8-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): October 1, 2002

GOODRICH CORPORATION
(Exact Name of Registrant as Specified in Charter)

New York	1-892	34-0252680
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS 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

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

     On June 18, 2002, Goodrich Corporation (the “Company”) announced that it had entered into a definitive agreement with TRW Inc. to acquire TRW Inc.’s Aeronautical Systems businesses for $1.5 billion in cash. The purchase price was determined by arm’s-length negotiations between the Company and TRW following an auction process conducted by TRW. The Company completed the acquisition on October 1, 2002.

     The acquired businesses design and manufacture commercial and military aerospace systems and equipment, including engine controls, flight controls, power systems, cargo systems, hoists and winches, and actuation systems. These businesses employ approximately 6,200 employees in 22 facilities in nine countries, including manufacturing and service operations in the United Kingdom, France, Germany, Canada, the United States and several Asia/Pacific countries.

     The acquired businesses sell aeronautical systems to major airlines and aircraft producers, as well as to the U.S. government and foreign governments and agencies.

     The Company financed the acquisition through borrowings under a $1.5 billion, 364-day credit facility provided by Citibank, N.A., Merrill Lynch Capital Corporation, Bank of America, N.A., Bank One, N.A. and JPMorgan Chase Bank. The credit facility expires on July 29, 2003. The Company expects to repay amounts outstanding under this credit facility from the net proceeds from long-term financing composed of a mix of debt and equity securities, cash from operations and the net proceeds from the sale of operating and non-operating assets.

ITEM 5. OTHER EVENTS

SFAS No. 142 Goodwill Impairment

     Effective July 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”) applicable to business combinations completed after June 30, 2001. Effective January 1, 2002, additional provisions of SFAS 142, relating to business combinations completed prior to June 30, 2001, became effective and were adopted by the Company. Under the provisions of the standard, intangible assets deemed to have indefinite lives and goodwill are not subject to amortization. All other intangible assets are amortized over their estimated useful lives. Intangible assets and goodwill are subject to annual impairment testing using the guidance and criteria described in the standard. This testing requires comparison of carrying values to fair values, and when appropriate, the carrying value of impaired assets is reduced to fair value.

     During the second quarter of 2002, the Company performed the first of the required impairment tests of goodwill and indefinite lived intangible assets. Based on those results, the Company determined that it was likely that goodwill relating to the Aviation Technical Services “reporting unit” (ATS) had been impaired. ATS is included in the Aerostructures and Aviation Technical Services business segment. During the third quarter of 2002, the Company completed its measurement of the goodwill impairment and recognized an impairment of $36.1 million (representing total goodwill of this reporting unit), which was reported as a cumulative effect of an accounting change in the first quarter of 2002. The results of operations have been restated accordingly.

Retroactive Financial Statement Application

     As noted above, the goodwill impairment charge was recorded as a cumulative effect of an accounting change retroactive to January 1, 2002. Table 1 and Table 2 reflect the impact of this accounting change on the condensed consolidated statement of income and balance sheet as of and for the six months ended June 30, 2002, as previously filed on the Company’s Form 10-Q for the quarter ended June 30, 2002. Table 3 and Table 4 reflect the impact of this accounting change on the condensed consolidated statement of income and balance sheet as of and for the quarter ended March 31, 2002, as previously filed on the Company’s Form 10-Q for the quarter ended March 31, 2002.

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Table 1

GOODRICH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Dollars in millions, except per share amounts)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2002			2001			2002			2001
								(Restated)
Sales		$	925.5		$	1,072.1		$	1,846.7		$	2,079.8
Operating Costs and Expenses:
	Cost of sales		673.3			768.6			1,343.6			1,483.7
	Selling and administrative expenses		143.0			149.9			282.1			301.4
	Merger-related and consolidation costs		14.6			7.6			22.1			13.4
			830.9			926.1			1,647.8			1,798.5
Operating income			94.6			146.0			198.9			281.3
Interest expense			(23.0	)		(28.7	)		(46.2	)		(58.7	)
Interest income			13.0			8.3			19.1			11.9
Other income (expense) – net			6.8			(7.5	)		(2.5	)		(7.1	)
Income before income taxes and Trust distributions			91.4			118.1			169.3			227.4
Income tax expense			(30.2	)		(39.6	)		(55.9	)		(76.1	)
Distributions on Trust Preferred Securities			(2.6	)		(2.6	)		(5.2	)		(5.2	)
Income from Continuing Operations			58.6			75.9			108.2			146.1
Income (Loss) from Discontinued Operations			(12.7	)		7.4			(11.9	)		109.5
Cumulative Effect of Change in Accounting			—			—			(36.1	)		—
Net Income		$	45.9		$	83.3		$	60.2		$	255.6
Basic Earnings (Loss) per Share:
	Continuing operations	$	0.57		$	0.73		$	1.06		$	1.41
	Discontinued operations		(0.12	)		0.07			(0.12	)		1.06
	Cumulative effect of change in accounting		—			—			(0.35	)		—
	Net Income	$	0.45		$	0.80		$	0.59		$	2.47
Diluted Earnings (Loss) per Share:
	Continuing operations	$	0.56		$	0.70		$	1.03		$	1.36
	Discontinued operations		(0.11	)		0.08			(0.09	)		1.04
	Cumulative effect of change in accounting		—			—			(0.35	)		—
	Net Income	$	0.45		$	0.78		$	0.59		$	2.40
Cash dividends declared per common share		$	0.20		$	0.275		$	0.475		$	0.55

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Table 2

GOODRICH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollars in millions)

			June 30,			December 31,
			2002			2001
			(Restated)
ASSETS
Current Assets
	Cash and cash equivalents		$	148.7		$	85.8
	Accounts and notes receivable, less allowances for doubtful receivables (June 30, 2002, $24.9; December 31, 2001, $42.1)			584.2			570.4
	Inventories			873.4			841.5
	Deferred income taxes			99.1			112.9
	Prepaid expenses and other assets			24.2			26.2
	Assets of discontinued operations			—			873.9
		Total Current Assets		1,729.6			2,510.7
Property, plant and equipment				930.9			955.5
Prepaid pension				234.3			238.7
Goodwill				696.0			747.3
Identifiable intangible assets				150.9			138.8
Payment-in-kind notes receivable, less discount ($22.8 at June 30, 2002; $22.2 at December 31, 2001)				174.9			168.4
Other assets				455.6			468.1
			$	4,372.2		$	5,227.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
	Short-term bank debt		$	229.9		$	113.3
	Accounts payable			325.5			396.6
	Accrued expenses			470.4			523.6
	Income taxes payable			213.5			119.2
	Liabilities of discontinued operations			—			589.4
	Current maturities of long-term debt and capital lease obligations			5.8			5.9
		Total Current Liabilities		1,245.1			1,748.0
Long-term debt and capital lease obligations				1,312.8			1,307.2
Pension obligations				158.7			155.5
Postretirement benefits other than pensions				311.5			320.1
Deferred income taxes				15.8			13.9
Other non-current liabilities				205.6			196.4
Commitments and contingent liabilities				—			—
Mandatorily redeemable preferred securities of trust				125.2			125.0
Shareholders’ Equity
	Common stock — $5 par value Authorized 200,000,000 shares; issued 115,613,297 shares at June 30, 2002, and 115,144,771 shares at December 31, 2001 (excluding 14,018,598 shares held by wholly owned subsidiaries at each date)			578.1			575.7
	Additional capital			931.3			973.5
	Income retained in the business			(14.0	)		333.7
	Accumulated other comprehensive income			(83.1	)		(110.1	)
	Unearned portion of restricted stock awards			(2.1	)		(0.6	)
	Common stock held in treasury, at cost (13,512,889 shares at June 30, 2002, and 13,446,808 shares at December 31, 2001)			(412.7	)		(410.8	)
		Total Shareholders’ Equity		997.5			1,361.4
			$	4,372.2		$	5,227.5

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Table 3

GOODRICH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

		Three Months Ended
		March 31,
		2002			2001
		(Restated)
Sales		$	921.2		$	1,007.7
Operating Costs and Expenses:
	Cost of sales		670.3			715.1
	Selling and administrative expenses		139.1			151.5
	Merger-related and consolidation costs		7.5			5.8
			816.9			872.4
Operating income			104.3			135.3
Interest expense			(23.2	)		(30.0	)
Interest income			6.1			3.6
Other income (expense) — net			(9.3	)		0.4
Income before income taxes and Trust distributions			77.9			109.3
Income tax expense			(25.7	)		(36.5	)
Distributions on Trust Preferred Securities			(2.6	)		(2.6	)
Income from Continuing Operations			49.6			70.2
Income from Discontinued Operations			0.8			102.1
Cumulative Effect of Change in Accounting			(36.1	)		—
Net Income		$	14.3		$	172.3
Basic Earnings per Share:
	Continuing operations	$	0.48		$	0.68
	Discontinued operations		0.01			1.00
	Cumulative effect of change in accounting		(0.35	)		—
	Net Income	$	0.14		$	1.68
Diluted Earnings per Share:
	Continuing operations	$	0.47		$	0.66
	Discontinued operations		0.02			0.96
	Cumulative effect of change in accounting		(0.34	)		—
	Net Income	$	0.15		$	1.62
Dividends declared per common share		$	0.275		$	0.275

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Table 4

GOODRICH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN MILLIONS)

				March 31,			December 31,
				2002			2001
				(Restated)
ASSETS
Current Assets
	Cash and cash equivalents			$	103.9		$	85.8
	Accounts and notes receivable, less allowances for doubtful receivables ($32.4 at March 31, 2002; $42.1 at December 31, 2001)				533.6			570.4
	Inventories				867.1			841.5
	Deferred income taxes				112.7			112.9
	Prepaid expenses and other assets				22.7			26.2
	Assets of discontinued operations				917.3			873.9
		Total Current Assets			2,557.3			2,510.7
Property, plant and equipment					941.4			955.5
Prepaid pension					237.8			238.7
Goodwill					704.0			747.3
Identifiable intangible assets					144.8			138.8
Payment-in-kind notes receivable, less discount ($22.5 at March 31, 2002; $22.2 at December 31, 2001)					174.0			168.4
Other assets					475.3			468.1
				$	5,234.6		$	5,227.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
	Short-term bank debt			$	149.9		$	113.3
	Accounts payable				341.1			396.6
	Accrued expenses				452.5			523.6
	Income taxes payable				189.5			119.2
		Liabilities of discontinued operations			630.1			589.4
	Current maturities of long-term debt and capital lease obligations				6.1			5.9
			Total Current Liabilities		1,769.2			1,748.0
Long-term debt and capital lease obligations					1,305.6			1,307.2
Pension obligations					160.1			155.5
Postretirement benefits other than pensions					313.6			320.1
Deferred income taxes					15.7			13.9
Other non-current liabilities					208.0			196.4
Commitments and contingent liabilities					—			—
Mandatorily redeemable preferred securities of trust					125.1			125.0
Shareholders’ Equity
	Common stock — $5 par value Authorized 200,000,000 shares; issued 115,478,463 shares at March 31, 2002, and 115,144,771 shares at December 31, 2001 (excluding 14,000,000 shares held by a wholly-owned subsidiary at each date)				577.4			575.7
	Additional capital				966.0			973.5
	Income retained in the business				319.9			333.7
	Accumulated other comprehensive income				(111.1	)		(110.1	)
	Unearned compensation				(2.4	)		(0.6	)
	Common stock held in treasury, at cost (13,505,977 shares at March 31, 2002, and 13,446,808 shares at December 31, 2001)				(412.5	)		(410.8	)
Total Shareholders’ Equity					1,337.3			1,361.4
				$	5,234.6		$	5,227.5

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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

(a)	Financial Statements of Businesses Acquired.
	The following combined financial statements of TRW Aeronautical Systems are incorporated herein by reference to Exhibit 99.1 filed herewith:
	•	Statements of Operations for the years ended December 31, 2001 and 2000.
	•	Balance Sheets as of December 31, 2001 and 2000.
	•	Statements of Cash Flows for the years ended December 31, 2001 and 2000.
	•	Statements of Changes in Stockholder’s Investment for the years ended December 31, 2001 and 2000.
	•	Notes to Financial Statements.
	The report of Ernst & Young LLP, independent auditors, on the combined financial statements of TRW Aeronautical Systems as of December 31, 2001 and 2000 and for the years ended December 31, 2001 and 2000 is filed herewith as part of Exhibit 99.1 and the related consent is filed herewith as Exhibit 23.1. Both the opinion and the consent are incorporated herein by reference.

	The following unaudited combined financial statements of TRW Aeronautical Systems are incorporated herein by reference to Exhibit 99.2 filed herewith:
	•	Statements of Operations for the six months ended June 30, 2002 and 2001.
	•	Balance Sheets as of June 30, 2002 and December 31, 2001.
	•	Statements of Cash Flows for the six months ended June 30, 2002 and 2001.
	•	Notes to Financial Statements.
(b)	Pro Forma Financial Information.
	The following unaudited pro forma financial statements are incorporated herein by reference to Exhibit 99.3 filed herewith:
	•	Unaudited Pro Forma Condensed Combined Balance Sheet at June 30, 2002.
	•	Unaudited Pro Forma Condensed Combined Statement of Income for the six months ended June 30, 2002.
	•	Unaudited Pro Forma Condensed Combined Statement of Income for the year ended December 31, 2001.
	•	Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
(c)	Exhibits
	Exhibit 2.1	Master Agreement of Purchase and Sale dated as of June 18, 2002 between Goodrich Corporation and TRW Inc. (incorporated by reference to Exhibit 2(B) to Goodrich Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
	Exhibit 2.2	Amendment No. 1 dated as of October 1, 2002 to Master Agreement of Purchase and Sale dated as of June 18, 2002 between Goodrich Corporation and TRW Inc.
	Exhibit 10.1	364-Day Credit Agreement dated as of July 30, 2002 among Goodrich Corporation, the lenders parties thereto and Citibank, N.A., as paying agent for such lenders (incorporated by reference

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	to Exhibit 10(TT) to Goodrich Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
Exhibit 10.2	Amendment No. 1 dated as of September 13, 2002 to the 364-Day Credit Agreement dated as of July 30, 2002 among Goodrich Corporation, the lenders parties thereto and Citibank, N.A., as paying agent for such lenders.
Exhibit 23.1	Consent of Ernst & Young LLP.
Exhibit 99.1	Combined financial statements of TRW Aeronautical Systems as of December 31, 2001 and 2000 and for the years ended December 31, 2001 and 2000 and report of Ernst & Young LLP.
Exhibit 99.2	Unaudited combined financial statements of TRW Aeronautical Systems as of June 30, 2002 and December 31, 2001 and for the six months ended June 30, 2002 and 2001.
Exhibit 99.3	Unaudited pro forma condensed combined financial statements of Goodrich Corporation and TRW Aeronautical Systems.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		GOODRICH CORPORATION (Registrant)
Date: October 16, 2002	By:	/s/ Robert D. Koney, Jr.
		Robert D. Koney, Jr. Vice President and Controller

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EXHIBIT INDEX

Exhibit 2.1	Master Agreement of Purchase and Sale dated as of June 18, 2002 between Goodrich Corporation and TRW Inc. (incorporated by reference to Exhibit 2(B) to Goodrich Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
Exhibit 2.2	Amendment No. 1 dated as of October 1, 2002 to Master Agreement of Purchase and Sale dated as of June 18, 2002 between Goodrich Corporation and TRW Inc.
Exhibit 10.1	364-Day Credit Agreement dated as of July 30, 2002 among Goodrich Corporation, the lenders parties thereto and Citibank, N.A., as paying agent for such lenders (incorporated by reference to Exhibit 10(TT) to Goodrich Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
Exhibit 10.2	Amendment No. 1 dated as of September 13, 2002 to the 364-Day Credit Agreement dated as of July 30, 2002 among Goodrich Corporation, the lenders parties thereto and Citibank, N.A., as paying agent for such lenders.
Exhibit 23.1	Consent of Ernst & Young LLP.
Exhibit 99.1	Combined financial statements of TRW Aeronautical Systems as of December 31, 2001 and 2000 and for the years ended December 31, 2001 and 2000 and report of Ernst & Young LLP.
Exhibit 99.2	Unaudited combined financial statements of TRW Aeronautical Systems as of June 30, 2002 and December 31, 2001 and for the six months ended June 30, 2002 and 2001.
Exhibit 99.3	Unaudited pro forma condensed combined financial statements of Goodrich Corporation and TRW Aeronautical Systems.

EX-2.2 3 g78625exv2w2.txt AMENDMENT NO. 1 DATED 10-1-2002 TO MASTER AGREEMEN EXHIBIT 2.2 AMENDMENT NO. 1 TO MASTER AGREEMENT OF PURCHASE AND SALE AMENDMENT NO. 1 (the "Amendment"), dated as of October 1, 2002, by and between Goodrich Corporation, a New York corporation ("Buyer"), and TRW Inc., an Ohio corporation ("TRW") to the Master Agreement of Purchase and Sale (the "Agreement"), dated as of June 18, 2002, by and between Buyer and TRW. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Agreement. WHEREAS, the parties hereto desire to enter into this Amendment so as to make certain modifications to the Agreement; NOW, THEREFORE, for good and valuable consideration and in consideration of the respective representations, warranties, covenants and agreements set forth in the Agreement, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I AMENDMENTS Section 1.1 Parties to the Agreement (a) The first paragraph of the Agreement shall be revised to add new parties to the agreement by deleting the word "and" before "TRW INC." on the third line, and adding the following words at the end of such first paragraph: "TRW Systemes Aeronautiques Civils, a subsidiary of TRW that is organized under the laws of France and registered with the Commercial and Companies Registry of Pontoise under the number 415 313 972 ("TRW SAC"), TRW Systemes Aeronautiques, a subsidiary of TRW that is organized under the laws of France and registered with the Commercial and Companies Registry of Versailles under the number 552 019 093 ("TRW SA"), and Goodrich Control Systems S.A.S., a subsidiary of Buyer that is organized under the laws of France and registered with the Registry of Commerce and Companies of Meaux under the number 443 177 233 RCS Meaux ("Goodrich Control Systems"). (b) Section 6.11 of the Agreement shall hereby be amended to add the following subsection (c) to such section: (c) In furtherance of Section 6.11(b), (i) TRW SAC and Goodrich Control Systems shall enter into a Local Transfer Agreement to effect the sale of the Acquired Assets owned by TRW SAC to Goodrich Control Systems, and (ii) TRW SA and Goodrich Control Systems shall enter into a Local Transfer Agreement to effect the sale of the Acquired Assets owned by TRW SA to Goodrich Control Systems. (c) Section 10.1 of the Agreement shall be amended to add the following language to the end of the first paragraph (immediately following the notice information for TRW): and (c) if to Goodrich Control Systems: Goodrich Control Systems S.A.S. 106 rue Fourny 78530 Buc, France Attention: President Telecopy: 00 33 1 39 20 52 90 With a copy to: Goodrich Corporation Four Coliseum Centre 2730 West Tyvola Road Charlotte, N.C. 28217 USA Attention: Corporate Secretary Telecopy: 704-423-7034 and (d) if to TRW SAC: TRW Systemes Aeronautiques Civils 15 rue des Sorins 92400 Nanterre France Attention: President Telecopy: 00 33 1 58 58 45 00 With a copy to: TRW Inc. 1900 Richmond Road Cleveland, OH 44124 USA Attention: Secretary Telecopy: 216-291-7070 2 and (e) if to TRW SA: TRW Systemes Aeronautiques 15 rue des Sorins 92000 Nanterre, France Attention: President Telecopy: With a copy to: TRW Inc. 1900 Richmond Road Cleveland, OH 44124 USA Attention: Secretary Telecopy: 216-291-7070 Section 1.2 Ancillary Agreements. (a) Section 1.1 of the Agreement shall be amended to add the following definition to such section, following the definition of "Domain Names": "Employee Leasing Agreement" shall mean the agreement to be entered into on the Closing Date, between TRW and Buyer, pursuant to which TRW or its Subsidiaries shall continue to employ certain employees of the Business past the Closing Date and lease such employees to Goodrich for the term of such agreement." (b) Section 1.1 of the Agreement shall be amended to add the following definitions to such section, following the definition of "Final Determination": "Foreign Exchange Termination Agreements" shall mean collectively the letter agreement dated September 26, 2002 and the letter agreement dated September 27, 2002, each between TRW and Buyer and relating to the treatment of, and cost reimbursement for, the termination of certain foreign exchange transactions." (c) The definition of "Ancillary Agreements" appearing in the third sentence of Section 6.11(a) of the Agreement shall be amended to add the words "the Employee Leasing Agreement, the Foreign Exchange Termination 3 Agreements, the Cincom Letter Agreement," following the words "the Local Transfer Agreements". Section 1.3 Transfer of Bank Accounts (a) Section 2.3(a) shall be amended by (1) removing the word "and" at the end of subsection (xiii), (2) replacing the period at the end of clause (xiv) with a semicolon followed by the word "and", and (3) adding the following subsection (xv) to such section: "(xv) the bank accounts listed on Schedule 2.3(a)(xv)." (b) A new Schedule 2.3(a)(xv) shall be added to the Agreement, as attached hereto as Exhibit A. (c) Subsection (i) of Section 2.3(b) of the Agreement shall be amended by adding the words "except for cash in the bank accounts listed on Schedule 2.3(a)(xv)," to the beginning of such subsection. Section 1.4 Compania Espanola de Sistemas Aeronauticos SA (Spain). Section 6.5 of the Agreement shall hereby be amended to add the following clause (c) to such section: (c) Buyer and TRW hereby agree that if (i) the consent of Construcciones Aeronatuicas, S.A. ("CASA") to the transfer of TRW's interests in the Spanish Affiliate is not obtained on or prior to October 1, 2002 (or such other date as the parties shall select as the Closing Date), (ii) all the conditions to closing in Article VII are satisfied or waived at or prior to such time, and (iii) CASA has not exercised its pre-emptive rights to purchase TRW's interests in the Spanish Affiliate, pursuant to the terms and conditions of the organizational documents governing the Spanish Affiliate (such rights, the "Pre-Emptive Rights"), then (x) the Closing shall take place on October 1, 2002 (or such other date as the parties shall select as the Closing Date), with a reduction of $3,000,000 (three million dollars) to the Purchase Price (which shall be treated as a decrease to the purchase price for all purposes of this Agreement), and (y) the provisions of Section 6.5(b) will apply to the treatment of TRW's interest in the Spanish Affiliate until the earlier of such time as CASA provides its consent to the transfer of TRW's interests in the Spanish Affiliate to Buyer or CASA exercises its Pre-Emptive Rights. Following the Closing Date, if CASA provides its consent to the transfer of TRW's interests in the Spanish Affiliate to Buyer, TRW 4 shall transfer ownership of TRW's interests in the Spanish Affiliate to Buyer immediately following receipt of such consent, and Buyer shall pay to TRW an amount equal to $3,000,000 (three million dollars) in immediately available funds (which shall be treated as a increase to the purchase price for all purposes of this Agreement), at which time the provisions of Section 6.5(b) as they relate to the treatment of TRW's interests in the Spanish Affiliate shall immediately cease. Following the Closing Date, if CASA exercises its Pre-Emptive Rights, then (i) upon transfer of TRW's interests in the Spanish Affiliate to CASA pursuant to such exercise, the provisions of Section 6.5(b) as they relate to the treatment of TRW's interests in the Spanish Affiliate shall immediately cease and (ii) Buyer and Seller shall use their reasonable best efforts to cooperate and shall negotiate in good faith to determine the value of TRW's interests in the Spanish Affiliate (the "Spanish Affiliate Price"). Buyer and TRW hereby expressly agree and acknowledge that the Spanish Affiliate Price may be different from the amount paid by CASA to TRW for the purchase of TRW's interests in the Spanish Affiliate pursuant to the exercise of CASA's Pre-Emptive Rights. If after ten (10) Business Days following the closing of the transfer of TRW's interests in the Spanish Affiliate to CASA, Buyer and TRW have not agreed on the Spanish Affiliate Price, Buyer and TRW shall appoint a third-party appraisal firm of international repute, reasonably mutually acceptable to Buyer and TRW (the "Spanish Appraiser"), to determine the Spanish Affiliate Price. The Spanish Appraiser shall determine the Spanish Affiliate Price according to commonly accepted valuation techniques and shall deliver its report to Buyer and to TRW within twenty 20 Business Days of its appointment. The Spanish Affiliate Price determined by the Spanish Appraiser shall be final, non-appealable and binding on both Buyer and TRW and may be enforced in any court having competent jurisdiction. The fees and expenses of the Spanish Appraiser shall be borne one-half by Buyer and one-half by TRW. If the Spanish Affiliate Price is greater than $3,000,000 (three million dollars), then TRW shall deliver to Goodrich an amount in immediately available funds equal to such excess (which shall be treated as a decrease to the Purchase Price for all purposes of this Agreement). If the Spanish Affiliate Price is less than $3,000,000 (three million dollars), then Goodrich shall deliver to TRW an amount in immediately available funds equal to such shortfall (which shall be treated as an increase to the Purchase Price for all purposes of this Agreement). The payment referred to in the two preceding sentences shall be made no later than two (2) Business Days after the later of (i) the date on which TRW transfers its interests in the Spanish Affiliate 5 to CASA, (ii) the date on which Buyer and TRW mutually agree the Spanish Affiliate Price or (iii) the date on which the Spanish Appraiser delivers its report to Buyer and TRW. Buyer shall control the process of agreeing with CASA on the appropriate price to be paid pursuant to the exercise of CASA's Pre-Emptive Rights, and TRW shall reasonably cooperate with Buyer in its control of such process. Section 1.5 TRW Thales Aerolec SAS (France). Section 6.5 of the Agreement shall hereby be amended to add the following clause (d) to such section: (d) Buyer and TRW hereby agree that if (i) the approval of the French Ministry of Finance to transfer TRW's interests in TRW Thales Aerolec SAS (the "French JV") is not obtained on or prior to October 1, 2002 (or such other date as the parties shall select as the Closing Date), and (ii) all the conditions to closing in Article VII are satisfied or waived at or prior to such time, then (x) the Closing shall take place on October 1, 2002 (or such other date as the parties shall select as the Closing Date), with a reduction of $30,000 (thirty thousand dollars) to the Purchase Price (which shall be treated as a decrease to the Purchase Price for all purposes of this Agreement), and (y) the provisions of Section 6.5(b) will apply to the treatment of TRW's interest in the French JV until the approval of the French Ministry of Finance to transfer TRW's interests in the French JV are obtained. As soon as reasonably practical following receipt of the approval of the French Ministry of Finance to transfer TRW's interests in the French JV, TRW shall transfer such interests in the French JV to Buyer, and Buyer shall pay to TRW an amount equal to $30,000 (thirty thousand dollars) in immediately available funds, which shall be treated as an increase in the Purchase Price for all purposes of this Agreement, and upon such payment, the provisions of Section 6.5(b) as they relate to the treatment of TRW's interest in the French JV shall immediately cease. Section 1.6 Certain Consent Issues. Section 6.5 of the Agreement shall hereby be amended to add the following clause (e) to such section: (e) TRW and Buyer shall comply with the procedures set forth in Exhibit D hereto in connection with seeking the consent of Cincom Systems, Inc. to the transfer of the Software License Agreement, dated July 31, 1997, between Cincom Systems, Inc. and TRW Limited, to Buyer. 6 Section 1.7 Certain Employee Matters (a) Section 6.8(a) of the Agreement shall be amended by adding the following sentence to the end of such subsection: "The obligations of the parties pursuant to this Section 6.8 shall be subject to the terms and conditions of the Employee Leasing Agreement." (b) Schedule 6.8(b) to the Agreement shall be amended by adding the name "Steve Vasiliadis" to such schedule. (c) Section 6.8(n) of the Agreement shall be deleted in its entirety. (d) Section 6.8(o) of the Agreement shall be amended by deleting subsection (ii) in its entirety and inserting the following subsection (ii) in its place: "(ii) At the Closing, or as soon as reasonably practicable thereafter, TRW shall (A) pay the five Australian Transferred Employees engaged in managerial or supervisory duties identified on Schedule 6.8(o) attached hereto as Exhibit B their accrued entitlement to annual leave and long service leave, and (B) provide Buyer with documentation concerning all entitlements to which each Australian Transferred Employee is entitled as at the Closing Date, including accrued sick leave, annual leave and long service leave. Buyer shall be responsible for honoring all entitlements to which each Australian Transferred Employee (except for the five Australian Transferred Employees identified on Schedule 6.8(o)) is entitled pursuant to services performed by such employee prior to the Closing Date, including accrued sick leave, annual leave and long service leave. Buyer and TRW agree that in exchange for Buyer assuming liability for the accrued sick leave, annual leave and long service leave of Transferred Australian Employees an amount equal to the value of the accrued sick leave, annual leave and long service leave of the Australian Transferred Employees as at Closing will appear as a liability of TRW in the Closing Balance Sheet." Section 1.8 Novation Agreements Section 6.9 of the Agreement shall be amended by adding the following sentence to the end of such section: "Nothing in any of the novation agreements, entered into by and among Buyer (or one of its Affiliates), TRW (or one of its 7 Affiliates) and various third parties, which novation agreements effect the replacement of TRW (or one of its Affiliates) by Buyer (or one of its Affiliates) as a party to the agreements of the Business, shall be construed to amend or otherwise affect any provision of this Agreement, including without limitation the allocation of liabilities in Section 2.4 of this Agreement." Section 1.9 Local Transfer Agreements. (a) Section 6.11(b) of the Agreement shall be amended by replacing the period after the phrase "Asset Selling Subsidiaries" in the sixth line with the word "and". (b) Section 6.11(b) of the Agreement shall be further amended by adding the following sentence to the end of such section: "To the extent there are any inconsistencies between terms and conditions of the Agreement and the terms and conditions of a Local Transfer Agreement, the terms and conditions of the Agreement shall prevail." Section 1.10 Asset Selling Subsidiaries. Schedule 2.3(a) shall be amended to add at the end of such Schedule a new item 16, which shall read "H.M. Hobson Ltd. - certain real property rights". Section 1.11 Tax Allocation (a) Subsection (i) of Section 2.7(a) shall be amended by inserting the following words at the end of the first sentence thereof: "including, in respect of each UK Item other than the UK Item described in Schedule 2.7 as UK Holdco Class A and Class B Shares, an appraisal of the A Portion and B Portion of that UK Item (if any) and, in the case of the UK Item described in Schedule 2.7 as UK Holdco Class A and Class B Shares, an appraisal of each such class of shares." (b) Section 2.7(a) shall be further amended by inserting following new subsection (v): "(v) In Section 2.7(a)(i) above, the following defined terms bear the following meanings: "A Portion" shall mean that portion of the UK Item forming part of the A Portion Business (as that term is defined in a deed of transfer between TRW Holding Limited, Goodrich 8 Control Systems Limited and Goodrich Controls Holding Limited to be executed on Closing pursuant to paragraph 10 of Schedule 2.1(the "Schedule 2.1(10) Transfer Deed"); and "B Portion" shall mean that portion of the UK Item forming part of the B Portion Business (as that term is defined in the Schedule 2.1(10) Transfer Deed). (c) The definition of "UK Items" shall be amended by replacing the word "and" in the final line with a comma, and adding the following words to the end of such definition "(v) HM Hobson Limited - Assets and (vi) TRW Systems Limited - Assets." (d) Schedule 2.7 containing the Purchase Price Allocation shall be deleted in its entirety, and replaced with the document attached as Exhibit C hereto. Section 1.12 Amendments to Supplemental Accounting Principles. (a) The information for Account Number 001-000, Title - Cash, in the Supplemental Accounting Principles, attached as Annex 1 to Section 4.7 of the TRW Disclosure Letter, shall be deleted in its entirety and replaced with the following: 001-000 CASH Represents balances in bank accounts including checks that have been issued/received but not cleared. EXCLUDED FROM REFERENCE BALANCE SHEET. EXCLUDED FROM THE CLOSING DATE BALANCE SHEET FOR U.S. UNITS. EXCLUDED FROM THE CLOSING DATE BALANCE SHEET FOR NON-U.S. UNITS WHERE BANK ACCOUNTS ARE NOT TRANSFERRED TO GOODRICH. INCLUDED IN THE CLOSING DATE BALANCE SHEET FOR NON-U.S. UNITS WHERE BANK ACCOUNTS ARE TRANSFERRED TO GOODRICH. 9 NOTE: CASH BALANCES THAT ARE DENOMINATED IN A NON-US DOLLAR CURRENCY SHOULD BE REFLECTED ON THE CLOSING BALANCE SHEET IN A US DOLLAR AMOUNT OBTAINED BY TRANSLATING THE FOREIGN CURRENCY BALANCE AT THE CLOSING DATE EXCHANGE RATE. TRW AND BUYER TREASURY DEPARTMENTS WILL WORK TOGETHER IN GOOD FAITH TO DETERMINE THE EXCHANGE RATE TO BE USED FOR THESE CASH BALANCES. THIS TREATMENT ASSUMES THAT ALL BANK ACCOUNTS ARE PROPERLY RECONCILED AS OF THE CLOSING DATE. FOR CLARIFICATION, THE ONLY BANK RECONCILIATION CATEGORIES SHOULD BE BANK BALANCE, OUTSTANDING CHECKS, UNDEPOSITED RECEIPTS AND BOOK BALANCE. UNLESS THERE ARE PROVEN BANK ERRORS, ALL "OTHER" RECONCILING ITEMS WILL BE CONSIDERED BOOK CASH ERRORS AND BOOK CASH SHOULD BE ADJUSTED ON THE RECONCILIATIONS. CLOSING DATE BANK RECONCILIATIONS WILL BE REVIEWED BY BUYER AND TRW PRIOR TO FINALIZATION OF ANY BOOK CASH BALANCES INCLUDED IN THE CLOSING BALANCE SHEET. WHERE APPROPRIATE, PETTY CASH BALANCES ARE EXCLUDED FROM THIS RECONCILIATION COMMENT. (b) The information for Account Number 035-000, Title - Short-Term Debt, in the Supplemental Accounting Principles, attached as Annex 1 to Section 4.7 of the TRW Disclosure Letter, shall be deleted in its entirety and replaced with the following: 035-000 SHORT-TERM Represents the unpaid balance of overdrafts, notes, drafts and other indebtedness that DEBT have been issued or assumed by or for the Business and which are payable within one year of the balance sheet date. EXCLUDED FROM THE REFERENCE BALANCE SHEET FOR ALL ENTITIES. THE CLOSING BALANCE SHEET WILL INCLUDE BANK DEBT ASSOCIATED WITH THE XIAMEN R&O JOINT VENTURE TO THE EXTENT THAT SUCH DEBT EXCEEDS OR IS LESS THAN $4.4 MILLION. SHOWN AS A CREDIT BALANCE (LIABILITY) IF THE DEBT IS GREATER THAN $4.4 MILLION; SHOWN AS A DEBIT BALANCE (ASSET) IF THE DEBT IS LESS THAN $4.4 MILLION. 10 Note: To the extent that Goodrich transfers any portion of Xiamen debt to another bank, or adds to or reduces the outstanding balance of Xiamen debt at or about the time of closing, that action will be considered a post closing event with no impact on the reference or closing balance sheet. (c) The information for Account Number 047-XXX, Title - L/T and Short Term Debt, in the Supplemental Accounting Principles, attached as Annex 1 to Section 4.7 of the TRW Disclosure Letter, shall be deleted in its entirety and replaced with the following: 047-XXX L/T AND Represents debt and obligations due to banks. SHORT TERM DEBT EXCLUDED FROM THE REFERENCE BALANCE SHEET FOR ALL ENTITIES. THE CLOSING BALANCE SHEET WILL INCLUDE BANK DEBT ASSOCIATED WITH THE XIAMEN R&O JOINT VENTURE TO THE EXTENT THAT SUCH DEBT EXCEEDS OR IS LESS THAN $4.4 MILLION. SHOWN AS A CREDIT BALANCE (LIABILITY) IF THE DEBT IS GREATER THAN $4.4 MILLION; SHOWN AS A DEBIT BALANCE (ASSET) IF THE DEBT IS LESS THAN $4.4 MILLION. NOTE: TO THE EXTENT THAT GOODRICH TRANSFERS ANY PORTION OF XIAMEN DEBT TO ANOTHER BANK, OR ADDS TO OR REDUCES THE OUTSTANDING BALANCE OF XIAMEN DEBT AT OR ABOUT THE TIME OF CLOSING, THAT ACTION WILL BE CONSIDERED A POST CLOSING EVENT WITH NO IMPACT ON THE REFERENCE OR CLOSING BALANCE SHEET. Section 1.13 TRW UK Pension Scheme (a) Subsection 6.8(u)(i) of the Agreement shall hereby be amended to add the following sentence at the end thereof: For the purposes of calculating any Payment under this Section 6.8(u), any on account transfer or excess payment made under paragraph 11 of Schedule 6.8(e)(ii) to the Agreement shall be ignored except that any on account transfer (as adjusted in accordance with Schedule 6.8(e)(ii)) shall be deemed to form part of the Transfer Amount (or such lesser amount as is actually transferred from the TRW Pension Scheme to the Buyer UK Pension Scheme 11 in discharge of the TRW Scheme's liability to provide benefits for the UK Transferred Employees) when the Transfer Amount (or such lesser amount) is actually transferred. (b) The "TRW Share Sale-Pension Schedule", attached as Annex 1 to Schedule 6.8(e)(ii) to the Agreement, shall be amended to add the following as paragraphs 10 and 11 to such TRW Share Sale-Pension Schedule: "10 REDUNDANCIES If on or before 31 December 2002 a Consenting Member is made redundant by the Buyer's Group or in the case of a Consenting Member who was a member of the "Senior Sections" in the TRW Scheme, such a Consenting Member retires at the employer's request and in either case is then aged 50 or over, TRW and the Buyer will co-operate in good faith (Revenue requirements permitting) to arrange for him to be offered the option of transferring the value of the rights he has then accrued or been credited under the Buyer's Scheme to the TRW Scheme, so that the TRW Scheme will provide for him the benefits which he would have received on redundancy or, in the case of a Consenting Member of the "Senior Sections", on retirement at the employer's request, had he remained in active membership of the TRW Scheme after Closing until the date when he was made redundant or, in the case of a Consenting Member of the "Senior Sections", the date when such a Consenting Member retired at the employer's request. Any such transfer value will be calculated by the TRW Actuary (and agreed by the Buyer's Actuary) in accordance with paragraph 4 of this Schedule. If Payment Date takes place after 31 December 2002, the transfer value shall be an amount equal to the sum of (a) and (b) (as defined below). There will be no physical transfer payment from the Buyer's Scheme back to the TRW Scheme but the transfer value will be made by netting off such amount against the Transfer Amount which would otherwise be paid by the TRW Scheme to the Buyer's Scheme under this Schedule (or against such lesser amount as is transferred from the TRW Scheme to the Buyer's Scheme in discharge of the TRW Scheme's liability to provide benefits for the UK Transferred Employees). 12 Where (a) is the part of the Transfer Amount in respect of the member concerned that would have been transferred to the Buyer's Scheme under this Schedule but for the provisions contained in this paragraph (with the proviso that, if the sum otherwise transferred on Payment Date from the TRW Scheme to the Buyer's Scheme is lower than the Transfer Amount, a reduction on that same basis is made to this item (a)); and Where (b) is the value of the Consenting Member's benefits that have accrued on or after Closing under the Buyer's Scheme calculated on the date of termination of service on the TRW PBO basis in accordance with the Actuary's Letter and paragraph 4 (with references to Closing being to the date of termination of service) and then increased or decreased over the period starting on the day of termination of service and ending on the end of the day which is 3 days before the Payment Date by the Timing Adjustment and then increased by interest at the Agreed Rate from (and including) the day which is 2 days before the Payment Date to the end of the day before the Payment Date. For the avoidance of doubt when calculating the value of the member's benefits on the TRW PBO basis, Factors A, B & C (as defined in the Actuary's Letter) will not apply. If Payment Date is on or before 31 December 2002, the transfer value shall be an amount in cash equal to the sum of (c) and (d) (as defined below). Where (c) is the part of the unadjusted Transfer Amount (as defined in the Actuary's Letter) in respect of the member concerned as at Closing (with the proviso that, if the sum transferred on Payment Date from the TRW Scheme to the Buyer's Scheme is lower than the Transfer Amount, a reduction on that same basis is made to this item (c)), and then increased or decreased over the period starting on Closing and ending on the end of the day which is 3 days before the day of payment of this transfer value by the Timing Adjustment and then increased by interest at the Agreed Rate from (and including) the day which is 2 days before the day of payment of this transfer value to the end of the day before the day of payment of this transfer value; and Where (d) is the value of the Consenting Member's benefits that have accrued on or after Closing under the Buyer's Scheme calculated on the date of termination of service on the TRW PBO basis in accordance with the Actuary's Letter and paragraph 4 (with references 13 to Closing being to the date of termination of service), and then increased or decreased over the period starting on the day of termination of service and ending on the end of the day which is 3 days before the day of payment of this transfer value by the Timing Adjustment and then increased by interest at the Agreed Rate from (and including) the day which is 2 days before the day of payment of this transfer value to the end of the day before the day of payment of this transfer value. For the avoidance of doubt when calculating the value of the member's benefits on the TRW PBO basis, Factors A, B & C (as defined in the Actuary's Letter) will not apply. If a member is reinstated in the TRW Scheme pursuant to this paragraph 10 he will then cease to be treated as a Consenting Member for all other purposes of this Schedule. 11 ON ACCOUNT TRANSFER (A) TRW will procure that, within 6 weeks after the end of the Transfer Consent Period or, if later the date when at least 90 per cent of the Option Forms have been received by TRW, TRW's Actuary will estimate the Transfer Amount and notify that estimate to the Buyer's Actuary. (B) TRW will use all reasonable endeavours to procure that the TRW Scheme will transfer to the Buyer's Scheme on such date as is agreed by TRW and the Buyer, as a payment on account of the Transfer Amount, an amount equal to 50 per cent. of the estimate so notified. (C) After the payment on account is made, for the purpose of this Schedule and the Actuary's Letter the TRW Scheme shall be deemed to have transferred on the Payment Date to the Buyer's Scheme in addition to the amount (if any) actually transferred on the Payment Date an amount equal to the payment made in accordance with this paragraph 11(B) and then increased or decreased by the Timing Adjustment over the period starting on the day the payment on account is made and ending on the end of the day which is 3 days before the Payment Date and then increased by interest at the Agreed Rate from and including the day which is 2 days before the Payment Date to the end of the day before the Payment Date. If the amount which the TRW Scheme is so deemed to have transferred on the Payment Date exceeds the Transfer Amount, the Buyer will on the Payment Date pay to TRW, or procure the payment by the Buyer's 14 Scheme to the TRW Scheme of, the excess. If the Buyer pays the excess to TRW, TRW will forthwith pay an amount equal to the excess received to the TRW Scheme. TRW will account to the Buyer for any Tax Benefit received in the same manner and circumstances as the Buyer is required to account to TRW for any Tax Benefit under paragraph 7(B). (D) In respect of any transfer between the TRW Scheme and the Buyer's Scheme, TRW (in the case of a transfer by the TRW Scheme) or the Buyer (in the case of a transfer by the Buyer's Scheme) will procure that the transferring scheme will before the transfer deliver to the receiving scheme a letter of direction supporting the use of Transaction Stamp Status Flag 5 in the form recommended by CREST. (E) If a payment on account is made, Appendix B to the Schedule will be modified to reflect the provisions of this paragraph." Section 1.14 Citroen Valve Business. Article VI of the Agreement shall hereby be amended to add the following Section 6.23 to such article: Section 6.23. Citroen Valve Business. TRW and Buyer shall treat the disposition of TRW Systemes Aeronautiques SAS' suspension valve business as set forth in Exhibit E hereto. Section 1.15 Reference Balance Sheet and SAP Amendments. The adjustments set forth on Exhibit F hereto shall be taken into account in preparing the Reference Balance Sheet and the Closing Balance Sheet. The Supplemental Accounting Principles attached as Annex 1 to Section 4.7 of the TRW Disclosure Letter shall be amended as set forth in Exhibit G hereto. ARTICLE II MISCELLANEOUS Section 2.1 Nature of Amendment. Except as expressly provided herein, the Agreement shall continue to be, and shall remain, in full force and effect. Except as expressly provided herein, this Amendment shall not be deemed to be a waiver of, or consent to, or a 15 modification or amendment of, any other term or condition of the Agreement. Any reference to the Agreement in the Agreement or any other document (except as specifically indicated to the contrary) shall be deemed to be a reference to the Agreement as amended hereby. Section 2.2 Governing Law. THIS AGREEMENT, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAWS OR ANY OTHER LAW THAT WOULD MAKE THE LAWS OF ANY OTHER JURISDICTION OTHER THAN THE STATE OF NEW YORK APPLICABLE HERETO. Section 2.3 Headings. The table of contents and the article, section, paragraph and other headings contained in this Amendment are inserted for convenience of reference only and shall not affect in any way the meaning or interpretation of this Amendment. Section 2.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement. Section 2.5 Entire Agreement. This Amendment, the Agreement, the Ancillary Agreements, the TRW Disclosure Letter, the Exhibits to the Agreement and this Amendment, the Schedules to the Agreement, and the Confidentiality Agreement constitute the entire agreement between the parties hereto with respect to the subject matter hereof, and supersede and cancel all prior agreements, negotiations, correspondence, undertakings, understandings and communications of the parties, oral and written, with respect to the subject matter hereof. 16 IN WITNESS WHEREOF, the parties have executed or caused this Amendment to be executed as of the date first written above. GOODRICH CORPORATION By: /s/ Alexander C. Schoch ---------------------------------------- Name: Alexander C. Schoch Title: Vice President, Associate General Counsel and Secretary TRW INC. By: /s/ Wesley G. Bush ---------------------------------------- Name: Wesley G. Bush Title: Executive Vice President TRW SYSTEMES AERONAUTIQUES CIVILS By: /s/ Robert A. Fulton ---------------------------------------- Name: Robert A. Fulton Title: Director TRW SYSTEMES AERONAUTIQUES By: /s/ Robert A. Fulton ---------------------------------------- Name: Robert A. Fulton Title: Director GOODRICH CONTROL SYSTEMS S.A.S. By: /s/ Joel Haldemann ---------------------------------------- Name: Joel Haldemann Title: President Exhibit A [Goodrich Corporation agrees to furnish supplementally to the Securities and Exchange Commission, upon request, a copy of any schedule referred to in the Agreement.] EX-10.2 4 g78625exv10w2.txt AMENDMENT NO. 1 DATED 9-13-02 TO THE 364-DAY CREDI EXHIBIT 10.2 Execution Counterpart AMENDMENT NO. 1 AMENDMENT NO. 1 dated as of September 13, 2002 among GOODRICH CORPORATION, a New York corporation (the "Company"), the lenders party to the Credit Agreement referred to below (the "Lenders"), and CITIBANK, N.A. ("Citibank"), as paying agent (in such capacity, together with its successors in such capacity, the "Paying Agent"). The Company, the Lenders and the Paying Agent are parties to a $1,500,000,000 364-Day Credit Agreement dated as of July 30, 2002 (as from time to time amended, the "Credit Agreement"). The Company has requested the Lenders to amend the Credit Agreement in certain respects, and the Lenders are willing so to amend the Credit Agreement, as hereinafter set forth. Accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 1, terms defined in the Credit Agreement are used herein as defined therein. Section 2. Amendments. Subject to the Paying Agent's receipt of counterparts this Amendment No. 1 duly executed by all of the parties hereto, but effective as of the date hereof, the Credit Agreement is amended as follows: A. Applicable Margin. The definition of "Applicable Margin" in Section 1.01 of the Credit Agreement is amended to read in its entirety as follows: ""Applicable Margin" means (a) for Eurocurrency Rate Advances, as of any date, a percentage per annum determined by reference to the Public Debt Rating and Leverage Ratio in effect on such date as set forth below:

- ------------------------------------------------------------------------------------------------------------------------- Public Debt Rating Applicable Margin for Applicable Margin for Applicable Margin for S&P/Moody's Eurocurrency Rate Advances Eurocurrency Rate Advances Eurocurrency Rate Advances When Leverage Ratio is Less When Leverage Ratio is When Leverage Ratio is than 3.50 to 1 Equal to or Greater than Equal to or Greater than 3.50 to 1 and less than 3.75 to 1 3.75 to 1 - ------------------------------------------------------------------------------------------------------------------------- Level 1 - ------- BBB+ or Baa1 0.650% 0.900% 1.025% - ------------------------------------------------------------------------------------------------------------------------- Level 2 - ------- BBB or Baa2 0.725% 0.975% 1.100% - ------------------------------------------------------------------------------------------------------------------------- Level 3 - ------- BBB- and Baa3 1.200% 1.450% 1.575% - ------------------------------------------------------------------------------------------------------------------------- Level 4 - ------- Lower than Level 3 1.625% 1.875% 2.000% - -------------------------------------------------------------------------------------------------------------------------

Amendment No. 1 --------------- -2- and (b) for Base Rate Advances, as of any date, a percentage per annum determined by reference to the Public Debt Rating and Leverage Ratio in effect on such date as set forth below:

- ------------------------------------------------------------------------------------------------------------------------- Public Debt Rating Applicable Margin for Applicable Margin for Applicable Margin for S&P/Moody's Base Rate Advances When Base Rate Advances When Base Rate Advances When Leverage Ratio is Leverage Ratio is Leverage Ratio is Equal to Less than 3.50 to 1 Equal to or Greater than or Greater than 3.75 to 1 3.50 to 1 and less than 3.75 to 1 - ------------------------------------------------------------------------------------------------------------------------- Level 1 - ------- BBB+ or Baa1 0.000% 0.000% 0.000% - ------------------------------------------------------------------------------------------------------------------------- Level 2 - ------- BBB or Baa2 0.000% 0.000% 0.000% - ------------------------------------------------------------------------------------------------------------------------- Level 3 - ------- BBB- and Baa3 0.000% 0.000% 0.075% - ------------------------------------------------------------------------------------------------------------------------- Level 4 - ------- Lower than Level 3 0.000% 0.375% 0.500% - -------------------------------------------------------------------------------------------------------------------------

The Applicable Margin for each Advance shall be determined by reference to the Public Debt Rating and the Leverage Ratio in effect from time to time, and shall be adjusted on the basis of the Leverage Ratio upward or downward on the third Business Day following delivery of the certificate referred to in Section 5.01(k)(iv); provided, that the Leverage Ratio shall be deemed to be greater than 3.75 to 1 for so long as the Company has not delivered such certificate as required under Section 5.01(k)(iv)." B. EBITDA. The definition of "EBITDA" in Section 1.01 of the Credit Agreement is amended by inserting after the words "interest expense" in the second line thereof the words "and distributions on trust preferred securities". C. Conditions Precedent to the Initial Borrowing. Section 3.02(a) of the Credit Agreement is amended to read in its entirety as follows: "(a) The Lenders shall have received copies, certified by an authorized officer of the Company, of all material filings made with any governmental authority in connection with the Transactions that are reasonably requested by the Paying Agent or its counsel on reasonable notice prior to the initial Borrowing." Amendment No. 1 --------------- -3- D. Leverage Ratio Definition. A new definition of "Leverage Ratio" is added in its correct alphabetical location in Section 1.01 of the Credit Agreement to read in its entirety as follows: ""Leverage Ratio" means the ratio of (a) Debt of the Company and its Consolidated Subsidiaries as of any date to (b) EBITDA of the Company and its Consolidated Subsidiaries for the four fiscal quarters ended on or immediately prior to such date." E. Consolidated Net Worth. Section 5.01(e) of the Credit Agreement is amended to read in its entirety as follows: "(e) Consolidated Net Worth. The Company will at all times keep and maintain Consolidated Net Worth at an amount not less than the sum of (i) $900,000,000 plus (ii) 50% of any positive Consolidated Net Income, which Consolidated Net Income shall be computed on a cumulative basis as of the last day of each fiscal year beginning with the fiscal year ending December 31, 2002 (for the purposes of this Section 5.01(e), Consolidated Net Income which is a deficit for any fiscal year shall be deemed to be zero) minus (iii) up to $285,000,000 of non-cash charges taken through Other Comprehensive Income in accordance with GAAP in 2002 related to potential underfunding of the Company's defined benefit pension plans plus (iv) up to $285,000,000 of any reversals recorded through Other Comprehensive Income in accordance with GAAP in 2003 and/or any subsequent years of non-cash charges actually taken in 2002 pursuant to clause (iii) of this Section 5.01(e)." F. Leverage Ratio. Section 5.01(f) of the Credit Agreement is amended to read in its entirety as follows: "(f) Leverage Ratio. The Company will maintain a Leverage Ratio of not greater than 4.00 to 1 until June 29, 2003, 3.75 to 1 from June 30, 2003 through September 29, 2003 and 3.50 to 1 after September 29, 2003." G. General. References in the Credit Agreement to "this Agreement" (including indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended hereby. Section 3. Representations and Warranties. The Company hereby represents and warrants to the Paying Agent and the Lenders that its making and performance of this Amendment No. 1 have been duly authorized by all necessary corporate action; the representations and warranties contained in Section 4.01 of the Credit Agreement are correct on and as of the date Amendment No. 1 --------------- -4- hereof as though made on and as of such date (except to the extent that any expressly relate to any earlier date); and no event has occurred and is continuing that constitutes a Default. Section 4. Miscellaneous. Except as expressly herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment No. 1 by signing any such counterpart. This Amendment No. 1 shall be governed by, and construed in accordance with, the law of the State of New York. Amendment No. 1 --------------- -5- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be executed by their respective officers thereunto duly authorized, as of the date first above written. GOODRICH CORPORATION By __________________________________ Title: By __________________________________ Title: CITIBANK, N.A., as Paying Agent By __________________________________ Title: Amendment No. 1 --------------- EX-23.1 5 g78625exv23w1.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the use of our report dated August 27, 2002, with respect to the combined financial statements of TRW Aeronautical Systems for the two years ended December 31, 2001, in the Current Report on Form 8-K dated October 1, 2002 of Goodrich Corporation. We also consent to the incorporation by reference of our report dated August 27, 2002, with respect to the combined financial statements of TRW Aeronautical Systems for the two years ended December 31, 2001, in the following Registration Statements and in the related Prospectuses of Goodrich Corporation:

Registration Number Description of Registration Statement Filing Date - ------------- ------------------------------------- ----------- 33-20421 The B.F.Goodrich Company Key Employees' March 1, 1988 Stock Option Plan - Form S-8 2-88940 The B.F.Goodrich Company Retirement Plus April 28, 1989 Savings Plan - Post-Effective Amendment No. 2 to Form S-8 33-29351 The Rohr Industries, Inc. 1988 Non-Employee June 19, 1989 Director Stock Option Plan - Form S-8 33-49052 The B.F.Goodrich Company Key Employees' June 26, 1992 Stock Option Plan - Form S-8 33-59580 The B.F.Goodrich Company Retirement March 15, 1993 Plus Savings Plan for Wage Employees - Form S-8 333-03293 The B.F.Goodrich Company May 8, 1996 Stock Option Plan - Form S-8 333-03343 Common Stock - Form S-3 May 8, 1996 333-19697 The B.F.Goodrich Company Savings January 13, 1997 Benefit Restoration Plan - Form S-8 333-53877 Pretax Savings Plan for the Salaried Employees May 29, 1998 of Rohr, Inc. (Restated 1994) and Rohr, Inc. Savings Plan for Employees Covered by Collective Bargaining Agreements (Restated 1994) - Form S-8 333-53879 Directors' Deferred Compensation Plan - Form S-8 May 29, 1998 333-53881 Rohr, Inc. 1982 Stock Option Plan, May 29, 1998 Rohr, Inc. 1989 Stock Incentive Plan and Rohr, Inc. 1995 Stock Incentive Plan - Form S-8 333-76297 Coltec Industries Inc. 1992 Stock Option Plan April 14, 1999 Coltec Industries Inc. 1994 Stock Option Plan for Outside Directors - Form S-8 333-77023 The B.F.Goodrich Company Stock Option April 26, 1999 Plan - Form S-8

333-95081 Shelf Registration for Common Stock, Series Preferred January 20, 2000 Stock and Debt Securities - Form S-3 333-60210 The B.F. Goodrich Company Stock Option May 4, 2001 Plan - Form S-8 333-60208 The B.F. Goodrich Company Employee May 4, 2001 Stock Purchase Plan - Form S-8 333-98165 Shelf Registration for Debt Securities, Series Preferred September 6, 2002 Stock, Common Stock, Stock Purchase Contracts and Stock Purchase Units - Form S-3 Cleveland, Ohio October 15, 2002 EX-99.1 6 g78625exv99w1.txt COMBINED FINANCIAL STATEMENTS OF TRW AERONAUTICAL EXHIBIT 99.1 A U D I T E D C O M B I N E D F I N A N C I A L S T A T E M E N T S TRW Aeronautical Systems Years ended December 31, 2001 and 2000 with Report of Independent Auditors INDEX TO FINANCIAL STATEMENTS Annual Financial Statements - --------------------------- Report of Independent Auditors............................................... 2 Statements of Operations for the Years Ended December 31, 2001 and 2000...... 3 Balance Sheets at December 31, 2001 and 2000................................. 4 Statements of Cash Flows for the Years Ended December 31, 2001 and 2000 ..... 5 Statements of Changes in Stockholder's Investment for the Years Ended December 31, 2001 and 2000................................................. 6 Notes to Financial Statements................................................ 7 1 REPORT OF INDEPENDENT AUDITORS Board of Directors TRW Inc. We have audited the accompanying combined balance sheets of TRW Aeronautical Systems as of December 31, 2001 and 2000, and the related combined statements of operations, cash flows and changes in stockholder's investment for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of TRW Aeronautical Systems at December 31, 2001 and 2000, and the combined results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Cleveland, Ohio August 27, 2002 2 STATEMENTS OF OPERATIONS TRW Aeronautical Systems (In millions) Years ended December 31 2001 2000 - --------------------------------------------------------------- ------------- Sales $ 1,101.8 $ 1,105.0 Cost of sales 755.7 740.3 - --------------------------------------------------------------- ------------- Gross profit 346.1 364.7 Administrative and selling expenses 170.5 138.6 Research and development expenses 78.5 67.5 Interest expense 82.0 85.6 Amortization of goodwill and intangible assets 32.1 30.3 Other (income) expense - net (4.6) 39.5 - --------------------------------------------------------------- ------------- Earnings (loss) before income taxes (12.4) 3.2 Income tax (benefit) expense (0.9) 7.3 - --------------------------------------------------------------- ------------- Net loss $ (11.5) $ (4.1) ============= ============= See notes to financial statements. 3 BALANCE SHEETS TRW Aeronautical Systems (In millions) December 31 2001 2000 - ----------------------------------------------------------------- ----------- ASSETS Current assets Cash and cash equivalents $ 27.1 $ 19.3 Accounts receivable (net of allowances of $1.7 and $1.9 in 2001 and 2000, respectively) 178.4 261.6 Inventories Finished products and work-in-process 156.2 130.8 Raw materials and supplies 32.3 40.0 - ----------------------------------------------------------------- ----------- Total inventories 188.5 170.8 Prepaid expenses 10.2 18.2 Deferred income taxes 30.5 40.7 - ----------------------------------------------------------------- ----------- Total current assets 434.7 510.6 Property, plant and equipment - on the basis of cost Land 28.8 30.2 Buildings 49.0 53.8 Machinery and equipment 264.3 199.0 - ----------------------------------------------------------------- ----------- 342.1 283.0 Less accumulated depreciation and amortization 83.4 55.2 - ----------------------------------------------------------------- ----------- Total property, plant and equipment - net 258.7 227.8 Intangible assets Goodwill 791.2 832.3 Other intangible assets 388.1 398.7 - ----------------------------------------------------------------- ----------- 1,179.3 1,231.0 Less accumulated amortization 100.1 68.8 - ----------------------------------------------------------------- ----------- Total intangible assets-net 1,079.2 1,162.2 Investments in affiliated companies 2.8 2.9 Other notes and accounts receivable 18.7 18.1 Deferred income taxes 15.1 -- Other assets 112.8 109.7 Prepaid pension cost 115.0 118.0 - ----------------------------------------------------------------- ----------- $ 2,037.0 $ 2,149.3 =========== =========== LIABILITIES AND STOCKHOLDER'S INVESTMENT Current liabilities Short-term debt $ 1.1 $ 4.1 Trade accounts payable 170.7 140.2 Accrued compensation 19.4 26.9 Other accruals 128.9 106.6 Income taxes 0.1 0.6 Current portion of long-term debt 6.3 7.1 - ----------------------------------------------------------------- ----------- Total current liabilities 326.5 285.5 Long-term debt 24.1 28.6 Long-term liabilities 124.2 115.3 Deferred income taxes -- 11.8 Stockholder's investment Parent company investment 1,731.0 1,815.3 Accumulated other comprehensive loss (168.8) (107.2) - ----------------------------------------------------------------- ----------- Total stockholder's investment 1,562.2 1,708.1 - ----------------------------------------------------------------- ----------- $ 2,037.0 $ 2,149.3 =========== =========== See notes to financial statements. 4 STATEMENTS OF CASH FLOWS TRW Aeronautical Systems (In millions) Years ended December 31 2001 2000 - ----------------------------------------------------------------- ----------- OPERATING ACTIVITIES Net loss $ (11.5) $ (4.1) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 69.7 66.5 Net gain on sale of assets (4.1) -- Deferred income taxes 13.9 34.0 Other-net 0.2 (1.1) Changes in assets and liabilities, net of effects of businesses divested Accounts receivable, net 76.3 (19.6) Inventories (22.0) 28.4 Trade accounts payable 34.5 (10.5) Prepaid expenses and other liabilities 47.5 (23.5) Other - net (5.5) (40.0) - ----------------------------------------------------------------- ----------- Net cash provided by operating activities 199.0 30.1 INVESTING ACTIVITIES Capital expenditures including other intangibles (88.6) (50.0) Net proceeds from divestitures 24.4 -- Other - net (2.2) (1.8) - ----------------------------------------------------------------- ----------- Net cash used in investing activities (66.4) (51.8) FINANCING ACTIVITIES Decrease in short-term debt (3.0) (5.1) Net transfer to parent company (113.9) (5.4) Principal payments on debt in excess of 90 days (2.3) (4.0) Other - net 2.8 (3.7) - ----------------------------------------------------------------- ----------- Net cash used in financing activities (116.4) (18.2) Effect of exchange rate changes on cash (8.4) 11.7 - ----------------------------------------------------------------- ----------- Increase (decrease) in cash and cash equivalents 7.8 (28.2) Cash and cash equivalents at beginning of year 19.3 47.5 - ----------------------------------------------------------------- ----------- Cash and cash equivalents at end of year $ 27.1 $ 19.3 ========= =========== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid (net of amount capitalized) $ 81.4 $ 86.6 Income tax refunds (net of taxes paid) 65.2 11.0 See notes to financial statements. 5 STATEMENTS OF CHANGES IN STOCKHOLDER'S INVESTMENT TRW Aeronautical Systems (In millions) - -------------------------------------------------------------------------------- Accumulated Parent Other Total Company Comprehensive Stockholder's Investment Loss Investment - -------------------------------------------------------------------------------- Balance at December 31, 1999 $ 1,657.6 $ (33.5) $ 1,624.1 - -------------------------------------------------------------------------------- Net loss - 2000 (4.1) (4.1) Foreign exchange loss, net of tax of $96.9 million (72.4) (72.4) Minimum pension liability, net of tax (1.3) (1.3) --------- Total comprehensive loss (77.8) Net transfers from Parent Company 161.8 161.8 - -------------------------------------------------------------------------------- Balance at December 31, 2000 1,815.3 (107.2) 1,708.1 - -------------------------------------------------------------------------------- Net loss - 2001 (11.5) (11.5) Foreign exchange loss, net of tax of $32.9 million (26.5) (26.5) Deferred cash flow hedges, net of tax of $15.2 million (33.1) (33.1) Minimum pension liability, net of tax (2.0) (2.0) --------- Total comprehensive loss (73.1) Net transfers to Parent Company (72.8) (72.8) - -------------------------------------------------------------------------------- Balance at December 31, 2001 $ 1,731.0 $ (168.8) $ 1,562.2 - -------------------------------------------------------------------------------- See notes to financial statements. 6 NOTES TO FINANCIAL STATEMENTS BASIS OF PRESENTATION AND TRANSACTIONS WITH TRW The combined financial statements of TRW Aeronautical Systems (the "Company") include the assets, liabilities, sales and expenses of TRW Inc.'s ("TRW") Aeronautical Systems businesses. The amounts are based upon TRW's historical amounts. Parent Company Investment represents TRW's investment in the Company including intercompany accounts. TRW Aeronautical Systems designs and manufactures high integrity systems and equipment, and provides services in the following product areas: equipment services, including spares and maintenance, repair and overhaul; flight controls; cargo systems; power generation and management; missile actuation and hoists and winches. On June 18, 2002, TRW announced that it had reached a definitive agreement with Goodrich Corporation for the sale of its Aeronautical Systems business, excluding certain assets and liabilities, for gross proceeds of approximately $1.5 billion. TRW expects to complete the sale by the end of the third quarter or early in the fourth quarter of 2002. The Statements of Operations of the Company include expenses recorded by the Company or directly charged to it by TRW. In addition, the statements include an allocation of TRW's general corporate expenses to reflect the services provided to or benefits received by the Company. The allocation was $8 million for 2001 and $7 million for 2000 and was reported in Administrative and Selling Expenses in the Statements of Operations. The allocation was based upon TRW's internal allocation methodology, which is based upon an established percentage of costs applied to the cost of operations (sales less earnings (loss) before taxes from continuing operations). Management believes that this is a reasonable method for allocating the general and administrative corporate expenses. The allocation is not necessarily representative of the operating expenses that would have been incurred had TRW Aeronautical Systems operated on a stand-alone basis. Debt reported on the Balance Sheets represents the historical third party obligations of the Aeronautical Systems business. Interest expense from the specific third party debt obligations attributed to the Company's operations is included in the Statements of Operations. In addition, an estimate of the interest expense of TRW attributable to the operations of the Company is also included in the Statements of Operations. The allocation of interest is based on a ratio of the Company's net assets to TRW's net assets (excluding TRW's automotive business) plus TRW's debt (excluding the debt of the Company and TRW's automotive business). Management believes that this is a reasonable method of allocating interest to the Company. This allocation is not, however, indicative of the total amount of interest that may be incurred by the Company as a separate entity. TRW accounts for and pays all United States income taxes. The Company's taxable income(loss) related to its United States operations and foreign operations subject to a United States "check-the-box" election to be taxed in the United States is included in TRW's consolidated income tax returns. The Statements of Operations include an allocation to the Company of TRW's United States income taxes(credits) in amounts generally equivalent to the provisions that would have resulted had the Company filed separate income tax returns for the years presented. The Company has also been allocated United States deferred income taxes based on the estimated differences between the book and tax basis of its assets and liabilities. Most of the Company's foreign operations account for and pay foreign income taxes related to their operations. For those foreign operations that have not separately accounted for and 7 paid income taxes related to their operations, the Statements of Operations include an allocation of TRW's foreign income taxes in amounts generally equivalent to the provisions which would have resulted had the Company filed separate income tax returns for the years presented. These operations have also been allocated foreign deferred income taxes based on the estimated differences between the book and tax basis of their assets and liabilities. In the opinion of management, all adjustments necessary for a fair presentation of financial position, operating results and cash flows have been presented. The financial information included may not necessarily reflect the results of operations, financial position, and changes in stockholder's investment in the future or what they would have been if the Company had been a separate, stand-alone company for the periods presented or in the future. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION - The combined financial statements include the accounts of the Company, which include all of TRW's Aeronautical Systems businesses. These businesses include direct and indirect wholly-owned subsidiaries of TRW Inc. Investments in affiliated companies are accounted for by the equity or cost method. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities, and reported amounts in the Statements of Operations. Actual results could differ from those estimates. REVENUE RECOGNITION - The Company recognizes sales in accordance with accounting principles generally accepted in the United States. The Company recognizes revenue when title is transferred to the customer. ENTRY FEES - It has become increasingly common for major aerospace customers to require an up-front contribution by way of an entry fee either in cash or through other arrangements. This payment effectively demonstrates the Company's commitment to participate in a new product program and is an essential part of the exclusive supply agreement. In return, the Company receives a percentage of product sales in the supply period after flight certification. These contributions are recognized as Other Assets on the Balance Sheets and amortized on a straight-line basis over the programs' useful lives following certification, which approximates 10 years. Entry fees capitalized at December 31, 2001 and 2000 were $105 million and $94 million, respectively. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all highly liquid investments purchased with a maturity of three months or less. ACCOUNTS RECEIVABLE - At December 31, 2001, the Company sold accounts receivable of its operations in the U.S. to TRW at face value as part of an accounts receivable securitization arrangement established by TRW with a financial institution and several financial conduits. The securitization transactions are accounted for as a sale of the receivables under the provisions of Statement of Financial Accounting Standards (SFAS) 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," and are removed from the Balance Sheets. The proceeds received are included in cash flows from operating activities in the Statements of Cash Flows. At December 31, 2001, $64 million of the Company's accounts receivable had been sold. 8 INVENTORIES - Inventories are stated at the lower of cost, principally the first-in, first-out (FIFO) method, or market. DEPRECIATION - Depreciation is computed over the assets' estimated useful lives, using the straight-line method for the majority of the Company's depreciable assets, including capital leases. The estimated useful lives of buildings, machinery and equipment, and computers and other office equipment are between 30 to 40 years, 8 to 12 years and 3 to 5 years, respectively. Depreciation expense was $38 million and $36 million for the years ended December 31, 2001 and 2000, respectively. INTANGIBLE ASSETS - Intangible assets are stated on the basis of cost and are being amortized by the straight-line method over the estimated future periods to be benefited. Other intangible assets include capitalized internal-use software and other identifiable intangible assets acquired through acquisitions, including core and developed technology and workforce. Capitalized internal-use software is being amortized over periods not to exceed 10 years. Other identifiable intangible assets are being amortized primarily over 5 to 30 years. ASSET IMPAIRMENT - The Company records impairment losses on long-lived and intangible assets when events and circumstances indicate that the assets may be impaired and the undiscounted net cash flows estimated to be generated by those assets are less than their carrying amounts. If the future undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are adjusted to their fair values. ENVIRONMENTAL COSTS - The Company participates in environmental assessments and remediation efforts at operating facilities, previously owned or operated facilities, and other waste sites. Costs related to these locations are accrued when it is probable that a liability has been incurred and the amount of that liability can be reasonably estimated. Estimated costs are recorded at undiscounted amounts, based on experience and assessments, and are regularly evaluated as efforts proceed. PRODUCT CAMPAIGN COSTS - The Company incurs product campaign costs when it and the customer decide to recall a product through a formal campaign to solicit the return of specific products due to a known or suspected safety concern. Product recall costs typically include the cost of the product being replaced, customer cost of the recall and labor to remove and replace the defective part. When a decision to recall a product has been made for which the Company bears some responsibility, it records the estimated cost to the Company of the recall as a charge to net earnings in that period in accordance with Financial Accounting Standards Board (FASB) Statement No. 5. RESEARCH AND DEVELOPMENT - Company-funded research and development programs include research and development for commercial products that is expensed as incurred. Customer-funded research and development expenses, net of customer funding, included in research and development expenses, were $43 million and $46 million for 2001 and 2000, respectively. SHIPPING AND HANDLING - Shipping costs include payments to a third-party shipper to move the product to the customer. Handling costs include costs from the point the product is removed from finished goods inventory to when provided to the shipper. Shipping and handling costs are expensed as incurred as cost of sales. FINANCIAL INSTRUMENTS - The Company adopted Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, on January 1, 2001. SFAS 133 requires companies to recognize all derivative instruments as either assets or liabilities at fair value. The transition adjustment recorded as a result of the adoption did not have a material impact on the Company's financial position or net earnings. 9 Under SFAS 133, the gain or loss on derivative instruments that have been designated and qualify as hedges of the exposure to changes in the fair value of an asset or a liability, as well as the offsetting gain or loss on the hedged item, are recognized in net earnings during the period of the change in fair values. For derivative instruments that have been designated and qualify as hedges of the exposure to variability in expected future cash flows, the gain or loss on the derivative is initially reported as a component of other comprehensive income (loss) and reclassified to the Statement of Operations when the hedged transaction affects net earnings. Any gain or loss on the derivative in excess of the cumulative change in the present value of future cash flows of the hedged item is recognized in net earnings during the period of change. For those hedged items that are terminated, any gain or loss on the derivative is recognized in net earnings upon termination. For derivative instruments that are a hedge of a net investment in a foreign currency, the gain or loss is reported in other comprehensive income (loss) as part of the cumulative translation adjustment. Derivatives not designated as hedges are adjusted to fair value through net earnings. Prior to the adoption of SFAS 133, changes in market value of contracts that hedged firm foreign currency commitments and inter-company transactions were generally included in the basis of the transactions. Changes in the market value of the contracts that hedged anticipated transactions were generally recognized in net earnings. NEW ACCOUNTING PRONOUNCEMENTS - The FASB recently issued SFAS 141, "Business Combinations," SFAS 142, "Goodwill and Intangible Assets," SFAS 143, "Accounting for Asset Retirement Obligations" and SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 141 requires companies to account for acquisitions entered into after June 30, 2001 using the purchase method and establishes criteria to be used in determining whether acquired intangible assets are to be recorded separately from goodwill. Statement 142 sets forth the accounting for goodwill and intangible assets after the completion of a business acquisition and for goodwill and intangible assets already recorded. Goodwill will no longer be amortized beginning January 1, 2002. Rather, goodwill will be tested for impairment by comparing the asset's fair value to its carrying value. Also, the value of workforce of approximately $11 million must be reclassified from intangible assets to goodwill. The Company adopted Statement 142 on January 1, 2002. At December 31, 2001, the Company had recorded $743 million of goodwill, net of accumulated amortization. In the second quarter of 2002, management conducted valuations and determined that goodwill was not impaired. In 2001, the Company recorded amortization expense for goodwill and the value of workforce of $20 million before tax, $19 million after tax. SFAS 143 requires the fair value of a liability for asset retirement obligations to be recorded in the period in which it is incurred. The statement applies to a company's legal or contractual obligation associated with the retirement of a tangible long-lived asset that resulted from the acquisition, construction or development or through the normal operation of a long-lived asset. The statement is effective for the Company beginning January 1, 2003. SFAS 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets. The statement provides a consistent method to value long-lived assets to be disposed of. New criteria must be met to classify the asset as an asset held-for-sale. This statement also changes the rules for reporting the effects of a disposal of a segment of a business. This statement was adopted on January 1, 2002. 10 The Company has evaluated the impact of SFAS 143 and SFAS 144 and believes that the adoption of these statements should not have a material impact on its financial position or results of operations. RESTRUCTURING In 2001, the Company announced restructuring actions as a result of decreased demand for its commercial aviation equipment and services. Cost reduction measures are being implemented including reductions of approximately 1,100 employees. As a result of these actions, the Company recorded before-tax charges of $24 million in 2001, of which $8 million and $16 million were recorded in administrative and selling expenses and cost of sales, respectively. As of December 31, 2001, the Company used $4 million for severance payments. In the second quarter of 2002, the Company reversed approximately $4 million of these charges, and expects the balance to be used by the end of 2002. As part of the LucasVarity acquisition, the Company recorded approximately $54 million for severance and other costs to close certain facilities. The costs were included in the purchase price allocation and reported in other accruals. During 2001 and 2000, $5 million and $38 million, respectively, were used for severance and lease termination costs. The remaining balance was used in the first quarter of 2002. A movement of the restructuring reserve is as follows: (In millions) - -------------------------------------------------------------------------------- Provision ------------------------ LucasVarity Used for Beginning Administrative Cost of Purchase Price Purposes Ending Balance and Selling Sales Allocation Intended Balance ------------------------------------------------------------------------ 2001 $ 7 $ 8 $ 16 - $ (9) $ 22 2000 4 - - 41 (38) 7 OTHER (INCOME) EXPENSE-NET Other (income) expense - net was income of $4 million and expense of $40 million in 2001 and 2000, respectively. Included in 2000 was $44 million of unrealized losses on foreign currency exchange contracts. 11 FINANCIAL INSTRUMENTS FAIR VALUES OF FINANCIAL INSTRUMENTS - at December 31 2001 2000 ----------------- ------------------- Carrying Fair Carrying Fair (In millions) Value Value Value Value - ----------------------------------------------------------- ------------------- Cash and cash equivalents $ 27 $ 27 $ 19 $ 19 Short-term debt 1 1 4 4 Floating rate long-term debt 24 25 29 28 Fixed rate long-term debt 6 6 7 6 Foreign currency forward contracts - (liability) asset (40) (40) 6 5 The fair value of long-term debt was estimated using a discounted cash flow analysis based on the Company's current borrowing rates for similar types of borrowing arrangements. The fair value of the foreign currency forward contracts was estimated using a discounted cash flow analysis based on quoted market prices of offsetting contracts. FOREIGN CURRENCY FORWARD CONTRACTS - The Company manufactures and sells its products in countries throughout the world. As a result, it is exposed to fluctuations in foreign currency exchange rates. The Company enters into forward contracts to hedge portions of its foreign currency denominated forecasted revenues, purchases and the subsequent cash flows. The critical terms of the hedges are the same as the underlying forecasted transactions, and the hedges are considered to be perfectly effective to offset the changes in fair value of cash flows from the hedged transactions. Gains or losses on these instruments, which mature at various dates through April 2007, are generally recorded in other comprehensive income(loss) until the underlying transaction is recognized in net earnings. The earnings impact is reported in either sales, cost of sales, or other (income) expense-net, to match the underlying transaction. The amount of gains and losses reclassified into net earnings in 2001 as a result of the discontinuation of cash flow hedges or hedge ineffectiveness were immaterial. Foreign currency cash flow hedges with a combined fair value of a $6 million loss after tax at December 31, 2001 are expected to be recognized in net earnings in 2002. At December 31, 2001, the Company had foreign currency forward contracts outstanding with a notional amount of $1.4 billion, denominated principally in the Euro and the British pound. Foreign exchange contracts are placed either through TRW, or directly with a number of major financial institutions to minimize credit risk. No collateral is held in relation to the contracts, and the Company anticipates that these financial institutions will satisfy their obligations under the contracts. The following table represents the movement of amounts reported in other comprehensive income (loss) of deferred cash flow hedges, net of tax. (In millions) 2001 - -------------------------------------------------------------------------------- Balance at December 31, 2000 $ -- Net change in derivative fair value and other movements during the year (40) Amounts reclassified to earnings during the year 7 - -------------------------------------------------------------------------------- Other comprehensive income(loss) $ (33) - -------------------------------------------------------------------------------- 12 INCOME TAXES EARNINGS (LOSS) BEFORE INCOME TAXES (In millions) 2001 2000 - ------------------------------------------------------------------- -------- U.S. $ (15) $ (86) Non-U.S. 3 89 - ------------------------------------------------------------------- -------- $ (12) $ 3 ======= ======== PROVISION FOR (BENEFIT OF) INCOME TAXES (In millions) 2001 2000 - ------------------------------------------------------------------- -------- Current U.S. federal $ (61) $ (21) Non-U.S. (5) 8 U.S. state and local - 3 - ------------------------------------------------------------------- -------- (66) (10) Deferred U.S. federal 61 23 Non-U.S. 4 (4) U.S. state and local - (2) - ------------------------------------------------------------------- -------- 65 17 ------- -------- $ (1) $ 7 ======= ======== EFFECTIVE INCOME TAX RATE 2001 2000 - ------------------------------------------------------------------- -------- U.S. statutory income tax rate 35.0% 35.0% Nondeductible expenses (1.3) 4.1 U.S. state and local income taxes net of U.S. federal tax benefit (2.2) 24.9 Non-U.S. tax rate variances net of foreign tax credits 7.2 4.5 Goodwill amortization (47.5) 157.9 R&D tax credits 15.0 - Other 1.3 3.5 - ------------------------------------------------------------------- -------- 7.5% 229.9% ======= ======== The effective income tax rate for the year ended December 31, 2001 was 7.5 percent compared to 229.9 percent for the year ended December 31, 2000. Excluding the unusual items for the years ended December 31, 2001 and 2000, the effective income tax rates would have been 54.5 percent and 48.3 percent, respectively. The major items affecting the effective income tax rate in 2001 were tax credits and non-deductible goodwill amortization. The main items affecting the effective tax rate in 2000 were non-deductible goodwill amortization and state and local income taxes. 13 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2001 and 2000, the Company had unused tax benefits of $3.4 million and $4.4 million, respectively, related to foreign net operating loss carryforwards for income tax purposes, of which the balance expires at various dates through 2005. A valuation allowance at December 31, 2001 and 2000, of $3.4 million and $4.4 million, respectively, has been recognized to offset the related deferred tax assets due to the uncertainty of realizing the benefit of the loss carryforwards. It is the Company's intention to reinvest undistributed earnings of certain foreign subsidiaries, thereby indefinitely postponing their remittance. Accordingly, deferred income taxes have not provided for accumulated undistributed earnings of $11 million at December 31, 2001. It is not practicable to estimate the additional income taxes and applicable withholding that would be payable on the remittance of such undistributed earnings. Deferred tax Deferred tax assets liabilities ------------ ------------ (In millions) 2001 2000 2001 2000 - ---------------------------------------------------------------- ------------ Pensions and post-retirement benefits other than pensions $ 13 $ 12 $ 38 $ 40 State and local taxes 1 1 Inventory 12 10 - - Reserves and accruals 13 22 - - Depreciation and amortization - - 101 99 Non-U.S. net operating loss carryforwards 3 4 - - Foreign currency exchange 139 106 - - Other 9 19 - - - ---------------------------------------------------------------- ------------ 189 173 140 140 Valuation allowance for deferred tax assets (3) (4) - - - ---------------------------------------------------------------- ------------ $186 $169 $140 $140 ============ ============ 14 PENSION PLANS During the periods presented, substantially all of TRW Aeronautical Systems' employees participated in TRW's defined benefit plans. The financial statements of the Company reflect the pension assets and liabilities related to the active and retired TRW Aeronautical Systems' employees in the Company's plans or in TRW's plans. The following table provides a reconciliation of the changes in the plans' benefit obligations and fair value of assets over the two-year period ended December 31, 2001, and a statement of the funded status as of December 31, 2001 and 2000: 2001 2000 -------------- -------------- (In millions) U.S. Non-U.S. U.S. Non-U.S. - -------------------------------------------------------------- -------------- Change in benefit obligations Benefit obligations at January 1 $ 30 $ 332 $ 24 $ 357 Service cost 3 18 2 18 Interest cost 2 19 2 19 Amendments 1 - - - Actuarial loss (gain) (1) (34) 4 (33) Foreign currency exchange rate changes and other - (9) - (28) Divestitures - - - (1) Benefits paid (2) (1) (2) - - -------------------------------------------------------------- -------------- Benefit obligations at December 31 $ 33 $ 325 $ 30 $ 332 Change in plan assets Fair value of plan assets at January 1 $ 26 $ 485 $ 25 $ 556 Actual return on plan assets - (55) 1 (30) Foreign currency exchange rate changes - (13) - (44) Company contributions 3 - 2 - Plan participant contributions - 4 - 3 Benefits paid (2) (1) (2) - - -------------------------------------------------------------- -------------- Fair value of plan assets at December 31 $ 27 $ 420 $ 26 $ 485 Funded status of the plan $ (6) $ 95 $ (4) $ 153 Unrecognized actuarial loss (gain) 5 2 3 (54) Unrecognized prior service cost 2 - 2 - - -------------------------------------------------------------- -------------- Total recognized $ 1 $ 97 $ 1 $ 99 - -------------------------------------------------------------- -------------- The following table provides the amounts recognized in the Balance Sheets as of December 31, 2001 and 2000: 2001 2000 -------------- -------------- (In millions) U.S. Non-U.S. U.S. Non-U.S. - -------------------------------------------------------------- -------------- Prepaid benefit cost $ 1 $ 114 $ 1 $ 117 Accrued benefit liability - (17) - (18) Additional minimum liability (7) - (4) - Intangible asset and other 2 - 2 - Accumulated other comprehensive loss 5 - 2 - - -------------------------------------------------------------- -------------- Total recognized $ 1 $ 97 $ 1 $ 99 - -------------------------------------------------------------- -------------- 15 The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the United States pension plans for the TRW Aeronautical Systems' employees and retirees with accumulated benefit obligations in excess of plan assets were $28 million, $28 million and $22 million, respectively, as of December 31, 2001, and $27 million, $27 million and $24 million, respectively, as of December 31, 2000. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the non-United States pension plans for the TRW Aeronautical Systems' employees and retirees with accumulated benefit obligations in excess of plan assets were $21 million, $16 million and $4 million, respectively, as of December 31, 2001, and $18 million, $15 million and $0 million, respectively, as of December 31, 2000. The following table provides the components of net pension cost for the plans for years 2001 and 2000: 2001 2000 -------------- -------------- (In millions) U.S. Non-U.S. U.S. Non-U.S. - -------------------------------------------------------------- -------------- Defined benefit plans Service cost-benefits earned during the year $ 3 $ 18 $ 2 $ 18 Interest cost on projected benefit obligations 2 19 2 19 Expected return on plan assets (3) (37) (2) (35) Amortization of prior service cost 1 - - - - -------------------------------------------------------------- -------------- Defined benefit plans 3 - 2 2 Defined contribution plans - - 2 - Employee stock ownership and savings plan 2 - - - - -------------------------------------------------------------- -------------- Total pension cost $ 5 $ - $ 4 $ 2 - -------------------------------------------------------------- -------------- The assumptions used in the measurement of the benefit obligations for the active and retired TRW Aeronautical Systems' employees are shown in the following table: 2001 2000 ---------------- ---------------- U.S. Non-U.S. U.S. Non-U.S. - ------------------------------------------------------------ ---------------- Actuarial assumptions Discount rate 7.25% 5.5-6.5% 7.50% 6.0-7.0% Rate of increase in compensation levels 4.10% 2.0-4.0% 4.10% 3.5-4.5% - ------------------------------------------------------------ ---------------- The expected long-term rate of return on plan assets for United States plans was 9.5 percent for 2001 and 2000. For non-United States plans the expected long-term rate of return ranged from 8 to 8.75 percent in 2001 and 2000. TRW sponsors a contributory stock ownership and savings plan for which a majority of TRW Aeronautical Systems' United States employees are eligible and under which TRW matches employee contributions up to three percent of the participant's qualified compensation. TRW contributions are held in an unleveraged employee stock ownership plan. Prior to 2001, certain employees participated in a defined contribution pension plan. Those employees participated in the stock ownership and savings plan in 2001. 16 POST-RETIREMENT BENEFITS OTHER THAN PENSIONS TRW provides health care and life insurance benefits for a majority of TRW Aeronautical Systems' retired employees in the United States and Canada. The health care plans provide for cost sharing, in the form of employee contributions, deductibles and coinsurance, between TRW Aeronautical Systems and its retirees. The post-retirement health care plan covering a majority of employees, limits the annual increase in TRW Aeronautical Systems' contribution toward the plan's cost to a maximum of the lesser of 50 percent of medical inflation or four percent. Life insurance benefits are generally noncontributory. Retirees in certain other countries are provided similar benefits by plans sponsored by their governments. The following table provides a reconciliation of the changes in the plans' benefit obligations and fair value of assets over the two-year period ended December 31, 2001, and a statement of the funded status as of December 31, 2001 and 2000 for the active and retired TRW Aeronautical Systems' employees: (In millions) 2001 2000 - ------------------------------------------------------------------ ---------- Change in benefit obligations Benefit obligations at January 1 $ 45 $ 30 Service cost 1 1 Interest cost 4 2 Actuarial loss 1 13 Benefits paid (2) (1) - ------------------------------------------------------------------ ---------- Benefit obligations at December 31 $ 49 $ 45 Change in plan assets Fair value of plan assets at January 1 $ 0 $ 0 Company contributions 2 1 Benefits paid (2) (1) - ------------------------------------------------------------------ ---------- Fair value of plan assets at December 31 $ 0 $ 0 - ------------------------------------------------------------------ ---------- Funded status of the plan $ (49) $ (45) Unrecognized actuarial loss 11 10 - ------------------------------------------------------------------ ---------- Total accrued benefit cost recognized $ (38) $ (35) - ------------------------------------------------------------------ ---------- The following table provides the components of net post-retirement benefit cost for the plans for years 2001 and 2000: (In millions) 2001 2000 - ------------------------------------------------------------------ ---------- Components of net post-retirement benefit cost Service cost $ 1 $ 1 Interest cost 4 2 - ------------------------------------------------------------------ ---------- Net post-retirement benefit cost $ 5 $ 3 - ------------------------------------------------------------------ ---------- The weighted-average discount rate used in determining the accumulated post-retirement benefit obligations as of December 31, 2001 and 2000 was 7.25 percent and 7.5 percent, respectively. A 6.4 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 17 2002. The rate was assumed to decrease gradually to 5.1 percent in the year 2009 and remain at that level, thereafter. A one-percentage-point change in the assumed health care cost trend rate would have the following effects: One-percentage-point -------------------- (In millions) Increase Decrease - ------------------------------------------------------------------- --------- Effect on total of service and interest cost components $ 1 $ 0 Effect on post-retirement benefit obligations 5 (4) - ------------------------------------------------------------------- --------- DEBT AND CREDIT AGREEMENTS SHORT-TERM DEBT (In millions) 2001 2000 - ------------------------------------------------------------------ ---------- U.S. borrowings $ - $ - Non-U.S. borrowings 1 4 - ------------------------------------------------------------------ ---------- 1 4 LONG-TERM DEBT (In millions) 2001 2000 - ------------------------------------------------------------------ ---------- Capitalized leases $ 26 $ 32 Other borrowings 4 4 - ------------------------------------------------------------------ ---------- Total long-term debt 30 36 Less current portion 6 7 - ------------------------------------------------------------------ ---------- $ 24 $ 29 - ------------------------------------------------------------------ ---------- The Company has borrowings under uncommitted credit agreements in certain countries in which it operates. These borrowings are primarily in the local currency of the country where the Company's operations are located. The borrowings are provided by various domestic and international banks at quoted market interest rates. The weighted-average interest rate on short-term borrowings outstanding at December 31, 2001 and 2000, was 2.6 percent and 7.4 percent, respectively. Capitalized lease arrangements are provided by several financial institutions, primarily in the United Kingdom, at rates ranging from 6.4 percent to 8.2 percent and expire at various dates through 2011. Other borrowings bear interest at rates ranging from 2.6 percent to 8.5 percent and mature at various dates through 2004. The maturities of long-term debt are, in millions: 2002-$6; 2003-$4; 2004-$4; 2005-$3; 2006-$2; and $11 thereafter. Compensating balance arrangements and fees were not material. 18 LEASE COMMITMENTS The Company leases certain offices, manufacturing and research buildings, machinery, automobiles and computer and other equipment. Such leases, some of which are noncancelable and in many cases include renewals, expire at various dates. The Company pays most maintenance, insurance and tax expenses relating to leased assets. Rental expense for operating leases was $14 million for 2001 and $12 million for 2000. At December 31, 2001, the future minimum lease payments for noncancelable operating leases totaled $49 million and are payable as follows, in millions: 2002-$11; 2003-$10; 2004-$8; 2005-$5; 2006-$2; and $ 13 thereafter. ACCUMULATED OTHER COMPREHENSIVE LOSS The components of accumulated other comprehensive loss at December 31, 2001 and 2000 are as follows: (In millions) 2001 2000 - ------------------------------------------------------------------ ---------- Minimum pension liability adjustments, net of tax $ (3) $ (1) Foreign currency exchange loss (net of tax of $139 million in 2001 and $106 million in 2000) (133) (106) Unrealized loss on cash flow hedges (net of tax of $15 million in 2001) (33) -- - ------------------------------------------------------------------ ---------- $(169) $(107) ========= ========== CONTINGENCIES Various claims, lawsuits and administrative proceedings are pending or threatened against the Company or its subsidiaries, covering a wide range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability and environmental matters. In addition, the Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party for certain waste management sites. Each of these matters is subject to various uncertainties, and some of these matters may be resolved unfavorably with respect to the Company. A reserve estimate for each matter is established using standard engineering cost estimating techniques. In the determination of such costs, consideration is given to the professional judgment of Company environmental engineers, in consultation with outside environmental specialists, when necessary. At multi-party sites, the reserve estimate also reflects the expected allocation of total project costs among the various potentially responsible parties. At December 31, 2001, the Company had reserves for environmental matters of $10 million. The Company believes any liability that may result from the resolution of environmental matters for which sufficient information is available to support these cost estimates will not have a material adverse effect on the Company's financial position or results of operations. However, the Company cannot predict the effect on the Company's financial position of expenditures for aspects of certain matters for which there is insufficient information. In addition, the Company cannot predict the effect of compliance with environmental laws and regulations with respect to unknown environmental 19 matters on the Company's financial position or results of operations or the possible effect of compliance with environmental requirements imposed in the future. Further, product liability claims may be asserted in the future for events not currently known by management. Although the ultimate liability from these potential claims cannot be ascertained at December 31, 2001, management does not anticipate that any related liability would have a material adverse effect on the Company's financial position. 20 EX-99.2 7 g78625exv99w2.txt UNAUDITED COMBINED FINANCIAL STATEMENTS OF TRW EXHIBIT 99.2 U N A U D I T E D C O M B I N E D F I N A N C I A L S T A T E M E N T S TRW Aeronautical Systems Six months ended June 30, 2002 and 2001 Statements of Operations (unaudited) TRW Aeronautical Systems (In millions) Six months ended June 30 2002 2001 - ------------------------------------------------------------- ------------ Sales $ 489.9 $ 534.9 Cost of sales 326.8 354.1 - ------------------------------------------------------------- ------------ Gross profit 163.1 180.8 Administrative and selling expenses 66.6 74.5 Research and development expenses 52.3 40.9 Interest expense 40.8 40.9 Impairment of goodwill 483.2 -- Amortization of goodwill and intangible assets 6.0 16.0 Other (income) expense-net 0.5 (4.5) - ------------------------------------------------------------- ------------ Earnings (loss) before income taxes (486.3) 13.0 Income tax (benefit) expense (29.1) 4.1 - ------------------------------------------------------------- ------------ Net earnings (loss) $ (457.2) $ 8.9 =========== ============ See notes to financial statements. Balance Sheets (unaudited) TRW Aeronautical Systems (In millions) June 30 December 31 2002 2001 - ----------------------------------------------------------------- ------------ ASSETS Current assets Cash and cash equivalents $ 13.3 $ 27.1 Accounts receivable 168.8 178.4 Inventories Finished products and work-in-process 158.7 156.2 Raw materials and supplies 62.4 32.3 - ----------------------------------------------------------------- ------------ Total inventories 221.1 188.5 Prepaid expenses 13.8 10.2 Income taxes receivable 4.2 -- Deferred income taxes -- 30.5 - ----------------------------------------------------------------- ------------ Total current assets 421.2 434.7 Property, plant and equipment-on the basis of cost Land 30.0 28.8 Buildings 70.3 49.0 Machinery and equipment 303.8 264.3 - ----------------------------------------------------------------- ------------ 404.1 342.1 Less accumulated depreciation and amortization 108.3 83.4 - ----------------------------------------------------------------- ------------ Total property, plant and equipment-net 295.8 258.7 Intangible assets Goodwill 364.9 791.2 Other intangible assets 395.1 388.1 - ----------------------------------------------------------------- ------------ 760.0 1,179.3 Less accumulated amortization 111.9 100.1 - ----------------------------------------------------------------- ------------ Total intangible assets-net 648.1 1,079.2 Investments in affiliated companies 3.1 2.8 Other notes and accounts receivable 21.1 18.7 Other assets 147.4 112.8 Deferred income taxes -- 15.1 Prepaid pension cost 115.8 115.0 - ----------------------------------------------------------------- ------------ $ 1,652.5 $ 2,037.0 ============= ============ LIABILITIES AND STOCKHOLDER'S INVESTMENT Current liabilities Short-term debt $ 0.1 $ 1.1 Trade accounts payable 142.0 170.7 Accrued compensation 24.7 19.4 Other accruals 98.9 128.9 Income taxes -- 0.1 Current portion of long-term debt 28.7 6.3 - ----------------------------------------------------------------- ------------ Total current liabilities 294.4 326.5 Long-term debt 1.5 24.1 Long-term liabilities 95.8 124.2 Deferred income taxes 18.2 -- Stockholder's investment Parent company investment 1,328.2 1,731.0 Accumulated other comprehensive loss (85.6) (168.8) - ----------------------------------------------------------------- ------------ Total stockholder's investment 1,242.6 1,562.2 - ----------------------------------------------------------------- ------------ $ 1,652.5 $ 2,037.0 ============= ============ See notes to financial statements. 2 Statements of Cash Flows (unaudited) TRW Aeronautical Systems (In millions) Six months ended June 30 2002 2001 - ------------------------------------------------------------------ --------- OPERATING ACTIVITIES Net earnings(loss) $ (457.2) $ 8.9 Adjustments to reconcile net earnings(loss) to net cash (used in)provided by operating activities Depreciation and amortization 23.4 33.8 Asset impairment charge 483.2 -- Net gain on sale of assets -- (4.5) Deferred income taxes (1.1) 59.0 Other-net (1.0) (0.1) Changes in assets and liabilities, net of effects of businesses divested Accounts receivable, net 20.5 19.7 Inventories (22.4) (28.7) Trade accounts payable (36.7) 27.0 Prepaid expenses and other liabilities (38.2) (28.5) Other-net (11.5) 7.9 - ------------------------------------------------------------------ --------- Net cash (used in)provided by operating activities (41.0) 94.5 INVESTING ACTIVITIES Capital expenditures including other intangibles (41.0) (35.1) Net proceeds from divestitures -- 27.7 Other-net (0.3) (8.7) - ------------------------------------------------------------------ --------- Net cash used in investing activities (41.3) (16.1) FINANCING ACTIVITIES Decrease in short-term debt (1.0) (4.8) Net transfer from(to) parent company 73.8 (65.8) Principal payments on debt in excess of 90 days -- 0.9 Other-net (0.1) 3.7 - ------------------------------------------------------------------ --------- Net cash provided by(used in) financing activities 72.7 (66.0) Effect of exchange rate changes on cash (4.2) (9.9) - ------------------------------------------------------------------ --------- (Decrease)increase in cash and cash equivalents (13.8) 2.5 Cash and cash equivalents at beginning of period 27.1 19.3 - ------------------------------------------------------------------ --------- Cash and cash equivalents at end of period $ 13.3 $ 21.8 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION Interest paid (net of amount capitalized) $ 39.9 $ 56.4 Income tax refunds (net of taxes paid) 8.5 45.2 See notes to financial statements. 3 NOTES TO FINANCIAL STATEMENTS (unaudited) BASIS OF PRESENTATION The accompanying combined financial statements of TRW Aeronautical Systems (the Company) include the assets, liabilities, sales and expenses of TRW Inc.'s (TRW) Aeronautical Systems businesses. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002, nor would they necessarily reflect the results of operations or financial position in the future or what they would have been if the Company had been a separate, stand-alone company for the period presented or in the future. On June 18, 2002, TRW announced that it had reached a definitive agreement with Goodrich Corporation for the sale of its Aeronautical Systems business, excluding certain assets and liabilities, for gross proceeds of approximately $1.5 billion. TRW expects to complete the sale early in the fourth quarter of 2002. The Statements of Operations of the Company include expenses recorded by the Company or directly charged to it by TRW. In addition, the statements include an allocation of TRW's general corporate expenses to reflect the services provided to or benefits received by the Company. The allocation was $3.3 million for the first half of 2002 and $3.4 million for the first half of 2001 and was reported in administrative and selling expenses in the Statements of Operations. The allocation was based upon TRW's internal allocation methodology, which is based upon an established percentage of costs applied to the cost of operations (sales less earnings (loss) before taxes from continuing operations). Management believes that this is a reasonable method for allocating the general and administrative corporate expenses. The allocation is not necessarily representative of the operating expenses that would have been incurred had TRW Aeronautical Systems operated on a stand-alone basis. Debt reported on the Balance Sheets represents the historical third party obligations of the Aeronautical Systems business. Interest expense from the specific third party debt obligations attributed to the Company's operations is included in the Statements of Operations. In addition, an estimate of the interest expense of TRW, attributable to the operations of the Company, is also included in the Statements of Operations. The allocation of interest is based on a ratio of the Company's net assets to TRW's net assets (excluding TRW's automotive business) plus TRW's debt (excluding the debt of the Company and TRW's automotive business). Management believes that this is a reasonable method of allocating interest to the Company. This allocation is not, however, indicative of the total amount of interest that may be incurred by the Company as a separate entity. TRW accounts for and pays all United States income taxes. The Company's taxable income(loss) related to its United States operations and foreign operations subject to a United States "check-the-box" election to be taxed in the United States is included in TRW's consolidated income tax returns. The Statements of Operations include an allocation to the Company of TRW's United States income taxes(credits) in amounts generally equivalent to the provisions that would have resulted had the Company filed separate income tax returns for the years presented. The Company has also been allocated United States deferred income taxes based on the estimated differences between the book and tax basis of its assets and liabilities. Most of the Company's foreign operations account for and pay foreign income taxes related to their operations. For those foreign operations that have not separately accounted for and paid income taxes related to their operations, the Statements of Operations include an allocation of TRW's foreign 4 income taxes in amounts generally equivalent to the provisions which would have resulted had the Company filed separate income tax returns for the years presented. These operations have also been allocated foreign deferred income taxes based on the estimated differences between the book and tax basis of their assets and liabilities. ACCOUNTING PRONOUNCEMENTS Effective January 1, 2002, the Company adopted Financial Accounting Standards Board (FASB) SFAS 141, "Business Combinations," SFAS 142, "Goodwill and Intangible Assets," and SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 141 requires that acquisitions entered into after June 30, 2001 are to be accounted for using the purchase method and establishes criteria to be used in determining whether acquired intangible assets are to be separated from goodwill. As a result of the Company's analysis, only the value of assembled workforce of approximately $11 million was reclassified from intangible assets to goodwill at January 1, 2002. SFAS 142 sets forth the accounting for goodwill and intangible assets already recorded. Commencing January 1, 2002, goodwill is no longer being amortized. Goodwill was tested for impairment by comparing the assets' fair values to their carrying values. With the adoption of SFAS 142, management's valuation of goodwill was determined not to be impaired. As a result of the proposed sale of Aeronautical Systems, an updated valuation was conducted taking into account the purchase price and an estimate of the fair value of the Company's assets and liabilities, which approximate their carrying values. The valuation resulted in an impairment of goodwill of $483.2 million. The Company reassessed the useful lives and residual values of all acquired intangible assets to make any necessary amortization period adjustments, which resulted in no adjustments being made. Amounts in 2001 have not been restated in accordance with the statement. The following table reflects the reconciliation of reported net earnings (loss) to adjusted net earnings (loss) for the exclusion of goodwill amortization. Six months ended June 30 ------------------- (In millions except per share data) 2002 2001 ------------------------------------------------------- --------- -------- NET EARNINGS (LOSS) Reported net earnings (loss) $ (457.2) $ 8.9 Add back: Goodwill amortization, net of tax - 9.4 --------- -------- Adjusted net earnings (loss) $ (457.2) $ 18.3 ========= ======== Estimated amortization expense for intangible assets for the next five years is approximately $12.0 million per year. SFAS 143, "Accounting for Asset Retirement Obligations," requires the fair value of a liability for asset retirement obligations to be recorded in the period in which it is incurred. The statement applies to a company's legal or contractual obligation associated with the retirement of a tangible long-lived asset that resulted from the acquisition, construction or development or through the normal operation of a long-lived asset. The statement is effective for the Company beginning January 1, 2003. Management has evaluated the impact of SFAS 143 and believes that its adoption should not have a material effect on the Company's financial position or results of operations. 5 SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," addresses the accounting and reporting for the impairment or disposal of long-lived assets. The statement provides a consistent method to value long-lived assets to be disposed of and broadens the presentation of discontinued operations. The adoption of SFAS 144 did not have a material effect on the Company's financial statements. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS 145 requires gains and losses on extinguishments of debt to be reclassified as income or loss from continuing operations rather than as extraordinary items as previously required by SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt." SFAS 145 also amends SFAS 13 requiring certain modifications to capital leases to be treated as sale-leaseback transactions and to subleases when the original lessee remains a secondary obligor, or guarantor. The provisions of SFAS 145 related to the rescission of SFAS 4 are effective for the Company on January 1, 2003. The remaining provisions of SFAS 145 were effective for transactions and reporting subsequent to May 15, 2002. The adoption of SFAS 145 did not have a material impact to the Company's financial position or results of operations. ACCOUNTS RECEIVABLE SECURITIZATION The Company sold accounts receivable of its operations in the U.S. to TRW at face value as part of an accounts receivable securitization arrangement established by TRW with a financial institution and several financial conduits. The proceeds received are included in cash flows from operating activities in the Statements of Cash Flows. The Company sold $53.4 million and $64.0 million of its accounts receivable at June 30, 2002 and December 31, 2001, respectively. Pursuant to the terms of the sale agreement with Goodrich Corporation, the Company discontinued selling accounts receivables to TRW in August 2002. All accounts receivable outstanding at that time were repurchased at face value. The securitization transactions are accounted for as a sale of the receivables under the provisions of Statement of Financial Accounting Standards (SFAS) 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," and are removed from the Balance Sheets. OTHER (INCOME)EXPENSE-NET Other (income) expense was expense of $0.5 million and income of $4.5 million for the six month periods ended June 30, 2002 and 2001, respectively. Included in 2001 was a $4.5 million gain on sale of real estate. RESTRUCTURINGS At December 31, 2001, restructuring charges of approximately $21.5 million had been recorded for severance and other costs. During the first six months of 2002, $4.7 million was used primarily to pay severance costs. Employee headcount has been reduced by over 800 since the start of the program in the fourth quarter of 2001. Also in 2002, the Company returned-to-profit $4.3 million as a result of changes in circumstances as to the extent of the program. The balance of $12.5 million is expected to be used by the end of 2002. 6 A movement of the restructuring reserve is as follows:

(In millions) - ----------------------------------------------------------------------------------------- Provision LucasVarity ----------------------- Purchase Used for Beginning Administrative Cost of Price Purposes Return- Ending Balance and Selling Sales Allocation Intended to-Profit Balance --------- -------------- ------- ----------- -------- --------- ------- Six-month period ended June 30, 2002 $ 21.5 $ -- $ -- $ -- $ (4.7) $ (4.3) $12.5

FINANCIAL INSTRUMENTS Foreign currency forward contracts - The Company manufactures and sells its products in countries throughout the world. As a result, it is exposed to fluctuations in foreign currency exchange rates. The Company enters into forward contracts to hedge portions of its foreign currency denominated forecasted revenues, purchases and the subsequent cash flows. The critical terms of the hedges are the same as the underlying forecasted transactions, and the hedges are considered to be perfectly effective to offset the changes in fair value of cash flows from the hedged transactions. Gains or losses on these instruments, which mature at various dates through April 2007, are generally recorded in other comprehensive income(loss) until the underlying transaction is recognized in net earnings. The earnings impact is reported in either sales, cost of sales, or other (income)expense-net, to match the underlying transaction. The Company designated these contracts as cash flow hedges. At June 30, 2002, the Company had foreign currency forward contracts outstanding with a notional amount of $1.2 billion, denominated principally in the Euro and the British pound. Foreign exchange contracts are placed either through TRW, or directly with a number of major financial institutions to minimize credit risk. No collateral is held in relation to the contracts, and the Company anticipates that these financial institutions will satisfy their obligations under the contracts. The following table represents the movement of amounts reported in other comprehensive income(loss) of deferred cash flow hedges, net of tax. Six months ended June 30 --------------------- (In millions) 2002 2001 ---------------------------------------------------- ---------- ---------- Beginning balance $ (33.1) $ -- Net change in derivative fair value and other movements 41.9 (54.1) Amounts reclassified to earnings 3.5 5.1 ---------- ---------- Other comprehensive income(loss) $12.3 $ (49.0) ========== ========== DEBT AND CREDIT AGREEMENTS At June 30, 2002, long-term debt, including the current portion of long-term debt, was $30.2 million, a decrease of $0.2 million from $30.4 million at December 31, 2001. The primary sources of long-term financing used by the Company are capitalized leases and bank borrowings. Subsequent to June 30, 2002, and in accordance with the sales agreement with Goodrich Corporation, TRW satisfied the Company's obligations under capitalized leases amounting to $25.7 million. 7 COMPREHENSIVE INCOME(LOSS) The components of comprehensive income(loss), net of tax, for the second quarter and six months of 2002 and 2001 are as follows: Six months ended June 30 ----------------------- (In millions) 2002 2001 - -------------------------------------------------------------------------------- Net earnings(loss) $(457.2) $ 8.9 Foreign currency exchange gain(loss) 37.8 (50.5) Unrealized gain(loss) on cash flow hedges 45.4 (49.0) -------- -------- Comprehensive income(loss) $(374.0) $ (90.6) ======== ======== The components of accumulated other comprehensive income(loss), net of tax, at June 30, 2002 and December 31, 2001 are as follows: June 30 December 31 (In millions) 2002 2001 - -------------------------------------------------------------------------------- Foreign currency exchange loss $ (94.7) $(132.5) Unrealized gain(loss) on cash flow hedges 12.3 (33.1) Minimum pension liability adjustments (3.2) (3.2) -------- -------- Accumulated other comprehensive income(loss) $ (85.6) $(168.8) ======== ======== CONTINGENCIES Various claims, lawsuits and administrative proceedings with respect to commercial, product liability and environmental matters are pending or threatened against the Company or its subsidiaries, arising from the ordinary course of business activities with respect to commercial, product liability and environmental matters. Taking into account established reserves, management believes that the ultimate resolution of each of the foregoing matters will not have a material effect on the Company's financial condition or results of operations. Further, product liability claims may be asserted in the future for events not currently known by management. Although the ultimate liability from these potential claims cannot be ascertained at June 30, 2002, management does not anticipate that any related liability would have a material adverse effect on the Company's financial position. 8 EX-99.3 8 g78625exv99w3.txt UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIALS EXHIBIT 99.3 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of Goodrich Corporation and the historical combined financial statements of TRW's aeronautical systems businesses. The unaudited pro forma condensed combined statements of income give effect to our acquisition of TRW's aeronautical systems businesses and the borrowing of $1.5 billion under a 364-day credit facility to fund that acquisition, with the assumptions and adjustments as described in the accompanying notes. The unaudited pro forma condensed combined statement of income for the year ended December 31, 2001 gives effect to these transactions as if they had been completed on January 1, 2001, and the unaudited pro forma condensed combined statement of income for the six months ended June 30, 2002 gives effect to these transactions as if they had been completed on January 1, 2002. The unaudited pro forma condensed combined balance sheet as of June 30, 2002 gives effect to these transactions as if they had been completed on June 30, 2002. The total estimated purchase price, calculated as described in Note d to these unaudited pro forma condensed combined financial statements, is allocated under the purchase method of accounting to the net tangible and intangible assets of the acquired businesses based on their fair values as of the completion of the acquisition. Independent valuation specialists are currently assisting us in determining the fair value of a significant portion of these assets. Final determination of these fair values will include our consideration of a final valuation prepared by the independent valuation specialists. This final valuation will be based on the actual net tangible and intangible assets of TRW's aeronautical systems businesses that existed as of October 1, 2002. These unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of fair values. Amounts preliminarily allocated to intangible assets with indefinite lives may change significantly or be eliminated, amounts allocated to intangible assets with definite lives may change significantly, and amortization methods and useful lives may be different from the assumptions used herein, any of which could result in a material change in amortization of intangible assets. Therefore, the actual amounts recorded based on our final assessment of asset fair values may differ materially from the information presented in these unaudited pro forma condensed combined financial statements. In addition to the receipt of the final valuation, the impact of ongoing integration activities could cause material differences in the information presented. The unaudited pro forma condensed combined financial statements do not reflect any operating efficiencies and cost savings that we may achieve or any expense associated with achieving these benefits. The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical financial statements and accompanying notes of Goodrich and TRW's aeronautical systems businesses. The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial condition that we would have reported had the acquisition been completed as of the dates presented, and should not be taken as representative of our future consolidated results of operations or financial condition. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF GOODRICH AND TRW'S AERONAUTICAL SYSTEMS BUSINESSES JUNE 30, 2002

HISTORICAL ------------------------- AERONAUTICAL PRO FORMA PRO FORMA GOODRICH SYSTEMS ADJUSTMENTS COMBINED -------- ------------ ----------- --------- (IN MILLIONS) ASSETS Current Assets Cash and cash equivalents $ 148.7 $ 13.3 $ (13.3)(a) $ 178.8 30.1(b) Accounts and notes receivable, net 584.2 168.8 -- 753.0 Inventories 873.4 221.1 26.0(e) 1,120.5 Deferred income taxes 99.1 -- -- 99.1 Prepaid expenses and other assets 24.2 18.0 (4.1)(a) 38.8 0.7(b) -------- -------- -------- -------- Total Current Assets 1,729.6 421.2 39.4 2,190.2 -------- -------- -------- -------- Property, plant and equipment 930.9 295.8 (3.1)(a) 1,223.6 Prepaid pension 234.3 115.8 (112.8)(a) 237.3 Goodwill 696.0 312.0 114.7(d) 1,122.7 Identifiable intangible assets 150.9 336.1 138.9(d) 625.9 Payment-in-kind notes receivable, less discount 174.9 -- -- 174.9 Other assets 455.6 171.6 -- 627.2 -------- -------- -------- -------- $4,372.2 $1,652.5 $ 177.1 $6,201.8 ======== ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term bank debt $ 229.9 $ 0.1 $ (0.1)(a) $1,729.9 1,500.0(b) Accounts payable 325.5 142.0 -- 467.5 Accrued expenses 470.4 123.6 (22.2)(a) 588.8 17.0(h) Income taxes payable 213.5 -- -- 213.5 Current maturities of long-term debt and capital lease obligations 5.8 28.7 (26.2)(a) 8.3 -------- -------- -------- -------- Total Current Liabilities 1,245.1 294.4 1,468.5 3,008.0 -------- -------- -------- -------- Long-term debt and capital lease obligations 1,312.8 1.5 -- 1,314.3 Pension obligations 158.7 25.3 (13.3)(a) 170.7 Postretirement benefits other than pensions 311.5 28.2 (7.2)(a) 332.5 Deferred income taxes 15.8 18.2 (18.2)(a) 15.8 Other non-current liabilities 205.6 42.3 (10.1)(a) 237.8 Mandatorily redeemable preferred securities of trust 125.2 -- -- 125.2 Total Shareholders' Equity 997.5 1,242.6 (1,242.6)(f) 997.5 -------- -------- -------- -------- $4,372.2 $1,652.5 $ 177.1 $6,201.8 ======== ======== ======== ========

See accompanying notes to unaudited pro forma condensed combined financial statements. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME OF GOODRICH AND TRW'S AERONAUTICAL SYSTEMS BUSINESSES SIX MONTHS ENDED JUNE 30, 2002

HISTORICAL ------------------------- AERONAUTICAL PRO FORMA PRO FORMA GOODRICH SYSTEMS ADJUSTMENTS COMBINED -------- ------------ ----------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Sales $1,846.7 $ 489.9 $ -- $2,336.6 Operating Costs and Expenses: Cost of sales 1,343.6 332.8 3.5(d) 1,679.9 Selling and administrative expenses 282.1 118.9 -- 401.0 Impairment of goodwill -- 483.2 (483.2)(d) -- Merger-related and consolidation costs 22.1 -- -- 22.1 -------- -------- -------- -------- 1,647.8 934.9 (479.7) 2,103.0 -------- -------- -------- -------- Operating income (loss) 198.9 (445.0) 479.7 233.6 Interest expense (46.2) (40.8) (21.5)(b) (67.7) 40.8(g) Interest income 19.1 -- -- 19.1 Other income (expense) - net (2.5) (0.5) -- (3.0) -------- -------- -------- -------- Income (loss) before income taxes and Trust distributions 169.3 (486.3) 499.0 182.0 Income tax expense (benefit) (55.9) 29.1 (33.3)(c) (60.1) Distributions on Trust Preferred Securities (5.2) -- -- (5.2) -------- -------- -------- -------- Income (loss) from Continuing Operations $ 108.2 $ (457.2) $ 465.7 $ 116.7 ======== ======== ======== ======== Income from continuing operations per share: Basic $ 1.06 $ 1.15 Diluted $ 1.03 $ 1.11 Average shares used in computing income from continuing operations per share (in millions): Basic 101.9 101.9 Diluted 105.2 105.2

See accompanying notes to unaudited pro forma condensed combined financial statements. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME OF GOODRICH AND TRW'S AERONAUTICAL SYSTEMS BUSINESSES YEAR ENDED DECEMBER 31, 2001

HISTORICAL ------------------------- AERONAUTICAL PRO FORMA PRO FORMA GOODRICH SYSTEMS ADJUSTMENTS COMBINED -------- ------------ ----------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Sales $4,184.5 $1,101.8 $ -- $5,286.3 Operating Costs and Expenses: Cost of sales 3,127.6 772.3 (13.1)(d) 3,886.8 Selling and administrative expenses 565.0 240.9 -- 805.9 Merger-related and consolidation costs 107.3 23.6 -- 130.9 -------- -------- -------- -------- 3,799.9 1,036.8 (13.1) 4,823.6 -------- -------- -------- -------- Operating income 384.6 65.0 13.1 462.7 Interest expense (107.8) (82.0) (43.0)(b) (150.8) 82.0(g) Interest income 24.1 -- -- 24.1 Other income (expense) - net (19.2) 4.6 -- (14.6) -------- -------- -------- -------- Income (loss) before income taxes and Trust distributions 281.7 (12.4) 52.1 321.4 Income tax (expense) benefit (94.3) 0.9 (14.3)(c) (107.7) Distributions on Trust Preferred Securities (10.5) -- -- (10.5) -------- -------- -------- -------- Income (loss) from Continuing Operations $ 176.9 $ (11.5) $ 37.8 $ 203.2 ======== ======== ======== ======== Income from continuing operations per share: Basic $ 1.72 $ 1.97 Diluted $ 1.65 $ 1.90 Average shares used in computing income from continuing operations per share (in millions): Basic 103.1 103.1 Diluted 106.9 106.9

See accompanying notes to unaudited pro forma condensed combined financial statements. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (a) Reflects the elimination of assets and liabilities we are not acquiring under the terms of the Master Agreement of Purchase and Sale, including cash, prepaid expenses, certain fixed assets, pension and postretirement assets and liabilities, deferred income taxes, bank debt, environmental liabilities and accrued liabilities. (b) Reflects the borrowing of $1.5 billion to finance the acquisition of TRW's aeronautical systems businesses under a 364-day credit facility provided by some of our existing lenders. The interest rate on the credit facility is variable, and is determined based upon LIBOR for the applicable borrowing period plus a credit spread (currently 0.725%). We also may borrow under the credit facility at the prime rate. For purposes of determining the adjustment to interest expense in the pro forma statements of income, the current one-month LIBOR rate was used with a credit spread of 0.725%, resulting in an interest rate of 2.525%. We incurred approximately $0.7 million in fees associated with the credit facility, which will be amortized to income as a component of interest expense over the term of the facility. The company also pays an annualized facility fee of 0.15% based on the average commitment amount, and a one time facility fee of 0.15% based on the commitment amount at December 31, 2002. Based on pro forma net borrowings of $1.5 billion under the facility, the annualized facility fee is $2.2 million. The pro forma annual interest expense under the facility based on the current rate of 2.525% is $37.9 million. Pro forma annual interest expense also includes amortization of the credit facility closing fees ($0.7 million), the annualized facility fee ($2.2 million) and the one time facility fee based on the commitment amount at December 31, 2002 ($2.2 million). The pro forma adjustment to cash of $30.1 million represents borrowings of $1.5 billion under the credit facility, reduced by $0.7 million in closing fees and $1,469.2 million in net cash paid to TRW at closing. (See Note (d)). The company expects to repay amounts outstanding under the credit facility from a combination of the net proceeds from the sale of common stock, the net proceeds from the sale of senior notes, the net proceeds from the sale of operating and non-operating assets and cash flow from operations. As the amounts, timing and certainty of the above sources of funds is not known, they have not been included in the pro forma financial statements. (c) Reflects the adjustment of income tax expense to the estimated combined effective rate for Goodrich and TRW's aeronautical systems businesses of 33.5% for the year ended December 31, 2001 and 33.0% for the six months ended June 30, 2002. (d) Reflects the estimated net fair value adjustment to TRW's aeronautical systems businesses goodwill and identifiable intangible assets as a result of the following estimated purchase price allocation: (in millions) Original purchase price for TRW's aeronautical systems businesses $ 1,500.0 Shares in joint venture not acquired (3.0) ---------- Cash paid to TRW 1,497.0 Cash received from TRW: For retiree medical (21.0) For foreign currency contracts terminated prior to closing (5.6) For foreign currency contract transfer costs (1.2) ---------- Net cash paid at closing 1,469.2 Estimated direct acquisition costs, including financial advisory, legal, accounting and other costs 17.0 ---------- Aggregate purchase price 1,486.2 Book value of the net assets of TRW's aeronautical systems businesses (1,242.6) Elimination of net balances not being acquired (see Note (a)) 36.0 Capitalized estimated manufacturing profit in inventory acquired (see Note (e)) (26.0) ---------- Net adjustment to goodwill and identifiable intangible assets $ 253.6 ========== This reflects our preliminary estimates of the purchase price allocation for the acquisition of TRW's aeronautical systems businesses, which may change upon completion of appraisals. For purposes of computing pro forma adjustments, we assumed historical values of current assets acquired and current liabilities assumed reflect fair value. The pro forma condensed combined balance sheet does not include any fair value adjustments for property, plant and equipment to fair value since we have not completed the appraisal process for these assets. The purchase price allocation does not include the effects of any anticipated restructuring activities that may occur in connection with the integration of TRW's aeronautical systems businesses. Further, we may identify other assets and liabilities to which a portion of the purchase price will be allocated. The identifiable intangible assets with definite lives have been adjusted to $475 million. This amount was estimated as part of our initial assessment in determining the total purchase price value. The amount preliminarily allocated to intangible assets with definite lives may change significantly and amortization methods and useful lives may be different from the assumptions used herein, any of which could result in a material change in amortization of intangible assets. The identifiable intangible assets are estimated to have an average life of 25 years, which results in pro forma annual amortization expense (using the straight line method) of $19 million, which is recorded in cost of sales. The proforma condensed combined income statements for the six months ended June 30, 2002 and the year ended December 31, 2001 have been adjusted to exclude $6.0 million and $12.1 million, respectively, representing the historical intangible assets amortization for TRW's aeronautical systems businesses. In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations" ("SFAS 141"), and Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method. Additionally, SFAS No. 141 establishes specific criteria for the recognition of intangible assets separately from goodwill. SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition and became effective January 1, 2002. The most significant changes made by SFAS No. 142 require that goodwill and indefinite lived intangible assets no longer be amortized and be tested for impairment at least on an annual basis. This provision of SFAS No. 142 applies to business combinations with effective dates after June 30, 2001. The pro forma condensed combined income statement does not include amortization for goodwill and other intangible assets with indefinite lives acquired with TRW's aeronautical systems businesses since the business combination was consummated after June 30, 2001. In addition, the condensed combined pro forma income statement for the year ended December 31, 2001 has been adjusted to exclude $20 million representing the historical goodwill amortization for TRW's aeronautical systems businesses, which is recorded in cost of sales. The pro forma condensed combined income statement for the six months ended June 30, 2002 has been adjusted to exclude the $483.2 million impairment of goodwill. We have not eliminated the $30.4 million of goodwill amortization of Goodrich included in our historical financial statements for the year ended December 31, 2001. The purchase price payable by us to TRW for the purchase of the aeronautical systems businesses is subject to potential upward or downward adjustment after the closing based on the difference between the net asset value of TRW's aeronautical systems businesses on October 1, 2002 (the closing date) and the net asset value of TRW's aeronautical systems businesses on May 31, 2002, both calculated in the manner set forth in the Master Agreement of Purchase and Sale. This adjustment has not been reflected in the pro forma financial statements. The purchase price will also be adjusted based on the funding of the pension plans of TRW's aeronautical systems businesses, based on the terms of the Master Agreement of Purchase and Sale. In general, the purchase price will be reduced by the amount by which the plans' projected benefit obligation exceeds the fair value of the assets of these plans. There is no purchase price adjustment if the fair value of the assets of the plans exceed the projected benefit obligation. The computation of this adjustment will be based on actuarial valuations of the plans which are not yet available. We do not anticipate that this adjustment will be material to the purchase price and no adjustment has been reflected in the pro forma financial statements. (e) Reflects the estimated purchase accounting adjustment for capitalization of estimated manufacturing profit in inventory acquired with TRW's aeronautical systems businesses. The pro forma condensed combined statement of income does not reflect the impact of the one-time adjustment to cost of sales during the periods when this inventory will be sold. (f) Reflects the elimination of the historical stockholder's investment in TRW's aeronautical systems businesses. (g) Reflects the elimination of interest expense allocated to the aeronautical systems businesses by TRW and the interest expense associated with debt not assumed by Goodrich under the terms of the Master Agreement of Purchase and Sale. (h) Reflects the accrual of the estimated direct acquisition costs, including financial advisory, legal, accounting and other costs. -----END PRIVACY-ENHANCED MESSAGE-----

EX-2.2

                                                                    EXHIBIT 2.2


                               AMENDMENT NO. 1 TO
                     MASTER AGREEMENT OF PURCHASE AND SALE

                  AMENDMENT NO. 1 (the "Amendment"), dated as of October 1,
2002, by and between Goodrich Corporation, a New York corporation ("Buyer"),
and TRW Inc., an Ohio corporation ("TRW") to the Master Agreement of Purchase
and Sale (the "Agreement"), dated as of June 18, 2002, by and between Buyer and
TRW. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Agreement.

                  WHEREAS, the parties hereto desire to enter into this
Amendment so as to make certain modifications to the Agreement;

                  NOW, THEREFORE, for good and valuable consideration and in
consideration of the respective representations, warranties, covenants and
agreements set forth in the Agreement, the parties hereto, intending to be
legally bound, agree as follows:

                                   ARTICLE I

                                   AMENDMENTS

                  Section 1.1       Parties to the Agreement

                  (a)      The first paragraph of the Agreement shall be
revised to add new parties to the agreement by deleting the word "and" before
"TRW INC." on the third line, and adding the following words at the end of such
first paragraph: "TRW Systemes Aeronautiques Civils, a subsidiary of TRW that
is organized under the laws of France and registered with the Commercial and
Companies Registry of Pontoise under the number 415 313 972 ("TRW SAC"), TRW
Systemes Aeronautiques, a subsidiary of TRW that is organized under the laws of
France and registered with the Commercial and Companies Registry of Versailles
under the number 552 019 093 ("TRW SA"), and Goodrich Control Systems S.A.S., a
subsidiary of Buyer that is organized under the laws of France and registered
with the Registry of Commerce and Companies of Meaux under the number 443 177
233 RCS Meaux ("Goodrich Control Systems").

                  (b)      Section 6.11 of the Agreement shall hereby be
amended to add the following subsection (c) to such section:

                           (c)      In furtherance of Section 6.11(b), (i) TRW
                  SAC and Goodrich Control Systems shall enter into a Local
                  Transfer Agreement to effect the sale of the Acquired Assets
                  owned by TRW SAC to Goodrich Control Systems, and (ii) TRW SA
                  and Goodrich



                  Control Systems shall enter into a Local Transfer Agreement
                  to effect the sale of the Acquired Assets owned by TRW SA to
                  Goodrich Control Systems.

                  (c)      Section 10.1 of the Agreement shall be amended to
add the following language to the end of the first paragraph (immediately
following the notice information for TRW):

                  and

                  (c)      if to Goodrich Control Systems:

                  Goodrich Control Systems S.A.S.
                  106 rue Fourny
                  78530 Buc, France
                  Attention:  President
                  Telecopy:  00 33 1 39 20 52 90

                  With a copy to:

                  Goodrich Corporation
                  Four Coliseum Centre
                  2730 West Tyvola Road
                  Charlotte, N.C. 28217 USA
                  Attention: Corporate Secretary
                  Telecopy: 704-423-7034

                           and

                  (d)      if to TRW SAC:

                  TRW Systemes Aeronautiques Civils
                  15 rue des Sorins
                  92400 Nanterre  France
                  Attention: President
                  Telecopy:  00 33 1 58 58 45 00

                  With a copy to:

                  TRW Inc.
                  1900 Richmond Road
                  Cleveland, OH 44124 USA
                  Attention: Secretary
                  Telecopy: 216-291-7070


                                       2

                  and

                  (e)      if to TRW SA:

                  TRW Systemes Aeronautiques
                  15 rue des Sorins
                  92000 Nanterre, France
                  Attention: President
                  Telecopy:

                  With a copy to:

                  TRW Inc.
                  1900 Richmond Road
                  Cleveland, OH 44124 USA
                  Attention: Secretary
                  Telecopy: 216-291-7070

                  Section 1.2       Ancillary Agreements.

                  (a)      Section 1.1 of the Agreement shall be amended to add
the following definition to such section, following the definition of "Domain
Names":

                  "Employee Leasing Agreement" shall mean the agreement to be
                  entered into on the Closing Date, between TRW and Buyer,
                  pursuant to which TRW or its Subsidiaries shall continue to
                  employ certain employees of the Business past the Closing
                  Date and lease such employees to Goodrich for the term of
                  such agreement."

                  (b)      Section 1.1 of the Agreement shall be amended to add
the following definitions to such section, following the definition of "Final
Determination":

                  "Foreign Exchange Termination Agreements" shall mean
                  collectively the letter agreement dated September 26, 2002
                  and the letter agreement dated September 27, 2002, each
                  between TRW and Buyer and relating to the treatment of, and
                  cost reimbursement for, the termination of certain foreign
                  exchange transactions."

                  (c)      The definition of "Ancillary Agreements" appearing
in the third sentence of Section 6.11(a) of the Agreement shall be amended to
add the words "the Employee Leasing Agreement, the Foreign Exchange Termination


                                       3

Agreements, the Cincom Letter Agreement," following the words "the Local
Transfer Agreements".

                  Section 1.3       Transfer of Bank Accounts

                  (a)      Section 2.3(a) shall be amended by (1) removing the
word "and" at the end of subsection (xiii), (2) replacing the period at the end
of clause (xiv) with a semicolon followed by the word "and", and (3) adding the
following subsection (xv) to such section:

                  "(xv)  the bank accounts listed on Schedule 2.3(a)(xv)."

                  (b)      A new Schedule 2.3(a)(xv) shall be added to the
Agreement, as attached hereto as Exhibit A.

                  (c)      Subsection (i) of Section 2.3(b) of the Agreement
shall be amended by adding the words "except for cash in the bank accounts
listed on Schedule 2.3(a)(xv)," to the beginning of such subsection.

                  Section 1.4       Compania Espanola de Sistemas Aeronauticos
SA (Spain). Section 6.5 of the Agreement shall hereby be amended to add the
following clause (c) to such section:

                           (c)      Buyer and TRW hereby agree that if (i) the
                  consent of Construcciones Aeronatuicas, S.A. ("CASA") to the
                  transfer of TRW's interests in the Spanish Affiliate is not
                  obtained on or prior to October 1, 2002 (or such other date
                  as the parties shall select as the Closing Date), (ii) all
                  the conditions to closing in Article VII are satisfied or
                  waived at or prior to such time, and (iii) CASA has not
                  exercised its pre-emptive rights to purchase TRW's interests
                  in the Spanish Affiliate, pursuant to the terms and
                  conditions of the organizational documents governing the
                  Spanish Affiliate (such rights, the "Pre-Emptive Rights"),
                  then (x) the Closing shall take place on October 1, 2002 (or
                  such other date as the parties shall select as the Closing
                  Date), with a reduction of $3,000,000 (three million dollars)
                  to the Purchase Price (which shall be treated as a decrease
                  to the purchase price for all purposes of this Agreement),
                  and (y) the provisions of Section 6.5(b) will apply to the
                  treatment of TRW's interest in the Spanish Affiliate until
                  the earlier of such time as CASA provides its consent to the
                  transfer of TRW's interests in the Spanish Affiliate to Buyer
                  or CASA exercises its Pre-Emptive Rights. Following the
                  Closing Date, if CASA provides its consent to the transfer of
                  TRW's interests in the Spanish Affiliate to Buyer, TRW


                                       4

                  shall transfer ownership of TRW's interests in the Spanish
                  Affiliate to Buyer immediately following receipt of such
                  consent, and Buyer shall pay to TRW an amount equal to
                  $3,000,000 (three million dollars) in immediately available
                  funds (which shall be treated as a increase to the purchase
                  price for all purposes of this Agreement), at which time the
                  provisions of Section 6.5(b) as they relate to the treatment
                  of TRW's interests in the Spanish Affiliate shall immediately
                  cease. Following the Closing Date, if CASA exercises its
                  Pre-Emptive Rights, then (i) upon transfer of TRW's interests
                  in the Spanish Affiliate to CASA pursuant to such exercise,
                  the provisions of Section 6.5(b) as they relate to the
                  treatment of TRW's interests in the Spanish Affiliate shall
                  immediately cease and (ii) Buyer and Seller shall use their
                  reasonable best efforts to cooperate and shall negotiate in
                  good faith to determine the value of TRW's interests in the
                  Spanish Affiliate (the "Spanish Affiliate Price"). Buyer and
                  TRW hereby expressly agree and acknowledge that the Spanish
                  Affiliate Price may be different from the amount paid by CASA
                  to TRW for the purchase of TRW's interests in the Spanish
                  Affiliate pursuant to the exercise of CASA's Pre-Emptive
                  Rights. If after ten (10) Business Days following the closing
                  of the transfer of TRW's interests in the Spanish Affiliate
                  to CASA, Buyer and TRW have not agreed on the Spanish
                  Affiliate Price, Buyer and TRW shall appoint a third-party
                  appraisal firm of international repute, reasonably mutually
                  acceptable to Buyer and TRW (the "Spanish Appraiser"), to
                  determine the Spanish Affiliate Price. The Spanish Appraiser
                  shall determine the Spanish Affiliate Price according to
                  commonly accepted valuation techniques and shall deliver its
                  report to Buyer and to TRW within twenty 20 Business Days of
                  its appointment. The Spanish Affiliate Price determined by
                  the Spanish Appraiser shall be final, non-appealable and
                  binding on both Buyer and TRW and may be enforced in any
                  court having competent jurisdiction. The fees and expenses of
                  the Spanish Appraiser shall be borne one-half by Buyer and
                  one-half by TRW. If the Spanish Affiliate Price is greater
                  than $3,000,000 (three million dollars), then TRW shall
                  deliver to Goodrich an amount in immediately available funds
                  equal to such excess (which shall be treated as a decrease to
                  the Purchase Price for all purposes of this Agreement). If
                  the Spanish Affiliate Price is less than $3,000,000 (three
                  million dollars), then Goodrich shall deliver to TRW an
                  amount in immediately available funds equal to such shortfall
                  (which shall be treated as an increase to the Purchase Price
                  for all purposes of this Agreement). The payment referred to
                  in the two preceding sentences shall be made no later than
                  two (2) Business Days after the later of (i) the date on
                  which TRW transfers its interests in the Spanish Affiliate


                                       5

                  to CASA, (ii) the date on which Buyer and TRW mutually agree
                  the Spanish Affiliate Price or (iii) the date on which the
                  Spanish Appraiser delivers its report to Buyer and TRW. Buyer
                  shall control the process of agreeing with CASA on the
                  appropriate price to be paid pursuant to the exercise of
                  CASA's Pre-Emptive Rights, and TRW shall reasonably cooperate
                  with Buyer in its control of such process.

                  Section 1.5       TRW Thales Aerolec SAS (France). Section
6.5 of the Agreement shall hereby be amended to add the following clause (d) to
such section:

                           (d)      Buyer and TRW hereby agree that if (i) the
                  approval of the French Ministry of Finance to transfer TRW's
                  interests in TRW Thales Aerolec SAS (the "French JV") is not
                  obtained on or prior to October 1, 2002 (or such other date
                  as the parties shall select as the Closing Date), and (ii)
                  all the conditions to closing in Article VII are satisfied or
                  waived at or prior to such time, then (x) the Closing shall
                  take place on October 1, 2002 (or such other date as the
                  parties shall select as the Closing Date), with a reduction
                  of $30,000 (thirty thousand dollars) to the Purchase Price
                  (which shall be treated as a decrease to the Purchase Price
                  for all purposes of this Agreement), and (y) the provisions
                  of Section 6.5(b) will apply to the treatment of TRW's
                  interest in the French JV until the approval of the French
                  Ministry of Finance to transfer TRW's interests in the French
                  JV are obtained. As soon as reasonably practical following
                  receipt of the approval of the French Ministry of Finance to
                  transfer TRW's interests in the French JV, TRW shall transfer
                  such interests in the French JV to Buyer, and Buyer shall pay
                  to TRW an amount equal to $30,000 (thirty thousand dollars)
                  in immediately available funds, which shall be treated as an
                  increase in the Purchase Price for all purposes of this
                  Agreement, and upon such payment, the provisions of Section
                  6.5(b) as they relate to the treatment of TRW's interest in
                  the French JV shall immediately cease.

                  Section 1.6 Certain Consent Issues. Section 6.5 of the
Agreement shall hereby be amended to add the following clause (e) to such
section:

                           (e)      TRW and Buyer shall comply with the
                  procedures set forth in Exhibit D hereto in connection with
                  seeking the consent of Cincom Systems, Inc. to the transfer
                  of the Software License Agreement, dated July 31, 1997,
                  between Cincom Systems, Inc. and TRW Limited, to Buyer.


                                       6

                  Section 1.7       Certain Employee Matters

                  (a)      Section 6.8(a) of the Agreement shall be amended by
adding the following sentence to the end of such subsection: "The obligations
of the parties pursuant to this Section 6.8 shall be subject to the terms and
conditions of the Employee Leasing Agreement."

                  (b)      Schedule 6.8(b) to the Agreement shall be amended by
adding the name "Steve Vasiliadis" to such schedule.

                  (c)      Section 6.8(n) of the Agreement shall be deleted in
its entirety.

                  (d)      Section 6.8(o) of the Agreement shall be amended by
deleting subsection (ii) in its entirety and inserting the following subsection
(ii) in its place:

                  "(ii) At the Closing, or as soon as reasonably practicable
                  thereafter, TRW shall (A) pay the five Australian Transferred
                  Employees engaged in managerial or supervisory duties
                  identified on Schedule 6.8(o) attached hereto as Exhibit B
                  their accrued entitlement to annual leave and long service
                  leave, and (B) provide Buyer with documentation concerning
                  all entitlements to which each Australian Transferred
                  Employee is entitled as at the Closing Date, including
                  accrued sick leave, annual leave and long service leave.
                  Buyer shall be responsible for honoring all entitlements to
                  which each Australian Transferred Employee (except for the
                  five Australian Transferred Employees identified on Schedule
                  6.8(o)) is entitled pursuant to services performed by such
                  employee prior to the Closing Date, including accrued sick
                  leave, annual leave and long service leave. Buyer and TRW
                  agree that in exchange for Buyer assuming liability for the
                  accrued sick leave, annual leave and long service leave of
                  Transferred Australian Employees an amount equal to the value
                  of the accrued sick leave, annual leave and long service
                  leave of the Australian Transferred Employees as at Closing
                  will appear as a liability of TRW in the Closing Balance
                  Sheet."

                  Section 1.8       Novation Agreements

                  Section 6.9       of the Agreement shall be amended by adding
the following sentence to the end of such section:

                           "Nothing in any of the novation agreements, entered
                  into by and among Buyer (or one of its Affiliates), TRW (or
                  one of its


                                       7

                  Affiliates) and various third parties, which novation
                  agreements effect the replacement of TRW (or one of its
                  Affiliates) by Buyer (or one of its Affiliates) as a party to
                  the agreements of the Business, shall be construed to amend
                  or otherwise affect any provision of this Agreement,
                  including without limitation the allocation of liabilities in
                  Section 2.4 of this Agreement."

                  Section 1.9       Local Transfer Agreements.

                  (a)      Section 6.11(b) of the Agreement shall be amended by
replacing the period after the phrase "Asset Selling Subsidiaries" in the sixth
line with the word "and".

                  (b)      Section 6.11(b) of the Agreement shall be further
amended by adding the following sentence to the end of such section:

                  "To the extent there are any inconsistencies between terms
                  and conditions of the Agreement and the terms and conditions
                  of a Local Transfer Agreement, the terms and conditions of
                  the Agreement shall prevail."

                  Section 1.10      Asset Selling Subsidiaries.

                  Schedule 2.3(a) shall be amended to add at the end of such
Schedule a new item 16, which shall read "H.M. Hobson Ltd. - certain real
property rights".

                  Section 1.11      Tax Allocation

                  (a)      Subsection (i) of Section 2.7(a) shall be amended by
inserting the following words at the end of the first sentence thereof:
"including, in respect of each UK Item other than the UK Item described in
Schedule 2.7 as UK Holdco Class A and Class B Shares, an appraisal of the A
Portion and B Portion of that UK Item (if any) and, in the case of the UK Item
described in Schedule 2.7 as UK Holdco Class A and Class B Shares, an appraisal
of each such class of shares."

                  (b)      Section 2.7(a) shall be further amended by inserting
following new subsection (v):

                  "(v) In Section 2.7(a)(i) above, the following defined terms
                  bear the following meanings:

                           "A Portion" shall mean that portion of the UK Item
                           forming part of the A Portion Business (as that term
                           is defined in a deed of transfer between TRW Holding
                           Limited, Goodrich


                                       8

                           Control Systems Limited and Goodrich Controls
                           Holding Limited to be executed on Closing pursuant
                           to paragraph 10 of Schedule 2.1(the "Schedule
                           2.1(10) Transfer Deed"); and

                           "B Portion" shall mean that portion of the UK Item
                           forming part of the B Portion Business (as that term
                           is defined in the Schedule 2.1(10) Transfer Deed).

                  (c)      The definition of "UK Items" shall be amended by
replacing the word "and" in the final line with a comma, and adding the
following words to the end of such definition "(v) HM Hobson Limited - Assets
and (vi) TRW Systems Limited - Assets."

                  (d)      Schedule 2.7 containing the Purchase Price
Allocation shall be deleted in its entirety, and replaced with the document
attached as Exhibit C hereto.

                  Section 1.12      Amendments to Supplemental Accounting
Principles.

                  (a)      The information for Account Number 001-000, Title -
Cash, in the Supplemental Accounting Principles, attached as Annex 1 to Section
4.7 of the TRW Disclosure Letter, shall be deleted in its entirety and replaced
with the following:


                     
001-000      CASH          Represents balances in bank accounts including checks that have been issued/received
                           but not cleared.

                           EXCLUDED FROM REFERENCE BALANCE SHEET.

                           EXCLUDED FROM THE CLOSING DATE BALANCE SHEET FOR U.S. UNITS.

                           EXCLUDED FROM THE CLOSING DATE BALANCE SHEET FOR NON-U.S. UNITS WHERE BANK ACCOUNTS ARE NOT
                           TRANSFERRED TO GOODRICH.

                           INCLUDED IN THE CLOSING DATE BALANCE SHEET FOR NON-U.S. UNITS WHERE BANK ACCOUNTS ARE
                           TRANSFERRED TO GOODRICH.




                                       9

                        
                           NOTE: CASH BALANCES THAT ARE DENOMINATED IN A NON-US DOLLAR
                           CURRENCY SHOULD BE REFLECTED ON THE CLOSING BALANCE SHEET IN A US DOLLAR AMOUNT
                           OBTAINED BY TRANSLATING THE FOREIGN CURRENCY BALANCE AT THE CLOSING DATE EXCHANGE RATE.
                           TRW AND BUYER TREASURY DEPARTMENTS WILL WORK TOGETHER IN GOOD FAITH TO DETERMINE
                           THE EXCHANGE RATE TO BE USED FOR THESE CASH BALANCES.

                           THIS TREATMENT ASSUMES THAT ALL BANK ACCOUNTS ARE PROPERLY RECONCILED AS OF THE
                           CLOSING DATE. FOR CLARIFICATION, THE ONLY BANK RECONCILIATION CATEGORIES SHOULD
                           BE BANK BALANCE, OUTSTANDING CHECKS,  UNDEPOSITED RECEIPTS AND BOOK BALANCE.
                           UNLESS THERE ARE PROVEN BANK ERRORS, ALL "OTHER" RECONCILING ITEMS WILL BE CONSIDERED
                           BOOK CASH ERRORS AND BOOK CASH SHOULD BE ADJUSTED ON THE RECONCILIATIONS. CLOSING
                           DATE BANK RECONCILIATIONS WILL BE REVIEWED BY BUYER AND TRW PRIOR TO FINALIZATION
                           OF ANY BOOK CASH BALANCES INCLUDED IN THE CLOSING BALANCE SHEET. WHERE APPROPRIATE,
                           PETTY CASH BALANCES ARE EXCLUDED FROM THIS RECONCILIATION COMMENT.



                  (b)      The information for Account Number 035-000, Title -
Short-Term Debt, in the Supplemental Accounting Principles, attached as Annex 1
to Section 4.7 of the TRW Disclosure Letter, shall be deleted in its entirety
and replaced with the following:


                     
035-000      SHORT-TERM    Represents the unpaid balance of overdrafts, notes, drafts and other indebtedness that
               DEBT        have been issued or assumed by or for the Business and which are payable within one year
                           of the balance sheet date.

                           EXCLUDED FROM THE REFERENCE BALANCE SHEET FOR ALL ENTITIES. THE CLOSING BALANCE SHEET WILL
                           INCLUDE BANK DEBT ASSOCIATED WITH THE XIAMEN R&O JOINT VENTURE TO THE EXTENT THAT SUCH DEBT
                           EXCEEDS OR IS LESS THAN $4.4 MILLION. SHOWN AS A CREDIT BALANCE (LIABILITY) IF THE DEBT IS
                           GREATER THAN $4.4 MILLION; SHOWN AS A DEBIT BALANCE (ASSET) IF THE DEBT IS LESS THAN $4.4
                           MILLION.




                                      10

                        
                           Note: To the extent that Goodrich transfers any portion of Xiamen debt to another bank, or
                           adds to or reduces the outstanding balance of Xiamen debt at or about the time of closing,
                           that action will be considered a post closing event with no impact on the reference or
                           closing balance sheet.



                  (c)      The information for Account Number 047-XXX, Title -
L/T and Short Term Debt, in the Supplemental Accounting Principles, attached as
Annex 1 to Section 4.7 of the TRW Disclosure Letter, shall be deleted in its
entirety and replaced with the following:

                     
047-XXX      L/T AND       Represents debt and obligations due to banks.
             SHORT
             TERM DEBT

                           EXCLUDED FROM THE REFERENCE BALANCE SHEET FOR ALL ENTITIES. THE CLOSING BALANCE SHEET WILL
                           INCLUDE BANK DEBT ASSOCIATED WITH THE XIAMEN R&O JOINT VENTURE TO THE EXTENT THAT SUCH DEBT
                           EXCEEDS OR IS LESS THAN $4.4 MILLION. SHOWN AS A CREDIT BALANCE (LIABILITY) IF THE DEBT IS
                           GREATER THAN $4.4 MILLION; SHOWN AS A DEBIT BALANCE (ASSET) IF THE DEBT IS LESS THAN $4.4
                           MILLION.

                           NOTE: TO THE EXTENT THAT GOODRICH TRANSFERS ANY PORTION OF XIAMEN DEBT TO ANOTHER BANK, OR
                           ADDS TO OR REDUCES THE OUTSTANDING BALANCE OF XIAMEN DEBT AT OR ABOUT THE TIME OF CLOSING,
                           THAT ACTION WILL BE CONSIDERED A POST CLOSING EVENT WITH NO IMPACT ON THE REFERENCE OR
                           CLOSING BALANCE SHEET.



                  Section 1.13      TRW UK Pension Scheme

                  (a)      Subsection 6.8(u)(i) of the Agreement shall hereby
be amended to add the following sentence at the end thereof:

                  For the purposes of calculating any Payment under this
                  Section 6.8(u), any on account transfer or excess payment
                  made under paragraph 11 of Schedule 6.8(e)(ii) to the
                  Agreement shall be ignored except that any on account
                  transfer (as adjusted in accordance with Schedule 6.8(e)(ii))
                  shall be deemed to form part of the Transfer Amount (or such
                  lesser amount as is actually transferred from the TRW Pension
                  Scheme to the Buyer UK Pension Scheme

                                       11

                  in discharge of the TRW Scheme's liability to provide benefits
                  for the UK Transferred Employees) when the Transfer Amount (or
                  such lesser amount) is actually transferred.

                  (b)      The "TRW Share Sale-Pension Schedule", attached as
Annex 1 to Schedule 6.8(e)(ii) to the Agreement, shall be amended to add the
following as paragraphs 10 and 11 to such TRW Share Sale-Pension Schedule:

                  "10      REDUNDANCIES

                  If on or before 31 December 2002 a Consenting Member is made
                  redundant by the Buyer's Group or in the case of a Consenting
                  Member who was a member of the "Senior Sections" in the TRW
                  Scheme, such a Consenting Member retires at the employer's
                  request and in either case is then aged 50 or over, TRW and
                  the Buyer will co-operate in good faith (Revenue requirements
                  permitting) to arrange for him to be offered the option of
                  transferring the value of the rights he has then accrued or
                  been credited under the Buyer's Scheme to the TRW Scheme, so
                  that the TRW Scheme will provide for him the benefits which
                  he would have received on redundancy or, in the case of a
                  Consenting Member of the "Senior Sections", on retirement at
                  the employer's request, had he remained in active membership
                  of the TRW Scheme after Closing until the date when he was
                  made redundant or, in the case of a Consenting Member of the
                  "Senior Sections", the date when such a Consenting Member
                  retired at the employer's request.

                  Any such transfer value will be calculated by the TRW Actuary
                  (and agreed by the Buyer's Actuary) in accordance with
                  paragraph 4 of this Schedule.

                  If Payment Date takes place after 31 December 2002, the
                  transfer value shall be an amount equal to the sum of (a) and
                  (b) (as defined below). There will be no physical transfer
                  payment from the Buyer's Scheme back to the TRW Scheme but
                  the transfer value will be made by netting off such amount
                  against the Transfer Amount which would otherwise be paid by
                  the TRW Scheme to the Buyer's Scheme under this Schedule (or
                  against such lesser amount as is transferred from the TRW
                  Scheme to the Buyer's Scheme in discharge of the TRW Scheme's
                  liability to provide benefits for the UK Transferred
                  Employees).


                                      12

                  Where (a) is the part of the Transfer Amount in respect of
                  the member concerned that would have been transferred to the
                  Buyer's Scheme under this Schedule but for the provisions
                  contained in this paragraph (with the proviso that, if the
                  sum otherwise transferred on Payment Date from the TRW Scheme
                  to the Buyer's Scheme is lower than the Transfer Amount, a
                  reduction on that same basis is made to this item (a)); and

                  Where (b) is the value of the Consenting Member's benefits
                  that have accrued on or after Closing under the Buyer's
                  Scheme calculated on the date of termination of service on
                  the TRW PBO basis in accordance with the Actuary's Letter and
                  paragraph 4 (with references to Closing being to the date of
                  termination of service) and then increased or decreased over
                  the period starting on the day of termination of service and
                  ending on the end of the day which is 3 days before the
                  Payment Date by the Timing Adjustment and then increased by
                  interest at the Agreed Rate from (and including) the day
                  which is 2 days before the Payment Date to the end of the day
                  before the Payment Date. For the avoidance of doubt when
                  calculating the value of the member's benefits on the TRW PBO
                  basis, Factors A, B & C (as defined in the Actuary's Letter)
                  will not apply.

                  If Payment Date is on or before 31 December 2002, the
                  transfer value shall be an amount in cash equal to the sum of
                  (c) and (d) (as defined below).

                  Where (c) is the part of the unadjusted Transfer Amount (as
                  defined in the Actuary's Letter) in respect of the member
                  concerned as at Closing (with the proviso that, if the sum
                  transferred on Payment Date from the TRW Scheme to the
                  Buyer's Scheme is lower than the Transfer Amount, a reduction
                  on that same basis is made to this item (c)), and then
                  increased or decreased over the period starting on Closing
                  and ending on the end of the day which is 3 days before the
                  day of payment of this transfer value by the Timing
                  Adjustment and then increased by interest at the Agreed Rate
                  from (and including) the day which is 2 days before the day
                  of payment of this transfer value to the end of the day
                  before the day of payment of this transfer value; and

                  Where (d) is the value of the Consenting Member's benefits
                  that have accrued on or after Closing under the Buyer's
                  Scheme calculated on the date of termination of service on
                  the TRW PBO basis in accordance with the Actuary's Letter and
                  paragraph 4 (with references


                                      13

                  to Closing being to the date of termination of service), and
                  then increased or decreased over the period starting on the
                  day of termination of service and ending on the end of the
                  day which is 3 days before the day of payment of this
                  transfer value by the Timing Adjustment and then increased by
                  interest at the Agreed Rate from (and including) the day
                  which is 2 days before the day of payment of this transfer
                  value to the end of the day before the day of payment of this
                  transfer value. For the avoidance of doubt when calculating
                  the value of the member's benefits on the TRW PBO basis,
                  Factors A, B & C (as defined in the Actuary's Letter) will
                  not apply.

                  If a member is reinstated in the TRW Scheme pursuant to this
                  paragraph 10 he will then cease to be treated as a Consenting
                  Member for all other purposes of this Schedule.

                  11       ON ACCOUNT TRANSFER

                  (A)      TRW will procure that, within 6 weeks after the end
                  of the Transfer Consent Period or, if later the date when at
                  least 90 per cent of the Option Forms have been received by
                  TRW, TRW's Actuary will estimate the Transfer Amount and
                  notify that estimate to the Buyer's Actuary.

                  (B)      TRW will use all reasonable endeavours to procure
                  that the TRW Scheme will transfer to the Buyer's Scheme on
                  such date as is agreed by TRW and the Buyer, as a payment on
                  account of the Transfer Amount, an amount equal to 50 per
                  cent. of the estimate so notified.

                  (C)      After the payment on account is made, for the
                  purpose of this Schedule and the Actuary's Letter the TRW
                  Scheme shall be deemed to have transferred on the Payment
                  Date to the Buyer's Scheme in addition to the amount (if any)
                  actually transferred on the Payment Date an amount equal to
                  the payment made in accordance with this paragraph 11(B) and
                  then increased or decreased by the Timing Adjustment over the
                  period starting on the day the payment on account is made and
                  ending on the end of the day which is 3 days before the
                  Payment Date and then increased by interest at the Agreed
                  Rate from and including the day which is 2 days before the
                  Payment Date to the end of the day before the Payment Date.
                  If the amount which the TRW Scheme is so deemed to have
                  transferred on the Payment Date exceeds the Transfer Amount,
                  the Buyer will on the Payment Date pay to TRW, or procure the
                  payment by the Buyer's


                                      14

                  Scheme to the TRW Scheme of, the excess. If the Buyer pays
                  the excess to TRW, TRW will forthwith pay an amount equal to
                  the excess received to the TRW Scheme. TRW will account to
                  the Buyer for any Tax Benefit received in the same manner and
                  circumstances as the Buyer is required to account to TRW for
                  any Tax Benefit under paragraph 7(B).

                  (D)      In respect of any transfer between the TRW Scheme
                  and the Buyer's Scheme, TRW (in the case of a transfer by the
                  TRW Scheme) or the Buyer (in the case of a transfer by the
                  Buyer's Scheme) will procure that the transferring scheme
                  will before the transfer deliver to the receiving scheme a
                  letter of direction supporting the use of Transaction Stamp
                  Status Flag 5 in the form recommended by CREST.

                  (E)      If a payment on account is made, Appendix B to the
                  Schedule will be modified to reflect the provisions of this
                  paragraph."

                  Section 1.14      Citroen Valve Business. Article VI of the
Agreement shall hereby be amended to add the following Section 6.23 to such
article:

                  Section 6.23.     Citroen Valve Business. TRW and Buyer shall
         treat the disposition of TRW Systemes Aeronautiques SAS' suspension
         valve business as set forth in Exhibit E hereto.

                  Section 1.15      Reference Balance Sheet and SAP Amendments.
The adjustments set forth on Exhibit F hereto shall be taken into account in
preparing the Reference Balance Sheet and the Closing Balance Sheet. The
Supplemental Accounting Principles attached as Annex 1 to Section 4.7 of the
TRW Disclosure Letter shall be amended as set forth in Exhibit G hereto.

                                  ARTICLE II
                                 MISCELLANEOUS

                  Section 2.1       Nature of Amendment.

                  Except as expressly provided herein, the Agreement shall
continue to be, and shall remain, in full force and effect. Except as expressly
provided herein, this Amendment shall not be deemed to be a waiver of, or
consent to, or a


                                      15

modification or amendment of, any other term or condition of the Agreement. Any
reference to the Agreement in the Agreement or any other document (except as
specifically indicated to the contrary) shall be deemed to be a reference to
the Agreement as amended hereby.

                  Section 2.2       Governing Law.

                  THIS AGREEMENT, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR
CHOICE OF LAWS OR ANY OTHER LAW THAT WOULD MAKE THE LAWS OF ANY OTHER
JURISDICTION OTHER THAN THE STATE OF NEW YORK APPLICABLE HERETO.

                  Section 2.3       Headings.

                  The table of contents and the article, section, paragraph and
other headings contained in this Amendment are inserted for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Amendment.

                  Section 2.4       Counterparts.

                  This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same agreement.

                  Section 2.5       Entire Agreement.

                  This Amendment, the Agreement, the Ancillary Agreements, the
TRW Disclosure Letter, the Exhibits to the Agreement and this Amendment, the
Schedules to the Agreement, and the Confidentiality Agreement constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof, and supersede and cancel all prior agreements, negotiations,
correspondence, undertakings, understandings and communications of the parties,
oral and written, with respect to the subject matter hereof.


                                      16

                  IN WITNESS WHEREOF, the parties have executed or caused this
Amendment to be executed as of the date first written above.


                                    GOODRICH CORPORATION


                                    By: /s/ Alexander C. Schoch
                                       ----------------------------------------
                                       Name: Alexander C. Schoch
                                       Title: Vice President,
                                              Associate General Counsel and
                                              Secretary


                                    TRW INC.


                                    By: /s/ Wesley G. Bush
                                       ----------------------------------------
                                       Name: Wesley G. Bush
                                       Title: Executive Vice President


                                    TRW SYSTEMES AERONAUTIQUES CIVILS


                                    By: /s/ Robert A. Fulton
                                       ----------------------------------------
                                       Name: Robert A. Fulton
                                       Title: Director


                                    TRW SYSTEMES AERONAUTIQUES


                                    By: /s/ Robert A. Fulton
                                       ----------------------------------------
                                       Name: Robert A. Fulton
                                       Title: Director


                                    GOODRICH CONTROL SYSTEMS S.A.S.


                                    By: /s/ Joel Haldemann
                                       ----------------------------------------
                                       Name: Joel Haldemann
                                       Title: President

                                   Exhibit A



[Goodrich Corporation agrees to furnish supplementally to the Securities and
Exchange Commission, upon request, a copy of any schedule referred to in the
Agreement.]

EX-10.2

                                                                    EXHIBIT 10.2


                                                           Execution Counterpart


                                 AMENDMENT NO. 1


                  AMENDMENT NO. 1 dated as of September 13, 2002 among GOODRICH
CORPORATION, a New York corporation (the "Company"), the lenders party to the
Credit Agreement referred to below (the "Lenders"), and CITIBANK, N.A.
("Citibank"), as paying agent (in such capacity, together with its successors in
such capacity, the "Paying Agent").

                  The Company, the Lenders and the Paying Agent are parties to a
$1,500,000,000 364-Day Credit Agreement dated as of July 30, 2002 (as from time
to time amended, the "Credit Agreement"). The Company has requested the Lenders
to amend the Credit Agreement in certain respects, and the Lenders are willing
so to amend the Credit Agreement, as hereinafter set forth. Accordingly, the
parties hereto hereby agree as follows:

                  Section 1. Definitions. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.

                  Section 2. Amendments. Subject to the Paying Agent's receipt
of counterparts this Amendment No. 1 duly executed by all of the parties hereto,
but effective as of the date hereof, the Credit Agreement is amended as follows:

                  A. Applicable Margin. The definition of "Applicable Margin" in
         Section 1.01 of the Credit Agreement is amended to read in its entirety
         as follows:

                           ""Applicable Margin" means (a) for Eurocurrency Rate
                  Advances, as of any date, a percentage per annum determined by
                  reference to the Public Debt Rating and Leverage Ratio in
                  effect on such date as set forth below:


- -------------------------------------------------------------------------------------------------------------------------
      Public Debt Rating           Applicable Margin for         Applicable Margin for         Applicable Margin for
         S&P/Moody's             Eurocurrency Rate Advances    Eurocurrency Rate Advances    Eurocurrency Rate Advances
                                When Leverage Ratio is Less      When Leverage Ratio is        When Leverage Ratio is
                                       than 3.50 to 1           Equal to or Greater than      Equal to or Greater than
                                                                3.50 to 1 and less than              3.75 to 1
                                                                       3.75 to 1
- -------------------------------------------------------------------------------------------------------------------------
                                                                                   
Level 1
- -------
BBB+ or Baa1                               0.650%                        0.900%                        1.025%
- -------------------------------------------------------------------------------------------------------------------------
Level 2
- -------
BBB or Baa2                                0.725%                        0.975%                        1.100%
- -------------------------------------------------------------------------------------------------------------------------
Level 3
- -------
BBB- and Baa3                              1.200%                        1.450%                        1.575%
- -------------------------------------------------------------------------------------------------------------------------
Level 4
- -------
Lower than Level 3                         1.625%                        1.875%                        2.000%
- -------------------------------------------------------------------------------------------------------------------------


                                Amendment No. 1
                                ---------------



                                      -2-


                  and (b) for Base Rate Advances, as of any date, a percentage
                  per annum determined by reference to the Public Debt Rating
                  and Leverage Ratio in effect on such date as set forth below:


- -------------------------------------------------------------------------------------------------------------------------
      Public Debt Rating           Applicable Margin for         Applicable Margin for         Applicable Margin for
         S&P/Moody's              Base Rate Advances When       Base Rate Advances When       Base Rate Advances When
                                     Leverage Ratio is             Leverage Ratio is        Leverage Ratio is Equal to
                                    Less than 3.50 to 1        Equal to or Greater than     or Greater than 3.75 to 1
                                                                  3.50 to 1 and less
                                                                    than 3.75 to 1
- -------------------------------------------------------------------------------------------------------------------------
                                                                                    
Level 1
- -------
BBB+ or Baa1                               0.000%                        0.000%                        0.000%
- -------------------------------------------------------------------------------------------------------------------------
Level 2
- -------
BBB or Baa2                                0.000%                        0.000%                        0.000%
- -------------------------------------------------------------------------------------------------------------------------
Level 3
- -------
BBB- and Baa3                              0.000%                        0.000%                        0.075%
- -------------------------------------------------------------------------------------------------------------------------
Level 4
- -------
Lower than Level 3                         0.000%                        0.375%                        0.500%
- -------------------------------------------------------------------------------------------------------------------------


                  The Applicable Margin for each Advance shall be determined by
                  reference to the Public Debt Rating and the Leverage Ratio in
                  effect from time to time, and shall be adjusted on the basis
                  of the Leverage Ratio upward or downward on the third Business
                  Day following delivery of the certificate referred to in
                  Section 5.01(k)(iv); provided, that the Leverage Ratio shall
                  be deemed to be greater than 3.75 to 1 for so long as the
                  Company has not delivered such certificate as required under
                  Section 5.01(k)(iv)."

                  B. EBITDA. The definition of "EBITDA" in Section 1.01 of the
         Credit Agreement is amended by inserting after the words "interest
         expense" in the second line thereof the words "and distributions on
         trust preferred securities".

                  C. Conditions Precedent to the Initial Borrowing. Section
         3.02(a) of the Credit Agreement is amended to read in its entirety as
         follows:

                           "(a) The Lenders shall have received copies,
                  certified by an authorized officer of the Company, of all
                  material filings made with any governmental authority in
                  connection with the Transactions that are reasonably requested
                  by the Paying Agent or its counsel on reasonable notice prior
                  to the initial Borrowing."


                                Amendment No. 1
                                ---------------




                                      -3-


                  D. Leverage Ratio Definition. A new definition of "Leverage
         Ratio" is added in its correct alphabetical location in Section 1.01 of
         the Credit Agreement to read in its entirety as follows:

                           ""Leverage Ratio" means the ratio of (a) Debt of the
                  Company and its Consolidated Subsidiaries as of any date to
                  (b) EBITDA of the Company and its Consolidated Subsidiaries
                  for the four fiscal quarters ended on or immediately prior to
                  such date."

                  E. Consolidated Net Worth. Section 5.01(e) of the Credit
         Agreement is amended to read in its entirety as follows:

                           "(e) Consolidated Net Worth. The Company will at all
                  times keep and maintain Consolidated Net Worth at an amount
                  not less than the sum of (i) $900,000,000 plus (ii) 50% of any
                  positive Consolidated Net Income, which Consolidated Net
                  Income shall be computed on a cumulative basis as of the last
                  day of each fiscal year beginning with the fiscal year ending
                  December 31, 2002 (for the purposes of this Section 5.01(e),
                  Consolidated Net Income which is a deficit for any fiscal year
                  shall be deemed to be zero) minus (iii) up to $285,000,000 of
                  non-cash charges taken through Other Comprehensive Income in
                  accordance with GAAP in 2002 related to potential underfunding
                  of the Company's defined benefit pension plans plus (iv) up to
                  $285,000,000 of any reversals recorded through Other
                  Comprehensive Income in accordance with GAAP in 2003 and/or
                  any subsequent years of non-cash charges actually taken in
                  2002 pursuant to clause (iii) of this Section 5.01(e)."

                  F. Leverage Ratio. Section 5.01(f) of the Credit Agreement is
         amended to read in its entirety as follows:

                              "(f) Leverage Ratio. The Company will maintain a
                  Leverage Ratio of not greater than 4.00 to 1 until June 29,
                  2003, 3.75 to 1 from June 30, 2003 through September 29, 2003
                  and 3.50 to 1 after September 29, 2003."

                  G. General. References in the Credit Agreement to "this
         Agreement" (including indirect references such as "hereunder",
         "hereby", "herein" and "hereof") shall be deemed to be references to
         the Credit Agreement as amended hereby.

                  Section 3. Representations and Warranties. The Company hereby
represents and warrants to the Paying Agent and the Lenders that its making and
performance of this Amendment No. 1 have been duly authorized by all necessary
corporate action; the representations and warranties contained in Section 4.01
of the Credit Agreement are correct on and as of the date


                                Amendment No. 1
                                ---------------


                                      -4-


hereof as though made on and as of such date (except to the extent that any
expressly relate to any earlier date); and no event has occurred and is
continuing that constitutes a Default.

                  Section 4. Miscellaneous. Except as expressly herein provided,
the Credit Agreement shall remain unchanged and in full force and effect. This
Amendment No. 1 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment No. 1 by signing any such counterpart.
This Amendment No. 1 shall be governed by, and construed in accordance with, the
law of the State of New York.



























                                Amendment No. 1
                                ---------------




                                      -5-


                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be executed by their respective officers thereunto duly
authorized, as of the date first above written.



                                           GOODRICH CORPORATION



                                           By __________________________________
                                              Title:



                                           By __________________________________
                                              Title:




                                           CITIBANK, N.A.,
                                             as Paying Agent



                                           By __________________________________
                                              Title:













                                Amendment No. 1
                                ---------------

EX-23.1

                                                                    EXHIBIT 23.1

               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


We consent to the use of our report dated August 27, 2002, with respect to the
combined financial statements of TRW Aeronautical Systems for the two years
ended December 31, 2001, in the Current Report on Form 8-K dated October 1, 2002
of Goodrich Corporation.

We also consent to the incorporation by reference of our report dated August 27,
2002, with respect to the combined financial statements of TRW Aeronautical
Systems for the two years ended December 31, 2001, in the following Registration
Statements and in the related Prospectuses of Goodrich Corporation:




Registration
  Number                  Description of Registration Statement                           Filing Date
- -------------             -------------------------------------                           -----------
                                                                                    
  33-20421                The B.F.Goodrich Company Key Employees'                         March 1, 1988
                          Stock Option Plan - Form S-8

  2-88940                 The B.F.Goodrich Company Retirement Plus                        April 28, 1989
                          Savings Plan - Post-Effective Amendment
                          No. 2 to Form S-8

  33-29351                The Rohr Industries, Inc. 1988 Non-Employee                     June 19, 1989
                          Director Stock Option Plan - Form S-8

  33-49052                The B.F.Goodrich Company Key Employees'                         June 26, 1992
                          Stock Option Plan - Form S-8

  33-59580                The B.F.Goodrich Company Retirement                             March 15, 1993
                          Plus Savings Plan for Wage Employees - Form S-8

  333-03293               The B.F.Goodrich Company                                        May 8, 1996
                          Stock Option Plan - Form S-8

  333-03343               Common Stock - Form S-3                                         May 8, 1996

  333-19697               The B.F.Goodrich Company Savings                                January 13, 1997
                          Benefit Restoration Plan - Form S-8

  333-53877               Pretax Savings Plan for the Salaried Employees                  May 29, 1998
                          of Rohr, Inc. (Restated 1994) and Rohr, Inc. Savings
                          Plan for Employees Covered by Collective Bargaining
                          Agreements (Restated 1994) - Form S-8

  333-53879               Directors' Deferred Compensation Plan - Form S-8                May 29, 1998

  333-53881               Rohr, Inc. 1982 Stock Option Plan,                              May 29, 1998
                          Rohr, Inc. 1989 Stock Incentive Plan and
                          Rohr, Inc. 1995 Stock Incentive Plan - Form S-8

  333-76297               Coltec Industries Inc. 1992 Stock Option Plan                   April 14, 1999
                          Coltec Industries Inc. 1994 Stock Option Plan for
                          Outside Directors - Form S-8

  333-77023               The B.F.Goodrich Company Stock Option                           April 26, 1999
                          Plan - Form S-8








                                                                                  
  333-95081              Shelf Registration for Common Stock, Series Preferred            January 20, 2000
                         Stock and Debt Securities - Form S-3

  333-60210              The B.F. Goodrich Company Stock Option                           May 4, 2001
                         Plan - Form S-8

  333-60208              The B.F. Goodrich Company Employee                               May 4, 2001
                         Stock Purchase Plan - Form S-8

  333-98165              Shelf Registration for Debt Securities, Series Preferred         September 6, 2002
                         Stock, Common Stock, Stock Purchase Contracts and
                         Stock Purchase Units - Form S-3


  





Cleveland, Ohio
October 15, 2002

EX-99.1

                                                                    EXHIBIT 99.1

A U D I T E D   C O M B I N E D   F I N A N C I A L   S T A T E M E N T S

TRW Aeronautical Systems
Years ended December 31, 2001 and 2000
with Report of Independent Auditors













                         INDEX TO FINANCIAL STATEMENTS

Annual Financial Statements
- ---------------------------

Report of Independent Auditors............................................... 2
Statements of Operations for the Years Ended December 31, 2001 and 2000...... 3
Balance Sheets at December 31, 2001 and 2000................................. 4
Statements of Cash Flows for the Years Ended December 31, 2001 and 2000 ..... 5
Statements of Changes in Stockholder's Investment for the Years Ended
  December 31, 2001 and 2000................................................. 6
Notes to Financial Statements................................................ 7





                                        1



                         REPORT OF INDEPENDENT AUDITORS


Board of Directors
TRW Inc.

         We have audited the accompanying combined balance sheets of TRW
Aeronautical Systems as of December 31, 2001 and 2000, and the related combined
statements of operations, cash flows and changes in stockholder's investment for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of TRW
Aeronautical Systems at December 31, 2001 and 2000, and the combined results of
its operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.


                                                           /s/ Ernst & Young LLP


Cleveland, Ohio
August 27, 2002




                                       2




STATEMENTS OF OPERATIONS

TRW Aeronautical Systems
(In millions)
Years ended December 31                                2001             2000
- ---------------------------------------------------------------    -------------

Sales                                               $ 1,101.8        $ 1,105.0
Cost of sales                                           755.7            740.3
- ---------------------------------------------------------------    -------------
Gross profit                                            346.1            364.7

Administrative and selling expenses                     170.5            138.6
Research and development expenses                        78.5             67.5
Interest expense                                         82.0             85.6
Amortization of goodwill and intangible assets           32.1             30.3
Other (income) expense - net                             (4.6)            39.5
- ---------------------------------------------------------------    -------------
Earnings (loss) before income taxes                     (12.4)             3.2
Income tax (benefit) expense                             (0.9)             7.3
- ---------------------------------------------------------------    -------------
Net loss                                            $   (11.5)       $    (4.1)
                                                  =============    =============


See notes to financial statements.







                                       3


BALANCE SHEETS

TRW Aeronautical Systems
(In millions)
December 31                                               2001          2000
- -----------------------------------------------------------------   -----------
ASSETS
Current assets
  Cash and cash equivalents                            $    27.1     $    19.3
  Accounts receivable (net of allowances of $1.7 and
    $1.9 in 2001 and 2000, respectively)                   178.4         261.6

  Inventories
    Finished products and work-in-process                  156.2         130.8
    Raw materials and supplies                              32.3          40.0
- -----------------------------------------------------------------   -----------
  Total inventories                                        188.5         170.8

  Prepaid expenses                                          10.2          18.2
  Deferred income taxes                                     30.5          40.7
- -----------------------------------------------------------------   -----------
Total current assets                                       434.7         510.6

Property, plant and equipment - on the basis of cost
  Land                                                      28.8          30.2
  Buildings                                                 49.0          53.8
  Machinery and equipment                                  264.3         199.0
- -----------------------------------------------------------------   -----------
                                                           342.1         283.0
  Less accumulated depreciation and amortization            83.4          55.2
- -----------------------------------------------------------------   -----------
Total property, plant and equipment - net                  258.7         227.8

Intangible assets
  Goodwill                                                 791.2         832.3
  Other intangible assets                                  388.1         398.7
- -----------------------------------------------------------------   -----------
                                                         1,179.3       1,231.0
  Less accumulated amortization                            100.1          68.8
- -----------------------------------------------------------------   -----------
Total intangible assets-net                              1,079.2       1,162.2

Investments in affiliated companies                          2.8           2.9
Other notes and accounts receivable                         18.7          18.1
Deferred income taxes                                       15.1            --
Other assets                                               112.8         109.7
Prepaid pension cost                                       115.0         118.0
- -----------------------------------------------------------------   -----------
                                                       $ 2,037.0     $ 2,149.3
                                                      ===========   ===========

LIABILITIES AND STOCKHOLDER'S INVESTMENT
Current liabilities
  Short-term debt                                      $     1.1     $     4.1
  Trade accounts payable                                   170.7         140.2
  Accrued compensation                                      19.4          26.9
  Other accruals                                           128.9         106.6
  Income taxes                                               0.1           0.6
  Current portion of long-term debt                          6.3           7.1
- -----------------------------------------------------------------   -----------
Total current liabilities                                  326.5         285.5

Long-term debt                                              24.1          28.6
Long-term liabilities                                      124.2         115.3
Deferred income taxes                                         --          11.8
Stockholder's investment
  Parent company investment                              1,731.0       1,815.3
  Accumulated other comprehensive loss                    (168.8)       (107.2)
- -----------------------------------------------------------------   -----------
Total stockholder's investment                           1,562.2       1,708.1
- -----------------------------------------------------------------   -----------
                                                       $ 2,037.0     $ 2,149.3
                                                      ===========   ===========

See notes to financial statements.


                                       4


STATEMENTS OF CASH FLOWS

TRW Aeronautical Systems
(In millions)
Years ended December 31                                   2001          2000
- -----------------------------------------------------------------   -----------

OPERATING ACTIVITIES
  Net loss                                              $ (11.5)      $ (4.1)
  Adjustments to reconcile net loss to net cash
    provided by operating activities
      Depreciation and amortization                        69.7         66.5
      Net gain on sale of assets                           (4.1)          --
      Deferred income taxes                                13.9         34.0
      Other-net                                             0.2         (1.1)
  Changes in assets and liabilities, net of effects
    of businesses divested
      Accounts receivable, net                             76.3        (19.6)
      Inventories                                         (22.0)        28.4
      Trade accounts payable                               34.5        (10.5)
      Prepaid expenses and other liabilities               47.5        (23.5)
      Other - net                                          (5.5)       (40.0)
- -----------------------------------------------------------------   -----------
Net cash provided by operating activities                 199.0         30.1

INVESTING ACTIVITIES
  Capital expenditures including other intangibles        (88.6)       (50.0)
  Net proceeds from divestitures                           24.4           --
  Other - net                                              (2.2)        (1.8)
- -----------------------------------------------------------------   -----------
Net cash used in investing activities                     (66.4)       (51.8)

FINANCING ACTIVITIES
  Decrease in short-term debt                              (3.0)        (5.1)
  Net transfer to parent company                         (113.9)        (5.4)
  Principal payments on debt in excess of 90 days          (2.3)        (4.0)
  Other - net                                               2.8         (3.7)
- -----------------------------------------------------------------   -----------
Net cash used in financing activities                    (116.4)       (18.2)
Effect of exchange rate changes on cash                    (8.4)        11.7
- -----------------------------------------------------------------   -----------
Increase (decrease) in cash and cash equivalents            7.8        (28.2)
Cash and cash equivalents at beginning of year             19.3         47.5
- -----------------------------------------------------------------   -----------
Cash and cash equivalents at end of year                $  27.1       $ 19.3
                                                        =========   ===========

SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid (net of amount capitalized)               $  81.4       $ 86.6
Income tax refunds (net of taxes paid)                     65.2         11.0

See notes to financial statements.



                                       5



STATEMENTS OF CHANGES IN STOCKHOLDER'S INVESTMENT

TRW Aeronautical Systems
(In millions)
- --------------------------------------------------------------------------------
                                                    Accumulated
                                        Parent         Other         Total
                                        Company    Comprehensive  Stockholder's
                                       Investment      Loss        Investment
- --------------------------------------------------------------------------------
Balance at December 31, 1999           $ 1,657.6     $  (33.5)     $ 1,624.1
- --------------------------------------------------------------------------------
Net loss - 2000                             (4.1)                       (4.1)

Foreign exchange loss, net of
  tax of $96.9 million                                  (72.4)         (72.4)
Minimum pension liability, net of tax                    (1.3)          (1.3)
                                                                   ---------
Total comprehensive loss                                               (77.8)

Net transfers from Parent Company          161.8                       161.8
- --------------------------------------------------------------------------------
Balance at December 31, 2000             1,815.3       (107.2)       1,708.1
- --------------------------------------------------------------------------------
Net loss - 2001                            (11.5)                      (11.5)

Foreign exchange loss, net of
  tax of $32.9 million                                  (26.5)         (26.5)
Deferred cash flow hedges, net of
  tax of $15.2 million                                  (33.1)         (33.1)
Minimum pension liability, net of tax                    (2.0)          (2.0)
                                                                   ---------
Total comprehensive loss                                               (73.1)

Net transfers to Parent Company            (72.8)                      (72.8)
- --------------------------------------------------------------------------------
Balance at December 31, 2001           $ 1,731.0     $ (168.8)     $ 1,562.2
- --------------------------------------------------------------------------------

See notes to financial statements.

                                       6



                         NOTES TO FINANCIAL STATEMENTS

                BASIS OF PRESENTATION AND TRANSACTIONS WITH TRW

         The combined financial statements of TRW Aeronautical Systems (the
"Company") include the assets, liabilities, sales and expenses of TRW Inc.'s
("TRW") Aeronautical Systems businesses. The amounts are based upon TRW's
historical amounts. Parent Company Investment represents TRW's investment in the
Company including intercompany accounts.

         TRW Aeronautical Systems designs and manufactures high integrity
systems and equipment, and provides services in the following product areas:
equipment services, including spares and maintenance, repair and overhaul;
flight controls; cargo systems; power generation and management; missile
actuation and hoists and winches.

         On June 18, 2002, TRW announced that it had reached a definitive
agreement with Goodrich Corporation for the sale of its Aeronautical Systems
business, excluding certain assets and liabilities, for gross proceeds of
approximately $1.5 billion. TRW expects to complete the sale by the end of the
third quarter or early in the fourth quarter of 2002.

         The Statements of Operations of the Company include expenses recorded
by the Company or directly charged to it by TRW. In addition, the statements
include an allocation of TRW's general corporate expenses to reflect the
services provided to or benefits received by the Company. The allocation was $8
million for 2001 and $7 million for 2000 and was reported in Administrative and
Selling Expenses in the Statements of Operations. The allocation was based upon
TRW's internal allocation methodology, which is based upon an established
percentage of costs applied to the cost of operations (sales less earnings
(loss) before taxes from continuing operations). Management believes that this
is a reasonable method for allocating the general and administrative corporate
expenses. The allocation is not necessarily representative of the operating
expenses that would have been incurred had TRW Aeronautical Systems operated on
a stand-alone basis.

         Debt reported on the Balance Sheets represents the historical third
party obligations of the Aeronautical Systems business. Interest expense from
the specific third party debt obligations attributed to the Company's operations
is included in the Statements of Operations. In addition, an estimate of the
interest expense of TRW attributable to the operations of the Company is also
included in the Statements of Operations. The allocation of interest is based on
a ratio of the Company's net assets to TRW's net assets (excluding TRW's
automotive business) plus TRW's debt (excluding the debt of the Company and
TRW's automotive business). Management believes that this is a reasonable method
of allocating interest to the Company. This allocation is not, however,
indicative of the total amount of interest that may be incurred by the Company
as a separate entity.

         TRW accounts for and pays all United States income taxes. The Company's
taxable income(loss) related to its United States operations and foreign
operations subject to a United States "check-the-box" election to be taxed in
the United States is included in TRW's consolidated income tax returns. The
Statements of Operations include an allocation to the Company of TRW's United
States income taxes(credits) in amounts generally equivalent to the provisions
that would have resulted had the Company filed separate income tax returns for
the years presented. The Company has also been allocated United States deferred
income taxes based on the estimated differences between the book and tax basis
of its assets and liabilities. Most of the Company's foreign operations account
for and pay foreign income taxes related to their operations. For those foreign
operations that have not separately accounted for and

                                       7



paid income taxes related to their operations, the Statements of Operations
include an allocation of TRW's foreign income taxes in amounts generally
equivalent to the provisions which would have resulted had the Company filed
separate income tax returns for the years presented. These operations have also
been allocated foreign deferred income taxes based on the estimated differences
between the book and tax basis of their assets and liabilities.

         In the opinion of management, all adjustments necessary for a fair
presentation of financial position, operating results and cash flows have been
presented. The financial information included may not necessarily reflect the
results of operations, financial position, and changes in stockholder's
investment in the future or what they would have been if the Company had been a
separate, stand-alone company for the periods presented or in the future.

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION - The combined financial statements include
the accounts of the Company, which include all of TRW's Aeronautical Systems
businesses. These businesses include direct and indirect wholly-owned
subsidiaries of TRW Inc. Investments in affiliated companies are accounted for
by the equity or cost method.

         USE OF ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities, and reported amounts in the Statements of Operations. Actual
results could differ from those estimates.

         REVENUE RECOGNITION - The Company recognizes sales in accordance with
accounting principles generally accepted in the United States. The Company
recognizes revenue when title is transferred to the customer.

         ENTRY FEES - It has become increasingly common for major aerospace
customers to require an up-front contribution by way of an entry fee either in
cash or through other arrangements. This payment effectively demonstrates the
Company's commitment to participate in a new product program and is an essential
part of the exclusive supply agreement. In return, the Company receives a
percentage of product sales in the supply period after flight certification.
These contributions are recognized as Other Assets on the Balance Sheets and
amortized on a straight-line basis over the programs' useful lives following
certification, which approximates 10 years. Entry fees capitalized at December
31, 2001 and 2000 were $105 million and $94 million, respectively.

         CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all
highly liquid investments purchased with a maturity of three months or less.

         ACCOUNTS RECEIVABLE - At December 31, 2001, the Company sold accounts
receivable of its operations in the U.S. to TRW at face value as part of an
accounts receivable securitization arrangement established by TRW with a
financial institution and several financial conduits.

         The securitization transactions are accounted for as a sale of the
receivables under the provisions of Statement of Financial Accounting Standards
(SFAS) 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," and are removed from the Balance Sheets. The
proceeds received are included in cash flows from operating activities in the
Statements of Cash Flows.

         At December 31, 2001, $64 million of the Company's accounts receivable
had been sold.

                                       8



         INVENTORIES - Inventories are stated at the lower of cost, principally
the first-in, first-out (FIFO) method, or market.

         DEPRECIATION - Depreciation is computed over the assets' estimated
useful lives, using the straight-line method for the majority of the Company's
depreciable assets, including capital leases. The estimated useful lives of
buildings, machinery and equipment, and computers and other office equipment are
between 30 to 40 years, 8 to 12 years and 3 to 5 years, respectively.
Depreciation expense was $38 million and $36 million for the years ended
December 31, 2001 and 2000, respectively.

         INTANGIBLE ASSETS - Intangible assets are stated on the basis of cost
and are being amortized by the straight-line method over the estimated future
periods to be benefited. Other intangible assets include capitalized
internal-use software and other identifiable intangible assets acquired through
acquisitions, including core and developed technology and workforce. Capitalized
internal-use software is being amortized over periods not to exceed 10 years.
Other identifiable intangible assets are being amortized primarily over 5 to 30
years.

         ASSET IMPAIRMENT - The Company records impairment losses on long-lived
and intangible assets when events and circumstances indicate that the assets may
be impaired and the undiscounted net cash flows estimated to be generated by
those assets are less than their carrying amounts. If the future undiscounted
cash flows are not sufficient to recover the carrying value of the assets, the
assets are adjusted to their fair values.


         ENVIRONMENTAL COSTS - The Company participates in environmental
assessments and remediation efforts at operating facilities, previously owned or
operated facilities, and other waste sites. Costs related to these locations are
accrued when it is probable that a liability has been incurred and the amount of
that liability can be reasonably estimated. Estimated costs are recorded at
undiscounted amounts, based on experience and assessments, and are regularly
evaluated as efforts proceed.


         PRODUCT CAMPAIGN COSTS - The Company incurs product campaign costs when
it and the customer decide to recall a product through a formal campaign to
solicit the return of specific products due to a known or suspected safety
concern. Product recall costs typically include the cost of the product being
replaced, customer cost of the recall and labor to remove and replace the
defective part. When a decision to recall a product has been made for which the
Company bears some responsibility, it records the estimated cost to the Company
of the recall as a charge to net earnings in that period in accordance with
Financial Accounting Standards Board (FASB) Statement No. 5.


         RESEARCH AND DEVELOPMENT - Company-funded research and development
programs include research and development for commercial products that is
expensed as incurred. Customer-funded research and development expenses, net of
customer funding, included in research and development expenses, were $43
million and $46 million for 2001 and 2000, respectively.

         SHIPPING AND HANDLING - Shipping costs include payments to a
third-party shipper to move the product to the customer. Handling costs include
costs from the point the product is removed from finished goods inventory to
when provided to the shipper. Shipping and handling costs are expensed as
incurred as cost of sales.

         FINANCIAL INSTRUMENTS - The Company adopted Statement of Financial
Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended, on January 1, 2001. SFAS 133 requires companies
to recognize all derivative instruments as either assets or liabilities at fair
value. The transition adjustment recorded as a result of the adoption did not
have a material impact on the Company's financial position or net earnings.

                                       9



         Under SFAS 133, the gain or loss on derivative instruments that have
been designated and qualify as hedges of the exposure to changes in the fair
value of an asset or a liability, as well as the offsetting gain or loss on the
hedged item, are recognized in net earnings during the period of the change in
fair values. For derivative instruments that have been designated and qualify as
hedges of the exposure to variability in expected future cash flows, the gain or
loss on the derivative is initially reported as a component of other
comprehensive income (loss) and reclassified to the Statement of Operations when
the hedged transaction affects net earnings. Any gain or loss on the derivative
in excess of the cumulative change in the present value of future cash flows of
the hedged item is recognized in net earnings during the period of change. For
those hedged items that are terminated, any gain or loss on the derivative is
recognized in net earnings upon termination. For derivative instruments that are
a hedge of a net investment in a foreign currency, the gain or loss is reported
in other comprehensive income (loss) as part of the cumulative translation
adjustment. Derivatives not designated as hedges are adjusted to fair value
through net earnings.

         Prior to the adoption of SFAS 133, changes in market value of contracts
that hedged firm foreign currency commitments and inter-company transactions
were generally included in the basis of the transactions. Changes in the market
value of the contracts that hedged anticipated transactions were generally
recognized in net earnings.

         NEW ACCOUNTING PRONOUNCEMENTS - The FASB recently issued SFAS 141,
"Business Combinations," SFAS 142, "Goodwill and Intangible Assets," SFAS 143,
"Accounting for Asset Retirement Obligations" and SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."

         SFAS 141 requires companies to account for acquisitions entered into
after June 30, 2001 using the purchase method and establishes criteria to be
used in determining whether acquired intangible assets are to be recorded
separately from goodwill. Statement 142 sets forth the accounting for goodwill
and intangible assets after the completion of a business acquisition and for
goodwill and intangible assets already recorded. Goodwill will no longer be
amortized beginning January 1, 2002. Rather, goodwill will be tested for
impairment by comparing the asset's fair value to its carrying value. Also, the
value of workforce of approximately $11 million must be reclassified from
intangible assets to goodwill. The Company adopted Statement 142 on January 1,
2002.

         At December 31, 2001, the Company had recorded $743 million of
goodwill, net of accumulated amortization. In the second quarter of 2002,
management conducted valuations and determined that goodwill was not impaired.
In 2001, the Company recorded amortization expense for goodwill and the value of
workforce of $20 million before tax, $19 million after tax.

         SFAS 143 requires the fair value of a liability for asset retirement
obligations to be recorded in the period in which it is incurred. The statement
applies to a company's legal or contractual obligation associated with the
retirement of a tangible long-lived asset that resulted from the acquisition,
construction or development or through the normal operation of a long-lived
asset. The statement is effective for the Company beginning January 1, 2003.

         SFAS 144 addresses the accounting and reporting for the impairment or
disposal of long-lived assets. The statement provides a consistent method to
value long-lived assets to be disposed of. New criteria must be met to classify
the asset as an asset held-for-sale. This statement also changes the rules for
reporting the effects of a disposal of a segment of a business. This statement
was adopted on January 1, 2002.

                                       10



         The Company has evaluated the impact of SFAS 143 and SFAS 144 and
believes that the adoption of these statements should not have a material impact
on its financial position or results of operations.

                                 RESTRUCTURING

         In 2001, the Company announced restructuring actions as a result of
decreased demand for its commercial aviation equipment and services. Cost
reduction measures are being implemented including reductions of approximately
1,100 employees. As a result of these actions, the Company recorded before-tax
charges of $24 million in 2001, of which $8 million and $16 million were
recorded in administrative and selling expenses and cost of sales, respectively.
As of December 31, 2001, the Company used $4 million for severance payments. In
the second quarter of 2002, the Company reversed approximately $4 million of
these charges, and expects the balance to be used by the end of 2002.

         As part of the LucasVarity acquisition, the Company recorded
approximately $54 million for severance and other costs to close certain
facilities. The costs were included in the purchase price allocation and
reported in other accruals. During 2001 and 2000, $5 million and $38 million,
respectively, were used for severance and lease termination costs. The remaining
balance was used in the first quarter of 2002.

A movement of the restructuring reserve is as follows:

(In millions)
- --------------------------------------------------------------------------------
                            Provision
                    ------------------------    LucasVarity    Used for
        Beginning   Administrative   Cost of   Purchase Price  Purposes  Ending
         Balance     and Selling      Sales      Allocation    Intended  Balance
        ------------------------------------------------------------------------
2001       $ 7           $ 8          $ 16            -         $  (9)    $ 22
2000         4             -             -           41           (38)       7


                           OTHER (INCOME) EXPENSE-NET

         Other (income) expense - net was income of $4 million and expense of
$40 million in 2001 and 2000, respectively. Included in 2000 was $44 million of
unrealized losses on foreign currency exchange contracts.


                                       11




                             FINANCIAL INSTRUMENTS

FAIR VALUES OF FINANCIAL INSTRUMENTS - at December 31

                                                 2001                2000
                                          -----------------  -------------------
                                          Carrying    Fair    Carrying    Fair
(In millions)                               Value    Value      Value    Value
- -----------------------------------------------------------  -------------------
Cash and cash equivalents                   $ 27      $ 27      $ 19      $ 19
Short-term debt                                1         1         4         4
Floating rate long-term debt                  24        25        29        28
Fixed rate long-term debt                      6         6         7         6
Foreign currency forward contracts -
  (liability) asset                          (40)      (40)        6         5

         The fair value of long-term debt was estimated using a discounted cash
flow analysis based on the Company's current borrowing rates for similar types
of borrowing arrangements. The fair value of the foreign currency forward
contracts was estimated using a discounted cash flow analysis based on quoted
market prices of offsetting contracts.

         FOREIGN CURRENCY FORWARD CONTRACTS - The Company manufactures and sells
its products in countries throughout the world. As a result, it is exposed to
fluctuations in foreign currency exchange rates. The Company enters into forward
contracts to hedge portions of its foreign currency denominated forecasted
revenues, purchases and the subsequent cash flows. The critical terms of the
hedges are the same as the underlying forecasted transactions, and the hedges
are considered to be perfectly effective to offset the changes in fair value of
cash flows from the hedged transactions. Gains or losses on these instruments,
which mature at various dates through April 2007, are generally recorded in
other comprehensive income(loss) until the underlying transaction is recognized
in net earnings. The earnings impact is reported in either sales, cost of sales,
or other (income) expense-net, to match the underlying transaction.

         The amount of gains and losses reclassified into net earnings in 2001
as a result of the discontinuation of cash flow hedges or hedge ineffectiveness
were immaterial. Foreign currency cash flow hedges with a combined fair value of
a $6 million loss after tax at December 31, 2001 are expected to be recognized
in net earnings in 2002.

         At December 31, 2001, the Company had foreign currency forward
contracts outstanding with a notional amount of $1.4 billion, denominated
principally in the Euro and the British pound. Foreign exchange contracts are
placed either through TRW, or directly with a number of major financial
institutions to minimize credit risk. No collateral is held in relation to the
contracts, and the Company anticipates that these financial institutions will
satisfy their obligations under the contracts.

         The following table represents the movement of amounts reported in
other comprehensive income (loss) of deferred cash flow hedges, net of tax.

(In millions)                                                           2001
- --------------------------------------------------------------------------------

Balance at December 31, 2000                                          $  --
Net change in derivative fair value and other movements
  during the year                                                       (40)
Amounts reclassified to earnings during the year                          7
- --------------------------------------------------------------------------------
Other comprehensive income(loss)                                      $ (33)
- --------------------------------------------------------------------------------

                                       12



                                  INCOME TAXES

EARNINGS (LOSS) BEFORE INCOME TAXES
(In millions)                                                2001         2000
- -------------------------------------------------------------------     --------
U.S.                                                        $ (15)       $ (86)
Non-U.S.                                                        3           89
- -------------------------------------------------------------------     --------
                                                            $ (12)       $   3
                                                           =======      ========

PROVISION FOR (BENEFIT OF) INCOME TAXES
(In millions)                                                2001         2000
- -------------------------------------------------------------------     --------
Current
  U.S. federal                                              $ (61)       $ (21)
  Non-U.S.                                                     (5)           8
  U.S. state and local                                          -            3
- -------------------------------------------------------------------     --------
                                                              (66)         (10)
Deferred
  U.S. federal                                                 61           23
  Non-U.S.                                                      4           (4)
  U.S. state and local                                          -           (2)
- -------------------------------------------------------------------     --------
                                                               65           17
                                                           -------      --------
                                                            $  (1)       $   7
                                                           =======      ========

EFFECTIVE INCOME TAX RATE
                                                             2001         2000
- -------------------------------------------------------------------     --------
U.S. statutory income tax rate                               35.0%        35.0%
Nondeductible expenses                                       (1.3)         4.1
U.S. state and local income taxes
  net of U.S. federal tax benefit                            (2.2)        24.9
Non-U.S. tax rate variances net of
  foreign tax credits                                         7.2          4.5
Goodwill amortization                                       (47.5)       157.9
R&D tax credits                                              15.0            -
Other                                                         1.3          3.5
- -------------------------------------------------------------------     --------
                                                              7.5%       229.9%
                                                           =======      ========

         The effective income tax rate for the year ended December 31, 2001 was
7.5 percent compared to 229.9 percent for the year ended December 31, 2000.
Excluding the unusual items for the years ended December 31, 2001 and 2000, the
effective income tax rates would have been 54.5 percent and 48.3 percent,
respectively. The major items affecting the effective income tax rate in 2001
were tax credits and non-deductible goodwill amortization. The main items
affecting the effective tax rate in 2000 were non-deductible goodwill
amortization and state and local income taxes.

                                       13


         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. At December 31,
2001 and 2000, the Company had unused tax benefits of $3.4 million and $4.4
million, respectively, related to foreign net operating loss carryforwards for
income tax purposes, of which the balance expires at various dates through 2005.
A valuation allowance at December 31, 2001 and 2000, of $3.4 million and $4.4
million, respectively, has been recognized to offset the related deferred tax
assets due to the uncertainty of realizing the benefit of the loss
carryforwards.

         It is the Company's intention to reinvest undistributed earnings of
certain foreign subsidiaries, thereby indefinitely postponing their remittance.
Accordingly, deferred income taxes have not provided for accumulated
undistributed earnings of $11 million at December 31, 2001. It is not
practicable to estimate the additional income taxes and applicable withholding
that would be payable on the remittance of such undistributed earnings.

                                                    Deferred tax   Deferred tax
                                                       assets      liabilities
                                                    ------------   ------------
(In millions)                                       2001    2000   2001    2000
- ----------------------------------------------------------------   ------------
Pensions and post-retirement benefits other
  than pensions                                     $ 13    $ 12   $ 38    $ 40
State and local taxes                                                 1       1
Inventory                                             12      10      -       -
Reserves and accruals                                 13      22      -       -
Depreciation and amortization                          -       -    101      99
Non-U.S. net operating loss carryforwards              3       4      -       -
Foreign currency exchange                            139     106      -       -
Other                                                  9      19      -       -
- ----------------------------------------------------------------   ------------
                                                     189     173    140     140
Valuation allowance for deferred tax assets           (3)     (4)     -       -
- ----------------------------------------------------------------   ------------
                                                    $186    $169   $140    $140
                                                    ============   ============


                                       14



                                 PENSION PLANS

         During the periods presented, substantially all of TRW Aeronautical
Systems' employees participated in TRW's defined benefit plans. The financial
statements of the Company reflect the pension assets and liabilities related to
the active and retired TRW Aeronautical Systems' employees in the Company's
plans or in TRW's plans. The following table provides a reconciliation of the
changes in the plans' benefit obligations and fair value of assets over the
two-year period ended December 31, 2001, and a statement of the funded status as
of December 31, 2001 and 2000:

                                                     2001              2000
                                                --------------    --------------
(In millions)                                   U.S.  Non-U.S.    U.S.  Non-U.S.
- --------------------------------------------------------------    --------------
Change in benefit obligations
Benefit obligations at January 1                $ 30   $ 332      $ 24   $ 357
  Service cost                                     3      18         2      18
  Interest cost                                    2      19         2      19
  Amendments                                       1       -         -       -
  Actuarial loss (gain)                           (1)    (34)        4     (33)
  Foreign currency exchange rate changes
    and other                                      -      (9)        -     (28)
  Divestitures                                     -       -         -      (1)
  Benefits paid                                   (2)     (1)       (2)      -
- --------------------------------------------------------------    --------------
Benefit obligations at December 31              $ 33   $ 325      $ 30   $ 332

Change in plan assets
Fair value of plan assets at January 1          $ 26   $ 485      $ 25   $ 556
  Actual return on plan assets                     -     (55)        1     (30)
  Foreign currency exchange rate changes           -     (13)        -     (44)
  Company contributions                            3       -         2       -
  Plan participant contributions                   -       4         -       3
  Benefits paid                                   (2)     (1)       (2)      -
- --------------------------------------------------------------    --------------
Fair value of plan assets at December 31        $ 27   $ 420      $ 26   $ 485

Funded status of the plan                       $ (6)  $  95      $ (4)  $ 153
  Unrecognized actuarial loss (gain)               5       2         3     (54)
  Unrecognized prior service cost                  2       -         2       -
- --------------------------------------------------------------    --------------
Total recognized                                $  1   $  97      $  1   $  99
- --------------------------------------------------------------    --------------

         The following table provides the amounts recognized in the Balance
Sheets as of December 31, 2001 and 2000:

                                                     2001              2000
                                                --------------    --------------
(In millions)                                   U.S.  Non-U.S.    U.S.  Non-U.S.
- --------------------------------------------------------------    --------------
Prepaid benefit cost                            $  1   $ 114      $  1   $ 117
Accrued benefit liability                          -     (17)        -     (18)
Additional minimum liability                      (7)      -        (4)      -
Intangible asset and other                         2       -         2       -
Accumulated other comprehensive loss               5       -         2       -
- --------------------------------------------------------------    --------------
Total recognized                                $  1   $  97      $  1   $  99
- --------------------------------------------------------------    --------------
                                       15



         The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the United States pension plans for the TRW
Aeronautical Systems' employees and retirees with accumulated benefit
obligations in excess of plan assets were $28 million, $28 million and $22
million, respectively, as of December 31, 2001, and $27 million, $27 million and
$24 million, respectively, as of December 31, 2000.

         The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the non-United States pension plans for the TRW
Aeronautical Systems' employees and retirees with accumulated benefit
obligations in excess of plan assets were $21 million, $16 million and $4
million, respectively, as of December 31, 2001, and $18 million, $15 million and
$0 million, respectively, as of December 31, 2000.

         The following table provides the components of net pension cost for the
plans for years 2001 and 2000:

                                                     2001              2000
                                                --------------    --------------
(In millions)                                   U.S.  Non-U.S.    U.S.  Non-U.S.
- --------------------------------------------------------------    --------------
Defined benefit plans
  Service cost-benefits earned during the year  $  3   $ 18       $  2    $ 18
  Interest cost on projected benefit obligations   2     19          2      19
  Expected return on plan assets                  (3)   (37)        (2)    (35)
  Amortization of prior service cost               1      -          -       -
- --------------------------------------------------------------    --------------
Defined benefit plans                              3      -          2       2
Defined contribution plans                         -      -          2       -
Employee stock ownership and savings plan          2      -          -       -
- --------------------------------------------------------------    --------------
Total pension cost                              $  5   $  -       $  4    $  2
- --------------------------------------------------------------    --------------

         The assumptions used in the measurement of the benefit obligations for
the active and retired TRW Aeronautical Systems' employees are shown in the
following table:


                                                  2001               2000
                                            ----------------   ----------------
                                             U.S.   Non-U.S.    U.S.   Non-U.S.
- ------------------------------------------------------------   ----------------
Actuarial assumptions
  Discount rate                             7.25%   5.5-6.5%   7.50%   6.0-7.0%
  Rate of increase in compensation levels   4.10%   2.0-4.0%   4.10%   3.5-4.5%
- ------------------------------------------------------------   ----------------

         The expected long-term rate of return on plan assets for United States
plans was 9.5 percent for 2001 and 2000. For non-United States plans the
expected long-term rate of return ranged from 8 to 8.75 percent in 2001 and
2000.

         TRW sponsors a contributory stock ownership and savings plan for which
a majority of TRW Aeronautical Systems' United States employees are eligible and
under which TRW matches employee contributions up to three percent of the
participant's qualified compensation. TRW contributions are held in an
unleveraged employee stock ownership plan. Prior to 2001, certain employees
participated in a defined contribution pension plan. Those employees
participated in the stock ownership and savings plan in 2001.

                                       16


                  POST-RETIREMENT BENEFITS OTHER THAN PENSIONS

         TRW provides health care and life insurance benefits for a majority of
TRW Aeronautical Systems' retired employees in the United States and Canada. The
health care plans provide for cost sharing, in the form of employee
contributions, deductibles and coinsurance, between TRW Aeronautical Systems and
its retirees. The post-retirement health care plan covering a majority of
employees, limits the annual increase in TRW Aeronautical Systems' contribution
toward the plan's cost to a maximum of the lesser of 50 percent of medical
inflation or four percent. Life insurance benefits are generally
noncontributory. Retirees in certain other countries are provided similar
benefits by plans sponsored by their governments. The following table provides a
reconciliation of the changes in the plans' benefit obligations and fair value
of assets over the two-year period ended December 31, 2001, and a statement of
the funded status as of December 31, 2001 and 2000 for the active and retired
TRW Aeronautical Systems' employees:

(In millions)                                               2001        2000
- ------------------------------------------------------------------   ----------
Change in benefit obligations
Benefit obligations at January 1                           $  45       $  30
  Service cost                                                 1           1
  Interest cost                                                4           2
  Actuarial loss                                               1          13
  Benefits paid                                               (2)         (1)
- ------------------------------------------------------------------   ----------
Benefit obligations at December 31                         $  49       $  45

Change in plan assets
Fair value of plan assets at January 1                     $   0       $   0
  Company contributions                                        2           1
  Benefits paid                                               (2)         (1)
- ------------------------------------------------------------------   ----------
Fair value of plan assets at December 31                   $   0       $   0
- ------------------------------------------------------------------   ----------
Funded status of the plan                                  $ (49)      $ (45)

Unrecognized actuarial loss                                   11          10
- ------------------------------------------------------------------   ----------
Total accrued benefit cost recognized                      $ (38)      $ (35)
- ------------------------------------------------------------------   ----------

         The following table provides the components of net post-retirement
benefit cost for the plans for years 2001 and 2000:

(In millions)                                               2001        2000
- ------------------------------------------------------------------   ----------
Components of net post-retirement benefit cost
Service cost                                                 $ 1         $ 1
Interest cost                                                  4           2
- ------------------------------------------------------------------   ----------
Net post-retirement benefit cost                             $ 5         $ 3
- ------------------------------------------------------------------   ----------

         The weighted-average discount rate used in determining the accumulated
post-retirement benefit obligations as of December 31, 2001 and 2000 was 7.25
percent and 7.5 percent, respectively. A 6.4 percent annual rate of increase in
the per capita cost of covered health care benefits was assumed for

                                       17



2002. The rate was assumed to decrease gradually to 5.1 percent in the year 2009
and remain at that level, thereafter.

         A one-percentage-point change in the assumed health care cost trend
rate would have the following effects:

                                                           One-percentage-point
                                                           --------------------
(In millions)                                              Increase    Decrease
- -------------------------------------------------------------------   ---------
Effect on total of service and interest cost components      $ 1         $ 0
Effect on post-retirement benefit obligations                  5          (4)
- -------------------------------------------------------------------   ---------


                           DEBT AND CREDIT AGREEMENTS

SHORT-TERM DEBT
(In millions)                                               2001        2000
- ------------------------------------------------------------------   ----------

U.S. borrowings                                             $  -        $  -
Non-U.S. borrowings                                            1           4
- ------------------------------------------------------------------   ----------
                                                               1           4


LONG-TERM DEBT
(In millions)                                               2001        2000
- ------------------------------------------------------------------   ----------

Capitalized leases                                          $ 26        $ 32
Other borrowings                                               4           4

- ------------------------------------------------------------------   ----------
Total long-term debt                                          30          36
Less current portion                                           6           7
- ------------------------------------------------------------------   ----------
                                                            $ 24        $ 29
- ------------------------------------------------------------------   ----------

         The Company has borrowings under uncommitted credit agreements in
certain countries in which it operates. These borrowings are primarily in the
local currency of the country where the Company's operations are located. The
borrowings are provided by various domestic and international banks at quoted
market interest rates. The weighted-average interest rate on short-term
borrowings outstanding at December 31, 2001 and 2000, was 2.6 percent and 7.4
percent, respectively.

         Capitalized lease arrangements are provided by several financial
institutions, primarily in the United Kingdom, at rates ranging from 6.4 percent
to 8.2 percent and expire at various dates through 2011. Other borrowings bear
interest at rates ranging from 2.6 percent to 8.5 percent and mature at various
dates through 2004.

         The maturities of long-term debt are, in millions: 2002-$6; 2003-$4;
2004-$4; 2005-$3; 2006-$2; and $11 thereafter.

         Compensating balance arrangements and fees were not material.

                                       18


                               LEASE COMMITMENTS

         The Company leases certain offices, manufacturing and research
buildings, machinery, automobiles and computer and other equipment. Such leases,
some of which are noncancelable and in many cases include renewals, expire at
various dates. The Company pays most maintenance, insurance and tax expenses
relating to leased assets. Rental expense for operating leases was $14 million
for 2001 and $12 million for 2000.

         At December 31, 2001, the future minimum lease payments for
noncancelable operating leases totaled $49 million and are payable as follows,
in millions: 2002-$11; 2003-$10; 2004-$8; 2005-$5; 2006-$2; and $ 13 thereafter.

                      ACCUMULATED OTHER COMPREHENSIVE LOSS

         The components of accumulated other comprehensive loss at December 31,
2001 and 2000 are as follows:

(In millions)                                               2001        2000
- ------------------------------------------------------------------   ----------

Minimum pension liability adjustments, net of tax          $  (3)      $  (1)
Foreign currency exchange loss (net of tax of
  $139 million in 2001 and $106 million in 2000)            (133)       (106)
Unrealized loss on cash flow hedges (net of tax of
  $15 million in 2001)                                       (33)         --
- ------------------------------------------------------------------   ----------
                                                           $(169)      $(107)
                                                         =========   ==========

                                 CONTINGENCIES

         Various claims, lawsuits and administrative proceedings are pending or
threatened against the Company or its subsidiaries, covering a wide range of
matters that arise in the ordinary course of its business activities with
respect to commercial, product liability and environmental matters. In addition,
the Company is conducting a number of environmental investigations and remedial
actions at current and former Company locations and, along with other companies,
has been named a potentially responsible party for certain waste management
sites. Each of these matters is subject to various uncertainties, and some of
these matters may be resolved unfavorably with respect to the Company. A reserve
estimate for each matter is established using standard engineering cost
estimating techniques. In the determination of such costs, consideration is
given to the professional judgment of Company environmental engineers, in
consultation with outside environmental specialists, when necessary. At
multi-party sites, the reserve estimate also reflects the expected allocation of
total project costs among the various potentially responsible parties. At
December 31, 2001, the Company had reserves for environmental matters of $10
million. The Company believes any liability that may result from the resolution
of environmental matters for which sufficient information is available to
support these cost estimates will not have a material adverse effect on the
Company's financial position or results of operations. However, the Company
cannot predict the effect on the Company's financial position of expenditures
for aspects of certain matters for which there is insufficient information. In
addition, the Company cannot predict the effect of compliance with environmental
laws and regulations with respect to unknown environmental

                                       19



matters on the Company's financial position or results of operations or the
possible effect of compliance with environmental requirements imposed in the
future.

Further, product liability claims may be asserted in the future for events not
currently known by management. Although the ultimate liability from these
potential claims cannot be ascertained at December 31, 2001, management does not
anticipate that any related liability would have a material adverse effect on
the Company's financial position.









                                       20

EX-99.2

                                                                    EXHIBIT 99.2

U N A U D I T E D   C O M B I N E D   F I N A N C I A L   S T A T E M E N T S

TRW Aeronautical Systems
Six months ended June 30, 2002 and 2001














Statements of Operations (unaudited)
TRW Aeronautical Systems
(In millions)
Six months ended June 30                               2002             2001
- -------------------------------------------------------------       ------------

Sales                                               $  489.9          $  534.9
Cost of sales                                          326.8             354.1
- -------------------------------------------------------------       ------------
Gross profit                                           163.1             180.8

Administrative and selling expenses                     66.6              74.5
Research and development expenses                       52.3              40.9
Interest expense                                        40.8              40.9
Impairment of goodwill                                 483.2                --
Amortization of goodwill and intangible assets           6.0              16.0
Other (income) expense-net                               0.5              (4.5)
- -------------------------------------------------------------       ------------
Earnings (loss) before income taxes                   (486.3)             13.0
Income tax (benefit) expense                           (29.1)              4.1
- -------------------------------------------------------------       ------------
Net earnings (loss)                                 $ (457.2)         $    8.9
                                                  ===========       ============

See notes to financial statements.









Balance Sheets (unaudited)
TRW Aeronautical Systems
(In millions)                                          June 30      December 31
                                                         2002           2001
- -----------------------------------------------------------------   ------------

ASSETS
Current assets
   Cash and cash equivalents                          $    13.3      $    27.1
   Accounts receivable                                    168.8          178.4
   Inventories
     Finished products and work-in-process                158.7          156.2
     Raw materials and supplies                            62.4           32.3
- -----------------------------------------------------------------   ------------
   Total inventories                                      221.1          188.5

   Prepaid expenses                                        13.8           10.2
   Income taxes receivable                                  4.2             --
   Deferred income taxes                                     --           30.5
- -----------------------------------------------------------------   ------------
Total current assets                                      421.2          434.7

Property, plant and equipment-on the basis of cost
   Land                                                    30.0           28.8
   Buildings                                               70.3           49.0
   Machinery and equipment                                303.8          264.3
- -----------------------------------------------------------------   ------------
                                                          404.1          342.1
   Less accumulated depreciation and amortization         108.3           83.4
- -----------------------------------------------------------------   ------------
Total property, plant and equipment-net                   295.8          258.7

Intangible assets
   Goodwill                                               364.9          791.2
   Other intangible assets                                395.1          388.1
- -----------------------------------------------------------------   ------------
                                                          760.0        1,179.3
   Less accumulated amortization                          111.9          100.1
- -----------------------------------------------------------------   ------------
Total intangible assets-net                               648.1        1,079.2

Investments in affiliated companies                         3.1            2.8
Other notes and accounts receivable                        21.1           18.7
Other assets                                              147.4          112.8
Deferred income taxes                                        --           15.1
Prepaid pension cost                                      115.8          115.0
- -----------------------------------------------------------------   ------------
                                                      $ 1,652.5      $ 2,037.0
                                                    =============   ============

LIABILITIES AND STOCKHOLDER'S INVESTMENT
Current liabilities
   Short-term debt                                    $     0.1      $     1.1
   Trade accounts payable                                 142.0          170.7
   Accrued compensation                                    24.7           19.4
   Other accruals                                          98.9          128.9
   Income taxes                                              --            0.1
   Current portion of long-term debt                       28.7            6.3
- -----------------------------------------------------------------   ------------
Total current liabilities                                 294.4          326.5


Long-term debt                                              1.5           24.1
Long-term liabilities                                      95.8          124.2
Deferred income taxes                                      18.2             --

Stockholder's investment
    Parent company investment                           1,328.2        1,731.0
    Accumulated other comprehensive loss                  (85.6)        (168.8)
- -----------------------------------------------------------------   ------------
Total stockholder's investment                          1,242.6        1,562.2
- -----------------------------------------------------------------   ------------
                                                      $ 1,652.5      $ 2,037.0
                                                    =============   ============

See notes to financial statements.


                                       2




Statements of Cash Flows (unaudited)
TRW Aeronautical Systems
(In millions)
Six months ended June 30                                    2002          2001
- ------------------------------------------------------------------     ---------

OPERATING ACTIVITIES
   Net earnings(loss)                                    $ (457.2)      $   8.9
   Adjustments to reconcile net earnings(loss) to
     net cash (used in)provided by operating activities
       Depreciation and amortization                         23.4          33.8
       Asset impairment charge                              483.2            --
       Net gain on sale of assets                              --          (4.5)
       Deferred income taxes                                 (1.1)         59.0
       Other-net                                             (1.0)         (0.1)
   Changes in assets and liabilities, net of
     effects of businesses divested
       Accounts receivable, net                              20.5          19.7
       Inventories                                          (22.4)        (28.7)
       Trade accounts payable                               (36.7)         27.0
       Prepaid expenses and other liabilities               (38.2)        (28.5)
       Other-net                                            (11.5)          7.9
- ------------------------------------------------------------------     ---------
Net cash (used in)provided by operating activities          (41.0)         94.5

INVESTING ACTIVITIES
   Capital expenditures including other intangibles         (41.0)        (35.1)
   Net proceeds from divestitures                              --          27.7
   Other-net                                                 (0.3)         (8.7)
- ------------------------------------------------------------------     ---------
Net cash used in investing activities                       (41.3)        (16.1)

FINANCING ACTIVITIES
   Decrease in short-term debt                               (1.0)         (4.8)
   Net transfer from(to) parent company                      73.8         (65.8)
   Principal payments on debt in excess of 90 days             --           0.9
   Other-net                                                 (0.1)          3.7
- ------------------------------------------------------------------     ---------
Net cash provided by(used in) financing activities           72.7         (66.0)
Effect of exchange rate changes on cash                      (4.2)         (9.9)
- ------------------------------------------------------------------     ---------
(Decrease)increase in cash and cash equivalents             (13.8)          2.5
Cash and cash equivalents at beginning of period             27.1          19.3
- ------------------------------------------------------------------     ---------
Cash and cash equivalents at end of period               $   13.3       $  21.8
                                                         =========     =========

SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid (net of amount capitalized)                $   39.9       $  56.4
Income tax refunds (net of taxes paid)                        8.5          45.2

See notes to financial statements.

                                       3




NOTES TO FINANCIAL STATEMENTS
(unaudited)


BASIS OF PRESENTATION

The accompanying combined financial statements of TRW Aeronautical Systems (the
Company) include the assets, liabilities, sales and expenses of TRW Inc.'s (TRW)
Aeronautical Systems businesses. The financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. In the opinion of management, all adjustments
consisting of normal recurring accruals considered necessary for a fair
presentation have been included. Operating results for the six-month period
ended June 30, 2002 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2002, nor would they necessarily
reflect the results of operations or financial position in the future or what
they would have been if the Company had been a separate, stand-alone company for
the period presented or in the future.

On June 18, 2002, TRW announced that it had reached a definitive agreement with
Goodrich Corporation for the sale of its Aeronautical Systems business,
excluding certain assets and liabilities, for gross proceeds of approximately
$1.5 billion. TRW expects to complete the sale early in the fourth quarter of
2002.

The Statements of Operations of the Company include expenses recorded by the
Company or directly charged to it by TRW. In addition, the statements include an
allocation of TRW's general corporate expenses to reflect the services provided
to or benefits received by the Company. The allocation was $3.3 million for the
first half of 2002 and $3.4 million for the first half of 2001 and was reported
in administrative and selling expenses in the Statements of Operations. The
allocation was based upon TRW's internal allocation methodology, which is based
upon an established percentage of costs applied to the cost of operations (sales
less earnings (loss) before taxes from continuing operations). Management
believes that this is a reasonable method for allocating the general and
administrative corporate expenses. The allocation is not necessarily
representative of the operating expenses that would have been incurred had TRW
Aeronautical Systems operated on a stand-alone basis.

Debt reported on the Balance Sheets represents the historical third party
obligations of the Aeronautical Systems business. Interest expense from the
specific third party debt obligations attributed to the Company's operations is
included in the Statements of Operations. In addition, an estimate of the
interest expense of TRW, attributable to the operations of the Company, is also
included in the Statements of Operations. The allocation of interest is based on
a ratio of the Company's net assets to TRW's net assets (excluding TRW's
automotive business) plus TRW's debt (excluding the debt of the Company and
TRW's automotive business). Management believes that this is a reasonable method
of allocating interest to the Company. This allocation is not, however,
indicative of the total amount of interest that may be incurred by the Company
as a separate entity.

TRW accounts for and pays all United States income taxes. The Company's taxable
income(loss) related to its United States operations and foreign operations
subject to a United States "check-the-box" election to be taxed in the United
States is included in TRW's consolidated income tax returns. The Statements of
Operations include an allocation to the Company of TRW's United States income
taxes(credits) in amounts generally equivalent to the provisions that would have
resulted had the Company filed separate income tax returns for the years
presented. The Company has also been allocated United States deferred income
taxes based on the estimated differences between the book and tax basis of its
assets and liabilities. Most of the Company's foreign operations account for and
pay foreign income taxes related to their operations. For those foreign
operations that have not separately accounted for and paid income taxes related
to their operations, the Statements of Operations include an allocation of TRW's
foreign

                                       4




income taxes in amounts generally equivalent to the provisions which would have
resulted had the Company filed separate income tax returns for the years
presented. These operations have also been allocated foreign deferred income
taxes based on the estimated differences between the book and tax basis of their
assets and liabilities.


ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2002, the Company adopted Financial Accounting Standards
Board (FASB) SFAS 141, "Business Combinations," SFAS 142, "Goodwill and
Intangible Assets," and SFAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS 141 requires that acquisitions entered into after June
30, 2001 are to be accounted for using the purchase method and establishes
criteria to be used in determining whether acquired intangible assets are to be
separated from goodwill. As a result of the Company's analysis, only the value
of assembled workforce of approximately $11 million was reclassified from
intangible assets to goodwill at January 1, 2002.

SFAS 142 sets forth the accounting for goodwill and intangible assets already
recorded. Commencing January 1, 2002, goodwill is no longer being amortized.
Goodwill was tested for impairment by comparing the assets' fair values to their
carrying values. With the adoption of SFAS 142, management's valuation of
goodwill was determined not to be impaired. As a result of the proposed sale of
Aeronautical Systems, an updated valuation was conducted taking into account the
purchase price and an estimate of the fair value of the Company's assets and
liabilities, which approximate their carrying values. The valuation resulted in
an impairment of goodwill of $483.2 million. The Company reassessed the useful
lives and residual values of all acquired intangible assets to make any
necessary amortization period adjustments, which resulted in no adjustments
being made. Amounts in 2001 have not been restated in accordance with the
statement.

The following table reflects the reconciliation of reported net earnings (loss)
to adjusted net earnings (loss) for the exclusion of goodwill amortization.

                                                               Six months ended
                                                                   June 30
                                                             -------------------
  (In millions except per share data)                           2002      2001
  -------------------------------------------------------    ---------  --------

  NET EARNINGS (LOSS)
  Reported net earnings (loss)                               $ (457.2)  $    8.9
     Add back:  Goodwill amortization, net of tax                   -        9.4
                                                             ---------  --------
  Adjusted net earnings (loss)                               $ (457.2)  $   18.3
                                                             =========  ========


Estimated amortization expense for intangible assets for the next five years is
approximately $12.0 million per year.

SFAS 143, "Accounting for Asset Retirement Obligations," requires the fair value
of a liability for asset retirement obligations to be recorded in the period in
which it is incurred. The statement applies to a company's legal or contractual
obligation associated with the retirement of a tangible long-lived asset that
resulted from the acquisition, construction or development or through the normal
operation of a long-lived asset. The statement is effective for the Company
beginning January 1, 2003. Management has evaluated the impact of SFAS 143 and
believes that its adoption should not have a material effect on the Company's
financial position or results of operations.

                                       5




SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
addresses the accounting and reporting for the impairment or disposal of
long-lived assets. The statement provides a consistent method to value
long-lived assets to be disposed of and broadens the presentation of
discontinued operations. The adoption of SFAS 144 did not have a material effect
on the Company's financial statements.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS 145 requires gains and losses on extinguishments of debt to be reclassified
as income or loss from continuing operations rather than as extraordinary items
as previously required by SFAS 4, "Reporting Gains and Losses from
Extinguishment of Debt." SFAS 145 also amends SFAS 13 requiring certain
modifications to capital leases to be treated as sale-leaseback transactions and
to subleases when the original lessee remains a secondary obligor, or guarantor.

The provisions of SFAS 145 related to the rescission of SFAS 4 are effective for
the Company on January 1, 2003. The remaining provisions of SFAS 145 were
effective for transactions and reporting subsequent to May 15, 2002. The
adoption of SFAS 145 did not have a material impact to the Company's financial
position or results of operations.


ACCOUNTS RECEIVABLE SECURITIZATION

The Company sold accounts receivable of its operations in the U.S. to TRW at
face value as part of an accounts receivable securitization arrangement
established by TRW with a financial institution and several financial conduits.
The proceeds received are included in cash flows from operating activities in
the Statements of Cash Flows. The Company sold $53.4 million and $64.0 million
of its accounts receivable at June 30, 2002 and December 31, 2001, respectively.
Pursuant to the terms of the sale agreement with Goodrich Corporation, the
Company discontinued selling accounts receivables to TRW in August 2002. All
accounts receivable outstanding at that time were repurchased at face value.

The securitization transactions are accounted for as a sale of the receivables
under the provisions of Statement of Financial Accounting Standards (SFAS) 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," and are removed from the Balance Sheets.


OTHER (INCOME)EXPENSE-NET

Other (income) expense was expense of $0.5 million and income of $4.5 million
for the six month periods ended June 30, 2002 and 2001, respectively. Included
in 2001 was a $4.5 million gain on sale of real estate.


RESTRUCTURINGS

At December 31, 2001, restructuring charges of approximately $21.5 million had
been recorded for severance and other costs. During the first six months of
2002, $4.7 million was used primarily to pay severance costs. Employee headcount
has been reduced by over 800 since the start of the program in the fourth
quarter of 2001. Also in 2002, the Company returned-to-profit $4.3 million as a
result of changes in circumstances as to the extent of the program. The balance
of $12.5 million is expected to be used by the end of 2002.

                                       6




A movement of the restructuring reserve is as follows:


(In millions)
- -----------------------------------------------------------------------------------------

                                        Provision         LucasVarity
                                 -----------------------   Purchase    Used for
                      Beginning  Administrative  Cost of    Price      Purposes   Return-   Ending
                       Balance     and Selling    Sales   Allocation   Intended  to-Profit  Balance
                      ---------  --------------  -------  -----------  --------  ---------  -------
                                                                       
Six-month period
ended June 30, 2002    $ 21.5         $ --        $ --       $ --       $ (4.7)   $ (4.3)    $12.5



FINANCIAL INSTRUMENTS

Foreign currency forward contracts - The Company manufactures and sells its
products in countries throughout the world. As a result, it is exposed to
fluctuations in foreign currency exchange rates. The Company enters into forward
contracts to hedge portions of its foreign currency denominated forecasted
revenues, purchases and the subsequent cash flows. The critical terms of the
hedges are the same as the underlying forecasted transactions, and the hedges
are considered to be perfectly effective to offset the changes in fair value of
cash flows from the hedged transactions. Gains or losses on these instruments,
which mature at various dates through April 2007, are generally recorded in
other comprehensive income(loss) until the underlying transaction is recognized
in net earnings. The earnings impact is reported in either sales, cost of sales,
or other (income)expense-net, to match the underlying transaction. The Company
designated these contracts as cash flow hedges.

At June 30, 2002, the Company had foreign currency forward contracts outstanding
with a notional amount of $1.2 billion, denominated principally in the Euro and
the British pound. Foreign exchange contracts are placed either through TRW, or
directly with a number of major financial institutions to minimize credit risk.
No collateral is held in relation to the contracts, and the Company anticipates
that these financial institutions will satisfy their obligations under the
contracts.

The following table represents the movement of amounts reported in other
comprehensive income(loss) of deferred cash flow hedges, net of tax.

                                                              Six months ended
                                                                   June 30
                                                           ---------------------
   (In millions)                                              2002       2001
   ----------------------------------------------------    ---------- ----------
   Beginning balance                                        $ (33.1)    $    --
   Net change in derivative fair value and other
     movements                                                 41.9       (54.1)
   Amounts reclassified to earnings                             3.5         5.1
                                                           ---------- ----------
   Other comprehensive income(loss)                           $12.3     $ (49.0)
                                                           ========== ==========



DEBT AND CREDIT AGREEMENTS

At June 30, 2002, long-term debt, including the current portion of long-term
debt, was $30.2 million, a decrease of $0.2 million from $30.4 million at
December 31, 2001. The primary sources of long-term financing used by the
Company are capitalized leases and bank borrowings. Subsequent to June 30, 2002,
and in accordance with the sales agreement with Goodrich Corporation, TRW
satisfied the Company's obligations under capitalized leases amounting to $25.7
million.


                                       7




COMPREHENSIVE INCOME(LOSS)

The components of comprehensive income(loss), net of tax, for the second quarter
and six months of 2002 and 2001 are as follows:

                                                             Six months ended
                                                                 June 30
                                                         -----------------------
(In millions)                                              2002           2001
- --------------------------------------------------------------------------------

Net earnings(loss)                                       $(457.2)       $   8.9
Foreign currency exchange gain(loss)                        37.8          (50.5)
Unrealized gain(loss) on cash flow hedges                   45.4          (49.0)
                                                         --------       --------
Comprehensive income(loss)                               $(374.0)       $ (90.6)
                                                         ========       ========


The components of accumulated other comprehensive income(loss), net of tax, at
June 30, 2002 and December 31, 2001 are as follows:

                                                         June 30     December 31
(In millions)                                              2002          2001
- --------------------------------------------------------------------------------

Foreign currency exchange loss                           $ (94.7)       $(132.5)
Unrealized gain(loss) on cash flow hedges                   12.3          (33.1)
Minimum pension liability adjustments                       (3.2)          (3.2)
                                                         --------       --------
Accumulated other comprehensive income(loss)             $ (85.6)       $(168.8)
                                                         ========       ========


CONTINGENCIES


Various claims, lawsuits and administrative proceedings with respect to
commercial, product liability and environmental matters are pending or
threatened against the Company or its subsidiaries, arising from the ordinary
course of business activities with respect to commercial, product liability and
environmental matters. Taking into account established reserves, management
believes that the ultimate resolution of each of the foregoing matters will not
have a material effect on the Company's financial condition or results of
operations.

Further, product liability claims may be asserted in the future for events not
currently known by management. Although the ultimate liability from these
potential claims cannot be ascertained at June 30, 2002, management does not
anticipate that any related liability would have a material adverse effect on
the Company's financial position.


                                       8

EX-99.3

                                                                    EXHIBIT 99.3

                     UNAUDITED PRO FORMA CONDENSED COMBINED
                              FINANCIAL STATEMENTS

         The following unaudited pro forma condensed combined financial
statements are based on the historical consolidated financial statements of
Goodrich Corporation and the historical combined financial statements of TRW's
aeronautical systems businesses. The unaudited pro forma condensed combined
statements of income give effect to our acquisition of TRW's aeronautical
systems businesses and the borrowing of $1.5 billion under a 364-day credit
facility to fund that acquisition, with the assumptions and adjustments as
described in the accompanying notes. The unaudited pro forma condensed combined
statement of income for the year ended December 31, 2001 gives effect to these
transactions as if they had been completed on January 1, 2001, and the unaudited
pro forma condensed combined statement of income for the six months ended June
30, 2002 gives effect to these transactions as if they had been completed on
January 1, 2002. The unaudited pro forma condensed combined balance sheet as of
June 30, 2002 gives effect to these transactions as if they had been completed
on June 30, 2002.

         The total estimated purchase price, calculated as described in Note d
to these unaudited pro forma condensed combined financial statements, is
allocated under the purchase method of accounting to the net tangible and
intangible assets of the acquired businesses based on their fair values as of
the completion of the acquisition. Independent valuation specialists are
currently assisting us in determining the fair value of a significant portion of
these assets. Final determination of these fair values will include our
consideration of a final valuation prepared by the independent valuation
specialists. This final valuation will be based on the actual net tangible and
intangible assets of TRW's aeronautical systems businesses that existed as of
October 1, 2002.

         These unaudited pro forma condensed combined financial statements have
been prepared based on preliminary estimates of fair values. Amounts
preliminarily allocated to intangible assets with indefinite lives may change
significantly or be eliminated, amounts allocated to intangible assets with
definite lives may change significantly, and amortization methods and useful
lives may be different from the assumptions used herein, any of which could
result in a material change in amortization of intangible assets. Therefore, the
actual amounts recorded based on our final assessment of asset fair values may
differ materially from the information presented in these unaudited pro forma
condensed combined financial statements. In addition to the receipt of the final
valuation, the impact of ongoing integration activities could cause material
differences in the information presented. The unaudited pro forma condensed
combined financial statements do not reflect any operating efficiencies and cost
savings that we may achieve or any expense associated with achieving these
benefits.

         The unaudited pro forma condensed combined financial statements should
be read in conjunction with the historical financial statements and accompanying
notes of Goodrich and TRW's aeronautical systems businesses. The unaudited pro
forma condensed combined financial statements are not intended to represent or
be indicative of the consolidated results of operations or financial condition
that we would have reported had the acquisition been completed as of the dates
presented, and should not be taken as representative of our future consolidated
results of operations or financial condition.




              UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
             OF GOODRICH AND TRW'S AERONAUTICAL SYSTEMS BUSINESSES

                                  JUNE 30, 2002




                                                                HISTORICAL
                                                         -------------------------
                                                                      AERONAUTICAL       PRO FORMA           PRO FORMA
                                                         GOODRICH        SYSTEMS        ADJUSTMENTS          COMBINED
                                                         --------     ------------      -----------          ---------
                                                                                 (IN MILLIONS)
                                                                                                 
ASSETS
Current Assets
  Cash and cash equivalents                              $  148.7        $   13.3        $  (13.3)(a)        $  178.8
                                                                                             30.1(b)
  Accounts and notes receivable, net                        584.2           168.8              --               753.0
  Inventories                                               873.4           221.1            26.0(e)          1,120.5
  Deferred income taxes                                      99.1              --              --                99.1
  Prepaid expenses and other assets                          24.2            18.0            (4.1)(a)            38.8
                                                                                              0.7(b)
                                                         --------        --------        --------            --------
     Total Current Assets                                 1,729.6           421.2            39.4             2,190.2
                                                         --------        --------        --------            --------

Property, plant and equipment                               930.9           295.8            (3.1)(a)         1,223.6
Prepaid pension                                             234.3           115.8          (112.8)(a)           237.3
Goodwill                                                    696.0           312.0           114.7(d)          1,122.7
Identifiable intangible assets                              150.9           336.1           138.9(d)            625.9
Payment-in-kind notes receivable, less discount             174.9              --              --               174.9
Other assets                                                455.6           171.6              --               627.2
                                                         --------        --------        --------            --------
                                                         $4,372.2        $1,652.5        $  177.1            $6,201.8
                                                         ========        ========        ========            ========


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Short-term bank debt                                   $  229.9        $    0.1        $   (0.1)(a)        $1,729.9
                                                                                          1,500.0(b)
  Accounts payable                                          325.5           142.0              --               467.5
  Accrued expenses                                          470.4           123.6           (22.2)(a)           588.8
                                                                                             17.0(h)
  Income taxes payable                                      213.5              --              --               213.5
  Current maturities of long-term debt
    and capital lease obligations                             5.8            28.7           (26.2)(a)             8.3
                                                         --------        --------        --------            --------
     Total Current Liabilities                            1,245.1           294.4         1,468.5             3,008.0
                                                         --------        --------        --------            --------

Long-term debt and capital lease obligations              1,312.8             1.5              --             1,314.3
Pension obligations                                         158.7            25.3           (13.3)(a)           170.7
Postretirement benefits other than pensions                 311.5            28.2            (7.2)(a)           332.5
Deferred income taxes                                        15.8            18.2           (18.2)(a)            15.8
Other non-current liabilities                               205.6            42.3           (10.1)(a)           237.8
Mandatorily redeemable preferred securities of trust        125.2              --              --               125.2
Total Shareholders' Equity                                  997.5         1,242.6        (1,242.6)(f)           997.5
                                                         --------        --------        --------            --------
                                                         $4,372.2        $1,652.5        $  177.1            $6,201.8
                                                         ========        ========        ========            ========



See accompanying notes to unaudited pro forma condensed combined financial
statements.




           UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
             OF GOODRICH AND TRW'S AERONAUTICAL SYSTEMS BUSINESSES

                         SIX MONTHS ENDED JUNE 30, 2002



                                                                HISTORICAL
                                                         -------------------------
                                                                      AERONAUTICAL       PRO FORMA           PRO FORMA
                                                         GOODRICH        SYSTEMS        ADJUSTMENTS          COMBINED
                                                         --------     ------------      -----------          ---------
                                                                     (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
                                                                                                 
Sales                                                    $1,846.7        $  489.9        $     --            $2,336.6
Operating Costs and Expenses:
  Cost of sales                                           1,343.6           332.8             3.5(d)          1,679.9
  Selling and administrative expenses                       282.1           118.9              --               401.0
  Impairment of goodwill                                       --           483.2          (483.2)(d)              --
  Merger-related and consolidation costs                     22.1              --              --                22.1
                                                         --------        --------        --------            --------
                                                          1,647.8           934.9          (479.7)            2,103.0
                                                         --------        --------        --------            --------
Operating income (loss)                                     198.9          (445.0)          479.7               233.6
Interest expense                                            (46.2)          (40.8)          (21.5)(b)           (67.7)
                                                                                             40.8(g)
Interest income                                              19.1              --              --                19.1
Other income (expense) - net                                 (2.5)           (0.5)             --                (3.0)
                                                         --------        --------        --------            --------
Income (loss) before
  income taxes and Trust distributions                      169.3          (486.3)          499.0               182.0
Income tax expense (benefit)                                (55.9)           29.1           (33.3)(c)           (60.1)
Distributions on Trust Preferred
  Securities                                                 (5.2)             --              --                (5.2)
                                                         --------        --------        --------            --------
Income (loss) from Continuing Operations                 $  108.2        $ (457.2)       $  465.7            $  116.7
                                                         ========        ========        ========            ========

Income from continuing operations per share:
  Basic                                                  $   1.06                                            $   1.15
  Diluted                                                $   1.03                                            $   1.11

Average shares used in computing income from
  continuing operations per share (in millions):
  Basic                                                     101.9                                               101.9
  Diluted                                                   105.2                                               105.2


See accompanying notes to unaudited pro forma condensed combined financial
statements.







           UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
             OF GOODRICH AND TRW'S AERONAUTICAL SYSTEMS BUSINESSES

                          YEAR ENDED DECEMBER 31, 2001





                                                                HISTORICAL
                                                         -------------------------
                                                                      AERONAUTICAL       PRO FORMA           PRO FORMA
                                                         GOODRICH        SYSTEMS        ADJUSTMENTS          COMBINED
                                                         --------     ------------      -----------          ---------
                                                                     (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
                                                                                                 
Sales                                                    $4,184.5        $1,101.8        $     --            $5,286.3
Operating Costs and Expenses:
  Cost of sales                                           3,127.6           772.3           (13.1)(d)         3,886.8
  Selling and administrative expenses                       565.0           240.9              --               805.9
  Merger-related and consolidation costs                    107.3            23.6              --               130.9
                                                         --------        --------        --------            --------
                                                          3,799.9         1,036.8           (13.1)            4,823.6
                                                         --------        --------        --------            --------
Operating income                                            384.6            65.0            13.1               462.7
Interest expense                                           (107.8)          (82.0)          (43.0)(b)          (150.8)
                                                                                             82.0(g)
Interest income                                              24.1              --              --                24.1
Other income (expense) - net                                (19.2)            4.6              --               (14.6)
                                                         --------        --------        --------            --------
Income (loss) before
  income taxes and Trust distributions                      281.7           (12.4)           52.1               321.4
Income tax (expense) benefit                                (94.3)            0.9           (14.3)(c)          (107.7)
Distributions on Trust Preferred
  Securities                                                (10.5)             --              --               (10.5)
                                                         --------        --------        --------            --------
Income (loss) from Continuing Operations                 $  176.9        $  (11.5)       $   37.8            $  203.2
                                                         ========        ========        ========            ========

Income from continuing operations per share:
  Basic                                                  $   1.72                                            $   1.97
  Diluted                                                $   1.65                                            $   1.90

Average shares used in computing income
  from continuing operations per share (in millions):
  Basic                                                     103.1                                               103.1
  Diluted                                                   106.9                                               106.9


See accompanying notes to unaudited pro forma condensed combined financial
statements.





                NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
                              FINANCIAL STATEMENTS


(a)      Reflects the elimination of assets and liabilities we are not acquiring
         under the terms of the Master Agreement of Purchase and Sale, including
         cash, prepaid expenses, certain fixed assets, pension and
         postretirement assets and liabilities, deferred income taxes, bank
         debt, environmental liabilities and accrued liabilities.

(b)      Reflects the borrowing of $1.5 billion to finance the acquisition of
         TRW's aeronautical systems businesses under a 364-day credit facility
         provided by some of our existing lenders. The interest rate on the
         credit facility is variable, and is determined based upon LIBOR for the
         applicable borrowing period plus a credit spread (currently 0.725%). We
         also may borrow under the credit facility at the prime rate. For
         purposes of determining the adjustment to interest expense in the pro
         forma statements of income, the current one-month LIBOR rate was used
         with a credit spread of 0.725%, resulting in an interest rate of
         2.525%.

         We incurred approximately $0.7 million in fees associated with the
         credit facility, which will be amortized to income as a component of
         interest expense over the term of the facility. The company also pays
         an annualized facility fee of 0.15% based on the average commitment
         amount, and a one time facility fee of 0.15% based on the commitment
         amount at December 31, 2002. Based on pro forma net borrowings of $1.5
         billion under the facility, the annualized facility fee is $2.2
         million.

         The pro forma annual interest expense under the facility based on the
         current rate of 2.525% is $37.9 million. Pro forma annual interest
         expense also includes amortization of the credit facility closing fees
         ($0.7 million), the annualized facility fee ($2.2 million) and the one
         time facility fee based on the commitment amount at December 31, 2002
         ($2.2 million).

         The pro forma adjustment to cash of $30.1 million represents borrowings
         of $1.5 billion under the credit facility, reduced by $0.7 million in
         closing fees and $1,469.2 million in net cash paid to TRW at closing.
         (See Note (d)).

         The company expects to repay amounts outstanding under the credit
         facility from a combination of the net proceeds from the sale of
         common stock, the net proceeds from the sale of senior notes, the net
         proceeds from the sale of operating and non-operating assets and cash
         flow from operations. As the amounts, timing and certainty of the above
         sources of funds is not known, they have not been included in the pro
         forma financial statements.

(c)      Reflects the adjustment of income tax expense to the estimated combined
         effective rate for Goodrich and TRW's aeronautical systems businesses
         of 33.5% for the year ended December 31, 2001 and 33.0% for the six
         months ended June 30, 2002.

(d)      Reflects the estimated net fair value adjustment to TRW's aeronautical
         systems businesses goodwill and identifiable intangible assets as a
         result of the following estimated purchase price allocation:



                                                                                   
                  (in millions)
                  Original purchase price for TRW's aeronautical systems businesses            $  1,500.0
                  Shares in joint venture not acquired                                               (3.0)
                                                                                               ----------
                    Cash paid to TRW                                                              1,497.0

                  Cash received from TRW:
                  For retiree medical                                                               (21.0)
                  For foreign currency contracts terminated prior to closing                         (5.6)
                  For foreign currency contract transfer costs                                       (1.2)
                                                                                               ----------
                    Net cash paid at closing                                                      1,469.2
                  Estimated direct acquisition costs, including
                    financial advisory, legal, accounting and other costs                            17.0
                                                                                               ----------
                    Aggregate purchase price                                                      1,486.2

                  Book value of the net assets of TRW's aeronautical systems businesses          (1,242.6)
                  Elimination of net balances not being acquired (see Note (a))                      36.0
                  Capitalized estimated manufacturing profit in inventory acquired
                    (see Note (e))                                                                  (26.0)
                                                                                               ----------
                    Net adjustment to goodwill and identifiable intangible assets              $    253.6
                                                                                               ==========

         

         This reflects our preliminary estimates of the purchase price
         allocation for the acquisition of TRW's aeronautical systems
         businesses, which may change upon completion of appraisals. For
         purposes of computing pro forma adjustments, we assumed historical
         values of current assets acquired and current liabilities assumed
         reflect fair value. The pro forma condensed combined balance sheet does
         not include any fair value adjustments for property, plant and
         equipment to fair value since we have not completed the appraisal
         process for these assets. The purchase price allocation does not
         include the effects of any anticipated restructuring activities that
         may occur in connection with the integration of TRW's aeronautical
         systems businesses. Further, we may identify other assets and
         liabilities to which a portion of the purchase price will be allocated.

         The identifiable intangible assets with definite lives have been
         adjusted to $475 million. This amount was estimated as part of our
         initial assessment in determining the total purchase price value. The
         amount preliminarily allocated to intangible assets with definite lives
         may change significantly and amortization methods and useful lives may
         be different from the assumptions used herein, any of which could
         result in a material change in amortization of intangible assets. The
         identifiable intangible assets are estimated to have an average life of
         25 years, which results in pro forma annual amortization expense (using
         the straight line method) of $19 million, which is recorded in cost of
         sales. The proforma condensed combined income statements for the six
         months ended June 30, 2002 and the year ended December 31, 2001 have
         been adjusted to exclude $6.0 million and $12.1 million, respectively,
         representing the historical intangible assets amortization for TRW's
         aeronautical systems businesses.

         In July 2001, the Financial Accounting Standards Board issued Statement
         No. 141, "Business Combinations" ("SFAS 141"), and Statement No. 142,
         "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS No. 141
         requires that all business combinations initiated after June 30, 2001
         be accounted for using the purchase method. Additionally, SFAS No. 141
         establishes specific criteria for the recognition of intangible assets
         separately from goodwill. SFAS No. 142 primarily addresses the
         accounting for goodwill and intangible assets subsequent to their
         acquisition and became effective January 1, 2002. The most significant
         changes made by SFAS No. 142 require that goodwill and indefinite lived
         intangible assets no longer be amortized and be tested for impairment
         at least on an annual basis. This provision of SFAS No. 142 applies to
         business combinations with effective dates after June 30, 2001. The pro
         forma condensed combined income statement does not include amortization
         for goodwill and other intangible assets with indefinite lives acquired
         with TRW's aeronautical systems businesses since the business
         combination was consummated after June 30, 2001. In addition, the
         condensed combined pro forma income statement for the year ended
         December 31, 2001 has been adjusted to exclude $20 million representing
         the historical goodwill amortization for TRW's aeronautical systems
         businesses, which is recorded in cost of sales. The pro forma condensed
         combined income statement for the six months ended June 30, 2002 has
         been adjusted to exclude the $483.2 million impairment of goodwill.



         We have not eliminated the $30.4 million of goodwill amortization of
         Goodrich included in our historical financial statements for the year
         ended December 31, 2001.

         The purchase price payable by us to TRW for the purchase of the
         aeronautical systems businesses is subject to potential upward or
         downward adjustment after the closing based on the difference between
         the net asset value of TRW's aeronautical systems businesses on October
         1, 2002 (the closing date) and the net asset value of TRW's
         aeronautical systems businesses on May 31, 2002, both calculated in the
         manner set forth in the Master Agreement of Purchase and Sale. This
         adjustment has not been reflected in the pro forma financial
         statements.

         The purchase price will also be adjusted based on the funding of the
         pension plans of TRW's aeronautical systems businesses, based on the
         terms of the Master Agreement of Purchase and Sale. In general, the
         purchase price will be reduced by the amount by which the plans'
         projected benefit obligation exceeds the fair value of the assets of
         these plans. There is no purchase price adjustment if the fair value of
         the assets of the plans exceed the projected benefit obligation. The
         computation of this adjustment will be based on actuarial valuations of
         the plans which are not yet available. We do not anticipate that this
         adjustment will be material to the purchase price and no adjustment has
         been reflected in the pro forma financial statements.

(e)      Reflects the estimated purchase accounting adjustment for
         capitalization of estimated manufacturing profit in inventory acquired
         with TRW's aeronautical systems businesses. The pro forma condensed
         combined statement of income does not reflect the impact
         of the one-time adjustment to cost of sales during the periods when
         this inventory will be sold.

(f)      Reflects the elimination of the historical stockholder's investment in
         TRW's aeronautical systems businesses.

(g)      Reflects the elimination of interest expense allocated to the
         aeronautical systems businesses by TRW and the interest expense
         associated with debt not assumed by Goodrich under the terms of the
         Master Agreement of Purchase and Sale.

(h)      Reflects the accrual of the estimated direct acquisition costs,
         including financial advisory, legal, accounting and other costs.