Q1 2010 Earnings Call Transcript
April 22, 2010 10:00 am ET
Paul Gifford – VP, IR
Marshall Larsen – Chairman, President and CEO
Scott Kuechle – EVP and CFO
Troy Lahr – Stifel Nicolaus
Doug Harned – Sanford Bernstein
Robert Stallard – Macquarie
Cai von Rumohr – Cowen & Co.
Peter Arment – Broadpoint Gleacher
Joseph Nadol – JP Morgan
Carter Copeland – Barclays Capital
Howard Rubel – Jefferies & Co.
Heidi Wood – Morgan Stanley
David Strauss – UBS
Sam Pearlstein – Wells Fargo Securities
Ken Herbert – Wedbush
Eric Hugel – Stevens
Noah Poponak – Goldman Sachs
Carter Leake – Davenport & Co.
Ron Epstein – Merrill Lynch
George Shapiro – Access 342
Previous Statements by GR
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Good day everyone and welcome to the Goodrich first quarter 2010 earnings release results conference call. Today’s call is being recorded. The press has been invited to participate in today’s conference in a listen-only mode. At this time for opening remarks and introductions I would like to turn the call over to your Vice President of Investor Relations, Mr. Paul Gifford; please go ahead, sir.
Thank you, and thank you for joining today as we discuss our first quarter 2010 results. In the room with me today are Marshall Larsen, our Chairman, President and CEO; and Scott Kuechle, our CFO.
We will start with brief prepared remarks followed by Q&A. The presentation is available on our website www.goodrich.com, which together with our press release provides the basis for most of our remarks. Before we start, let me remind you that today’s remarks include forward-looking statements that involve risks and uncertainties and actual results could differ materially from those projected in the forward-looking statements.
The risks and uncertainties are detailed from time-to-time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. They are also detailed in today’s earnings press release. I urge you to read them carefully.
This conference call is being web cast and replays will be available at our internet site beginning this afternoon. Once again we ask that callers limit themselves to one question each, so that we can have time to allow all of you to ask your questions. If you have further unanswered questions, you can get back into the queue and ask another question time permitting.
Now I’ll turn the call over to Marshall, who will provide with you an overview of our first quarter 2010 results and our updated full year outlook for 2010.
Thanks, Paul and good morning everyone. I assume you’ve all had the opportunity to review today’s earnings release and the related presentation. There’s a lot of information in both these documents that you’ll find helpful as you think about Goodrich. So, rather than spend all of my prepared remarks on the information already contained in the press release, today I will only spend a few minutes on our first quarter results and our outlook for 2010.
Then I’ll focus on trends and indicators of what we are seeing in our markets right now and what we think those trends mean for Goodrich. Let’s start with a quick overview of our first quarter results and our outlook for the year.
Our first quarter results were consistent with our expectations. Earnings per share of $0.87 were solidly operational, and were impacted by tax expense of approximately $0.12 per share higher than our prior outlook for the full year tax rate. Specifically, we incurred additional tax expense of $0.08 in the quarter related to the passage of the healthcare reform legislation, and additional expense of $0.02 per share related to delays in extending the R&D tax credit.
Our first quarter 2010 sales were nearly the same as our first quarter 2009 sales. Large commercial original equipment market channel experienced a sales increase of 12%, which was mostly attributable to the impact of the Boeing strike on quarter one 2009 sales. Our regional business and general aviation original equipment sales decreased by about 31% compared to the first quarter of 2009.
Sales in this market channel declined abruptly in the first three quarters of 2009, stabilized in the fourth quarter, and we experienced sequential growth in quarter one of 2010. Sales in our commercial aftermarket channel decreased 10% in the first quarter of 2010 compared to the first quarter of 2009. However, three of our eight commercial businesses reported higher aftermarket sales in the first quarter 2010 compared to the first quarter of 2009.
Sequentially, commercial aftermarket sales were 9% higher in the first quarter 2010 than during the fourth quarter of 2009 with seven of our eight commercial businesses recording higher aftermarket sales in Q1 2010 than Q4 of 2009.
Our defense and space sales exhibited strong growth in the first quarter of 2010, increasing by 13% compared to the first quarter of 2009. Our acquisition of AIS contributed 8% of this growth, in organic sales about 5%, driven primarily by strong sales in our sensors and integrated systems business, in our intelligence, surveillance and reconnaissance business.
In the first quarter 2010, we achieved segment operating income margins of 15.3% compared to 17.2% in the first quarter of 2009. Sequentially, segment operating income margins were more than 1% higher than the fourth quarter of 2009. The sequential improvement was due to higher aftermarket sales and continuing emphasis on cost containment.
Net cash provided by operating activities minus capital expenditures for the first quarter 2010 was $9 million. During the first quarter 2010, we contributed $105 to our worldwide pension plans compared to contributions of $8 million in the first quarter of 2009. Excluding the first quarter 2010 pension contribution, net cash provided by operating activities, minus capital expenditures, was more than 100% of net income.