Commercial, Regional, Business and General Aviation Airplane Aftermarket The commercial, regional, business and general aviation airplane aftermarket channel includes sales of products and services for existing commercial and general aviation airplanes, primarily to airlines and package carriers around the world.
The key growth drivers in this channel include worldwide passenger capacity growth measured by Available Seat Miles (ASM) and the size, type and activity levels of the worldwide airplane fleet. Other important factors affecting growth in this market channel are the age and types of the airplanes in the fleet, fuel prices, Gross Domestic Product (GDP) trends in countries and regions around the world and domestic and international air freight activity.
Capacity in the global airline system, as measured by ASMs, is expected to decrease 5% to 8% in 2009. ASM growth could deteriorate further if airlines choose to fly their in-service airplanes less frequently due to high fuel prices, decreased demand and other factors including the downturn of the global economy.
While we have significant product content on most of the airplane models that are currently in service, we enjoy the benefit of having excellent positions on the newer, more fuel-efficient airplanes currently in service. Even though many airlines have announced that they will remove some of their older airplanes from their fleets, we do not expect these removals to have a significant impact on our results in 2009.
Defense and Space
Worldwide defense and space sales include sales to prime contractors such as Boeing, Northrop Grumman, Lockheed Martin, the U.S. Government and foreign companies and governments.
The key growth drivers in this channel include the level of defense spending by the U.S. and foreign governments, the number of new platform starts, the level of military flight operations and the level of upgrade, overhaul and maintenance activities associated with existing platforms.
The market for our defense and space products is global, and is not dependent on any single program, platform or customer. We anticipate fewer new fighter and transport aircraft platform starts over the next several years. We also anticipate that the introduction of the F-35 Lightning II and new helicopter platforms, along with upgrades on existing defense and space platforms, will provide long-term growth opportunities in this market channel. Additionally, we are participating in, and developing new products for, the rapidly expanding homeland security and intelligence, surveillance and reconnaissance sectors, which should further strengthen our position in this market channel.

Long-term Sustainable Growth
We believe that we are well positioned to continue to grow overall sales due to:
• 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 Pratt & Whitney PurePowerδ PW1000G, the Dassault Falcon 7X and the Lockheed Martin F-35 Lightning II;

• The large installed base of commercial airplanes and our strong positions on newer, more fuel-efficient airplanes, 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 (MRO) opportunities for our systems and components, particularly in Europe, Asia and the Middle East, where we have expanded 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.

First Quarter 2009 Sales Content by Market Channel During the first quarter 2009, approximately 94% of our sales were from our three primary market channels described above. Following is a summary of the percentage of sales by market channel:

Airbus Commercial OE                                                            17 %
Boeing Commercial OE                                                             8 %
Regional, Business and General Aviation Airplane OE                              8 %

Total Commercial, Regional, Business and General Aviation Airplane OE           33 %

Large Commercial Airplane Aftermarket                                           28 %
Regional, Business and General Aviation Airplane Aftermarket                     6 %

Total Commercial, Regional, Business and General Aviation Airplane
Aftermarket                                                                     34 %

Total Defense and Space                                                         27 %

Other                                                                            6 %

Total                                                                          100 %

Results of Operations - First Quarter 2009 as Compared to First Quarter 2008

                                                        First Quarter                     $              %
                                                  2009                 2008            Change         Change
                                                         (Dollars in millions, except diluted EPS)
Sales                                         $    1,695.9         $    1,745.0        $ (49.1 )          2.8

Segment operating income (1)                  $      291.9         $      301.8        $  (9.9 )          3.3
Corporate general and administrative
costs                                                (24.1 )              (27.3 )          3.2           11.7

Total operating income                               267.8                274.5           (6.7 )          2.4
Net interest expense                                 (28.2 )              (27.7 )         (0.5 )          1.8
Other income (expense) - net                          (4.4 )               (9.8 )          5.4           55.1

Income from continuing operations before
income taxes                                         235.2                237.0           (1.8 )          0.8
Income tax expense                                   (61.9 )              (78.9 )         17.0           21.5

Income from continuing operations                    173.3                158.1           15.2            9.6
Income from discontinued operations                    0.5                  4.3           (3.8 )         88.4

Consolidated net income                              173.8                162.4           11.4            7.0
Net income attributable to
noncontrolling interests (2)                          (4.0 )               (4.5 )          0.5           11.1

Net income attributable to Goodrich           $      169.8         $      157.9        $  11.9            7.5

Effective tax rate                                    26.3 %               33.3 %

Diluted EPS: (3)
Continuing operations                         $       1.35         $       1.20        $  0.15           12.5

Net income attributable to Goodrich           $       1.35         $       1.23        $  0.12            9.8

(1) We measure each reporting segment's profit based upon operating income. Accordingly, we do not allocate net interest expense, other income (expense) - net and income taxes to our reporting segments. The company-wide Enterprise Resource Planning (ERP) implementation costs that were not directly associated with a specific business were not allocated to 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) On January 1, 2009, we adopted Statement of Financial Accounting Standards No. 160. See Note 2, "New Accounting Standards" to our condensed consolidated financial statements.

(3) On January 1, 2009, we adopted Financial Accounting Standards Board Staff Position No. EITF 03-6-1. See Note 2, "New Accounting Standards" to our condensed consolidated financial statements.

Sales
The sales decrease in the first quarter 2009 as compared to the first quarter 2008 was driven by changes in each of our major market channels as follows:
• Large commercial airplane original equipment sales decreased by approximately 7%;

• Regional, business and general aviation airplane original equipment sales decreased by approximately 2%; and

• Large commercial, regional, business and general aviation airplane aftermarket sales decreased by approximately 8%; partially offset by

• Defense and space sales of both original equipment and aftermarket products and services increased by approximately 11%.

Segment operating income
See discussion in the "Business Segment Performance" section. Corporate general and administrative costs Corporate general and administrative costs decreased primarily due to reductions in discretionary spending and favorable foreign exchange partially offset by higher share-based compensation.
Other income (expense) - net
Other income (expense) - net decreased for the first quarter 2009 as compared to the first quarter 2008, primarily as a result of lower expenses for retiree health expenses for previously owned businesses of approximately $4 million. Income from continuing operations
In addition to the items described above, income from continuing operations during the first quarter 2009 as compared to the first quarter 2008 was also impacted by the following items:

                                                                          Increase (Decrease)
                                                           Before               After                Diluted
                                                            Tax                  Tax                   EPS
                                                               (Dollars in millions, except diluted EPS)
Lower effective tax rate                                $          -         $       16.5         $         0.13

Higher pension expense                                  $      (28.4 )       $      (18.0 )       $        (0.15 )

Changes in estimates on long-term contracts             $      (34.9 )       $      (21.3 )       $        (0.16 )

Lower effective tax rate
For the first quarter of 2009 we reported an effective tax rate of 26.3% as compared to 33.3% in the first quarter of 2008. The decrease in the effective tax rate was primarily due to a favorable adjustment to state tax reserves (see "Contingencies" section).
Higher pension expense
The increase in pension expense was primarily due to the investment losses of our plan assets in 2008 partially offset by a higher discount rate. Changes in estimates on long-term contracts During the first quarter 2009 and 2008, we revised estimates on certain of our long-term contracts, primarily in our aerostructures and aircraft wheels and brakes business units. These changes in estimates resulted in lower income of approximately $35 million in the first quarter of 2009 compared to the first quarter of 2008.
Income from discontinued operations
On March 3, 2008, we sold a previously discontinued business for a gain of $6.1 million.

2009 OUTLOOK
We expect the following approximate results for the years ending December 31,
2009:

                                                           2009 Outlook
    Sales                                            $6.9 billion
    Diluted EPS - Net Income                         $4.50 to $4.75 per share
    Capital Expenditures                             $220 to $240 million
    Operating Cash Flow minus Capital Expenditures   Exceed 75% of net income

Full year 2009 sales expectations are approximately $6.9 billion, compared with prior expectations of $7.1 to $7.2 billion reported in our 2008 Annual Report on Form 10-K. Net income per diluted share is expected to be in a range of $4.50 to $4.75, compared with prior expectations of $4.50 to $4.90. These expectations reflect our updated sales expectations, improved performance from cost containment initiatives, a lower effective tax rate and the expected resolution of certain non-operating items.
Our 2009 outlook assumes, among other factors:
• A full-year effective tax rate of 30% to 31%; and

• Higher pre-tax pension expense of $103 million compared to 2008, or $0.52 per diluted share. The higher pension expense incorporates our return on U.S. plan assets of approximately negative 19% in 2008 and the lowering of the long-term U.S. rate of return on assets to 8.75% for 2009 partially offset by a 2009 U.S. discount rate of approximately 6.5% compared to a rate of 6.3% for 2008.

Sales
Our current market assumptions, for each of our major market channels, for the full year 2009 outlook, compared with the full year 2008, include the following:
• Large commercial airplane OE sales are expected to be approximately flat, based on the latest 2009 delivery estimates by Boeing and Airbus and including any impact of the recent 2010 production rate adjustments announced by Boeing;

• Regional, business and general aviation airplane OE sales are expected to decrease by slightly more than 20%;

• Large commercial, regional, business and general aviation airplane aftermarket sales are expected to decrease by 5% to 8%. This outlook includes double-digit decreases in sales in support of freighters and regional, business and general aviation airplanes. This outlook also assumes that worldwide ASMs will decrease by approximately 5% to 8%; and

• Defense and space sales of both OE and aftermarket products and services are expected to increase by approximately 8%.

Cash Flow
We continue to expect net cash provided by operating activities, minus capital expenditures to exceed 75% of net income. Our outlook reflects a continuation of investments to support the current schedule for the Boeing 787 Dreamliner and Airbus A350 XWB airplane programs, and low cost country manufacturing and productivity initiatives that are expected to enhance margins over the near and long-term. We now expect capital expenditures for 2009 to be in a range of $220 million to $240 million, compared to the prior outlook of $230 million to $270 million.
BUSINESS SEGMENT PERFORMANCE
Our three business segments are as follows:
• The Actuation and Landing Systems segment provides systems, components and related services pertaining to aircraft taxi, take-off, flight control, landing and stopping, and 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.

We measure each reporting segment's profit based upon operating income. Accordingly, we do not allocate net interest expense, other income (expense) - net and income taxes to the reporting segments. The company-wide ERP implementation costs that were not directly associated with a specific business were not allocated to the segments. The accounting policies of the reportable segments are the same as those for our condensed consolidated financial statements. For a reconciliation of total segment operating income to total operating income, see Note 3, "Business Segment Information" to our condensed consolidated financial statements.
First Quarter 2009 Compared with First Quarter 2008

                                 First Quarter                                                      % of Sales
                                                              Increase/            %
                             2009             2008           (Decrease)         Change          2009          2008
                                       (Dollars in millions)
NET CUSTOMER SALES
Actuation and Landing
Systems                    $   612.7        $   682.1        $     (69.4 )         10.2
Nacelles and Interior
Systems                        632.2            620.5               11.7            1.9
Electronic Systems             451.0            442.4                8.6            1.9

                           $ 1,695.9        $ 1,745.0        $     (49.1 )          2.8

SEGMENT OPERATING
INCOME
Actuation and Landing
Systems                    $    76.1        $    74.1        $       2.0            2.7          12.4          10.9
Nacelles and Interior
Systems                        148.7            178.8              (30.1 )         16.8          23.5          28.8
Electronic Systems              67.1             48.9               18.2           37.2          14.9          11.1

                           $   291.9        $   301.8        $      (9.9 )          3.3          17.2          17.3

Actuation and Landing Systems: Actuation and Landing Systems segment sales for the first quarter 2009 decreased from the first quarter 2008 primarily due to the following:
• Lower large commercial airplane OE sales of approximately $42 million, primarily due to the residual impact of the Boeing machinists' strike in late 2008 on our landing gear business;

• Lower regional, business and general aviation airplane aftermarket sales of approximately $21 million, primarily due to changes in estimates on certain long-term contracts in our aircraft wheels and brakes business that were more favorable in 2008; and

• Lower defense and space OE and aftermarket sales of approximately $5 million, primarily in our aircraft wheels and brakes business.

Actuation and Landing Systems segment operating income for the first quarter 2009 increased from the first quarter 2008 primarily as a result of the following:
• Reduced operating costs and higher pricing across all businesses, which resulted in higher income of approximately $21 million; and

• Favorable foreign exchange of approximately $4 million; partially offset by

• Lower income of approximately $14 million related to changes in estimates for certain long-term contracts in our wheels and brakes business that were more favorable in 2008; and

• Lower sales volume across most businesses resulting in lower income of approximately $9 million.

Nacelles and Interior Systems: Nacelles and Interior Systems segment sales for the first quarter 2009 increased from the first quarter 2008 primarily due to the following:
• Higher large commercial airplane OE sales of approximately $21 million, primarily in our aerostructures and interiors businesses;

• Higher defense and space OE and aftermarket sales of approximately $8 million, primarily in our aerostructures business; and

• Higher regional, business, and general aviation airplane OE sales of approximately $4 million, primarily in our interiors business; partially offset by

• Lower large commercial airplane aftermarket sales of approximately $21 million, primarily in our aerostructures and interiors businesses.

Nacelles and Interior Systems segment operating income for the first quarter 2009 decreased from the first quarter 2008 primarily due to the following:
• Lower income of approximately $22 million related to changes in estimates for certain long-term contracts at our aerostructures business that were more favorable in 2008; and

• Lower sales volume and unfavorable product mix, primarily in our interiors and aerostructures businesses, which resulted in lower income of approximately $15 million; partially offset by

• Favorable foreign exchange of approximately $5 million; and

• Favorable pricing partially offset by higher operating costs, across all of our businesses, which resulted in higher income of approximately $2 million.

Electronic Systems: Electronic Systems segment sales for the first quarter 2009 increased from the first quarter 2008 primarily due to the following:
• Higher defense and space OE and aftermarket sales of approximately $45 million, across all of our businesses, including sales of approximately $20 million associated with the 2008 acquisitions of TEAC Aerospace Holdings, Inc. (TEAC) and Recon/Optical, Inc. (ROI), which occurred subsequent to the first quarter of 2008; partially offset by

• Lower engine controls sales of approximately $24 million which are no longer being reported by us. Sales in 2009 will be recorded by the engine controls joint venture (JV) with Rolls-Royce that was formed in the fourth quarter of 2008;

• Lower regional, business and general aviation airplane aftermarket sales of approximately $8 million, primarily in our sensors and integrated systems and engine control and electrical power businesses; and

• Lower regional, business and general aviation airplane OE sales of approximately $5 million, primarily in our engine control and electrical power business.

Electronic Systems segment operating income for the first quarter 2009 increased from the first quarter 2008 primarily due to the following:
• Higher sales volume and favorable product mix which resulted in higher income of approximately $16 million, primarily in our sensors and integrated systems and intelligence, surveillance and reconnaissance businesses; and

• Lower manufacturing, engineering and general and administrative costs of approximately $6 million, which are recorded by the JV in 2009. We will record our portion of the JV's 2009 results in other income (expense) - net; partially offset by

• Higher operating costs of approximately $3 million, primarily in our intelligence, surveillance and reconnaissance and sensors and integrated systems businesses.

LIQUIDITY AND CAPITAL RESOURCES
We currently expect to fund expenditures for capital requirements and other liquidity needs from a combination of cash, internally generated funds and financing arrangements. We believe that our internal liquidity, together with access to external capital resources, will be sufficient to satisfy existing plans and commitments, including our stock repurchase program, and also provide adequate financial flexibility. The current economic conditions, including the turmoil in the banking sector and credit markets, are expected to be manageable due to our strong balance sheet, lack of any large near-term funding requirements and a strong banking group with a multi-year committed credit facility.

The following events have affected our liquidity and capital resources during 2009:
• We paid quarterly dividends of $0.25 per share on January 2 and April 1; and

• We issued $300 million in senior notes which mature on March 1, 2019.

Cash
At March 31, 2009, we had cash and cash equivalents of $665.1 million, as compared to $370.3 million at December 31, 2008. Credit Facilities
We have the following amounts available under our credit facilities: . . .