and cash equivalents
    
    
    12.1
    
    
    
    (42.9
    )Cash and cash equivalents at beginning of period
    
    
    201.3
    
    
    
    251.3Cash and cash equivalents at end of period
    
    $
    213.4
    
    
    $
    208.4
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1. Basis of Interim Financial Statement Preparation and Use of Estimates
   Note 2. New Accounting Standards Not Yet Adopted
 Fair Value Option for Financial Assets and Financial Liabilities
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Fair Value Measurement
  Accounting for Income Tax Benefits on Dividends on Share-Based Payment Awards
  Accounting for Postretirement Benefits Associated with Split-Dollar Life Insurance
  7




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Note 3. Business Segment Information
  
    
    The Actuation and Landing Systems segment provides systems, components and related
services pertaining to aircraft taxi, take-off, flight control, landing and stopping, as
well as engine components, including fuel delivery systems and rotating assemblies, and
airframe maintenance.
    
    The Nacelles and Interior Systems segment produces products and provides maintenance,
repair and overhaul services associated with aircraft engines, including thrust reversers,
cowlings, nozzles and their components, and aircraft interior products, including slides,
seats, cargo and lighting systems.
    
    The Electronic Systems segment produces a wide array of systems and components that
provide flight performance measurements, flight management, fuel controls, electrical
systems, and control and safety data, as well as reconnaissance and surveillance systems.
 8




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Sales:Actuation and Landing Systems
    
    $
    635.3
    
    
    $
    561.9
    
    
    $
    1,244.5
    
    
    $
    1,100.3Nacelles and Interior Systems
    
    
    533.6
    
    
    
    514.9
    
    
    
    1,080.5
    
    
    
    1,008.7Electronic Systems
    
    
    453.5
    
    
    
    406.4
    
    
    
    885.9
    
    
    
    798.0$
    1,622.4
    
    
    $
    1,483.2
    
    
    $
    3,210.9
    
    
    $
    2,907.0Intersegment sales:Actuation and Landing Systems
    
    $
    6.7
    
    
    $
    6.4
    
    
    $
    13.4
    
    
    $
    12.6Nacelles and Interior Systems
    
    
    4.9
    
    
    
    4.6
    
    
    
    9.3
    
    
    
    8.2Electronic Systems
    
    
    7.5
    
    
    
    7.0
    
    
    
    17.1
    
    
    
    16.6$
    19.1
    
    
    $
    18.0
    
    
    $
    39.8
    
    
    $
    37.4Operating income:Actuation and Landing Systems
    
    $
    61.0
    
    
    $
    39.3
    
    
    $
    110.9
    
    
    $
    62.6Nacelles and Interior Systems
    
    
    135.3
    
    
    
    114.8
    
    
    
    261.6
    
    
    
    219.6Electronic Systems
    
    
    62.6
    
    
    
    54.1
    
    
    
    117.4
    
    
    
    97.0258.9
    
    
    
    208.2
    
    
    
    489.9
    
    
    
    379.2Corporate general and administrative expenses
    
    
    (32.7
    )
    
    
    (23.9
    )
    
    
    (61.4
    )
    
    
    (51.1
    )ERP implementation costs
    
    
    (4.0
    )
    
    
    (5.5
    )
    
    
    (7.3
    )
    
    
    (6.6
    )Pension curtailment
    
    
    
    
    
    
    (10.9
    )
    
    
    
    
    
    
    (10.9
    )Total operating income
    
    $
    222.2
    
    
    $
    167.9
    
    
    $
    421.2
    
    
    $
    310.6
 June 30,
    
    
    December 31,2007
    
    
    2006Total assets:Actuation and Landing Systems
    
    $
    2,354.6
    
    
    $
    2,182.0Nacelles and Interior Systems
    
    
    2,311.9
    
    
    
    2,150.1Electronic Systems
    
    
    1,955.5
    
    
    
    1,904.7Corporate
    
    
    648.6
    
    
    
    664.4$
    7,270.6
    
    
    $
    6,901.2
 Note 4. Other Income (Expense)  Net
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Retiree health care expenses related to
previously owned businesses
    
    $
    (4.4
    )
    
    $
    (4.2
    )
    
    $
    (9.2
    )
    
    $
    (9.0
    )Loss on exchange and extinguishment of debt
    
    
    
    
    
    
    (4.8
    )
    
    
    
    
    
    
    (4.8
    )Expenses related to previously owned businesses
    
    
    (5.6
    )
    
    
    (6.6
    )
    
    
    (11.3
    )
    
    
    (8.0
    )Minority interest and equity in affiliated companies
    
    
    (7.2
    )
    
    
    (3.6
    )
    
    
    (12.8
    )
    
    
    (7.4
    )Other  net
    
    
    (0.5
    )
    
    
    (1.7
    )
    
    
    
    
    
    
    (2.3
    )Other income (expense)  net
    
    $
    (17.7
    )
    
    $
    (20.9
    )
    
    $
    (33.3
    )
    
    $
    (31.5
    )
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Note 5. Discontinued Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)
    
    
    (Dollars in millions)Sales
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating income
    
    $
    (0.5
    )
    
    $
    (0.1
    )
    
    $
    (0.5
    )
    
    $
    0.9Income tax benefit (expense)
    
    $
    0.2
    
    
    $
    
    
    
    $
    0.2
    
    
    $
    (0.4
    )Income (loss) from discontinued operations
    
    $
    (0.3
    )
    
    $
    (0.1
    )
    
    $
    (0.3
    )
    
    $
    0.5
  Note 6. Earnings Per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions, except per share amounts)NumeratorNumerator for basic and diluted earnings per share  income from
continuing operations
    
    $
    125.1
    
    
    $
    81.1
    
    
    $
    224.9
    
    
    $
    281.4DenominatorDenominator for basic earnings per share  weighted-average shares
    
    
    125.3
    
    
    
    124.5
    
    
    
    125.3
    
    
    
    124.0Effect of dilutive securities:Stock options, employee stock purchase plan, restricted shares and
restricted share units
    
    
    2.5
    
    
    
    1.8
    
    
    
    2.4
    
    
    
    1.9Other deferred compensation shares
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.12.6
    
    
    
    1.9
    
    
    
    2.5
    
    
    
    2.0Denominator for diluted earnings per share  adjusted
weighted-average shares and assumed conversion
    
    
    127.9
    
    
    
    126.4
    
    
    
    127.8
    
    
    
    126.0Per share income from continuing operationsBasic
    
    $
    1.00
    
    
    $
    0.65
    
    
    $
    1.79
    
    
    $
    2.27Diluted
    
    $
    0.98
    
    
    $
    0.64
    
    
    $
    1.76
    
    
    $
    2.23
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Note 7. Sale of Receivables
 
 Note 8. Inventories
  June 30,
    
    
    December 31,2007
    
    
    2006(Dollars in millions)FIFO or average cost (which approximates current costs):Finished products
    
    $
    342.7
    
    
    $
    334.9In-process
    
    
    989.1
    
    
    
    880.9Raw materials and supplies
    
    
    497.2
    
    
    
    416.01,829.0
    
    
    
    1,631.8Less:Reserve to reduce certain inventories to LIFO basis
    
    
    (49.5
    )
    
    
    (48.5
    )Progress payments and advances
    
    
    (29.9
    )
    
    
    (31.5
    )Total
    
    $
    1,749.6
    
    
    $
    1,551.8
   Note 9. Goodwill and Identifiable Intangible Assets
  BusinessBalance
    
    
    Combinations
    
    
    Foreign
    
    
    BalanceDecember 31,
    
    
    Completed or
    
    
    Currency
    
    
    June 30,2006
    
    
    Finalized
    
    
    Translation
    
    
    2007(Dollars in millions)Actuation and Landing Systems
    
    $
    326.3
    
    
    $
    
    
    
    $
    4.7
    
    
    $
    331.0Nacelles and Interior Systems
    
    
    422.9
    
    
    
    
    
    
    
    1.9
    
    
    
    424.8Electronic Systems
    
    
    592.1
    
    
    
    
    
    
    
    2.8
    
    
    
    594.9$
    1,341.3
    
    
    $
    
    
    
    $
    9.4
    
    
    $
    1,350.7
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Note 10. Financing Arrangements
     Lease Commitments
    12




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Note 11. Pensions and Postretirement Benefits
 Pensions
  U.S. Plans
    
    
    U.K. Plans
    
    
    Other Non-U.S. PlansThree Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Service cost
    
    $
    12.2
    
    
    $
    12.2
    
    
    $
    7.0
    
    
    $
    7.2
    
    
    $
    1.2
    
    
    $
    1.0Interest cost
    
    
    40.5
    
    
    
    37.9
    
    
    
    9.5
    
    
    
    8.2
    
    
    
    1.3
    
    
    
    1.3Expected rate of return on plan assets
    
    
    (49.8
    )
    
    
    (43.5
    )
    
    
    (15.0
    )
    
    
    (12.8
    )
    
    
    (1.5
    )
    
    
    (1.2
    )Amortization of prior service cost
    
    
    1.9
    
    
    
    2.5
    
    
    
    (0.2
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    Amortization of actuarial (gain) loss
    
    
    17.1
    
    
    
    10.2
    
    
    
    
    
    
    
    (0.3
    )
    
    
    0.2
    
    
    
    0.3Periodic benefit cost (income)
    
    
    21.9
    
    
    
    19.3
    
    
    
    1.3
    
    
    
    1.8
    
    
    
    1.2
    
    
    
    1.4Settlements and curtailments (gain) loss
    
    
    
    
    
    
    10.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefit charge (credit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    Net benefit cost (income)
    
    $
    21.9
    
    
    $
    30.2
    
    
    $
    1.3
    
    
    $
    2.0
    
    
    $
    1.2
    
    
    $
    1.4
 U.S. Plans
    
    
    U.K. Plans
    
    
    Other Non-U.S. PlansSix Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Service cost
    
    $
    23.5
    
    
    $
    25.9
    
    
    $
    14.5
    
    
    $
    14.4
    
    
    $
    2.3
    
    
    $
    2.1Interest cost
    
    
    80.5
    
    
    
    76.2
    
    
    
    19.5
    
    
    
    16.3
    
    
    
    2.6
    
    
    
    2.5Expected rate of return on plan assets
    
    
    (98.6
    )
    
    
    (89.4
    )
    
    
    (29.8
    )
    
    
    (24.6
    )
    
    
    (2.9
    )
    
    
    (2.6
    )Amortization of prior service cost
    
    
    3.8
    
    
    
    4.7
    
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    Amortization of actuarial (gain) loss
    
    
    32.7
    
    
    
    26.2
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.6Periodic benefit cost (income)
    
    
    41.9
    
    
    
    43.6
    
    
    
    3.7
    
    
    
    5.6
    
    
    
    2.5
    
    
    
    2.6Settlements and curtailments (gain) loss
    
    
    
    
    
    
    10.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefit charge (credit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    Net benefit cost (income)
    
    $
    41.9
    
    
    $
    54.5
    
    
    $
    3.7
    
    
    $
    5.8
    
    
    $
    2.5
    
    
    $
    2.6
  U.S. Plans
    
    U.K. Plans
    
    Other Non-U.S. PlansThree and Six Months Ended
    
    Three and Six Months Ended
    
    Three and Six Months EndedJune 30,
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006
    
    2007
    
    2006Discount rate 2007
    
    5.89%
    
    N.A.
    
    5.00%
    
    N.A.
    
    4.88%
    
    N.A.Discount rate 1/1/06-4/10/06
    
    N.A.
    
    5.64%
    
    N.A.
    
    4.75%
    
    N.A.
    
    4.76%Discount rate 4/11/06-5/18/06
    
    N.A.
    
    6.01%
    
    N.A.
    
    4.75%
    
    N.A.
    
    4.76%Discount rate 5/19/06-6/30/06
    
    N.A.
    
    6.34%
    
    N.A.
    
    4.75%
    
    N.A.
    
    4.76%Expected long-term return on assets
    
    9.00%
    
    9.00%
    
    8.50%
    
    8.50%
    
    8.28%
    
    8.34%Rate of compensation increase
    
    3.86%
    
    3.63%
    
    3.50%
    
    3.50%
    
    3.36%
    
    3.34%
  13




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Postretirement Benefits Other Than Pensions
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Service cost
    
    $
    0.5
    
    
    $
    0.7
    
    
    $
    1.0
    
    
    $
    0.7Interest cost
    
    
    5.6
    
    
    
    5.2
    
    
    
    11.5
    
    
    
    9.8Amortization of prior service cost
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )Amortization of actuarial (gain) loss
    
    
    (0.7
    )
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.6Periodic benefit cost
    
    
    5.3
    
    
    
    6.7
    
    
    
    13.2
    
    
    
    11.0Settlements and curtailments (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefit charge (credit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    5.3
    
    
    $
    6.7
    
    
    $
    13.2
    
    
    $
    11.0
  Three and Six Months Ended June 30,2007
    
    2006Discount rate
    
    5.79%
    
    5.55%Healthcare trend rate
    
    9% in 2007 to 5% in 2013
    
    9% in 2006 to 5% in 2010
 Note 12. Comprehensive Income (Loss)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Net income
    
    $
    124.8
    
    
    $
    81.0
    
    
    $
    224.6
    
    
    $
    282.5Other comprehensive income (loss):Unrealized foreign currency translation gains (losses) during period
    
    
    46.8
    
    
    
    64.1
    
    
    
    58.2
    
    
    
    75.9Pension/OPEB liability adjustments during the period
    
    
    9.9
    
    
    
    109.3
    
    
    
    26.5
    
    
    
    109.3Gain (loss) on cash flow hedges
    
    
    32.6
    
    
    
    46.5
    
    
    
    24.3
    
    
    
    50.1Gain (loss) on certain investments
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )Total comprehensive income
    
    $
    214.1
    
    
    $
    300.8
    
    
    $
    333.6
    
    
    $
    517.7
  June 30,
    
    
    December 31,2007
    
    
    2006(Dollars in millions)Cumulative unrealized foreign currency translation gains (losses)
    
    $
    306.6
    
    
    $
    248.4Pension/OPEB liability adjustments
    
    
    (537.1
    )
    
    
    (563.6
    )Accumulated gains (losses) on cash flow hedges
    
    
    78.7
    
    
    
    54.4Total accumulated other comprehensive income (loss)
    
    $
    (151.8
    )
    
    $
    (260.8
    )
  14




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Note 13. Income Taxes
    15




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##### Table of Contents



Note 14. Contingencies
 General
  Environmental
    16




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##### Table of Contents



Asbestos
  17




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##### Table of Contents



Insurance Coverage
    Liabilities of Divested Businesses
 Asbestos
  18




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##### Table of Contents



Other
  Aerostructures Long-Term Contracts
  19




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##### Table of Contents



Tax
    Coltec Industries Inc and Subsidiaries
Goodrich Corporation and Subsidiaries
    
    December, 1997  July, 1999 (through date of acquisition)
1998-1999 (including Rohr and Coltec)
   20




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##### Table of Contents



Note 15. Guarantees
  Maximum
    
    CarryingPotential
    
    Amount ofPayment
    
    LiabilityEnvironmental remediation indemnification (Note 14)
    
    No limit
    
    $
    16.9Debt and lease payments
    
    $
    2.0
    
    
    $
    Residual value on leases (Note 10)
    
    $
    32.0
    
    
    $
    Letter of credit and bank guarantees
    
    $
    52.2
    
    
    $
    
  Service and Product Warranties
   (Dollars in millions)Balance at December 31, 2006
    
    $
    160.3Net provisions for warranties issued during the year
    
    
    23.3Net (benefit) provisions for warranties existing at the beginning of the year
    
    
    (3.8
    )Payments
    
    
    (17.6
    )Foreign currency translation
    
    
    2.8Balance at June 30, 2007
    
    $
    165.0
  June 30,
    
    
    December 31,2007
    
    
    2006(Dollars in millions)Short-term liabilities
    
    $
    66.5
    
    
    $
    57.5Long-term liabilities
    
    
    98.5
    
    
    
    102.8Total
    
    $
    165.0
    
    
    $
    160.3
 21




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##### Table of Contents



Note 16. Derivatives and Hedging Activities
  Foreign Currency Contracts
    Interest Rate Swaps
  Note 17. Share-Based Compensation
   22




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    OVERVIEW
  Key Market Channels for Products and Services, Growth Drivers and Industry and our Highlights
  Commercial and General Aviation Airplane OE
    23




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Commercial and General Aviation Airplane Aftermarket
     Defense and Space
    24




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##### Table of Contents



Long-term Sustainable Growth
  
    
    Awards for key products on important new and expected programs, including the Airbus A380
and A350 XWB, the Boeing 787 and 747-8, the Embraer 190, the Dassault Falcon 7X and the
Lockheed Martin F-35 Lightning II and F-22 Raptor;
    
    Growing commercial airplane fleet, which should fuel sustained aftermarket strength;
    
    Balance in the large commercial airplane market, with strong sales to both Airbus and Boeing;
    
    Aging of the existing large commercial and regional airplane fleets, which should result
in increased aftermarket support;
    
    Increased number of long-term agreements for product sales on new and existing commercial
airplanes;
    
    Increased opportunities for aftermarket growth due to airline outsourcing;
    
    Growth in global maintenance, repair and overhaul opportunities for our systems and
components, particularly in Europe, Asia and the Middle East, where we are expanding our
capacity; and
    
    Expansion of our product offerings in support of high growth areas in the defense and
space market channel, such as intelligence, surveillance and reconnaissance products.
 Second Quarter 2007 Sales Content by Market Channel
  Airbus Commercial OE
    
    
    13
    %Boeing Commercial OE
    
    
    11
    %Regional and General Aviation Airplane OE
    
    
    8
    %Total Commercial and General Aviation Airplane OE
    
    
    32
    %Large Commercial Airplane Aftermarket
    
    
    29
    %Regional and General Aviation Airplane Aftermarket
    
    
    7
    %Heavy Airplane Maintenance
    
    
    3
    %Total Commercial and General Aviation Airplane Aftermarket
    
    
    39
    %Total Defense and Space
    
    
    24
    %Other
    
    
    5
    %Total
    
    
    100
    %
 25




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Summary Performance  Second Quarter 2007 as Compared to Second Quarter 2006
 Second Quarter2007
    
    
    2006
    
    
    % Change(Dollars in millions, except diluted EPS)Sales
    
    $
    1,622.4
    
    
    $
    1,483.2
    
    
    
    9.4Segment operating income(1)
    
    $
    258.9
    
    
    $
    208.2
    
    
    
    24.4Percent of sales
    
    
    16.0
    %
    
    
    14.0
    %Income from continuing operations before income taxes
    
    $
    175.2
    
    
    $
    116.8
    
    
    
    50.0Income from continuing operations
    
    $
    125.1
    
    
    $
    81.1
    
    
    
    54.3Net income
    
    $
    124.8
    
    
    $
    81.0
    
    
    
    54.1Effective tax rate
    
    
    28.6
    %
    
    
    30.6
    %Diluted EPS:Continuing operations
    
    $
    0.98
    
    
    $
    0.64
    
    
    
    53.1Net income
    
    $
    0.98
    
    
    $
    0.64
    
    
    
    53.1
 
 (1)
    
    Segment operating income is total segment revenue reduced by operating
expenses directly identifiable with our business segments except for
certain Enterprise Resource Planning (ERP) system implementation
expenses and pension curtailment expenses in 2006, which were not
allocated to the segments. Segment operating income is used by
management to assess the operating performance of the segments. For a
reconciliation of total segment operating income to total operating
income, see Note 3, Business Segment Information to our Condensed
Consolidated Financial Statements.  
    
    Large commercial airplane original equipment sales decreased by approximately 1%;
    
    Regional, business and general aviation airplane original equipment sales increased by
approximately 26%;
    
    Large commercial, regional and general aviation airplane aftermarket sales increased by
approximately 14%; and
    
    Defense and space sales of both original equipment and aftermarket products and services
increased by approximately 8%.
   Increase (Decrease)Before
    
    
    After
    
    
    DilutedTax
    
    
    Tax
    
    
    EPS(Dollars in millions, except diluted EPS)Foreign exchange rate impact, including net monetary asset remeasurement
    
    $
    (3.4
    )
    
    $
    (2.1
    )
    
    $
    (0.02
    )Loss on exchange and extinguishment of debt in 2006
    
    $
    4.8
    
    
    $
    3.0
    
    
    $
    0.02Higher share-based compensation
    
    $
    (9.3
    )
    
    $
    (5.6
    )
    
    $
    (0.05
    )Lower net pension expense, including 2006 pension curtailment
    
    $
    9.0
    
    
    $
    5.6
    
    
    $
    0.04
 26




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Summary Performance  Six Months Ended June 30, 2007 as Compared to Six Months Ended June 30,
2006
 Six Months Ended,June 302007
    
    
    2006
    
    
    % Change(Dollars in millions, except diluted EPS)Sales
    
    $
    3,210.9
    
    
    $
    2,907.0
    
    
    
    10.5Segment operating income(1)
    
    $
    489.9
    
    
    $
    379.2
    
    
    
    29.2Percent of sales
    
    
    15.3
    %
    
    
    13.0
    %Income from continuing operations before income taxes
    
    $
    328.8
    
    
    $
    218.0
    
    
    
    50.8Income from continuing operations
    
    $
    224.9
    
    
    $
    281.4
    
    
    
    (20.1
    )Net income
    
    $
    224.6
    
    
    $
    282.5
    
    
    
    (20.5
    )Effective tax rate (benefit)(2)
    
    
    31.6
    %
    
    
    (29.1
    )%Diluted EPS:Continuing operations
    
    $
    1.76
    
    
    $
    2.23
    
    
    
    (21.1
    )Net income
    
    $
    1.76
    
    
    $
    2.24
    
    
    
    (21.4
    )
 
 (1)
    
    Segment operating income is total segment revenue reduced by operating
expenses directly identifiable with our business segments except for
certain enterprise ERP system implementation expenses and pension
curtailment expenses in 2006, which were not allocated to the
segments. Segment operating income is used by management to assess the
operating performance of the segments. For a reconciliation of total
segment operating income to total operating income, see Note 3,
Business Segment Information to our Condensed Consolidated Financial
Statements.(2)
    
    The change in our effective tax rate resulted primarily from the
reversal of tax reserves in connection with the favorable Rohr and
Coltec tax settlements, which reduced the tax rate by approximately 60
percentage points, or $1.05 per diluted share, for the six months
ended June 30, 2006.  
    
    Large commercial airplane original equipment sales increased by approximately 2%;
    
    Regional, business and general aviation airplane original equipment sales increased by
approximately 16%;
    
    Large commercial, regional and general aviation airplane aftermarket sales increased by
approximately 18%; and
    
    Defense and space sales of both original equipment and aftermarket products and services
increased by approximately 8%.
  27




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Increase (Decrease)Before
    
    
    After
    
    
    DilutedTax
    
    
    Tax
    
    
    EPS(Dollars in millions, except diluted EPS)Foreign exchange rate impact, including net monetary asset remeasurement
    
    $
    (14.1
    )
    
    $
    (8.8
    )
    
    $
    (0.07
    )Loss on exchange and extinguishment of debt in 2006
    
    $
    4.8
    
    
    $
    3.0
    
    
    $
    0.02Lower net pension expense, including 2006 pension curtailment
    
    $
    14.6
    
    
    $
    9.1
    
    
    $
    0.07
  2007 Outlook
  2007 Outlook
    
    2006 ActualSales
    
    $6.5-$6.6 billion
    
    $5.9 billionDiluted EPS  Net Income
    
    $3.50-$3.60 per share
    
    $3.81 per share*Capital Expenditures
    
    $270-$290 million
    
    $256.8 millionOperating Cash Flow net of Capital Expenditures
    
    60%-75% of income from continuing operations
    
    4% of income from continuing operations
 
 *
    
    includes a tax benefit of $1.15 related primarily to the Rohr and Coltec tax settlements in 2006. ,
   28




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
    
    Deliveries of Airbus and Boeing large commercial aircraft are expected to increase by
approximately 8% to 10% in 2007 compared to 2006. Our sales of large commercial aircraft
original equipment products are projected to grow by about 10% in 2007 compared to 2006.
    
    Capacity in the global airline system, as measured by available seat miles (ASMs), is
expected to grow at approximately 4% to 5% in 2007. Our sales to airlines and package
carriers for large commercial and regional aircraft aftermarket parts and services are
expected to grow by 13% to 15% in 2007 compared to 2006.
    
    Total regional and business aircraft production is expected to increase slightly in 2007
compared to 2006. Deliveries to Embraer in support of its Embraer 190 aircraft, which
includes a significant amount of our content, are expected to enable us to increase sales in
this market channel by about 15% in 2007 compared to 2006.
    
    Defense and space sales (original equipment and aftermarket) are expected to grow by
approximately 10% in 2007 compared to 2006. Growth is expected in all three segments.
 RESULTS OF OPERATIONS
 Second Quarter 2007 Compared with Second Quarter 2006
 Second Quarter
    
    
    $2007
    
    
    2006
    
    
    Change(Dollars in millions)Sales
    
    $
    1,622.4
    
    
    $
    1,483.2
    
    
    $
    139.2Segment Operating Income
    
    $
    258.9
    
    
    $
    208.2
    
    
    $
    50.7Corporate General and Administrative Costs
    
    
    (32.7
    )
    
    
    (23.9
    )
    
    
    (8.8
    )ERP Implementation Costs
    
    
    (4.0
    )
    
    
    (5.5
    )
    
    
    1.5Pension Curtailment
    
    
    
    
    
    
    (10.9
    )
    
    
    10.9Total Operating Income
    
    
    222.2
    
    
    
    167.9
    
    
    
    54.3Net Interest Expense
    
    
    (29.3
    )
    
    
    (30.2
    )
    
    
    0.9Other Income (Expense)  Net
    
    
    (17.7
    )
    
    
    (20.9
    )
    
    
    3.2Income Tax (Expense) Benefit
    
    
    (50.1
    )
    
    
    (35.7
    )
    
    
    (14.4
    )Income from Continuing Operations
    
    
    125.1
    
    
    
    81.1
    
    
    
    44.0Income (loss) from Discontinued Operations
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    (0.2
    )Net Income
    
    $
    124.8
    
    
    $
    81.0
    
    
    $
    43.8
 29




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Six Months Ended June 30, 2007 Compared with Six Months Ended June 30, 2006
 Six Months EndedJune 30,
    
    
    $2007
    
    
    2006
    
    
    Change(Dollars in millions)Sales
    
    $
    3,210.9
    
    
    $
    2,907.0
    
    
    $
    303.9Segment Operating Income
    
    $
    489.9
    
    
    $
    379.2
    
    
    $
    110.7Corporate General and Administrative Costs
    
    
    (61.4
    )
    
    
    (51.1
    )
    
    
    (10.3
    )ERP Implementation Costs
    
    
    (7.3
    )
    
    
    (6.6
    )
    
    
    (0.7
    )Pension Curtailment
    
    
    
    
    
    
    (10.9
    )
    
    
    10.9Total Operating Income
    
    
    421.2
    
    
    
    310.6
    
    
    
    110.6Net Interest Expense
    
    
    (59.1
    )
    
    
    (61.1
    )
    
    
    2.0Other Income (Expense)  Net
    
    
    (33.3
    )
    
    
    (31.5
    )
    
    
    (1.8
    )Income Tax (Expense) Benefit
    
    
    (103.9
    )
    
    
    63.4
    
    
    
    (167.3
    )Income from Continuing Operations
    
    
    224.9
    
    
    
    281.4
    
    
    
    (56.5
    )Income (loss) from Discontinued Operations
    
    
    (0.3
    )
    
    
    0.5
    
    
    
    (0.8
    )Cumulative Effect of Change in Accounting
    
    
    
    
    
    
    0.6
    
    
    
    (0.6
    )Net Income
    
    $
    224.6
    
    
    $
    282.5
    
    
    $
    (57.9
    )
   30




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BUSINESS SEGMENT PERFORMANCE
  31




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
    
    The Actuation and Landing Systems segment provides systems, components and related
services pertaining to aircraft taxi, take-off, flight control, landing and stopping, as
well as engine components, including fuel delivery systems and rotating assemblies, and
airframe maintenance.
    
    The Nacelles and Interior Systems segment produces products and provides maintenance,
repair and overhaul services associated with aircraft engines, including thrust reversers,
cowlings, nozzles and their components, and aircraft interior products, including slides,
seats, cargo and lighting systems.
    
    The Electronic Systems segment produces a broad array of systems and components that
provide flight performance measurements, flight management information, engine controls,
fuel controls, electrical power systems, safety data, and reconnaissance and surveillance
systems.
  Second Quarter 2007 Compared with Second Quarter 2006
 Second Quarter
    
    
    Increase/
    
    
    %
    
    
    % of Sales2007
    
    
    2006
    
    
    (Decrease)
    
    
    Change
    
    
    2007
    
    
    2006NET CUSTOMER SALESActuation and Landing Systems
    
    $
    635.3
    
    
    $
    561.9
    
    
    $
    73.4
    
    
    
    13.1Nacelles and Interior Systems
    
    
    533.6
    
    
    
    514.9
    
    
    
    18.7
    
    
    
    3.6Electronic Systems
    
    
    453.5
    
    
    
    406.4
    
    
    
    47.1
    
    
    
    11.6$
    1,622.4
    
    
    $
    1,483.2
    
    
    $
    139.2
    
    
    
    9.4SEGMENT OPERATING INCOMEActuation and Landing Systems
    
    $
    61.0
    
    
    $
    39.3
    
    
    $
    21.7
    
    
    
    55.2
    
    
    
    9.6
    
    
    
    7.0Nacelles and Interior Systems
    
    
    135.3
    
    
    
    114.8
    
    
    
    20.5
    
    
    
    17.9
    
    
    
    25.4
    
    
    
    22.3Electronic Systems
    
    
    62.6
    
    
    
    54.1
    
    
    
    8.5
    
    
    
    15.7
    
    
    
    13.8
    
    
    
    13.3$
    258.9
    
    
    $
    208.2
    
    
    $
    50.7
    
    
    
    24.4
    
    
    
    16.0
    
    
    
    14.0
 32




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##### Table of Contents



Actuation and Landing Systems:
 
    
    Higher large commercial airplane aftermarket sales of approximately $22 million,
primarily in our landing gear, aircraft wheels and brakes and actuation business units;
    
    Higher large commercial airplane OE sales of approximately $21 million, primarily in
our landing gear business unit;
    
    Higher regional and business OE and aftermarket sales of approximately $10 million,
primarily in our aircraft wheels and brakes and landing gear business units;
    
    Higher military OE and aftermarket sales of approximately $6 million, primarily in our
actuation and aircraft wheels and brakes business units; and
    
    Higher airframe heavy maintenance sales of approximately $5 million.
  
    
    Higher sales volume and favorable product mix across all business units, which resulted
in higher income of approximately $25 million;
    
    Improved brake-life performance in the aircraft wheels and brakes business unit and
higher pricing in our landing gear, aircraft wheels and brakes and actuation business units,
offset by increased operating costs, primarily in our landing gear business unit; and
    
    Unfavorable foreign exchange impact of approximately $4 million.
 Nacelles and Interior Systems:
 
    
    Higher large commercial airplane aftermarket sales, including spare parts and MRO volume
of approximately $39 million, primarily in our aerostructures and interiors business units;
and
    
    Higher regional, business, and general aviation aircraft OE sales primarily from our
aerostructures business unit of approximately $11 million.
   33




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##### Table of Contents



Electronic Systems:
 
    
    Higher defense and space OE and aftermarket sales of approximately $20 million across all
of our business units;
    
    Higher regional and general aviation airplane OE and aftermarket sales of approximately
$15 million in our sensor and integrated systems and engine control and electrical power
business units;
    
    Higher commercial OE and aftermarket sales of approximately $7 million in our sensors and
integrated systems business unit; and
    
    Higher sales of products to the helicopter market of approximately $5 million in our
sensors and integrated systems and engine controls and electrical power business units.
  Six Months Ended June 30, 2007 Compared with Six Months Ended June 30, 2006
 Six Months Ended June 30,Increase/
    
    
    %
    
    
    % of Sales2007
    
    
    2006
    
    
    (Decrease)
    
    
    Change
    
    
    2007
    
    
    2006NET CUSTOMER SALESActuation and Landing Systems
    
    $
    1,244.5
    
    
    $
    1,100.3
    
    
    $
    144.2
    
    
    
    13.1Nacelles and Interior Systems
    
    
    1,080.5
    
    
    
    1,008.7
    
    
    
    71.8
    
    
    
    7.1Electronic Systems
    
    
    885.9
    
    
    
    798.0
    
    
    
    87.9
    
    
    
    11.0$
    3,210.9
    
    
    $
    2,907.0
    
    
    $
    303.9
    
    
    
    10.5SEGMENT OPERATING INCOMEActuation and Landing Systems
    
    $
    110.9
    
    
    $
    62.6
    
    
    $
    48.3
    
    
    
    77.2
    
    
    
    8.9
    
    
    
    5.7Nacelles and Interior Systems
    
    
    261.6
    
    
    
    219.6
    
    
    
    42.0
    
    
    
    19.1
    
    
    
    24.2
    
    
    
    21.8Electronic Systems
    
    
    117.4
    
    
    
    97.0
    
    
    
    20.4
    
    
    
    21.0
    
    
    
    13.3
    
    
    
    12.2$
    489.9
    
    
    $
    379.2
    
    
    $
    110.7
    
    
    
    29.2
    
    
    
    15.3
    
    
    
    13.0
 34




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##### Table of Contents



Actuation and Landing Systems:
 
    
    Higher large commercial airplane aftermarket sales of approximately $48 million,
primarily in our landing gear, aircraft wheels and brakes and actuation business units;
    
    Higher large commercial airplane OE sales of approximately $37 million, primarily in our
landing gear business unit;
    
    Higher regional and business OE and aftermarket sales of approximately $28 million,
primarily in our aircraft wheels and brakes and landing gear business units;
    
    Higher airframe heavy maintenance sales of approximately $10 million; and
    
    Higher military OE and aftermarket sales of approximately $8 million, primarily
in our actuation, aircraft wheels and brakes, and engine components business units.
  
    
    Higher sales volume and favorable product mix across all business units, which resulted
in higher income of approximately $40 million;
    
    Higher operating income of approximately $18 million, driven primarily by higher pricing
across most of our business units and improved brake-life performance in the aircraft wheels
and brakes business unit, partially offset by increased operating costs, primarily in our
landing gear and aircraft wheels and brakes business units; and
    
    Unfavorable foreign exchange impact of approximately $10 million.
 35




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##### Table of Contents



Nacelles and Interior Systems:
 
    
    Higher large commercial airplane aftermarket sales, including spare parts and MRO volume
of approximately $83 million, primarily in our aerostructures and interiors business units;
and
    
    Higher defense OE and aftermarket sales of approximately $10 million, primarily in our
interiors business unit; and
    
    Higher regional, business, and general aviation aircraft OE sales primarily from our
aerostructures business of approximately $10 million.
   Electronic Systems:
 
    
    Higher defense and space OE and aftermarket sales of approximately $35 million across all
of our business units;
    
    Higher regional and general aviation airplane OE and aftermarket sales of approximately
$31 million in our sensors and integrated systems and engine control and electrical power
business units;
    
    Higher sales of products to the helicopter market of approximately $12 million in our
sensors and integrated systems and engine controls and electrical power business units; and
    
    Higher commercial OE and aftermarket sales of approximately $9 million in our engine
control and electrical power business unit.
  36




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LIQUIDITY AND CAPITAL RESOURCES
  Cash
  Credit Facilities
  
    
    $500 million committed global revolving credit facility that expires in May 2012, of
which $444.7 million was available as of June 30, 2007; and
    
    $75 million of uncommitted domestic money market facilities and $165.8 million of
uncommitted and committed foreign working capital facilities with various banks to meet
short-term borrowing requirements, of which $230.6 million was available as of June 30,
2007.
 Off-Balance Sheet Arrangements
 Lease Commitments
    Sale of Receivables
  37




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##### Table of Contents



Derivatives
  
    
    Foreign Currency Contracts Designated as Cash Flow Hedges:Our
contracts had a notional amount of $1,828.2 million, fair value of
$122.8 million and maturity dates ranging from July 2007 to December
2011. The amount of accumulated other comprehensive income that would
be reclassified into earnings in the next 12 months is a gain of $51
million. During the second quarter of 2007 and 2006, we realized net
gains of $15.1 million and $12.9 million, respectively, related to
contracts that settled. During the six months ended June 30, 2007 and
2006, we realized net gains of $30.6 million and $20.6 million
respectively, related to contracts that settled.
 
    
    Foreign Currency Contracts not Designated as Hedges:Our contracts,
most of which mature monthly, had a notional amount of $236 million
and a fair value of a net asset/gain of $0.4 million. During the
second quarter of 2007, we realized a net gain of $1.4 million related
to contracts that settled compared to a net loss of $2.2 million
during the second quarter of 2006 related to contracts that settled.
During the six months ended June 30, 2007, we realized a net gain of
$0.5 million compared to a net loss of $0.2 million during the six
months ended June 30, 2006 related to contracts that settled.
 
    
    Interest Rate Swaps Designated as Fair Value Hedges:Our contracts had
a notional amount of $193 million, fair value of $3.3 million net
liability/loss and maturity dates ranging from April 2008 to July
2016.
 Contractual Obligations and Other Commercial Commitments
  CASH FLOW
  Six Months Ended June 30,
    
    $2007
    
    2006
    
    Change(Dollars in millions)Operating activities of continuing operations
    
    $
    197.7
    
    
    $
    54.9
    
    
    $
    142.8Investing activities of continuing operations
    
    $
    (95.5
    )
    
    $
    (93.7
    )
    
    $
    (1.8
    )Financing activities of continuing operations
    
    $
    (91.1
    )
    
    $
    (20.2
    )
    
    $
    (70.9
    )Discontinued operations
    
    $
    (0.7
    )
    
    $
    11.2
    
    
    $
    (11.9
    )
 38




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##### Table of Contents



Six Months Ended June 30, 2007 as Compared to Six Months Ended June 30, 2006
 Operating Activities of Continuing Operations
  
    
    Increased before tax income of approximately $111 million; and
    
    A non-recurring cash outlay of approximately $97 million relating to the termination of
our accounts receivable securitization program in 2006; partially offset by
    
    Increased pension plan contributions of approximately $83 million.
  Investing Activities of Continuing Operations
   Financing Activities of Continuing Operations
  
    
    Purchases of our common stock during the six months ended June 30, 2007 totaling $113.3
million, primarily in conjunction with the share repurchase program announced on October 24,
2006;
    
    Repayments of short-term debt totaling $1.8 million during the six months ended June 30,
2007, as compared to increased short-term debt of $8 million during the six months ended
June 30, 2006; partially offset by
    
    An increase of $22 million of proceeds from the issuance of common stock, primarily for
share-based compensation awards, to $68.1 million during the six months ended June 30, 2007
as compared to $46.1 million for the six months ended June 30, 2006; and
    
    The cash premiums of $20.5 million we paid in connection with the exchange of $533.2
million principal amount of our long-term notes for similar notes of longer duration during
the six months ended June 30, 2006.
 39




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##### Table of Contents



Discontinued Operations
  CONTINGENCIES
 General
  Environmental
  40




---



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41




---



##### Table of Contents



Asbestos
  Insurance Coverage
    Liabilities of Divested Businesses
 Asbestos
  42




---



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Other
  Guarantees
  Aerostructures Long-Term Contracts
  43




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##### Table of Contents



Tax
    Coltec Industries Inc and Subsidiaries
    
    December, 1997  July, 1999 (through date of acquisition)Goodrich Corporation and Subsidiaries
    
    1998-1999 (including Rohr and Coltec)
   44




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##### Table of Contents



NEW ACCOUNTING STANDARDS NOT YET ADOPTED
 Fair Value Option for Financial Assets and Financial Liabilities
  Fair Value Measurement
  Accounting for Income Tax Benefits on Dividends on Share-Based Payment Awards
  45




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Accounting for Postretirement Benefits Associated with Split-Dollar Life Insurance
  CRITICAL ACCOUNTING POLICIES
   Contract Accounting-Percentage of Completion
 Revenue Recognition
  46




---



##### Table of Contents




    
    Projected number of units to be delivered under the contracts;
    
    Escalation of future sales prices under the contracts;
    
    Costs, including material and labor costs and related escalation;
    
    Labor improvements due to the learning curve experience; and
    
    Supplier pricing including escalation where applicable.
 Inventory
   Income Taxes
  47




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##### Table of Contents



Identifiable Intangible Assets
  Other Assets
  
    
    Changes in market conditions that may affect product sales under the program, including
market acceptance and competition from others;
    
    Performance of subcontract suppliers and other production risks;
    
    Bankruptcy or other less significant financial difficulties of other program
participants, including the aircraft manufacturer, the OEM and other program suppliers or
the aircraft customer; and
    
    Availability of specialized raw materials in the marketplace.
 Participation Payments
  48




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##### Table of Contents



Entry Fees
  Sales Incentives
  Flight Certification Costs
  49




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##### Table of Contents



Service and Product Warranties
   
    
    The historical performance of our products and changes in performance of newer products;
    
    The mix and volumes of products being sold; and
    
    The impact of product changes.
 Pension and Postretirement Benefits Other Than Pensions
  50




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##### Table of Contents



FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
   
    
    demand for and market acceptance of new and existing products, such as the Airbus A350
XWB and A380, the Boeing 787 Dreamliner, the EMBRAER 190, the Dassault Falcon 7X and the
Lockheed Martin F-35 Lightning II and F-22 Raptor;
    
    our ability to extend our commercial original equipment contracts beyond the initial
contract periods;
    
    cancellation or delays of orders or contracts by customers or with suppliers;
    
    successful development of products and advanced technologies;
    
    the health of the commercial aerospace industry, including the impact of bankruptcies
and/or consolidations in the airline industry;
    
    global demand for aircraft spare parts and aftermarket services;
    
    changing priorities or reductions in the defense budgets in the U.S. and other countries,
U.S. foreign policy and the level of activity in military flight operations;
    
    the resolution of contractual disputes with Northrop Grumman related to the purchase of
aeronautical systems;
    
    the possibility of restructuring and consolidation actions beyond those previously
announced by us;
    
    threats and events associated with and efforts to combat terrorism;
    
    the extent to which expenses relating to employee and retiree medical and pension
benefits change;
    
    competitive product and pricing pressures;
    
    our ability to recover from third parties under contractual rights of indemnification for
environmental and other claims arising out of the divestiture of our tire, vinyl and other
businesses;
    
    possible assertion of claims against us on the theory that we, as the former corporate
parent of Coltec Industries Inc, bear some responsibility for the asbestos-related
liabilities of Coltec and its subsidiaries, 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;
    
    the effect of changes in accounting policies;
    
    cumulative catch-up adjustments or loss contract reserves on long-term contracts
accounted for under the percentage of completion method of accounting;
    
    domestic and foreign government spending, budgetary and trade policies;
    
    economic and political changes in international markets where we compete, such as changes
in currency exchange rates, inflation, deflation, recession and other external factors over
which we have no control; and
    
    the outcome of contingencies including completion of acquisitions, divestitures, tax
audits, litigation and environmental remediation efforts.
 51




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   52




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##### Table of Contents



Changes in Internal Control
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  ISSUER PURCHASES OF EQUITY SECURITIES
 (c) Total Number of
    
    
    (d) Maximum NumberShares Purchased as
    
    
    (or Approximate Dollar(a) Total Number
    
    
    
    
    
    
    Part of Publicly
    
    
    Value) of Shares that Mayof Shares
    
    
    (b) Average Price
    
    
    Announced Plans or
    
    
    Yet Be Purchased UnderPeriod
    
    Purchased (1)
    
    
    Paid Per Share
    
    
    Programs (2)
    
    
    the Plans or Programs (2)April 2007
    
    
    29,652
    
    
    $
    51.85
    
    
    
    23,000May 2007
    
    
    942,746
    
    
    
    57.81
    
    
    
    928,000June 2007
    
    
    7,000
    
    
    
    58.34
    
    
    
    7,000Total
    
    
    979,398
    
    
    $
    57.64
    
    
    
    958,000
    
    
    $174 million
 
 (1)
    
    The category includes 21,398 shares delivered to us by employees to pay withholding taxes due
upon vesting of a restricted unit award and to pay the exercise price of employee stock
options.(2)
    
    This balance represents the number of shares that were repurchased under our repurchase
program that was announced on October 24, 2006 (the Program). Under the Program we are
authorized to repurchase up to $300 million of our common stock. Unless terminated earlier by
resolution of our Board of Directors, the Program will expire when we have purchased all
shares authorized for repurchase. 53




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
    
    The eleven nominees for director were elected;
    
    The appointment of Ernst & Young LLP as independent registered public accounting firm
for the year 2007 was ratified; and
    
    The shareholder proposal regarding Pay-For-Superior-Performance was not approved.
  Election of Directors:
 Number of Shares Voted For
    
    Number of Shares Vote WithheldDiane C. Creel
    
    
    112,507,444
    
    
    
    1,656,307George A. Davidson, Jr.
    
    
    110,911,062
    
    
    
    3,252,688Harris E. DeLoach, Jr.
    
    
    112,728,478
    
    
    
    1,435,272James W. Griffith
    
    
    112,194,430
    
    
    
    1,969,320William R. Holland
    
    
    112,687,209
    
    
    
    1,476,542John P. Jumper
    
    
    112,869,236
    
    
    
    1,294,514Marshall O. Larsen
    
    
    111,182,981
    
    
    
    2,980,769Lloyd W. Newton
    
    
    112,639,859
    
    
    
    1,523,891Douglas E. Olesen
    
    
    111,239,256
    
    
    
    2,924,495Alfred M. Rankin, Jr.
    
    
    111,228,546
    
    
    
    2,935,204A. Thomas Young
    
    
    110,930,652
    
    
    
    3,233,098
 Appointment of Independent Registered Public Accounting Firm:
  Shareholder Proposal regarding Pay-For-Superior-Performance:
  54




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Item 6. Exhibits.
  Exhibit 3.1
    
    Restated Certificate of Incorporation of Goodrich Corporation,
filed as Exhibit 3.1 to Goodrich Corporations Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003
(File No. 1-892), is incorporated herein by reference.Exhibit 3.2
    
    By-Laws of Goodrich Corporation, as amended, filed as Exhibit
3.1 to Goodrich Corporations Current Report on Form 8-K
dated July 26, 2007, is incorporated herein by reference. In
accordance with Item 601(b)(4)(iii)(A) of Regulation S-K,
Goodrich Corporation hereby undertakes to furnish to the
Securities and Exchange Commission upon request, a copy of all
instruments defining the rights of holders of long-term debt.Exhibit 10.1
    
    Amendment Number One to the Goodrich Corporation Pension Benefit Restoration Plan.Exhibit 10.2
    
    Amendment Number Two to the Goodrich Corporation Outside Director Phantom Share Plan.Exhibit 10.3
    
    Amendment Number Two to the Goodrich Corporation Outside Director Deferral Plan.Exhibit 15
    
    Letter Re: Unaudited Interim Financial Information.Exhibit 31
    
    Rule 13a-14(a)/15d-14(a) Certifications.Exhibit 32
    
    Section 1350 Certifications.
 55




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##### Table of Contents



SIGNATURE
  July 30, 2007
    GOODRICH CORPORATION/s/ SCOTT E. KUECHLEScott E. KuechleSenior Vice President and Chief Financial Officer/s/ SCOTT A. COTTRILLScott A. CottrillVice President and Controller
(Principal Accounting Officer) 56




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##### Table of Contents



EXHIBIT INDEX
 Exhibit 3.1
    
    Restated Certificate of Incorporation of Goodrich Corporation,
filed as Exhibit 3.1 to Goodrich Corporations Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003
(File No. 1-892), is incorporated herein by reference.Exhibit 3.2
    
    By-Laws of Goodrich Corporation, as amended, filed as Exhibit
3.1 to Goodrich Corporations Current Report on Form 8-K
dated July 26, 2007, is incorporated herein by reference. In
accordance with Item 601(b)(4)(iii)(A) of Regulation S-K,
Goodrich Corporation hereby undertakes to furnish to the
Securities and Exchange Commission upon request, a copy of all
instruments defining the rights of holders of long-term debt.Exhibit 10.1
    
    Amendment Number One to the Goodrich Corporation Pension Benefit Restoration Plan.*Exhibit 10.2
    
    Amendment Number Two to the Goodrich Corporation Outside Director Phantom Share Plan.*Exhibit 10.3
    
    Amendment Number Two to the Goodrich Corporation Outside Director Deferral Plan.*Exhibit 15
    
    Letter Re: Unaudited Interim Financial Information.*Exhibit 31
    
    Rule 13a-14(a)/15d-14(a) Certifications.*Exhibit 32
    
    Section 1350 Certifications.*
 
 *
    
    Submitted electronically herewith. 57