2. Forward Looking Statements
This report contains “forward-looking statements” within the meaning of Section
21E of the Securities Exchange Act of 1934. All statements, other than
statements of fact, that address activities, events or developments that we or
our management intend, expect, project, believe or anticipate will or may occur
in the future are forward-looking statements. Forward-looking statements are
based on management’s assumptions and assessments in light of past
experience and trends, current economic and industry conditions, expected
future developments and other relevant factors. They are not guarantees of
future performance, and actual results, developments and business decisions
may differ from those envisaged by our forward-looking statements. Our
forward-looking statements are also subject to risks and uncertainties, which
can affect our performance in both the near- and long-term. We identify the
principal risks and uncertainties that affect our performance in our Form 10-K
and other filings with the Securities and Exchange Commission.
1Q 2009 Earnings Release
2
April 24, 2009
3. Overview
• 1Q Results In Line
– $7.6B Sales, $0.54 Earnings Per Share, $232M Free Cash Flow
– Tougher End-Market Conditions
– FY09 EPS Outlook $2.85 - $3.20
• Benefiting From Productivity Actions
– Executing Repositioning Projects
– HOS, FT, VPD™ Benefits
– Fixed Cost, Discretionary Spend, Investment Prioritization Focus
• Continued Seed Planting
– Repositioning: $44 Million ($0.04 EPS) Actions in 1Q
– Technology: SmartPathTM Ground-Based Augmentation System
– Energy Efficiency: US Army Corps of Engineers Contract
Tougher Conditions, Aggressive Cost Actions
1Q 2009 Earnings Release
3
April 24, 2009
5. Market Assumptions Update
2009 February 23 Current
Business
Drivers Update Update
Flight Hours (2)% (4)%
AT&R
OE Deliveries 0% to 5% 0% to 5%
TFE Flight Hours (15)% (15)%
B&GA
OE Deliveries (5)% to (10)% (25)%+
Defense DOD Budget 3% 3%
US/EU Housing Sales No Recovery No Recovery
US/EU Non-Res Downturn Downturn
ACS – Developed
Retrofit / Regulation Stable Stable
Industrial Cap/Op Ex Cautious Weakening
Res Soft; Non-
ACS – Emerging New Construction Moderating
Res Stable
Europe Auto Sales (15)% to (20)% (15)% to (20)%
Turbocharging Europe Diesel Penetration (1) pts (5) pts
Small Engine Shift (4) pts (6) pts
UOP Refining / Gas / Petrochem Slowing Slowing
Biggest Changes: Commercial Aero, Europe Turbo
1Q 2009 Earnings Release
5
April 24, 2009
6. Aerospace
Financial Highlights
($M)
1Q08 1Q09 V
Sales $ 3,030 $ 2,759 (9)% • Sales down 9%, Organic (ex. CS) down 5%
- Air Transport & Regional down 17%,
Segment 563 488 (13)% Organic down 7%
Profit
OE (24)%, flat Organic
Margin 18.6% 17.7% (90) bps
Aftermarket (11)% (Flight Hours down 4.5%)
- Business & General Aviation down 19%
OE (14)%
Business Highlights Aftermarket (25)%
- Defense & Space up 4%
+ Strong Defense & Space Performance
• Segment Profit down 13%
+ Cost Actions
90 bps Margin Contraction
– AT&R Flight Hours - Further Declines
+ Productivity, Net
– B&GA OE – Significant Customer
– Mix
Reschedules
– Volume
Executing In Difficult Environment
1Q 2009 Earnings Release
6
April 24, 2009
7. Automation And Control Solutions
Financial Highlights
($M)
1Q08 1Q09 V
• Sales down 6%
Sales $ 3,180 $ 3,001 (6)%
(3)% Organic
Segment 328 311 (5)% +7% Acquisition Impact
(9)% F/X Impact
Profit
Margin 10.3% 10.4% 10 bps - Products down 5%
(8)% Organic
Challenging March Conditions
- Solutions down 6%
Business Highlights
+5% Organic
Growth Across All Regions
+ Solutions Backlog Execution (4)% Organic Orders
+ Cost Actions
• Segment Profit down 5%
+ Europe flat, Asia up Organically
10 bps Margin Expansion
– Solutions Orders Delays + Productivity, Net
– Products 1Q Exit Rates – Volume
– Product / Solutions Mix
Good Results Despite Slowing Growth
1Q 2009 Earnings Release
7
April 24, 2009
8. Transportation Systems
Financial Highlights
($M)
1Q08 1Q09 V
Sales $ 1,276 $ 756 (41)% • Sales down 41%
F/X Impact (6)%
Segment 149 (3) (102)%
- Turbo down 53%
Profit
Lower Passenger and Commercial
Margin 11.7% (0.4)% (1210) bps Production Volumes; European Consumer
Shift
- CPG down 3%
Volume Growth More Than Offset By Pass-
Business Highlights
Through of Raw Material Declines
- Friction Materials down 35%
+ Cost Actions
Volume and FX
+ CPG Performance
– Weak Global OE Production • Segment Profit down 102%
1210 bps Margin Contraction
– Turbo Customer Launch Delays
+ Productivity, Net
– Consumer Shift Impacting Penetration
– Turbo Volume
Unprecedented Turbo Declines
1Q 2009 Earnings Release
8
April 24, 2009
9. Specialty Materials
Financial Highlights
($M)
1Q08 1Q09 V
Sales $ 1,409 $ 1,054 (25)% • Sales down 25%
- UOP down 27%
Segment 265 125 (53)%
Tough catalyst sales comparison with
Profit
1Q08
Margin 18.8% 11.9% (690) bps
- Resins and Chemicals down 35%
Strong volume offset by formula pricing
impacts
Business Highlights - Specialty Products down 24%
Weak Electronic Materials
+ Cost Actions
• Segment Profit down 53%
+ R&C Ammonium Sulfate Volumes
690 bps Margin Contraction
– UOP Comparisons
+ Productivity
– Semiconductor Segment Demand – Volume
– UOP Mix
UOP Comparisons, Formula Pricing Impacts
1Q 2009 Earnings Release
9
April 24, 2009
10. 2009 Financial Outlook
2009
Guidance
($B)
Aerospace $ 11.5 - 11.9
ACS 12.8 - 13.1
Transportation 3.2 - 3.4
Specialty Materials 4.6 - 4.7
Total Sales $ 32.3 - 33.2
Aerospace $ 2.0 2.2
-
ACS 1.4 1.5
-
Transportation 0.1 0.2
-
Specialty Materials 0.6 0.6
-
Total Segment Profit $ 4.1 4.4
-
Net Income $ 2.2 2.4
-
EPS $ 2.85 3.20
-
Free Cash Flow > 100% Net Income
Reflects Market Conditions
1Q 2009 Earnings Release
10 Excludes impact of acquisition related costs (FAS 141(R)) April 24, 2009
12. Summary
• 1Q Results In Line
– Additional $44M Repositioning Funded
• Adjusting 2009 Outlook to Reflect Market Declines
– Commercial Aerospace (AT&R Flight Hours, Business Jet OE)
– Transportation Systems (European OE)
• Organization Committed to Cost and Earnings Delivery
– FY09 EPS Outlook $2.85 - $3.20
Tougher Conditions, Aggressive Cost Actions
1Q 2009 Earnings Release
12
April 24, 2009
13. Appendix
Reconciliation of non-GAAP Measures
to GAAP Measures
1Q 2009 Earnings Release
13
April 24, 2009
14. Reconciliation of Segment Profit to Operating Income and
Calculation of Segment Profit and Operating Income Margin
1Q08 1Q09
($M )
Sales $8,895 $7,570
Cost of Products and Services Sold (6,672) (5,756)
Selling, General and Administrative Expenses (1,255) (1,152)
Operating Income $968 $662
Stock Based Compensation (1) 41 42
(1, 2)
Repositioning and Other 213 117
(1)
Pension and OPEB Expense 27 55
Segment Profit $1,249 $876
Operating Income $968 $662
÷ Sales $8,895 $7,570
Operating Income Margin % 10.9% 8.7%
Segment Profit $1,249 $876
÷ Sales $8,895 $7,570
Segment Profit Margin % 14.0% 11.6%
(1 Included in co st o f pro ducts and services so ld and selling, general and administrative expenses
)
(2) Includes repo sitio ning, asbesto s, enviro nmental expenses and equity inco me (beginning 1 /2008)
/1
1Q 2009 Earnings Release
14
April 24, 2009
15. Reconciliation of Free Cash Flow to Cash Provided by Operating
Activities and Calculation of Cash Flow Conversion
1Q08 1Q09
($M )
Cash Provided by Operating Activities $721 $341
Expenditures for Property, Plant and Equipment (150) (109)
Free Cash Flow 571 232
Cash Provided by Operating Activities $721 $341
÷ Net Income 643 397
Operating Cash Flow Conversion % 112% 86%
Free Cash Flow $571 $232
÷ Net Income 643 397
Free Cash Flow Conversion % 89% 58%
1Q 2009 Earnings Release
15
April 24, 2009
16. Reconciliation of Segment Profit to Operating Income and
Calculation of Segment Profit and Operating Income Margin
2008 2009E
($B)
Sales $36.6 $32.3 - $33.2
Cost of Products and Services Sold (28.0) (24.4) - (24.9)
Selling, General and Administrative Expenses (5.0) (4.4) - (4.6)
Operating Income $3.6 $3.5 - $3.7
Stock Based Compensation (1) 0.1 ~0.1
Repositioning and Other (1, 2) 1.0 0.3 - 0.4
Pension and OPEB Expense (1) 0.1 ~0.2
Segment Profit $4.8 $4.1 - 4.4
Operating Income $3.6 $3.5 - $3.7
÷ Sales $36.6 $32.3 - $33.2
Operating Income Margin % 9.8% ~11.0%
Segment Profit $4.8 $4.1 - 4.4
÷ Sales $36.6 $32.3 - $33.2
Segment Profit Margin % 13.3% 12.8 - 13.4%
(1 Included in co st o f pro ducts and services so ld and selling, general and administrative expenses
)
(2) Includes repo sitio ning, asbesto s, enviro nmental expenses and equity inco me (beginning 1 /2008)
/1
1Q 2009 Earnings Release
16
April 24, 2009
