##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 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
    
    34-0252680(State of Incorporation)
    
    (I.R.S. Employer Identification No.)Four Coliseum Centre 
2730 West Tyvola Road 
Charlotte, North Carolina
    
    28217(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (704) 423-7000
 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 6. Exhibits.SIGNATUREExhibit 10.1Exhibit 15Exhibit 31Exhibit 32    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
       
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CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions, except per share amounts)Sales
    
    $
    1,601.7
    
    
    $
    1,395.3
    
    
    $
    4,724.4
    
    
    $
    4,224.0Operating costs and expenses:Cost of sales
    
    
    1,102.9
    
    
    
    1,004.3
    
    
    
    3,293.4
    
    
    
    3,063.8Selling and administrative costs
    
    
    262.6
    
    
    
    217.9
    
    
    
    777.0
    
    
    
    679.21,365.5
    
    
    
    1,222.2
    
    
    
    4,070.4
    
    
    
    3,743.0Operating Income
    
    
    236.2
    
    
    
    173.1
    
    
    
    654.0
    
    
    
    481.0Interest expense
    
    
    (31.5
    )
    
    
    (30.7
    )
    
    
    (93.8
    )
    
    
    (94.0
    )Interest income
    
    
    2.2
    
    
    
    1.3
    
    
    
    5.5
    
    
    
    3.5Other income (expense)  net
    
    
    (12.5
    )
    
    
    (16.3
    )
    
    
    (45.6
    )
    
    
    (47.9
    )Income from continuing operations before income taxes
    
    
    194.4
    
    
    
    127.4
    
    
    
    520.1
    
    
    
    342.6Income tax benefit (expense)
    
    
    (54.2
    )
    
    
    (27.3
    )
    
    
    (156.9
    )
    
    
    37.1Income From Continuing Operations
    
    
    140.2
    
    
    
    100.1
    
    
    
    363.2
    
    
    
    379.7Income (loss) from discontinued operations  net of income taxes
    
    
    (13.4
    )
    
    
    0.6
    
    
    
    (11.8
    )
    
    
    2.9Cumulative effect of change in accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Net Income
    
    $
    126.8
    
    
    $
    100.7
    
    
    $
    351.4
    
    
    $
    383.2Basic Earnings Per ShareContinuing operations
    
    $
    1.12
    
    
    $
    0.80
    
    
    $
    2.90
    
    
    $
    3.05Discontinued operations
    
    
    (0.11
    )
    
    
    0.01
    
    
    
    (0.09
    )
    
    
    0.02Cumulative effect of change in accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net Income
    
    $
    1.01
    
    
    $
    0.81
    
    
    $
    2.81
    
    
    $
    3.08Diluted Earnings Per ShareContinuing operations
    
    $
    1.10
    
    
    $
    0.79
    
    
    $
    2.84
    
    
    $
    3.01Discontinued operations
    
    
    (0.11
    )
    
    
    0.01
    
    
    
    (0.09
    )
    
    
    0.02Cumulative effect of change in accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net Income
    
    $
    0.99
    
    
    $
    0.80
    
    
    $
    2.75
    
    
    $
    3.04Dividends Declared Per Common Share
    
    $
    0.20
    
    
    $
    0.20
    
    
    $
    0.60
    
    
    $
    0.60
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CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
 September 30,
    
    
    December 31,2007
    
    
    2006(Dollars in millions,except share amounts)Current AssetsCash and cash equivalents
    
    $
    314.3
    
    
    $
    201.3Accounts and notes receivable, less allowances for doubtful receivables
($18.7 at September 30, 2007 and $19.4 at December 31, 2006)
    
    
    1,015.5
    
    
    
    897.6Inventories  net
    
    
    1,778.7
    
    
    
    1,520.1Deferred income taxes
    
    
    247.5
    
    
    
    247.3Prepaid expenses and other assets
    
    
    102.4
    
    
    
    91.1Assets from discontinued operations
    
    
    106.9
    
    
    
    124.8Total Current Assets
    
    
    3,565.3
    
    
    
    3,082.2Property, plant and equipment  net
    
    
    1,314.7
    
    
    
    1,256.0Prepaid pension
    
    
    2.7
    
    
    
    2.3Goodwill
    
    
    1,362.0
    
    
    
    1,341.3Identifiable intangible assets  net
    
    
    465.3
    
    
    
    472.0Deferred income taxes
    
    
    43.7
    
    
    
    35.5Other assets
    
    
    765.4
    
    
    
    711.9Total Assets
    
    $
    7,519.1
    
    
    $
    6,901.2Current LiabilitiesShort-term debt
    
    $
    12.2
    
    
    $
    11.8Accounts payable
    
    
    607.2
    
    
    
    576.7Accrued expenses
    
    
    904.7
    
    
    
    798.7Income taxes payable
    
    
    107.4
    
    
    
    212.5Deferred income taxes
    
    
    3.4
    
    
    
    3.3Current maturities of long-term debt and capital lease obligations
    
    
    0.8
    
    
    
    1.4Liabilities from discontinued operations
    
    
    22.9
    
    
    
    29.7Total Current Liabilities
    
    
    1,658.6
    
    
    
    1,634.1Long-term debt and capital lease obligations
    
    
    1,723.1
    
    
    
    1,721.7Pension obligations
    
    
    387.8
    
    
    
    612.1Postretirement benefits other than pensions
    
    
    369.1
    
    
    
    379.1Long-term income taxes payable
    
    
    134.2
    
    
    
    Deferred income taxes
    
    
    167.1
    
    
    
    55.8Other non-current liabilities
    
    
    554.7
    
    
    
    521.7Commitments and contingent liabilities
    
    
    
    
    
    
    Shareholders EquityCommon stock  $5 par valueAuthorized 200,000,000 shares; issued 141,782,788 shares at September 30,
2007 and 139,041,884 shares at December 31, 2006 (excluding
14,000,000 shares held by a wholly owned subsidiary)
    
    
    708.9
    
    
    
    695.2Additional paid-in capital
    
    
    1,425.1
    
    
    
    1,313.3Income retained in the business
    
    
    952.0
    
    
    
    666.5Accumulated other comprehensive income (loss)
    
    
    29.6
    
    
    
    (260.8
    )Common stock held in treasury, at cost (16,864,167 shares at
September 30, 2007 and 14,090,913 shares at December 31, 2006)
    
    
    (591.1
    )
    
    
    (437.5
    )Total Shareholders Equity
    
    
    2,524.5
    
    
    
    1,976.7Total Liabilities And Shareholders Equity
    
    $
    7,519.1
    
    
    $
    6,901.2
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in millions)Operating ActivitiesNet income
    
    $
    351.4
    
    
    $
    383.2Adjustments to reconcile net income to net cash provided by operating activities:(Income) loss from discontinued operations
    
    
    11.8
    
    
    
    (2.9
    )Cumulative effect of change in accounting
    
    
    
    
    
    
    (0.6
    )Restructuring and consolidation:Expenses
    
    
    1.5
    
    
    
    4.4Payments
    
    
    (2.9
    )
    
    
    (4.7
    )Pension and postretirement benefits:Expenses
    
    
    95.6
    
    
    
    98.8Contributions and benefit payments
    
    
    (137.4
    )
    
    
    (126.0
    )Asset impairments
    
    
    
    
    
    
    3.3Depreciation and amortization
    
    
    188.6
    
    
    
    172.3Excess tax benefits related to share-based payment arrangements
    
    
    (11.7
    )
    
    
    (4.2
    )Share-based compensation expense
    
    
    55.3
    
    
    
    36.1Loss on exchange and extinguishment of debt
    
    
    
    
    
    
    2.0Deferred income taxes
    
    
    (11.9
    )
    
    
    (3.2
    )Change in assets and liabilities, net of effects of acquisitions and divestitures:Receivables
    
    
    (93.5
    )
    
    
    (144.7
    )Change in receivables sold, net
    
    
    
    
    
    
    (97.1
    )Inventories, net of pre-production and excess-over-average
    
    
    (120.0
    )
    
    
    (92.3
    )Pre-production and excess-over-average inventories
    
    
    (86.7
    )
    
    
    (100.8
    )Other current assets
    
    
    7.8
    
    
    
    10.0Accounts payable
    
    
    11.8
    
    
    
    36.6Accrued expenses
    
    
    76.8
    
    
    
    28.9Income taxes payable
    
    
    68.3
    
    
    
    (142.4
    )Other non-current assets and liabilities
    
    
    1.3
    
    
    
    (37.2
    )Net Cash Provided By Operating Activities
    
    
    406.1
    
    
    
    19.5Investing ActivitiesPurchases of property, plant and equipment
    
    
    (160.6
    )
    
    
    (152.7
    )Proceeds from sale of property, plant and equipment
    
    
    0.8
    
    
    
    1.7Net Cash Used In Investing Activities
    
    
    (159.8
    )
    
    
    (151.0
    )Financing ActivitiesIncrease (decrease) in short-term debt, net
    
    
    (0.3
    )
    
    
    67.6Loss on exchange or extinguishment of debt
    
    
    
    
    
    
    (4.5
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    512.7Repayment of long-term debt and capital lease obligations
    
    
    (1.1
    )
    
    
    (534.2
    )Proceeds from issuance of common stock
    
    
    78.9
    
    
    
    47.0Purchases of treasury stock
    
    
    (152.5
    )
    
    
    (2.1
    )Dividends
    
    
    (75.9
    )
    
    
    (75.1
    )Excess tax benefits related to share-based payment arrangements
    
    
    11.7
    
    
    
    4.2Distributions to minority interest holders
    
    
    (3.2
    )
    
    
    (2.4
    )Net Cash (Used In) Provided By Financing Activities
    
    
    (142.4
    )
    
    
    13.2Discontinued OperationsNet cash provided by operating activities
    
    
    6.6
    
    
    
    2.5Net cash used in investing activities
    
    
    (1.4
    )
    
    
    (0.9
    )Net cash provided by financing activities
    
    
    
    
    
    
    0.1Net cash provided by discontinued operations
    
    
    5.2
    
    
    
    1.7Effect of exchange rate changes on cash and cash equivalents
    
    
    3.9
    
    
    
    5.4Net increase (decrease) in cash and cash equivalents
    
    
    113.0
    
    
    
    (111.2
    )Cash and cash equivalents at beginning of period
    
    
    201.3
    
    
    
    251.3Cash and cash equivalents at end of period
    
    $
    314.3
    
    
    $
    140.1
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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
  6




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Fair Value Measurement
  Accounting for Income Tax Benefits of 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.
    
    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.
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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Sales:Actuation and Landing Systems
    
    $
    607.8
    
    
    $
    515.8
    
    
    $
    1,764.1
    
    
    $
    1,537.8Nacelles and Interior Systems
    
    
    545.2
    
    
    
    464.2
    
    
    
    1,625.8
    
    
    
    1,472.9Electronic Systems
    
    
    448.7
    
    
    
    415.3
    
    
    
    1,334.5
    
    
    
    1,213.3$
    1,601.7
    
    
    $
    1,395.3
    
    
    $
    4,724.4
    
    
    $
    4,224.0Intersegment sales:Actuation and Landing Systems
    
    $
    8.0
    
    
    $
    6.6
    
    
    $
    21.2
    
    
    $
    19.3Nacelles and Interior Systems
    
    
    5.1
    
    
    
    4.2
    
    
    
    14.2
    
    
    
    12.2Electronic Systems
    
    
    5.9
    
    
    
    8.6
    
    
    
    23.0
    
    
    
    25.2$
    19.0
    
    
    $
    19.4
    
    
    $
    58.4
    
    
    $
    56.7Operating income:Actuation and Landing Systems
    
    $
    73.6
    
    
    $
    42.3
    
    
    $
    182.0
    
    
    $
    103.3Nacelles and Interior Systems
    
    
    143.6
    
    
    
    103.0
    
    
    
    404.7
    
    
    
    321.9Electronic Systems
    
    
    58.7
    
    
    
    56.6
    
    
    
    175.7
    
    
    
    153.2275.9
    
    
    
    201.9
    
    
    
    762.4
    
    
    
    578.4Corporate general and administrative expenses
    
    
    (34.5
    )
    
    
    (23.0
    )
    
    
    (95.9
    )
    
    
    (74.1
    )ERP implementation costs
    
    
    (5.2
    )
    
    
    (5.8
    )
    
    
    (12.5
    )
    
    
    (12.4
    )Pension curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10.9
    )Total operating income
    
    $
    236.2
    
    
    $
    173.1
    
    
    $
    654.0
    
    
    $
    481.0
 September 30,
    
    
    December 31,2007
    
    
    2006Total assets:Actuation and Landing Systems
    
    $
    2,302.9
    
    
    $
    2,062.1Nacelles and Interior Systems
    
    
    2,380.1
    
    
    
    2,148.6Electronic Systems
    
    
    1,992.1
    
    
    
    1,904.3Corporate
    
    
    737.1
    
    
    
    661.4Discontinued Operations
    
    
    106.9
    
    
    
    124.8$
    7,519.1
    
    
    $
    6,901.2
 Note 4. Other Income (Expense)  Net
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Retiree health care expenses related to previously owned businesses
    
    $
    (4.6
    )
    
    $
    (4.5
    )
    
    $
    (13.8
    )
    
    $
    (13.5
    )Loss on exchange and extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.8
    )Expenses related to previously owned businesses
    
    
    (4.8
    )
    
    
    (6.0
    )
    
    
    (16.1
    )
    
    
    (14.0
    )Minority interest and equity in affiliated companies
    
    
    (4.7
    )
    
    
    (3.6
    )
    
    
    (17.6
    )
    
    
    (11.0
    )Other  net
    
    
    1.6
    
    
    
    (2.2
    )
    
    
    1.9
    
    
    
    (4.6
    )Other income (expense)  net
    
    $
    (12.5
    )
    
    $
    (16.3
    )
    
    $
    (45.6
    )
    
    $
    (47.9
    )
  9




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Note 5. Discontinued Operations
     Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Sales  ATS
    
    $
    34.4
    
    
    $
    40.7
    
    
    $
    122.6
    
    
    $
    119.0Before tax income from operations  ATS
    
    $
    0.8
    
    
    $
    1.1
    
    
    $
    3.8
    
    
    $
    3.9Income tax benefit (expense)
    
    
    (0.2
    )
    
    
    (0.4
    )
    
    
    (1.3
    )
    
    
    (1.4
    )Estimated loss on sale of ATS (net of income tax benefit of $37.5)
    
    
    (13.9
    )
    
    
    
    
    
    
    (13.9
    )
    
    
    Insurance settlements  net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.1Liabilities of previously discontinued operations  net of tax
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.4
    )
    
    
    (0.7
    )Income (loss) from discontinued operations
    
    $
    (13.4
    )
    
    $
    0.6
    
    
    $
    (11.8
    )
    
    $
    2.9
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Note 6. Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions, except per share amounts)NumeratorNumerator for basic and diluted earnings
per share  income from continuing
operations
    
    $
    140.2
    
    
    $
    100.1
    
    
    $
    363.2
    
    
    $
    379.7DenominatorDenominator for basic earnings per share
 weighted-average shares
    
    
    125.0
    
    
    
    124.7
    
    
    
    125.2
    
    
    
    124.2Effect of dilutive securities:Stock options, employee stock purchase
plan, restricted shares and restricted
share units
    
    
    2.6
    
    
    
    1.5
    
    
    
    2.5
    
    
    
    1.8Other deferred compensation shares
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.12.7
    
    
    
    1.6
    
    
    
    2.6
    
    
    
    1.9Denominator for diluted earnings per share
 adjusted weighted-average shares and
assumed conversion
    
    
    127.7
    
    
    
    126.3
    
    
    
    127.8
    
    
    
    126.1Per share income from continuing operationsBasic
    
    $
    1.12
    
    
    $
    0.80
    
    
    $
    2.90
    
    
    $
    3.05Diluted
    
    $
    1.10
    
    
    $
    0.79
    
    
    $
    2.84
    
    
    $
    3.01
    Note 7. Sale of Receivables
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Note 8. Inventories
  September 30,
    
    
    December 31,2007
    
    
    2006(Dollars in millions)FIFO or average cost (which approximates current costs):Finished products
    
    $
    328.5
    
    
    $
    317.4In-process
    
    
    1,023.1
    
    
    
    866.7Raw materials and supplies
    
    
    499.8
    
    
    
    416.01,851.4
    
    
    
    1,600.1Less:Reserve to reduce certain inventories to LIFO basis
    
    
    (50.0
    )
    
    
    (48.5
    )Progress payments and advances
    
    
    (22.7
    )
    
    
    (31.5
    )Total
    
    $
    1,778.7
    
    
    $
    1,520.1
   Note 9. Goodwill and Identifiable Intangible Assets
  BusinessBalance
    
    
    Combinations
    
    
    Foreign
    
    
    BalanceDecember 31,
    
    
    Completed or
    
    
    Currency
    
    
    September 30,2006
    
    
    Finalized
    
    
    Translation
    
    
    2007(Dollars in millions)Actuation and Landing Systems
    
    $
    326.3
    
    
    $
    
    
    
    $
    8.9
    
    
    $
    335.2Nacelles and Interior Systems
    
    
    422.9
    
    
    
    
    
    
    
    6.5
    
    
    
    429.4Electronic Systems
    
    
    592.1
    
    
    
    
    
    
    
    5.3
    
    
    
    597.4$
    1,341.3
    
    
    $
    
    
    
    $
    20.7
    
    
    $
    1,362.0
 12




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##### Table of Contents



Note 10. Financing Arrangements
  
    
    The amount borrowed;
    
    The Companys public debt rating by Standard & Poor, Moodys and Fitch; and
    
    At the Companys option, rates tied to the agent banks prime rate or, for U.S. Dollar
and Great Britain Pounds Sterling borrowings, the London interbank offered rate and for
Euro Dollar borrowings, the EURIBO rate.
    13




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##### Table of Contents



Lease Commitments
    Note 11. Pensions and Postretirement Benefits
 Pensions
  U.S. Plans
    
    
    U.K. Plans
    
    
    Other Non-U.S. PlansThree Months
    
    
    Three Months
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Service cost
    
    $
    11.4
    
    
    $
    9.5
    
    
    $
    7.4
    
    
    $
    7.5
    
    
    $
    1.3
    
    
    $
    1.1Interest cost
    
    
    39.5
    
    
    
    39.6
    
    
    
    10.0
    
    
    
    8.5
    
    
    
    1.4
    
    
    
    1.2Expected rate of return on plan assets
    
    
    (47.7
    )
    
    
    (46.3
    )
    
    
    (15.2
    )
    
    
    (12.8
    )
    
    
    (1.6
    )
    
    
    (1.4
    )Amortization of prior service cost
    
    
    1.8
    
    
    
    1.9
    
    
    
    (0.3
    )
    
    
    (0.2
    )
    
    
    
    
    
    
    0.1Amortization of actuarial (gain) loss
    
    
    14.3
    
    
    
    10.2
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.3Periodic benefit cost (income)
    
    
    19.3
    
    
    
    14.9
    
    
    
    1.9
    
    
    
    3.0
    
    
    
    1.4
    
    
    
    1.3Settlements and curtailments (gain) loss
    
    
    6.0
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefit charge (credit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    Net benefit cost (income)
    
    $
    25.3
    
    
    $
    15.0
    
    
    $
    1.9
    
    
    $
    3.3
    
    
    $
    1.4
    
    
    $
    1.3
 14




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##### Table of Contents



U.S. Plans
    
    
    U.K. Plans
    
    
    Other Non-U.S. PlansNine Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Service cost
    
    $
    34.9
    
    
    $
    35.4
    
    
    $
    21.9
    
    
    $
    21.9
    
    
    $
    3.6
    
    
    $
    3.2Interest cost
    
    
    120.0
    
    
    
    115.8
    
    
    
    29.5
    
    
    
    24.8
    
    
    
    4.0
    
    
    
    3.7Expected rate of return on plan assets
    
    
    (146.3
    )
    
    
    (135.7
    )
    
    
    (45.0
    )
    
    
    (37.4
    )
    
    
    (4.5
    )
    
    
    (4.0
    )Amortization of prior service cost
    
    
    5.6
    
    
    
    6.6
    
    
    
    (0.8
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    0.1Amortization of actuarial (gain) loss
    
    
    47.0
    
    
    
    36.4
    
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    0.9Periodic benefit cost (income)
    
    
    61.2
    
    
    
    58.5
    
    
    
    5.6
    
    
    
    8.6
    
    
    
    3.9
    
    
    
    3.9Settlements and curtailments (gain) loss
    
    
    6.0
    
    
    
    11.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefit charge (credit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    Net benefit cost (income)
    
    $
    67.2
    
    
    $
    69.5
    
    
    $
    5.6
    
    
    $
    9.1
    
    
    $
    3.9
    
    
    $
    3.9
   15




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##### Table of Contents



Postretirement Benefits Other Than Pensions
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Service cost
    
    $
    0.4
    
    
    $
    0.6
    
    
    $
    1.4
    
    
    $
    1.3Interest cost
    
    
    5.6
    
    
    
    5.5
    
    
    
    17.1
    
    
    
    15.3Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )Amortization of actuarial (gain) loss
    
    
    1.4
    
    
    
    1.0
    
    
    
    2.2
    
    
    
    1.6Periodic benefit cost
    
    
    7.4
    
    
    
    7.1
    
    
    
    20.6
    
    
    
    18.1Settlements and curtailments (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special termination benefit charge (credit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    7.4
    
    
    $
    7.1
    
    
    $
    20.6
    
    
    $
    18.1
  Three and Nine Months EndedSeptember 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
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Net income
    
    $
    126.8
    
    
    $
    100.7
    
    
    $
    351.4
    
    
    $
    383.2Other comprehensive income (loss):Unrealized foreign currency translation gains (losses) during period
    
    
    51.4
    
    
    
    5.9
    
    
    
    109.6
    
    
    
    81.8Pension/OPEB liability adjustments during the period
    
    
    100.9
    
    
    
    0.4
    
    
    
    127.4
    
    
    
    109.7Gain (loss) on cash flow hedges
    
    
    29.1
    
    
    
    (12.5
    )
    
    
    53.4
    
    
    
    37.6Gain (loss) on certain investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Total comprehensive income
    
    $
    308.2
    
    
    $
    94.5
    
    
    $
    641.8
    
    
    $
    612.2
 16




---



##### Table of Contents



September 30,
    
    
    December 31,2007
    
    
    2006(Dollars in millions)Cumulative unrealized foreign currency translation gains (losses)
    
    $
    358.0
    
    
    $
    248.4Pension/OPEB liability adjustments
    
    
    (436.2
    )
    
    
    (563.6
    )Accumulated gains (losses) on cash flow hedges
    
    
    107.8
    
    
    
    54.4Total accumulated other comprehensive income (loss)
    
    $
    29.6
    
    
    $
    (260.8
    )
  Note 13. Income Taxes
   17




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##### Table of Contents



Note 14. Contingencies
 General
  Environmental
   18




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##### Table of Contents



19




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##### Table of Contents



Asbestos
  Insurance Coverage
     20




---



##### Table of Contents



Liabilities of Divested Businesses
 Asbestos
   Other
  21




---



##### Table of Contents



Aerostructures Long-Term Contracts
  Tax
    Coltec Industries Inc and Subsidiaries
    
    December, 1997  July, 1999
(through date of acquisition)Goodrich Corporation and Subsidiaries
    
    1998-1999 (including Rohr and Coltec)
  22




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##### Table of Contents



Note 15. Guarantees
  Maximum
    
    
    CarryingPotential
    
    
    Amount ofPayment
    
    
    LiabilityEnvironmental remediation indemnification (Note 14)
    
    No limit
    
    $
    16.6Debt and lease payments
    
    $
    2.0
    
    
    $
    Residual value on leases (Note 10)
    
    $
    24.8
    
    
    $
    Letter of credit and bank guarantees
    
    $
    54.5
    
    
    $
    
  Service and Product Warranties
  23




---



##### Table of Contents



(Dollars in millions)Balance at December 31, 2006
    
    $
    160.3Net provisions for warranties issued during the year
    
    
    38.5Net (benefit) provisions for warranties existing at the beginning of the year
    
    
    (7.9
    )Payments
    
    
    (30.5
    )Foreign currency translation
    
    
    5.7Balance at September 30, 2007
    
    $
    166.1
  September 30,
    
    
    December 31,2007
    
    
    2006(Dollars in millions)Short-term liabilities
    
    $
    65.3
    
    
    $
    57.5Long-term liabilities
    
    
    100.8
    
    
    
    102.8Total
    
    $
    166.1
    
    
    $
    160.3
 Note 16. Derivatives and Hedging Activities
  Foreign Currency Contracts
    24




---



##### Table of Contents



Interest Rate Swaps
  Note 17. Share-Based Compensation
    Note 18. Subsequent Event
  25




---



##### 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
   26




---



##### Table of Contents



Commercial and General Aviation Airplane Aftermarket
     Defense and Space
   27




---



##### 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 helicopter products and systems and intelligence, surveillance
and reconnaissance products.
 28




---



##### Table of Contents



Third Quarter 2007 Sales Content by Market Channel
  Airbus Commercial OE
    
    
    14
    %Boeing Commercial OE
    
    
    11
    %Regional and General Aviation Airplane OE
    
    
    8
    %Total Commercial and General Aviation Airplane OE
    
    
    33
    %Large Commercial Airplane Aftermarket
    
    
    29
    %Regional and General Aviation Airplane Aftermarket
    
    
    8
    %Total Commercial and General Aviation Airplane Aftermarket
    
    
    37
    %Total Defense and Space
    
    
    26
    %Other
    
    
    4
    %Total
    
    
    100
    %
 Summary Performance  Third Quarter 2007 as Compared to Third Quarter 2006
 Third Quarter2007
    
    
    2006
    
    
    % Change(Dollars in millions, except diluted EPS)Sales
    
    $
    1,601.7
    
    
    $
    1,395.3
    
    
    
    14.8Segment operating income(1)
    
    $
    275.9
    
    
    $
    201.9
    
    
    
    36.7Percent of sales
    
    
    17.2
    %
    
    
    14.5
    %Income from continuing operations before income taxes
    
    $
    194.4
    
    
    $
    127.4
    
    
    
    52.6Income from continuing operations
    
    $
    140.2
    
    
    $
    100.1
    
    
    
    40.1Net income
    
    $
    126.8
    
    
    $
    100.7
    
    
    
    25.9Effective tax rate
    
    
    27.9
    %
    
    
    21.4
    %Diluted EPS:Continuing operations
    
    $
    1.10
    
    
    $
    0.79
    
    
    
    39.2Net income
    
    $
    0.99
    
    
    $
    0.80
    
    
    
    23.8
 
 (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 increased by approximately 18%;
    
    Regional, business and general aviation airplane original equipment sales increased by
approximately 20%;
    
    Large commercial, regional and general aviation airplane aftermarket sales increased by
approximately 16%; and
    
    Defense and space sales of both original equipment and aftermarket products and services
increased by approximately 9%.
 29




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##### Table of Contents



Increase (Decrease)Before
    
    
    After
    
    
    DilutedTax
    
    
    Tax
    
    
    EPS(Dollars in millions, except diluted EPS)Settlement of customer claims
    
    $
    21.6
    
    
    $
    13.5
    
    
    $
    0.11Changes in estimate on long-term contracts
    
    $
    17.8
    
    
    $
    11.1
    
    
    $
    0.09Higher share-based compensation
    
    $
    (15.3
    )
    
    $
    (9.6
    )
    
    $
    (0.07
    )
 Settlement of customer claims
  Changes in estimate on long-term contracts
  Share-based compensation
  
    
    Approximately $9 million of increased costs resulting from an increase in our share price
and favorable performance against plan targets; and
    
    Approximately $4 million of costs related to the accelerated vesting of the 2007 special
stock options.
 30




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Summary Performance  Nine Months Ended September 30, 2007 as Compared to Nine Months Ended September 30, 2006
 Nine Months Ended,September 302007
    
    
    2006
    
    
    % Change(Dollars in millions, except diluted EPS)Sales
    
    $
    4,724.4
    
    
    $
    4,224.0
    
    
    
    11.8Segment operating income(1)
    
    $
    762.4
    
    
    $
    578.4
    
    
    
    31.8Percent of sales
    
    
    16.1
    %
    
    
    13.7
    %Income from continuing operations before income taxes
    
    $
    520.1
    
    
    $
    342.6
    
    
    
    51.8Income from continuing operations
    
    $
    363.2
    
    
    $
    379.7
    
    
    
    (4.3
    )Net income
    
    $
    351.4
    
    
    $
    383.2
    
    
    
    (8.3
    )Effective tax rate (benefit)(2)
    
    
    30.2
    %
    
    
    (10.8
    )%Diluted EPS:Continuing operations
    
    $
    2.84
    
    
    $
    3.01
    
    
    
    (5.6
    )Net income
    
    $
    2.75
    
    
    $
    3.04
    
    
    
    (9.5
    )
 
 (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 lower effective tax rate for the nine months ended September 30, 2006 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 45 percentage points, or $1.15 per
diluted share.  
    
    Large commercial airplane original equipment sales increased by approximately 7%;
    
    Regional, business and general aviation airplane original equipment sales increased by
approximately 17%;
    
    Large commercial, regional and general aviation airplane aftermarket sales increased by
approximately 17%; and
    
    Defense and space sales of both original equipment and aftermarket products and services
increased by approximately 8%.
  31




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##### Table of Contents



Increase (Decrease)Before
    
    
    After
    
    
    DilutedTax
    
    
    Tax
    
    
    EPS(Dollars in millions, except diluted EPS)Changes in estimate on long-term contracts
    
    $
    41.5
    
    
    $
    25.9
    
    
    $
    0.20Settlement of customer claims
    
    $
    21.6
    
    
    $
    13.5
    
    
    $
    0.11Foreign exchange rate impact, including net monetary asset remeasurement
    
    $
    (19.7
    )
    
    $
    (12.3
    )
    
    $
    (0.10
    )Higher share-based compensation
    
    $
    (19.1
    )
    
    $
    (12.0
    )
    
    $
    (0.09
    )
 Changes in estimate on long-term contracts
  Settlement of customer claims
  Foreign exchange rate impact
  
    
    Approximately $44 million related to unfavorable foreign currency translation of net
costs in currencies other than the U.S. Dollar, partially offset by approximately $21
million of higher net gains on cash flow hedges settled during the nine months ended
September 30, 2007; and
    
    Approximately $3 million of increased net transaction losses relating to re-measuring
U.S. Dollar denominated monetary assets/liabilities into the local functional currency,
offset by approximately $6 million of higher net gains on forward contracts we entered into
to offset the impact of net monetary asset gains/losses.
 Share-based compensation
  
    
    Approximately $20 million of increased costs resulting from an increase in our share
price and favorable performance against plan targets; and
    
    Approximately $8 million of costs related to the 2007 special stock options; partially
offset by
    
    Approximately $10 million of costs that resulted from accelerated expense on awards
granted to employees who were retirement eligible on the grant date in the first quarter of
2006.
 32




---



##### Table of Contents



2007 Outlook
  2007 Outlook
    
    2006 ActualSales
    
    $6.4-$6.5 billion
    
    $5.7 billionDiluted EPS  Income from Continuing Operations
    
    $3.65-$3.70 per share
    
    $3.78 per share*Capital Expenditures
    
    $270-$290 million
    
    $254.6 millionOperating Cash Flow net of Capital Expenditures
    
    60%-75% of income from continuing operations
    
    2% of income from continuing operations**
 
 *
    
    includes a tax benefit of $1.15 related primarily to the Rohr and Coltec tax settlements in
2006.**
    
    includes a non-recurring cash outlay in 2006 of approximately $97 million relating to the
termination of our accounts receivable securitization program and $117 million of tax payments
associated with the Rohr and Coltec tax settlements.     33




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##### Table of Contents



2008 Outlook
  
    
    Large commercial airplane original equipment sales are expected to increase by slightly
more than 20%;
    
    Regional business and general aviation airplane original equipment sales are expected to
increase by about 13%;
    
    Large commercial, regional and general aviation airplane aftermarket sales are expected
to increase by about 8% to 10%; and
    
    Defense and space sales of both original equipment and aftermarket products and services
are expected to increase by about 5% to 8%.
    34




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##### Table of Contents



RESULTS OF OPERATIONS
 Third Quarter 2007 Compared with Third Quarter 2006
 Third Quarter
    
    
    $2007
    
    
    2006
    
    
    Change(Dollars in millions)Sales
    
    $
    1,601.7
    
    
    $
    1,395.3
    
    
    $
    206.4Segment Operating Income
    
    $
    275.9
    
    
    $
    201.9
    
    
    $
    74.0Corporate General and Administrative Costs
    
    
    (34.5
    )
    
    
    (23.0
    )
    
    
    (11.5
    )ERP Implementation Costs
    
    
    (5.2
    )
    
    
    (5.8
    )
    
    
    0.6Total Operating Income
    
    
    236.2
    
    
    
    173.1
    
    
    
    63.1Net Interest Expense
    
    
    (29.3
    )
    
    
    (29.4
    )
    
    
    0.1Other Income (Expense)  Net
    
    
    (12.5
    )
    
    
    (16.3
    )
    
    
    3.8Income Tax (Expense) Benefit
    
    
    (54.2
    )
    
    
    (27.3
    )
    
    
    (26.9
    )Income from Continuing Operations
    
    
    140.2
    
    
    
    100.1
    
    
    
    40.1Income (loss) from Discontinued Operations  Net of Income Taxes
    
    
    (13.4
    )
    
    
    0.6
    
    
    
    (14.0
    )Net Income
    
    $
    126.8
    
    
    $
    100.7
    
    
    $
    26.1
     35




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Nine Months Ended September 30, 2007 Compared with Nine Months Ended September 30, 2006
 Nine Months EndedSeptember 30,
    
    
    $2007
    
    
    2006
    
    
    Change(Dollars in millions)Sales
    
    $
    4,724.4
    
    
    $
    4,224.0
    
    
    $
    500.4Segment Operating Income
    
    $
    762.4
    
    
    $
    578.4
    
    
    $
    184.0Corporate General and Administrative Costs
    
    
    (95.9
    )
    
    
    (74.1
    )
    
    
    (21.8
    )ERP Implementation Costs
    
    
    (12.5
    )
    
    
    (12.4
    )
    
    
    (0.1
    )Pension Curtailment
    
    
    
    
    
    
    (10.9
    )
    
    
    10.9Total Operating Income
    
    
    654.0
    
    
    
    481.0
    
    
    
    173.0Net Interest Expense
    
    
    (88.3
    )
    
    
    (90.5
    )
    
    
    2.2Other Income (Expense)  Net
    
    
    (45.6
    )
    
    
    (47.9
    )
    
    
    2.3Income Tax (Expense) Benefit
    
    
    (156.9
    )
    
    
    37.1
    
    
    
    (194.0
    )Income from Continuing Operations
    
    
    363.2
    
    
    
    379.7
    
    
    
    (16.5
    )Income (loss) from Discontinued Operations  Net of Income Taxes
    
    
    (11.8
    )
    
    
    2.9
    
    
    
    (14.7
    )Cumulative Effect of Change in Accounting
    
    
    
    
    
    
    0.6
    
    
    
    (0.6
    )Net Income
    
    $
    351.4
    
    
    $
    383.2
    
    
    $
    (31.8
    )
      36




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##### Table of Contents



BUSINESS SEGMENT PERFORMANCE
   
    
    The Actuation and Landing Systems segment provides systems, components and related
services pertaining to aircraft taxi, take-off, flight control, landing and stopping, as
well as engine components, including fuel delivery systems and rotating assemblies.
    
    The Nacelles and Interior Systems segment produces products and provides maintenance,
repair and overhaul services associated with aircraft engines, including thrust reversers,
cowlings, nozzles and their components, and aircraft interior products, including slides,
seats, cargo and lighting systems.
    
    The Electronic Systems segment produces a broad array of systems and components that
provide flight performance measurements, flight management information, engine controls,
fuel controls, electrical power systems, safety data, and reconnaissance and surveillance
systems.
  37




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Third Quarter 2007 Compared with Third Quarter 2006
 Third Quarter
    
    
    Increase/
    
    
    %
    
    
    % of Sales2007
    
    
    2006
    
    
    (Decrease)
    
    
    Change
    
    
    2007
    
    
    2006NET CUSTOMER SALESActuation and Landing Systems
    
    $
    607.8
    
    
    $
    515.8
    
    
    $
    92.0
    
    
    
    17.8Nacelles and Interior Systems
    
    
    545.2
    
    
    
    464.2
    
    
    
    81.0
    
    
    
    17.4Electronic Systems
    
    
    448.7
    
    
    
    415.3
    
    
    
    33.4
    
    
    
    8.0$
    1,601.7
    
    
    $
    1,395.3
    
    
    $
    206.4
    
    
    
    14.8SEGMENT OPERATING INCOMEActuation and Landing Systems
    
    $
    73.6
    
    
    $
    42.3
    
    
    $
    31.3
    
    
    
    74.0
    
    
    
    12.1
    
    
    
    8.2Nacelles and Interior Systems
    
    
    143.6
    
    
    
    103.0
    
    
    
    40.6
    
    
    
    39.4
    
    
    
    26.3
    
    
    
    22.2Electronic Systems
    
    
    58.7
    
    
    
    56.6
    
    
    
    2.1
    
    
    
    3.7
    
    
    
    13.1
    
    
    
    13.6$
    275.9
    
    
    $
    201.9
    
    
    $
    74.0
    
    
    
    36.7
    
    
    
    17.2
    
    
    
    14.5
 Actuation and Landing Systems:
 
    
    Higher large commercial airplane OE sales of approximately $51 million, primarily in our
landing gear and actuation business units;
    
    Higher military OE and aftermarket sales of approximately $15 million, primarily in our
actuation and aircraft wheels and brakes business units; and
    
    Higher regional and business OE and aftermarket sales of approximately $13 million,
primarily in our landing gear, aircraft wheels and brakes and engine components business
units.
    
    Higher large commercial airplane aftermarket sales of approximately $4 million, primarily
in our landing gear and actuation business units;
  
    
    Higher sales volume and favorable product mix across most business units, which resulted
in higher income of approximately $17 million;
    
    Settlement of claims with a customer which resulted in higher income of approximately $15
million; and
    
    Higher pricing net of increased costs across most business units, which resulted in
higher income of approximately $4 million; partially offset by
    
    Unfavorable foreign exchange impact of approximately $4 million.
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Nacelles and Interior Systems:
 
    
    Higher commercial airplane aftermarket sales, including spare parts and MRO volume, of
approximately $63 million, primarily in our aerostructures and interiors business units;
    
    Higher regional, business, and general aviation aircraft OE sales, primarily from our
aerostructures business unit, of approximately $8 million; and
    
    Higher large commercial OE sales, primarily from our aerostructures business unit, of
approximately $8 million.
  
    
    Higher sales volume, primarily in our aerostructures and interiors business units, which
resulted in higher income of approximately $48 million;
    
    Favorable changes in estimates for certain long-term contracts at our aerostructures
business unit, resulting in higher income of approximately $13 million; and
    
    Settlement of claims with a customer which resulted in higher income of approximately $7
million; partially offset by
    
    Higher costs of $26 million, primarily related to research and development expenses in
our aerostructures and interiors business units.
 Electronic Systems:
 
    
    Higher defense and space OE and aftermarket sales of approximately $15 million across all
of our business units; and
    
    Higher regional and general aviation airplane OE and aftermarket sales of approximately
$12 million in our sensor and integrated systems and engine control and electrical power
business units.
  
    
    Higher sales volume and favorable product mix which resulted in higher operating income
of approximately $15 million; partially offset by
    
    Higher manufacturing costs of approximately $13 million, primarily in our sensors and
integrated systems and engine control and electrical power business units.
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Nine Months Ended September 30, 2007 Compared with Nine Months Ended September 30, 2006
 Nine Months EndedSeptember 30,
    
    
    Increase/
    
    
    %
    
    
    % of Sales2007
    
    
    2006
    
    
    (Decrease)
    
    
    Change
    
    
    2007
    
    
    2006NET CUSTOMER SALESActuation and Landing Systems
    
    $
    1,764.1
    
    
    $
    1,537.8
    
    
    $
    226.3
    
    
    
    14.7Nacelles and Interior Systems
    
    
    1,625.8
    
    
    
    1,472.9
    
    
    
    152.9
    
    
    
    10.4Electronic Systems
    
    
    1,334.5
    
    
    
    1,213.3
    
    
    
    121.2
    
    
    
    10.0$
    4,724.4
    
    
    $
    4,224.0
    
    
    $
    500.4
    
    
    
    11.8SEGMENT OPERATING INCOMEActuation and Landing Systems
    
    $
    182.0
    
    
    $
    103.3
    
    
    $
    78.7
    
    
    
    76.2
    
    
    
    10.3
    
    
    
    6.7Nacelles and Interior Systems
    
    
    404.7
    
    
    
    321.9
    
    
    
    82.8
    
    
    
    25.7
    
    
    
    24.9
    
    
    
    21.9Electronic Systems
    
    
    175.7
    
    
    
    153.2
    
    
    
    22.5
    
    
    
    14.7
    
    
    
    13.2
    
    
    
    12.6$
    762.4
    
    
    $
    578.4
    
    
    $
    184.0
    
    
    
    31.8
    
    
    
    16.1
    
    
    
    13.7
 Actuation and Landing Systems:
 
    
    Higher large commercial airplane OE sales of approximately $91 million, primarily in our
landing gear business unit;
    
    Higher large commercial airplane aftermarket sales of approximately $51 million,
primarily in our landing gear, aircraft wheels and brakes and actuation business units;
    
    Higher regional and business OE and aftermarket sales of approximately $41 million,
primarily in our aircraft wheels and brakes, landing gear and engine components business
units; and
    
    Higher military OE and aftermarket sales of approximately $24 million, primarily in our
actuation and aircraft wheels and brakes business units.
  
    
    Higher sales volume and favorable product mix across all business units, which resulted
in higher income of approximately $43 million;
    
    Higher operating income of approximately $36 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
    
    Settlement of claims with a customer which resulted in higher income of approximately $15
million; partially offset by
    
    Unfavorable foreign exchange impact of approximately $14 million.
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Nacelles and Interior Systems:
 
    
    Higher large commercial airplane aftermarket sales, including spare parts and MRO volume
of approximately $142 million, primarily in our aerostructures and interiors business units;
    
    Higher large commercial airplane OE sales of approximately $32 million, primarily in our
aerostructures business unit;
    
    Higher regional, business, and general aviation aircraft OE sales primarily from our
aerostructures business of approximately $18 million; and
    
    Higher defense OE and aftermarket sales of approximately $14 million, primarily in our
interiors business unit.
   
    
    Higher sales volume, primarily in our aerostructures and interiors business units, which
resulted in higher income of approximately $102 million;
    
    Favorable changes in estimates for certain long-term contracts at our aerostructures
business unit, resulting in higher income of approximately $27 million; and
    
    Settlement of claims with a customer which resulted in higher income of approximately $7
million; partially offset by
    
    Higher costs of approximately $50 million, primarily related to research and development
and selling, general and administrative expenses in our aerostructures and interiors
business units.
 Electronic Systems:
 
    
    Higher defense and space OE and aftermarket sales of approximately $52 million in our
sensors and integrated systems and engine control and electrical power business units;
    
    Higher regional and general aviation airplane OE and aftermarket sales of approximately
$41 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 $14 million in our
sensors and integrated systems and engine controls and electrical power business units; and
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
    
    Higher commercial OE and aftermarket sales of approximately $14 million in our engine
control and electrical power business unit.
  
    
    Higher sales volume and pricing and favorable product mix across most of our business
units, which resulted in higher income of approximately $49 million; partially offset by
    
    Higher costs of approximately $25 million, primarily in our sensors and integrated
systems and engine control and electrical power business units; and
    
    Unfavorable foreign exchange impact of approximately $3 million.
 LIQUIDITY AND CAPITAL RESOURCES
  Cash
  Credit Facilities
  
    
    $500 million committed global revolving credit facility that expires in May 2012, of
which $442.8 million was available as of September 30, 2007; and
    
    $75 million of uncommitted domestic money market facilities and $175.4 million of
uncommitted and committed foreign working capital facilities with various banks to meet
short-term borrowing requirements, of which $236.4 million was available as of September 30,
2007.
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Off-Balance Sheet Arrangements
 Lease Commitments
    Sale of Receivables
  Derivatives
  
    
    Foreign Currency Contracts Designated as Cash Flow Hedges:Our contracts had a notional
amount of $1,960.1 million, fair value of $168.1 million and maturity dates ranging from
October 2007 to December 2011. The amount of accumulated other comprehensive income that would
be reclassified into earnings in the next 12 months was a gain of $69.4 million. During the
third quarter of 2007 and 2006, we realized net gains of $19.7 million and $9.1 million,
respectively, related to contracts that settled. During the nine months ended September 30,
2007 and 2006, we realized net gains of $50.3 million and $29.7 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 $241.7 million, which mature on a monthly basis with
maturity dates ranging from October 2007 to December 2011. During the third quarter of 2007,
we realized a net gain of $5.5 million to a net gain of $0.3 million during the third quarter
of 2006. During the nine months ended September 30, 2007, we realized a net gain of $6 million
compared to a net gain of $0.1 million during the nine months ended September 30, 2006.
 43




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
    
    Interest Rate Swaps Designated as Fair Value Hedges:Our contracts had a notional amount of
$193 million, a fair value of $0.6 million net liability/loss and maturity dates ranging from
April 2008 to July 2016.
 Contractual Obligations and Other Commercial Commitments
  CASH FLOW
  Nine Months Ended September 30,
    
    
    $2007
    
    
    2006
    
    
    Change(Dollars in millions)Operating activities of continuing operations
    
    $
    406.1
    
    
    $
    19.5
    
    
    $
    386.6Investing activities of continuing operations
    
    $
    (159.8
    )
    
    $
    (151.0
    )
    
    $
    (8.8
    )Financing activities of continuing operations
    
    $
    (142.4
    )
    
    $
    13.2
    
    
    $
    (155.6
    )Discontinued operations
    
    $
    5.2
    
    
    $
    1.7
    
    
    $
    3.5
 Nine Months Ended September 30, 2007 as Compared to Nine Months Ended September 30, 2006
 Operating Activities of Continuing Operations
  
    
    Increased before tax income of approximately $178 million;
    
    A non-recurring cash outlay in 2006 of approximately $97 million relating to the
termination of our accounts receivable securitization program; and
    
    Non-recurring tax payments in 2006 of $117 million associated with the Rohr and Coltec
tax settlements; partially offset by
    
    Increased pension plan contributions of approximately $11 million in 2007.
  44




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Investing Activities of Continuing Operations
   Financing Activities of Continuing Operations
  
    
    Purchases of our common stock during the nine months ended September 30, 2007 totaling
$152.5 million, primarily in conjunction with the share repurchase program announced on
October 24, 2006;
    
    Repayments of short-term debt totaling $0.3 million during the nine months ended
September 30, 2007, as compared to increased short-term debt of $67.6 million during the
nine months ended September 30, 2006; partially offset by
    
    An increase of $31.9 million of proceeds from the issuance of our common stock, primarily
from the exercises of share-based compensation awards, to $78.9 million during the nine
months ended September 30, 2007 as compared to $47 million for the nine months ended
September 30, 2006; and
    
    The cash premiums of $20.5 million we paid in connection with the exchange of $533.3
million principal amount of our long-term notes for similar notes of longer duration during
the nine months ended September 30, 2006.
  45




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Discontinued Operations
  CONTINGENCIES
 General
  Environmental
   46




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47




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##### Table of Contents



Asbestos
  Insurance Coverage
     48




---



##### Table of Contents



Liabilities of Divested Businesses
 Asbestos
   Other
  Guarantees
  49




---



##### Table of Contents



Aerostructures Long-Term Contracts
  Tax
    Coltec Industries Inc and Subsidiaries
    
    December, 1997  July, 1999
(through date of acquisition)Goodrich Corporation and Subsidiaries
    
    1998-1999 (including Rohr and Coltec)
  50




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NEW ACCOUNTING STANDARDS NOT YET ADOPTED
 Fair Value Option for Financial Assets and Financial Liabilities
  Fair Value Measurement
  51




---



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Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards
  Accounting for Postretirement Benefits Associated with Split-Dollar Life Insurance
  CRITICAL ACCOUNTING POLICIES
  52




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Contract Accounting-Percentage of Completion
 Revenue Recognition
   
    
    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
  53




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Income Taxes
  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;
 54




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
    
    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
  Entry Fees
  55




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Sales Incentives
  Flight Certification Costs
  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.
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Pension and Postretirement Benefits Other Than Pensions
  FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
   
    
    the closing of the transaction for the sale of ATS on the terms contained in the
agreement;
    
    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, including
delays or cancellations associated with the Boeing 787 Dreamliner and the Airbus A380
aircraft programs;
    
    successful development of products and advanced technologies;
 57




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##### Table of Contents




    
    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 or tax legislation;
    
    cumulative catch-up adjustments or loss contract reserves on long-term contracts
accounted for under the percentage of completion method of accounting;
    
    domestic and foreign government spending, budgetary and trade policies;
    
    economic and political changes in international markets where we compete, such as changes
in currency exchange rates, inflation, 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.
 58




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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  59




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Changes in Internal Control
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  ISSUER PURCHASES OF EQUITY SECURITIES
 (d) Maximum Number(or ApproximateDollarValue) of Shares(c) Total Number of
    
    that MayShares Purchased as
    
    Yet Be Purchased(a) Total Number
    
    
    
    
    
    Part of Publicly
    
    Underof Shares
    
    (b) Average Price
    
    Announced Plans or
    
    the Plans orPeriod
    
    Purchased (1)
    
    Paid Per Share
    
    Programs (2)
    
    Programs (2)July 2007
    
    
    230,195
    
    
    $
    62.65
    
    
    
    230,000August 2007
    
    
    420,855
    
    
    
    58.75
    
    
    
    420,600September 2007
    
    
    1,414
    
    
    
    63.29
    
    
    
    Total
    
    
    652,464
    
    
    
    60.14
    
    
    
    650,600
    
    
    $135 million
 
 (1)
    
    The category includes 1,864 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. 
 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 Three to the Goodrich Corporation Outside Director Phantom Share Plan.Exhibit 15
    
    Letter Re: Unaudited Interim Financial Information.Exhibit 31
    
    Rule 13a-14(a)/15d-14(a) Certifications.Exhibit 32
    
    Section 1350 Certifications.
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SIGNATURE
  October 26, 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) 62




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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 Three to the Goodrich Corporation Outside Director Phantom Share 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. 63