We have significant sales content on most of the airplanes manufactured in this market channel. Over the last few years, we have benefited from increased production rates and deliveries of Airbus and Boeing airplanes and from our substantial content on many of the regional and general aviation airplanes. Delivery of new commercial, regional, business, and general aviation aircraft in 2009 and beyond, however, may be negatively impacted by the current economic conditions which may influence customers' willingness and/or ability to purchase new aircraft.
On June 23, 2009, Boeing announced a further delay in its 787 airplane program. While Boeing did not announce specific details of the delay, we continue to expect 787 deliveries to commence during 2010. Based on the information available to us, we do not expect the most recent delay to have a material impact on our results of operations and cash flows.
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, or temporarily ground airplanes due to decreased demand, high fuel prices 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, such as Boeing MD-80 and 737 Classic 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 Pratt & Whitney PurePower™ 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 long-term 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.

Second Quarter 2009 Sales Content by Market Channel During the second quarter 2009, approximately 95% 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                                                            10 %
Regional, Business and General Aviation Airplane OE                              7 %

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

Large Commercial Airplane Aftermarket                                           27 %
Regional, Business and General Aviation Airplane Aftermarket                     5 %

Total Commercial, Regional, Business and General Aviation Airplane
Aftermarket                                                                     32 %

Total Defense and Space                                                         29 %

Other                                                                            5 %

Total                                                                          100 %

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

                                                         Second Quarter                                        %
                                                   2009                   2008               Change         Change
                                                    (Dollars in millions, except diluted EPS)
Sales                                         $      1,699.7         $      1,849.3         $ (149.6 )          8.1

Segment operating income (1)                  $        271.9         $        316.7         $  (44.8 )         14.1
Corporate general and administrative
costs                                                  (30.5 )                (28.2 )           (2.3 )          8.2

Total operating income                                 241.4                  288.5            (47.1 )         16.3
Net interest expense                                   (30.6 )                (27.1 )           (3.5 )         12.9
Other income (expense) - net                            (6.4 )                 (3.0 )           (3.4 )        113.3

Income from continuing operations before
income taxes                                           204.4                  258.4            (54.0 )         20.9
Income tax expense                                     (54.8 )                (69.5 )           14.7           21.2

Income from continuing operations                      149.6                  188.9            (39.3 )         20.8
Income from discontinued operations                     31.2                    3.0             28.2          940.0

Consolidated net income                                180.8                  191.9            (11.1 )          5.8
Net income attributable to
noncontrolling interests (2)                            (3.7 )                 (5.3 )            1.6           30.2

Net income attributable to Goodrich           $        177.1         $        186.6         $   (9.5 )          5.1

Effective tax rate                                      26.9 %                 26.9 %

Diluted EPS: (3)
Continuing operations                         $         1.15         $         1.43         $  (0.28 )         19.6

Net income attributable to Goodrich           $         1.40         $         1.45         $  (0.05 )          3.4

(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 second quarter 2009 as compared to the second quarter 2008 was driven by changes in each of our major market channels as follows:
• Large commercial airplane original equipment sales decreased by approximately $34 million, or 7%;

• Regional, business and general aviation airplane original equipment sales decreased by approximately $53 million, or 32%; and

• Large commercial, regional, business and general aviation airplane aftermarket sales decreased by approximately $101 million, or 16%; partially offset by

• Defense and space sales of both original equipment and aftermarket products and services increased by approximately $49 million, or 11%.

Segment operating income
See discussion in the "Business Segment Performance" section. Corporate general and administrative costs Corporate general and administrative costs increased primarily due to higher share based compensation, as discussed below, partially offset by reductions in discretionary spending.
Other income (expense) - net
Other income (expense) - net increased for the second quarter 2009 as compared to the second quarter 2008, primarily as a result of lower income from equity in affiliated companies of approximately $2 million. Income from continuing operations
In addition to the items described above, income from continuing operations during the second quarter 2009 as compared to the second quarter 2008 was also impacted by the following items:

                                                    Increase (Decrease)
                                       Before             After              Diluted
                                        Tax                Tax                 EPS
                                         (Dollars in millions, except diluted EPS)
  Higher pension expense            $      (21.2 )     $      (13.5 )     $        (0.11 )

  Higher share based compensation   $      (10.3 )     $       (6.6 )     $        (0.05 )

Higher pension expense
The increase in pension expense was primarily due to the investment losses of our plan assets in 2008 partially offset by the effect of a higher discount rate.

Higher share based compensation
The increase in share based compensation was primarily due to the increase in our share price.
Effective tax rate
We reported an effective tax rate of 26.9% for both periods. See Note 15, "Income Taxes" to our condensed consolidated financial statements. Income from discontinued operations
Income from discontinued operations increased for the second quarter 2009 as compared to the second quarter 2008, due to the favorable resolution of a past environmental claim. See Note 6, "Discontinued Operations" to our condensed consolidated financial statements.
Results of Operations - Six Months Ended June 30, 2009 as Compared to Six Months

Ended June 30, 2008

                                                         Second Quarter                        $               %
                                                   2009                   2008               Change         Change
                                                    (Dollars in millions, except diluted EPS)
Sales                                         $      3,395.6         $      3,594.3         $ (198.7 )          5.5

Segment operating income (1)                  $        563.8         $        618.6         $  (54.8 )          8.9
Corporate general and administrative
costs                                                  (54.6 )                (55.6 )            1.0            1.8

Total operating income                                 509.2                  563.0            (53.8 )          9.6
Net interest expense                                   (58.8 )                (54.8 )           (4.0 )          7.3
Other income (expense) - net                           (10.8 )                (12.8 )            2.0           15.6

Income from continuing operations before
income taxes                                           439.6                  495.4            (55.8 )         11.3
Income tax expense                                    (116.7 )               (148.4 )           31.7           21.4

Income from continuing operations                      322.9                  347.0            (24.1 )          6.9
Income from discontinued operations                     31.7                    7.3             24.4          334.2

Consolidated net income                                354.6                  354.3              0.3            0.1
Net income attributable to
noncontrolling interests (2)                            (7.7 )                 (9.8 )            2.1           21.4

Net income attributable to Goodrich           $        346.9         $        344.5         $    2.4            0.7

Effective tax rate                                      26.6 %                 30.0 %

Diluted EPS: (3)
Continuing operations                         $         2.49         $         2.62         $  (0.13 )          5.0

Net income attributable to Goodrich           $         2.74         $         2.68         $   0.06            2.2

(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 six months ended June 30, 2009 as compared to the six months ended June 30, 2008 was driven by changes in each of our major market channels as follows:
• Large commercial airplane original equipment sales decreased by approximately $68 million, or 7%;

• Regional, business and general aviation airplane original equipment sales decreased by approximately $55 million, or 18%; and

• Large commercial, regional, business and general aviation airplane aftermarket sales decreased by approximately $154 million, or 12%; partially offset by

• Defense and space sales of both original equipment and aftermarket products and services increased by approximately $94 million, or 11%.

Segment operating income
See discussion in the "Business Segment Performance" section. Corporate general and administrative costs Corporate general and administrative costs increased primarily due to higher share based compensation, as discussed below, partially offset by reductions in discretionary spending.
Other income (expense) - net
Other income (expense) - net decreased for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, primarily as a result of lower expenses for retiree health expenses for previously owned businesses of approximately $5 million offset by lower income from equity in affiliated companies of approximately $3 million.
Income from continuing operations
In addition to the items described above, income from continuing operations during the six months ended June 30, 2009 as compared to the six months ended June 30, 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                                $          -         $       15.0         $         0.12

Higher pension expense                                  $      (50.1 )       $      (31.8 )       $        (0.25 )

Changes in estimates on long-term contracts             $      (35.2 )       $      (21.4 )       $        (0.17 )

Higher share based compensation                         $      (15.9 )       $       (9.8 )       $        (0.07 )

Lower effective tax rate
For the six months ended June 30, 2009, we reported an effective tax rate of 26.6% as compared to 30% for the six months ended June 30, 2008. The decrease in the effective tax rate was primarily due to amended state returns and a favorable adjustment to state tax reserves. See Note 15, "Income Taxes" to our condensed consolidated financial statements. Higher pension expense
The increase in pension expense was primarily due to the investment losses of our plan assets in 2008 partially offset by the effect of a higher discount rate.
Changes in estimates on long-term contracts During the six months ended June 30, 2009 and 2008, we revised estimates on certain of our long-term contracts, primarily in our aerostructures and aircraft wheels and brakes businesses, which resulted in before tax income of $13.5 million and $48.7 million, respectively. Higher share based compensation
The increase in share based compensation was primarily due to the increase in our share price.
Income from discontinued operations
Income from discontinued operations increased primarily due to the favorable resolution of a past environmental claim partially offset by a gain on the sale of a previously discontinued business in March 2008 that did not recur in 2009.

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

                                                       2009 Outlook
 Sales                                    $6.9 billion
 Diluted EPS - Net Income                 $4.60 to $4.75 per share
 Capital Expenditures                     $200 to $220 million
 Operating Cash Flow minus Capital        Exceed 75% of net income from
 Expenditures                             continuing operations

Full year 2009 sales expectations are approximately $6.9 billion. These sales expectations, compared to 2008, include unfavorable sales impacts of approximately $163 million related to foreign currency exchange rate fluctuations and lower sales of approximately $125 million related to the engine controls joint venture (JV) with Rolls-Royce that was formed in the fourth quarter of 2008. Net income per diluted share is expected to be in a range of $4.60 to $4.75, compared with prior expectations of $4.50 to $4.75. Our 2009 outlook assumes, among other factors:
• Higher pre-tax pension expense of $101 million, or $0.51 per diluted share, compared to 2008;

• Restructuring charges totaling about $0.09 per diluted share. About one-half of the expected charges were incurred during the first half of 2009; and

• A full year 2009 effective tax rate of 29% to 30%.

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 original equipment sales are expected to increase slightly in 2009, compared to 2008. This expectation is based on the latest 2009 delivery estimates from Boeing and Airbus of about 480 deliveries each;

• Regional, business and general aviation airplane original equipment sales are expected to decrease by slightly more than 25%. Regional airplane original equipment sales are expected to decrease by 15% to 20%, and business and general aviation original equipment sales are expected to decrease by more than 40%;

• Large commercial, regional, business and general aviation airplane aftermarket sales are expected to decrease by 8% to 10%. These expectations include double-digit decreases in sales in support of freighters and regional, business and general aviation airplanes; and

• Defense and space sales of both original equipment and aftermarket products and services are expected to increase by approximately 12% in 2009, compared to 2008.

Cash Flow
We continue to expect net cash provided by operating activities, minus capital expenditures to exceed 75% of net income from continuing operations. Our outlook reflects ongoing investments to support the current schedule for the Boeing 787 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 $200 million to $220 million compared to our prior expectation of $220 million to $240 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.
Second Quarter 2009 Compared with Second Quarter 2008

                                 Second Quarter               Increase/            %                % of Sales
                             2009             2008           (Decrease)         Change          2009          2008
                                       (Dollars in millions)
NET CUSTOMER SALES
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